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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
____________
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-19867
________________________
ESKIMO PIE CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0571720
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
901 Moorefield Park Drive
Richmond, VA 23236
(Address of principal executive offices, including zip code)
___________
Registrant's phone number, including area code:
(804) 560-8400
____________
Securities registered pursuant to section 12(g) of the Act:
ESKIMO PIE CORPORATION COMMON STOCK, $1.00 par value,
and Preferred Stock Purchase Rights
___________
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 ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
There were 3,479,964 shares of the Registrant's Common Stock outstanding on
March 20, 2000. The aggregate market value held by non-affiliates on March 20,
2000 was approximately $29 million.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in the Registrant's Proxy Statement for the Annual
Meeting to be held on May 3, 2000 is incorporated by reference into Part III
herein.
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INDEX
Part I
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Item 1. Business................................................... 1
Item 2. Properties................................................. 5
Item 3. Legal Proceedings.......................................... 6
Item 4. Submission of Matters to a Vote of Security Holders........ 6
Executive Officers of the Registrant....................... 7
Part II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters........................................ 8
Item 6. Selected Financial Data.................................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 10
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 16
Item 8. Financial Statements and Supplementary Data................ 17
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..................... 33
Part III
Item 10 Directors and Executive Officers of the Registrant......... 33
Item 11. Executive Compensation..................................... 33
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................. 33
Item 13. Certain Relationships and Related Transactions............. 33
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.......................................... 34
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________________________________
Trademarks and service marks of the Company are italicized where they
appear herein. NutraSweet(R) is the registered trademark of Monsanto Company,
Chicago, Illinois. Welch's(R) is the registered trademark of Welch Foods Inc.,
a Cooperative ("Welch's"), Concord, Massachusetts. Nabisco(R), OREO(R) and
SnackWell's(R) are the registered trademarks of Nabisco Brands Company
("Nabisco"), San Francisco, California. Weight Watchers(R) and Smart Ones(R)
are the registered trademarks of Weight Watchers International, Inc. ("Weight
Watchers"), Jericho, New York. All Rights Reserved.
Market share and product distribution data were obtained from ACNielsen, a
nationally recognized market research firm based in Schaumburg, Illinois, which
provides the Company with scanner-based product movement data from U.S. grocery
stores.
Forward Looking Statements:
Statements contained in this Annual Report on Form 10-K regarding the
Company's future plans and performance are forward looking statements within the
meaning of the federal securities laws. These statements are based upon
management's current expectations and beliefs about future events and their
effect upon the Company. There can be no assurance that future developments
affecting the Company will mirror those currently anticipated by management.
Actual results may vary materially from those included in the forward looking
statements. These forward looking statements involve risks and uncertainties,
including but not limited to, the highly competitive nature of the frozen
dessert market and the level of consumer interest in the Company's products,
product costing, the weather, the performance of management, the Company's
relationships with its licensees and licensors and government regulation. For a
more complete discussion of these risks and uncertainties, see "Other Factors
Affecting the Business of the Company" beginning on page 3 hereof. The Company
assumes no duty to update any forward looking statements.
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PART I
ITEM 1. BUSINESS
Introduction
Eskimo Pie Corporation (the Company) created the frozen novelty industry in
1921 with the invention of the Eskimo Pie ice cream bar. Today, the Company
markets a broad range of frozen novelties, ice cream and sorbet products under
the Eskimo Pie, RealFruit, Welch's, Weight Watchers Smart Ones, SnackWell's and
OREO brand names. These nationally branded products are generally manufactured
by a select group of licensed dairies who purchase the necessary flavors,
ingredients and packaging directly from the Company. The Company also sells a
full line of quality flavors and ingredients for use in dairy and frozen dessert
products outside of those used in its nationally licensed brands business and
manufactures soft serve yogurt and premium ice cream products for sale to the
foodservice industry.
The Company's strengths include national brand recognition, quality products
and the management of complex sales and distribution networks. The Company's
growth has come primarily as a result of the development and introduction of
Eskimo Pie brand frozen dessert products, the development and marketing of
frozen dessert products under the licensing of other well-known national brands
under sublicensing arrangements, and the use of a select group of quality-
oriented licensee manufacturers who provide a cost effective means to
manufacture and distribute the Company's products.
In September 1999, the Company announced that its Board of Directors had
authorized management to actively pursue all strategic alternatives to maximize
shareholder value, including a sale of the Company as a whole or one or more
sales of the Company's strategic assets.
The Company is a Virginia corporation with executive offices at 901
Moorefield Park Drive, Richmond, Virginia 23236.
Licensing Strategy
The Company has granted licenses to seven dairies who purchase packaging and
ingredients from the Company for use in the manufacture and distribution of the
Eskimo Pie and other branded novelties and ice cream products. Licensees are
selected based upon their reputation for product quality and manufacturing and
distribution capabilities. The licensees produce, store and distribute products
in accordance with specific quality control standards which ensure uniform
formulations, taste and appearance across all licensee territories. The Company
regularly inspects the licensees' production and storage facilities and monitors
finished products for adherence to the Company's quality standards.
Each licensee operates within geographic territorial boundaries under
agreements which generally include three year terms subject to termination by
the Company for quality control violations, failure to meet minimum volume
requirements or material changes in the Company's ownership or the licensee's
business. These agreements provide for six to twelve month transition periods
in the event of termination. Beginning in 1999, licensees were contractually
required to contribute to trade promotion spending and to make separate
quarterly payments to the Company for licensing fees. These licensing fees
amounted to $1,040,000 in 1999 and are expected to total to $1,040,000
annually, through 2001.
Certain key ingredients (such as chocolate coatings and powders) and
wrappers used by the Company's licensees in the manufacture of Eskimo Pie and
other licensed frozen novelties and ice cream products are produced at Company
owned facilities located in New Berlin, Wisconsin and Bloomfield, New Jersey.
Other products sold within the licensing system are purchased from
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approved vendors and "drop shipped" directly to licensee production facilities.
Products sold under "drop shipped" arrangements include cartons, ice cream
sandwich wafers and proprietary ingredients used in the manufacture of
sublicensed brand products.
As a result of the Company's licensing strategy, the seven licensee dairies
account for approximately 60% of the Company's net sales. The licensing
strategy allows the Company to select a strong customer base which it actively
monitors to minimize the impact of an unforeseen loss of any of its licensee
customers. The loss of one or more licensees could cause some disruption in the
Company's operations, although, based upon prior experience with replacing
licensees, management believes it could find a suitable replacement within a
short period of time. As a result, such customer loss would not have a
significant impact on the Company's operations, liquidity or capital resources.
The licensing strategy also allows the Company to operate with relatively
low capital requirements. The Company's working capital requirements are limited
to that necessary to support advertising, sales promotion and administrative
activities rather than the much larger amounts that would be required to support
the self-manufacture of finished consumer goods.
The Company provides significant marketing support for the Eskimo Pie and
other licensed brands manufactured and distributed by its licensees. The
Company engages in product/concept development, and advertising and sales
promotion expense generally includes trade promotion and introductory costs,
price-off and feature price promotions, regional consumer promotion, couponing
and other trial purchase generating programs and broker commissions.
The Company has 13 field sales personnel among the Company's operating
divisions, and engages broker representatives in each major U.S. market.
Distribution of the Company's finished consumer products is handled by the
licensees and distributors in their respective territories.
Sublicensing Efforts
The Company leverages its licensee and trade relationships and marketing
presence by securing the limited rights for nationally recognized brand names
such as Welch's, Weight Watchers Smart Ones, SnackWell's and OREO. These rights
allow the Company to manage the product development, manufacture, distribution,
marketing and sales of branded frozen novelties and ice cream products in
exchange for royalty payments to the owners of the brand names.
Welch's. Since 1980, the Company has managed the manufacture and marketing
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of Welch's brand frozen fruit juice bars under an exclusive agreement with Welch
Foods Inc. (Welch's). Under the Company's management, the four varieties of
Welch's frozen juice bars continue to be leading products in the "All Family"
fruit and juice bar category according to ACNielsen. The Company introduced, in
selected test markets, two new Welch's products in 1999 which were targeted to
attract the attention of a more youthful audience.
Weight Watchers. In January 1995, the Company entered into an agreement
---------------
with Weight Watchers Food Company whereby it assumed the management of an
existing line of frozen novelty products. During 1998, the Company transitioned
the Weight Watchers brand to incorporate the Smart Ones trademark consistent
with an overall brand repositioning by Weight Watchers International, Inc. There
are currently six Weight Watchers Smart Ones products being distributed to
retail grocery stores including the new Mocha Java bar which was introduced in
the fourth quarter of 1998.
Nabisco Brands. In December 1994, the Company entered into an agreement
--------------
with Nabisco Brands Company under which it has developed and marketed frozen
novelty and packaged ice cream products under the SnackWell's and OREO brand
names. The Company currently manages one SnackWell's and two OREO novelty
products that are currently distributed to the retail grocery and single serve
convenience markets.
2
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Master License Agreements between the Company and each respective licensor
set forth the Company's rights and obligations in connection with the respective
sub-licensed businesses. Although the specific terms vary, each of the Master
License Agreements provides for royalty payments or license fees (although the
basis and rate are different under each agreement), the length of the agreement
(5 to 20 years) and conditions for termination (which may be exercised by either
party based on certain conditions). The agreements have been subjected to
various renegotiations and amendments from time to time as business conditions
have changed.
Although each agreement also includes certain threshold performance
requirements (such as the requirement to develop a certain number of new
products each year, reach certain distribution goals, etc.), there are no
guaranteed payments required of the Company by any of the agreements. Failure
to comply with the terms of the Master License Agreements may result in
termination of the respective agreement (or as is more likely the case, some
cure or other renegotiation of terms), but in no case would the Company be
required to make specified payments if the Company does not continue to utilize
the rights under the respective agreements.
Non-licensed Products
In addition to products manufactured for use in its licensed and
sublicensed businesses, the Company sells various other ingredients to the dairy
industry produced at its New Berlin, Wisconsin facility. This business involves
blending, cooking and processing basic flavors and fruits to produce products
which subsequently are used by the Company's customers to flavor frozen
desserts, ice cream novelties and fluid dairy products. This business, which
accounts for approximately 20% of the Company's sales, has grown in recent years
and provides a positive gross margin contribution although at lower levels than
the Company's licensing business.
The Company also manufactures soft serve yogurt and premium ice cream mix
in a leased facility in Russellville, Arkansas. Soft serve mix is sold under the
Eskimo Pie brand name to broad- line foodservice distributors, yogurt shops and
other foodservice establishments who, in turn, sell soft serve ice cream and
yogurt products to consumers. The sale of soft serve yogurt and ice cream mix,
which accounts for approximately 14% of the Company's sales, is managed by a
separate sales force working within the Company's wholly owned subsidiary, Sugar
Creek Foods, Inc.
The Company also manufactures flexible packaging, such as private label ice
cream novelty wraps, at its Bloomfield, New Jersey plant. These products are
sold to the dairy industry, including many of the Company's licensees.
Other Factors Affecting the Business of the Company
This document and other information or statements the Company may release
from time to time include forward looking statements, within the meaning of
federal securities laws, about the Company's future plans and performance.
Numerous factors, including but not limited to those discussed below, produce
risks and uncertainties that may cause actual results to vary materially from
those included in the forward looking statements.
Competition. The principal outlet for the Company's licensed and
-----------
sublicensed products is retail grocery stores which sell approximately $1.8
billion of frozen novelties annually according to the International Dairy Foods
Association. The Company's branded frozen novelties compete with over 300
national, regional and local brands, including the brands of two of the world's
largest food conglomerates. The Company also competes with national, regional
and local brands of soft serve frozen yogurt and premium ice cream, packaged ice
cream and sorbet products.
Management believes that the Company has a number of competitive advantages
in the frozen dessert market. The Eskimo Pie brand name is one of the most
widely recognized names in this market and it is management's belief that
consumers identify the Eskimo Pie name with a
3
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consistently high quality product. The Company has been an active leader in new
product introductions, as evidenced by Eskimo Pie Sweetened with NutraSweet and
the numerous sub-licensed products developed in recent years. In addition, the
Company's licensing strategy enables it to operate with relatively low capital
requirements.
Product Costing. The Company purchases raw materials such as sugar and
---------------
coconut oil from a number of suppliers. Other materials used by the Company
include paper, cartons and chocolate liquor. With the exception of ice cream
sandwich wafers, NutraSweet brand aspartame, and the proprietary items required
to be purchased from the owners of the sublicensed brands, the Company believes
that its raw materials are readily available from a number of sources. Raw
material costs may be influenced by fluctuations in the commodity markets.
Seasonality. The frozen dessert market is seasonal with sales concentrated
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in the summer months. Because the Company supplies packaging and ingredients to
manufacturers of its licensed and sublicensed products, the Company has a higher
level of sales preceding and during the summer months and a lower level of sales
in the first and fourth quarters. Annual sales can be adversely affected by
unseasonably cool weather during the summer months.
Management. The Company is reliant on the abilities of the management team
----------
led by David B. Kewer, the Company's President and Chief Executive Officer.
These personnel have significant experience in their respective functional areas
and the loss of these individuals or others could have an adverse effect on the
Company's ability to implement its future plans.
Licensee Relationships. The nature and extent of the Company's
----------------------
relationships with its licensees are discussed under "Licensing Strategy" above.
Licensor Relationships. The Company derives approximately 33% of its
----------------------
revenues from sub-licensed products which, in general, are governed by
contractual agreements between the licensor and the Company (as discussed under
"Sublicensing Efforts" above). The loss of these sub-licensed brands could have
an adverse effect on the Company's business.
Year 2000 Matters. See "Management's Discussion and Analysis of Financial
-----------------
Condition and Results of Operations - Impact of Year 2000" for a discussion of
this issue.
Government Regulation. Like other companies in the food industry, the
---------------------
Company and its licensees are subject to extensive regulation by various local,
state and federal governmental agencies. Pursuant to a wide range of statutes,
rules and regulations, such agencies prescribe requirements governing product
quality, purity, manufacturing, advertising and labeling. Food products are
often subject to "standard of identity" requirements, which are promulgated at
both the federal and state level to control the permissible qualitative and
quantitative ingredient content of foods and related information that must be
provided on food product labels. The Federal Food and Drug Administration
("FDA"), the Federal Trade Commission ("FTC") and many states review product
labels and advertising to assure compliance with applicable statutes and
regulations.
The Company cannot predict the impact of the changes that it may be required
to make in the future as a result of other legislation, rules or governmental
review. FDA regulations may, in certain instances, affect the ability of the
Company, as well as others in the industry, to develop and market new products
and to utilize technological innovations in the manufacturing of existing
products. Nevertheless, the Company does not currently believe these rules and
regulations will have a significant impact on its operations.
Trademarks. The licensing of trademarks owned and sublicensed by the
----------
Company, especially the Eskimo Pie brand, is central to the business of the
Company. The Company has exclusive rights with respect to these trademarks in
the U.S. and, for Eskimo Pie and RealFruit, in Canada and certain other
countries around the world. The Company has made federal and various
international filings with respect to its significant trademarks and intends to
keep these filings
4
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current. The Company is not aware of any challenge to the validity of any
trademark material to its business in areas where the Company and its licensees
are currently conducting operations.
Environmental. The Company's operations are subject to rules and
-------------
regulations governing air quality, waste disposal and other environmental
related matters, as well as other general employee health and safety laws and
regulations. Other than as set forth below with respect to the Bloomfield
plant, the Company believes that it is in substantial compliance with all such
applicable laws and rules.
In the third quarter of 1991, the Company learned that small quantities of
cleanup solvents, solvent inks and oil were disposed of many years before at its
Bloomfield, New Jersey plant. The Company promptly notified regulatory
authorities and undertook testing to determine the extent of any contamination.
In connection with the consummation of the Company's public offering in March,
1992, the Company's former parent, Reynolds Metals Company ("Reynolds"), entered
into an agreement with the Company under which Reynolds will continue to manage
environmental testing and remediation activities at the Bloomfield plant. Under
the agreement, Reynolds will reimburse the Company for certain cleanup costs (as
defined in the agreement), relating to the Bloomfield plant, that may be
incurred by the Company in excess of $300,000. The Company recorded a $300,000
liability for these costs in 1992 of which approximately $70,000 remains unused
at December 31, 1999.
In connection with the Board's decision to explore a possible sale of the
Company, management is attempting to accelerate resolution of the Bloomfield
environmental issue. As a result of its efforts, management has made certain
estimates and recorded an additional liability of $106,000 relating to costs
associated with (1) testing and remediation with respect to certain items as to
which the Company and Reynolds do not agree on the extent of Reynolds'
remediation responsibility under the agreement and (2) expediting the timeframe
under which certain testing results are available for review by management,
regulatory authorities and potential purchasers of the Company.
Except as provided for in the agreement relating to the Bloomfield facility,
Reynolds has not otherwise undertaken any responsibility or assumed liability
for any environmental obligations of the Company.
Employees. At December 31, 1999, the Company employed approximately 105
---------
persons. No employees are currently covered by collective bargaining
agreements. The Company believes that its employee relations are good.
ITEM 2. PROPERTIES
In 1992, the Company acquired an office building in the Moorefield Office
Park in Richmond, Virginia. The building consists of approximately 32,496
square feet on 3.4 acres which serves as the Company's executive and
administrative offices and as the Company's new product development and quality
control facility. Approximately 8,500 square feet of the headquarters building
is leased to outside parties at rates consistent with local market conditions.
The Company owns its ingredients manufacturing plant in New Berlin,
Wisconsin which consists of approximately 73,820 square feet on 4.0 acres. The
Company expanded its New Berlin plant by 18,000 square feet in 1990 and
purchased certain new equipment at that time. The Company completed $800,000 of
capital improvements in the New Berlin facility during 1998 (consisting
primarily of equipment additions) in connection with the consolidation of its
flavors production at the New Berlin facility which was completed in 1997.
The Company also owns its printing and packaging plant in Bloomfield, New
Jersey, which consists of approximately 71,583 square feet on 2.0 acres. The
Bloomfield plant was expanded and modernized in 1985 with a 35,000 square foot
addition.
5
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In connection with the March 1, 1994 acquisition of Sugar Creek Foods of
Russellville, Inc., the Company's subsidiary, Sugar Creek Foods, Inc., is
leasing from the former owner of the business a soft serve yogurt and ice cream
mix production facility, consisting of approximately 23,805 square feet, and a
packaging facility, consisting of approximately 16,000 square feet, both located
in Russellville, Arkansas. In addition, Sugar Creek Foods, Inc. owns a freezer
facility, consisting of approximately 5,013 square feet, adjacent to the
production facility in Russellville. In 1999, the Company purchased a small
parcel of land adjacent to the freezer facility for future potential expansion
of the freezer facility.
The Company owns virtually all of its equipment and replacement parts for
all manufacturing equipment are readily available.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to ordinary routine litigation incidental to its
business, the disposition of which is not expected to have a significant effect
on the Company's financial condition or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
6
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EXECUTIVE OFFICERS OF THE REGISTRANT
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Present Position and
Name (Age) Length of Service Other Business Experience During Past Five Years
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Arnold H. Dreyfuss (71) Chairman of the Board Director since 1992; Chief Executive Officer from September 1996
since September 1996. to February 1998; President of Jupiter Ocean and Racquet Club of
Jupiter, Florida; formerly (1982 until 1991) Chairman of the
Board and Chief Executive Officer of Hamilton
Beach/Proctor-Silex, Inc.
Kimberly P. Ferryman (43) Vice President, Corporate Director, Quality Assurance and Product Development
Quality Assurance and from March 1994 to February 1995; Senior Product Development
Product Development Technologist from November 1988 to February 1994. (All were
since February 1995. positions with the Company)
Craig L. Hettrich (40) Vice President and Formerly, Vice President, Sales and Marketing for Frionor USA
General Manager, from March 1996 to January 1998; Director of National Sales and
Foodservice Division various other sales and marketing positions with General Mills -
since February 1998. Yoplait/Columbo Division from September 1991 to February 1996.
V. Stephen Kangisser (48) Vice President, Sales Vice President, Marketing, May 1996 to July 1998; formerly, Vice
since August 1998. President, Sales and Marketing for H.P. Hood, Inc., Boston,
Massachusetts from 1993 to 1996; Director of Sales and
Marketing and various other positions with Kraft, Inc. from 1974
through 1993.
David B. Kewer (45) President and Director since May 1997; President and Chief Operating Officer
Chief Executive Officer from March 1997 to February 1998; formerly, President, Willy
since March 1998. Wonka Candy Factory, a division of Nestle' USA, Inc., from
August 1993 to February 1996; Senior Vice President Marketing
and Strategic Planning and various other marketing and sales
positions with Nestle' Ice Cream Company from 1988 to 1993.
Thomas M. Mishoe, Jr. (47) Chief Financial Officer, Independent Consultant, from August 1995 to February 1996; Chief
Vice President, Treasurer Financial and Administrative Officer, Goldome Credit Corporation
and Corporate Secretary from May 1993 to May 1995; Senior Manager with Ernst & Young
since February 1996. LLP, from 1987 to May 1993.
William J. Weiskopf (39) Vice President and National Sales Manager, Flavors, November 1995 to August 1997;
General Manager, Regional Sales Manager from May 1994 to November 1995; formerly
Flavors Division Account Manager, Food Group for E. T. Horn Company from 1987 to
since August 1997. 1994.
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7
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol "EPIE". As of March 20, 2000, there were
approximately 500 Shareholders of Record of the Company's Common Stock
(including brokers, dealers, banks and other nominees participating in The
Depository Trust Company).
The high and low sales prices for shares of the Company's Common Stock as
reported on The Nasdaq Stock Market and dividends declared per share during the
periods indicated are set forth below:
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High Low Dividends
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<S> <C> <C> <C>
1999
First Quarter $ 15 $ 6 5/8 $0.05
Second Quarter 10 1/4 6 5/8 0.05
Third Quarter 11 1/2 8 1/8 -
Fourth Quarter 10 3/8 7 3/8 -
- ------------------------------------------------------------------------------------------------
1998
First Quarter $ 14 1/4 $ 10 1/8 $0.05
Second Quarter 16 1/4 11 9/16 0.05
Third Quarter 13 5/16 7 3/4 0.05
Fourth Quarter 14 7 1/8 0.05
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The Company's Board of Directors voted not to declare the 1999 third and
fourth quarter dividends, in light of the announcement made in September 1999 to
pursue all strategic alternatives to maximize shareholder value, including a
possible sale of the Company as a whole or one or more sales of the Company's
strategic assets. The declaration of dividends is subject to the discretion of
the Company's Board of Directors, based on the general business conditions
encountered by the Company, as well as the financial condition, earnings and
capital requirements of the Company and other factors deemed relevant by the
Board. Management believes that the elimination of the dividend will enhance the
Company's financial flexibility as it pursues a potential sale of the Company.
8
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ITEM 6. SELECTED FINANCIAL DATA
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For the year ended and as of December 31, 1999/1/ 1998/2/ 1997/3/ 1996/4/ 1995
- -----------------------------------------------------------------------------------------------------------------------
(In thousands, except Per Share Data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 66,452 $ 63,492 $ 66,392 $ 74,084 $ 83,975
Operating income (loss) 1,683 1,755 498 (2,009) 8,804
Net income (loss) $ 836 $ 795 $ 108 $ (2,046) $ 5,076
Per Share Data:
Basic:
Weighted average number of
common shares outstanding 3,463,211 3,458,394 3,456,180 3,460,729 3,475,119
Net income (loss) $ 0.24 $ 0.23 $ 0.03 $ (0.59) $ 1.46
========== ========== ========== ========== ==========
Assuming dilution:
Weighted average number of
common shares outstanding 3,463,211 3,462,677 3,461,867 3,460,729 3,642,624
Net income (loss) $ 0.24 $ 0.23 $ 0.03 $ (0.59) $ 1.42
========== ========== ========== ========== ==========
Cash dividends $ 0.10 $ 0.20 $ 0.20 $ 0.20 $ 0.20
Balance Sheet Data:
Cash and cash equivalents $ 1,751 $ 530 $ 3,353 $ 2,143 $ 717
Working capital 3,929 6,345 6,732 6,002 9,193
Total assets 36,486 40,088 41,580 44,440 45,872
Total debt 3,901 9,018 10,335 9,800 9,800
Shareholders' equity 22,796 22,226 22,081 22,470 25,687
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</TABLE>
____________________
/1/ The 1999 results of operations include special charges associated with
analysis of strategic alternatives, restructuring and proxy contest
activities which aggregate to a loss of $1,808,000 ($1,139,000 after
related income tax benefits). Additional discussion is provided in
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Notes to Consolidated Financial Statements.
/2/ The 1998 results of operations include the recovery of $600,000 of past due
rent associated with equipment leased to one of the Company's licensees and
$80,000 of incremental expenses associated with the Company's consideration
of strategic alternatives which aggregate to a gain of $520,000 ($325,000
after related income tax expense). Additional discussion is provided in
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Notes to Consolidated Financial Statements.
/3/ The 1997 results of operations include income and expenses associated with
restructuring activities which aggregate to a gain of $272,000 ($169,000
after related income tax expense). Additional discussion is provided in
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Notes to Consolidated Financial Statements.
/4/ The 1996 results of operations include special charges relating to
executive severance accruals ($593,000), a loss on the disposal of fixed
assets ($725,000) and the disposal of licensee and Company held inventories
($920,000), aggregating to $2,238,000 ($1,482,000 after related income tax
benefits).
9
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
For the year ended December 31, 1999, the Company recorded sales of $66.5
million, which resulted in net income of $836,000 or $0.24 per share. These
results compare with net income of $795,000 ($0.23 per share) in 1998 and
$108,000 ($0.03 per share) in 1997. The increased profitability reflects an
improved sales mix towards more profitable business, renegotiated licensing
contracts with the Company's licensees and a continued focus on expense control.
The 1999 results include expenses associated with the Company's analysis of
strategic alternatives of approximately $1,223,000, restructuring activities of
$191,000 and proxy contest expenses of $394,000 which, after related tax
effects, reduced net income by $1,139,000 or $0.33 per share. Exclusive of
these special charges incurred during 1999, net income would have been
$1,975,000 or $0.57 per share.
The 1998 results include the recovery of $600,000 of past due rent
associated with ice cream making equipment leased to one of the Company's
licensee customers as well as approximately $80,000 of incremental expenses
associated with the Company's consideration of strategic alternatives. Combined,
these two items accounted for additional 1998 net income of approximately
$325,000 ($0.09 per share) after related tax effects. The 1997 results include
income (offset by certain expenses) associated with restructuring activities
which aggregate to a gain of $169,000 ($0.05 per share) after related tax
effects.
Additional details regarding all of these items are provided below.
Net Sales and Gross Profit
- --------------------------
Net sales consist of the following:
<TABLE>
<CAPTION>
-----------------------------------
For the year ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Eskimo Pie brand $20,495 $22,038 $23,380
Other licensed brands 21,618 19,610 21,048
------- ------- -------
Total licensed brands 42,113 41,648 44,428
Flavors and ingredients 13,181 12,040 12,319
Foodservice 9,477 8,127 8,164
Packaging and other revenues 1,681 1,677 1,481
------- ------- -------
$66,452 $63,492 $66,392
======= ======= =======
- ----------------------------------------------------------------------------------
</TABLE>
The Company's frozen novelty business competes in a mature category which
is dominated by two of the world's largest food conglomerates who together
account for over one third of the category's sales. Consumer demand for frozen
novelty products has been flat in recent years. Packaged ice cream producers
continue to seek consumer attention with retail price promotions thus providing
extensive price competition to the Company's novelty products. The competitive
environment and recent consumption trends have provided challenges to
management's attempts to return the Company to its former profitability.
1999 Compared with 1998, Eskimo Pie Brand
- -----------------------------------------
10
<PAGE>
Eskimo Pie brand sales decreased 6.3% in 1999 as compared to 1998. Sales of
"regular" Eskimo Pie milk and dark chocolate products were flat as compared to
1998. Declines in sales velocity and distribution on flanker items in the Eskimo
Pie No Sugar Added product line resulted in overall decline in Eskimo Pie Brand
sales. Consumer resistance to price advances caused by escalating dairy
ingredient prices in 1997 and 1998 continued to affect ice cream novelty
products in 1999.
1999 Compared with 1998, Other Licensed Brands
- ----------------------------------------------
Sales of other licensed brand products (RealFruit, Welch's, Weight Watchers
Smart Ones, OREO and SnackWell's brands) increased 9.3% in 1999.
Welch's brand sales increased 19% in 1999, primarily due to the
introduction of the Double Dare product line. While trade acceptance of these
new products was very good, consumer takeaway was below expectations. Sales of
the regular Welch's fruit juice line were down 5%, following the trend in
overall fruit juice bar novelty sales. Sales gains on the base fruit juice bars
in western markets were more than offset by declines in eastern markets where
the brand experienced significant competitive pressure.
Weight Watcher's novelty sales were up 7.5%, continuing its growth from
1998 spurred by the repositioning to the Smart Ones trademark. A new flavor,
Mocha Java, was introduced in key consumption markets and added incremental
sales volume. Geographic expansion of the line is being considered for the
fourth quarter of 2000 to take advantage of the continuing sales momentum and
consumer interest in the Smart Ones brand.
Nabisco sales increased 4% in 1999. The limited regional introduction of
the OREO Big Stuf ice cream sandwich in retail grocery and club store channels
more than offset declines in the remainder of the Nabisco product line. The
SnackWell brand continued its decline, reflecting the continuing consumer
retreat from "good for you" products. In addition, the OREO cookies'n cream cone
introduced in 1998 was withdrawn from the market due to a complete interruption
of production caused by an explosion at the production facility contracted to
produce the product and the inability to locate an alternative producer that
could provide product of similar quality.
Sales of RealFruit brand sorbet continued to decline in 1999 consistent
with segment trends. In 2000, a number of opportunities will be explored to
further develop the RealFruit brand.
Other licensed brands also include sales of approximately $600,000 to the
single serve impulse market. The Company entered the single serve market during
1998 with a range of Eskimo Pie, Welch's and OREO brand novelty products created
specifically for this retail channel.
1998 Compared with 1997
- -----------------------
Eskimo Pie brand sales decreased 5.8% for the year due to significant sales
declines during the first half of the year, largely due to unseasonably cool and
wet weather in some of the Company's strongest (west coast) markets. However,
Eskimo Pie brand sales increased by 16.9% in the second half of 1998, as
compared with 1997, as a result of increased distribution into the populous
northeast markets and increased promotional activity during the later part of
the 1998 summer selling season.
Sales of other licensed brand products (RealFruit, Welch's, Weight Watchers
Smart Ones, OREO and SnackWell's brands) decreased 6.8% in 1998. As is similar
to the trends noted with the Eskimo Pie brand, these sales were much stronger in
the second half of 1998 (actually showing an 11.3% improvement over 1997) but
not enough to offset declines from the first half of the year.
Welch's brand sales declined in the first half of 1998, largely due to El
Nino weather effects in the west coast markets where the Welch's brand has its
strongest consumer acceptance. Welch's brand sales in the second half of 1998
returned to prior year levels.
11
<PAGE>
Weight Watchers brand sales increased 17.8% during 1998 largely due to the
successful repositioning of this line of products under the Smart Ones
trademark. Weight Watchers International, Inc., the owner of the Weight
Watchers and Smart Ones trademarks, transitioned its entire line of products to
the Smart Ones brand and contributed part of their 1998 earned royalties to the
Company's cost of converting to the new trademark.
Sales of OREO and SnackWell's brands decreased 13.3% during 1998 as
compared with 1997. The decrease is due to the discontinuance of the packaged
ice cream products sold under these brands and the continued consumer retreat
from "good-for-you" products. However, test market introduction of two new OREO
brand novelties provided additional sales volume that reduced the overall
decline in OREO and SnackWell's brand sales.
Other licensed brands also include approximately $850,000 of 1998 sales
from the single serve impulse market.
Flavors and Ingredients
- -----------------------
Revenue in the Flavors and Ingredients Division increased by 9.5% in 1999,
following slight declines in revenue during 1998 and 1997. The Division's
improvement was primarily due to the successful implementation of the Company's
sales initiative to further penetrate the national frozen dessert and fluid
dairy manufacturers. The Flavors Division secured new business during 1999 with
four targeted national accounts. Management believes this development of
national accounts, coupled with continued support of its regional dairy
customers, will position the Division for further growth in the rapidly
consolidating dairy industry.
Foodservice
- -----------
Revenue in the Foodservice Division increased by 17% in 1999, following a
relatively flat year in 1998 and a 7% decline in 1997. During 1999, management
implemented a strategy to increase sales and profitability, capitalizing on the
fact that Eskimo Pie markets the only nationally branded premium soft serve ice
cream, in addition to a full range of frozen yogurt and smoothie products. This
message has been delivered to distributors and operators using the Company's
"The Right Choice System." The Right Choice System is a comprehensive,
consultative approach to marketing the Company's soft serve products which
features premium quality products, provides operational support and provides
merchandising and promotional opportunities to foodservice distributors.
Gross Profit
- ------------
Gross profit, as a percent of sales, increased 170 basis points in 1999 to
41.8%, as compared to 40.1% in 1998,exclusive of the fourth quarter 1998 benefit
of the recovery of $600,000 in past due rental income discussed below.
Renegotiated licensing contracts with the Company's licensees provided for
increases in fixed royalty licensing fees, which more than offset some margin
erosion within the licensed brands. Further margin improvement is attributable
to continued focus on expense control and efficiencies at the manufacturing
facilities, including the discontinuance of certain unprofitable packaging
operations in the first quarter of 1999, as discussed below.
The $600,000 of rental income recorded in 1998 arose in connection with an
arrangement under which one of the Company's licensee customers had leased ice
cream novelty making equipment from the Company which provided rental income
based on the "units of production" manufactured on the equipment. Since 1992,
the Company had received annual rental payments that, in the aggregate, were
less than that required to fully amortize the Company's original investment.
The customer acknowledged its past due obligation and agreed to pay $600,000 to
bring the lease current at December 31, 1998. As collectibility of the lease
payments was not reasonably predictable, no contingent rent had been previously
recorded and the $600,000 recovery was recognized in the fourth
12
<PAGE>
quarter 1998 as a reduction of cost of goods sold (consistent with the previous
rent received on this equipment).
During 1998, significant attention was focused on the ice cream industry
based on 1998 butterfat prices which increased by approximately 150% from 1997
levels. As a licensing company that does not actually produce finished novelty
and packaged ice cream products, the Company was not directly impacted by the
increased cost of this commodity. However, as a result of the butterfat cost
increases some of the Company's licensees increased the price of the Company's
licensed ice cream and novelty products they produce which may have ultimately
affected consumer demand and the Company's sale of related components and
packaging. The Company is also affected by butterfat pricing in connection with
premium soft serve ice cream products sold to the foodservice industry.
Butterfat purchases within the Foodservice division traditionally account for
less than 1% of consolidated cost of goods sold. In 1999 butterfat pricing
returned to 1997 levels.
Expenses and Other Income
- -------------------------
Advertising and sales promotion for 1999 was consistent with 1998 in
absolute dollars, but as a percent of sales, decreased from 25.3% in 1998 to
24.4% in 1999. Management's intent to increase spending under its previously
announced Growth and Restructuring Plan was curtailed as a result of the
Company's September 1999 announcement of its intention to explore a possible
sale of the Company.
Selling, general and administrative expenses decreased in 1999 by $144,000
or 1.7% despite bonus payments of approximately $550,000 (as compared to
$115,000 in 1998). In 1998, these expenses decreased $1,095,000 or 11.7% after a
decrease of $960,000 or 9.3% in 1997. These decreased expenditures are a result
of management's continued focus on cost control initiatives.
During 1999, the Company incurred $1.8 million of restructuring and other
special charges.
The Company incurred approximately $1,223,000 in expenses related to the
analysis of strategic alternatives, the development of the Company's Growth and
Restructuring Plan and management's pursuit of a possible sale of the Company in
whole or in parts. $433,000 of these charges relate to partial payments of
retention incentives intended to maintain the employment of key personnel during
uncertain times. The remaining costs consist primarily of legal, investment
banking, and other professional services.
The Company undertook two reduction-in-force programs in the first half of
the year to reduce overhead expenses, resulting in restructuring charges of
approximately $191,000.
In March 1999, the Company discontinued certain non-core manufacturing
operations and terminated the employment of seven production employees at its
Bloomfield, New Jersey packaging plant who were not involved in the production
of products for the Company's licensing businesses. As a result, the Company
incurred related severance costs of approximately $105,000, all of which has
been paid. As a result of this action, profitability in the Packaging Division,
exclusive of the severance costs, improved by approximately $350,000 over 1998
results.
During the second quarter of 1999, the Company eliminated two vacant
positions and terminated the employment of six employees located at the
Company's corporate headquarters. The severance costs associated with these
terminations totaled approximately $86,000; however, when combined with the
savings from the eliminated positions, these actions are anticipated to provide
annualized savings of approximately $300,000 per year.
The Company incurred approximately $394,000 of proxy contest related
expenses, including legal and other professional service fees and administrative
expenses associated with the Company's delayed annual meeting of shareholders in
1999.
13
<PAGE>
During the third quarter of 1997, the Company consolidated its flavors
production in New Berlin, Wisconsin. In connection with the consolidation, the
Company discontinued flavors operations in Los Angeles, California, terminated
the employment of the plant's 14 employees and sold the plant facility.
Included in income from restructuring activities is an approximate $1,000,000
gain from the sale of plant assets offset primarily by approximately $300,000 of
employee severance expenses. The Company used a portion of the proceeds from
the sale of the Los Angeles facility to complete an expansion of the New Berlin
facility. The New Berlin expansion, which cost approximately $800,000, provides
the necessary capacity to serve the Company's current and expected business
requirements at costs which are lower than operating two plants.
During the fourth quarter of 1997, the Company completed a restructuring of
its operations into a divisional operating unit alignment. In connection with
this restructuring, two senior level employees were terminated with severance
benefits of approximately $215,000. In addition, $200,000 of previously incurred
severance and other special costs associated with the Company's 1997
restructuring activities were offset against the income recognized from the
flavors consolidation. The Company also recorded $593,000 of restructuring
charges during the third quarter of 1996, relating to severance commitments
associated with a change in executive management. All severance commitments
associated with the above restructuring activities had been paid as of December
31, 1998.
Seasonality
- -----------
The frozen novelty industry is seasonal with sales concentrated in the
summer months. Because the Company supplies packaging and ingredients to
manufacturers of its licensed and sublicensed products, the Company has a higher
level of sales preceding and during the summer months.
The following table provides two years of unaudited quarterly financial
data:
<TABLE>
<CAPTION>
For the 1999 quarter ended March 31 June 30 Sept 30 Dec 31
- ----------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $16,129 $22,146 $15,686 $12,491
Gross profit 6,846 10,431 6,862 3,656
Net income (loss) 232 1,399 105 (900)
Per share
Basic 0.07 0.40 0.03 (0.26)
Assuming dilution 0.07 0.40 0.03 (0.26)
</TABLE>
<TABLE>
<CAPTION>
For the 1998 quarter ended March 31 June 30 Sept 30 Dec 31
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Net sales $16,031 $20,114 $15,179 $12,168
Gross profit 6,530 9,062 6,154 4,336
Net income (loss) 201 1,049 65 (520)
Per share
Basic 0.06 0.30 0.02 (0.15)
Assuming dilution 0.06 0.30 0.02 (0.15)
</TABLE>
1999 gross profit includes special charges of approximately $1.8 million as
discussed under the caption Expenses and Other Income above. These special
charges, after related tax benefits, reduced 1999 net income by approximately
$1.1 million or $0.33 per share.
As discussed under the caption Net Sales and Gross Profit above, the
Company recorded $600,000 of past due rental income in the fourth quarter of
1998 and approximately $80,000 of incremental expenses associated with the
previously announced decision to explore strategic alternatives. Combined, these
two items provided additional net income of $325,000 ($0.09 per share) after
related tax effects.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
- ----------------------------------------------
14
<PAGE>
The Company's utilization of licensees in its national branded novelty
business allows it to operate with relatively low capital requirements. The
Company's licensing strategy reduces working capital requirements to that
necessary to support advertising, sales promotion and administrative activities
rather than the much larger amounts that would be required to support the self-
manufacture of finished consumer goods. Working capital requirements generally
precede the seasonal pattern of the Company's sales. The Company believes that
the cash generated from operations and funds available under its credit
agreements provide the Company with sufficient funds and the financial
flexibility to support its ongoing business.
The Company's principal customers are seven licensee dairies, who account
for approximately 60% of the Company's net sales. Each licensee operates within
geographic territorial boundaries under agreements which generally include three
year terms subject to termination by the Company for quality control violations,
failure to meet minimum volume requirements or material changes in the Company's
ownership or the licensee's business. These agreements provide for six to twelve
month transition periods in the event of termination. Beginning in 1999,
licensees were required to contribute to trade promotion spending and make
separate quarterly payments to the Company for licensing royalty fees which are
expected to aggregate to $1,040,000 annually through 2001.
The Company's licensing strategy allows it to manage a strong licensee base
which it can actively monitor to minimize the impact of an unforeseen loss of
any of its licensees. The loss of one or more of these major licensees could
cause some disruption in the Company's operations, although, based upon prior
experience with replacing major licensees, management believes it could locate a
suitable replacement within a short period of time and, as a result, such
customer loss would not have a significant impact on the Company's operations,
liquidity or capital resources.
During the third quarter of 1998, the Company extended its licensing
agreement with Welch Foods, Inc. (Welch's). Under the agreement, the Company
will continue to provide product development, sales, marketing and production
support for the Welch's Fruit Juice Bars which the Company has managed since
1980. The extended licensing agreement continues through the year 2008 and
provides for enhanced opportunities for new product development under the
Welch's trademark. The Company paid Welch's approximately $800,000 in August
1998 as partial payment against a total of $1,500,000 license fees payable over
the term of the license. There are no guaranteed or required payments under the
license and certain termination clauses exist which would preclude payment of
the balance of the license fees.
As partial consideration in connection with the 1994 acquisition of Sugar
Creek Foods, the Company issued $3,800,000 in convertible subordinated notes
payable to the former Sugar Creek Foods shareholders. These notes became due in
February 1999. Payment of the subordinated debt was initially funded under the
Company's committed line of credit. By December 31, 1999 the balance on the
line of credit had been paid in full, with cash flows provided by the Company's
operations.
On May 20, 1999, the Company renewed its $10 million committed line of
credit, which is now available for general corporate purposes through April
2001. Borrowings under the line bear interest at the lender's overnight money
market rate plus 100 basis points.
In September 1999, the Company's Board of Directors voted to suspend the
quarterly dividend payments indefinitely. The Board's decision to suspend its
dividend was made in light of the Company's decision to pursue all strategic
alternatives to maximize shareholder value, including a possible sale of the
Company as a whole or one or more sales of the Company's strategic assets.
Management believes that the elimination of the dividend will enhance the
Company's financial flexibility as it pursues a possible sale of the Company.
At this time, the Board of Directors has no plans to reinstate the
quarterly dividend payments. The declaration of dividends is subject to the
discretion of the Company's Board of Directors, based on
15
<PAGE>
the general business conditions encountered by the Company, as well as the
financial condition, earnings and capital requirements of the Company and other
factors deemed relevant by the Board.
The Company believes that the annual cash generated from operations and
funds available under its credit agreements will provide the Company with
sufficient funds and the financial flexibility to support its ongoing business,
strategic objectives and debt repayment requirements.
IMPACT OF YEAR 2000
Considerable attention was given to the effect of the Year 2000 (Y2K) on
various computer systems. This concern stemmed from the inability of certain
computerized applications and devices (hardware, software and equipment) to
process dates after December 31, 1999. The Company's efforts to address the Y2K
Problem consisted of the implementation of new management information systems,
review of other internal systems and equipment and inquiries of external trading
partners (key licensees, customers, suppliers and service providers). As a
result of these efforts, the Company has experienced no significant disruptions
in business related to Year 2000 issues. The Company will continue to monitor
its mission critical computer applications and those of its suppliers and
vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
The Company's implementation of its new management information systems was
divided into two phases. One phase of the project was the installation and
continued integration of the Company's plant production management system. This
phase of the project, which is not critical to the Company's Y2K capabilities,
has been slowed as a result of the Company's decision to seek a sale of the
Company in whole or in parts. The other phase related to the implementation of
newly acquired software was completed prior to the end of the year. This new
software is now being used by the Company to run its daily financial operations.
Project expenditures relating to the new management information systems of
approximately $1.9 million have been capitalized under the provisions of the
AICPA's Statement of Position 98-1 and will be amortized to expense over the
expected useful life.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes that its exposure to market risks is not
material.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the year ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------
(In thousands, except Per Share Data)
<S> <C> <C> <C>
Net sales $ 66,452 $ 63,492 $ 66,392
Cost of products sold 38,657 37,410 39,682
-------------------------------------
Gross profit 27,795 26,082 26,710
Advertising and sales promotion expenses 16,195 16,074 17,136
Selling, general and administrative expenses 8,109 8,253 9,348
(Income) expense from restructuring activities 191 - (272)
Expense from analysis of strategic alternatives 1,223 - -
Expense from proxy contest 394 - -
-------------------------------------
Operating income 1,683 1,755 498
Interest (income)/expense and other-net 356 493 508
Gain (loss) on disposal of fixed assets - - 184
-------------------------------------
Income (loss) before income taxes 1,327 1,262 174
Income tax expense 491 467 66
-------------------------------------
Net income $ 836 $ 795 $ 108
=====================================
Per Share Data
Basic:
Weighted average number of common shares outstanding 3,463,211 3,458,394 3,456,180
Net income $ 0.24 $ 0.23 $ 0.03
=====================================
Assuming dilution:
Weighted average number of common shares outstanding 3,463,211 3,462,677 3,461,867
Net income $ 0.24 $ 0.23 $ 0.03
=====================================
</TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
(In thousands, except share data) Shares Amount Capital Earnings Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 3,447,573 $3,448 $4,168 $14,854 $22,470
Net income 108 108
Cash dividends ($0.20 per share) (692) (692)
Issuance of common stock 10,429 10 115 125
Compensation from stock option grant 70 70
----------------------------------------------------------------
Balance at December 31, 1997 3,458,002 3,458 4,353 14,270 22,081
Net income 795 795
Cash dividends ($0.20 per share) (691) (691)
Issuance of common stock 595 1 7 8
Compensation from stock option grant 33 33
----------------------------------------------------------------
Balance at December 31, 1998 3,458,597 $3,459 $4,393 $14,374 $22,226
Net income 836 836
Cash dividends ($0.10 per share) (346) (346)
Issuance of common stock 5,452 5 56 61
Compensation from stock option grant 19 19
----------------------------------------------------------------
Balance at December 31, 1999 3,458,597 $3,464 $4,468 $14,864 $22,796
================================================================
</TABLE>
CONSOLIDATED BALANCE SHEETS
17
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1999 1998
- -------------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,751 $ 530
Receivables 6,057 6,817
Inventories 4,032 4,897
Prepaid expenses 557 889
----------------------
Total current assets 12,397 13,133
Property, plant and equipment - net 6,578 7,665
Goodwill and other intangibles 16,598 17,645
Other assets 913 1,645
----------------------
Total assets $ 36,486 $ 40,088
======================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,208 $ 2,875
Accrued advertising and promotion 2,217 1,728
Accrued compensation and related amounts 1,033 211
Other accrued expenses 1,038 657
Current portion of long term debt 972 1,317
----------------------
Total current liabilities 8,468 6,788
Long term debt 2,929 3,901
Convertible subordinated notes - 3,800
Postretirement benefits and other liabilities 2,293 3,373
Shareholders' equity:
Preferred stock, $1.00 par value; 1,000,000 shares authorized,
none issued and outstanding - -
Common stock, $1.00 par value; 10,000,000 shares authorized,
3,464,050 issued and outstanding in 1999 and 3,458,597 in 1998 3,464 3,459
Additional capital 4,468 4,393
Retained earnings 14,864 14,374
----------------------
Total shareholders' equity 22,796 22,226
----------------------
Total liabilities and shareholders' equity $ 36,486 $ 40,088
======================
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the year ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 836 $ 795 $ 108
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,296 1,560 1,426
Amortization 1,116 1,097 1,086
Gain on disposal of fixed assets - - (1,183)
Compensation from stock option grant 19 33 70
Change in deferred income taxes and other assets 419 451 (69)
Change in postretirement benefits and other liabilities (1,132) 136 (333)
Change in receivables 761 (1,496) (1,270)
Change in inventories and prepaid expenses 1,359 (729) 3,836
Change in accounts payable and accrued expenses 2,023 (531) (2,762)
--------------------------------
Net cash provided by operating activities 6,697 1,316 909
Investing activities
Acquisition of intangible assets - (975) (587)
Capital expenditures (610) (1,334) (1,413)
Proceeds from disposal of fixed assets 401 - 1,994
Other 147 178 464
--------------------------------
Net cash (used in) provided by investing activities (62) (2,131) 458
Financing activities
Borrowings under long term credit facility 3,800 - 1,150
Redemption of convertible subordinate notes (3,800)
Principal payments on long term debt (5,117) (1,317) (615)
Issuance of common stock 49 - -
Cash dividends (346) (691) (692)
--------------------------------
Net cash used in financing activities (5,414) (2,008) (157)
--------------------------------
Change in cash and cash equivalents 1,221 (2,823) 1,210
Cash and cash equivalents at beginning of year 530 3,353 2,143
--------------------------------
Cash and cash equivalents at end of year $ 1,751 $ 530 $ 3,353
================================
Income tax payments (recoveries) $ - $ 150 $(1,632)
================================
Interest payments $ 437 $ 567 $ 636
================================
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
The Company, which operates primarily in the United States, markets and
manufactures through its own plants and licensed dairies a broad range of frozen
novelties, frozen yogurt, ice cream and sorbet products under the Eskimo Pie,
RealFruit, Welch's, Weight Watchers, Smart Ones, SnackWell's and OREO brand
names. The Company also continues to manufacture ingredients and packaging for
sale to the dairy industry.
Principles of Consolidation: The accounts of the Company and its wholly-owned
subsidiaries are included in the consolidated financial statements after
elimination of all material intercompany balances and transactions.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents and Investments: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. The carrying amount of cash equivalents approximates fair value
because of the short maturity of those investments. Investments with maturities
beyond three months are carried at fair value.
Inventories: Inventories are stated at the lower of cost or market. The cost
of inventories is determined by the last-in, first-out (LIFO) method except for
approximately $650,000 of inventories at December 31, 1999 and $625,000 in 1998
which were determined by the first-in, first-out (FIFO) method. LIFO
liquidations reduced cost of goods sold by $118,000 in 1999 and $120,000 in
1997.
Inventories are classified as follows:
<TABLE>
<CAPTION>
As of December 31, 1999 1998
- -------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Finished goods $ 2,667 $ 3,294
Raw materials and packaging supplies 2,286 2,642
-------- --------
Total FIFO inventories 4,953 5,936
Reserve to adjust inventories to LIFO (921) (1,039)
-------- --------
$ 4,032 $ 4,897
======== ========
- -------------------------------------------------------------------------------------------
</TABLE>
Property, Plant, and Equipment : Property, plant and equipment is stated at
cost and consists of the following:
<TABLE>
<CAPTION>
As of December 31, 1999 1998
- -------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Land $ 679 $ 630
Buildings 5,315 5,304
Machinery and equipment 11,070 10,789
Equipment leased or loaned to customers 2,400 3,727
-------- --------
19,464 20,450
Less accumulated depreciation and amortization (12,886) (12,785)
-------- --------
$ 6,578 $ 7,665
======== ========
- -------------------------------------------------------------------------------------------
</TABLE>
Development and implementation costs for purchased and internally developed
software are capitalized in accordance with AICPA Statement of Position 98-1,
"Accounting for the Costs of Computer Software Development for or Obtained for
Internal Use." At December 31, 1999 and
20
<PAGE>
1998, capitalized software costs included in machinery and equipment above
amounted to $1.9 million and $1.5 million, respectively. Depreciation and
amortization are provided by the straight line method over the estimated useful
lives of the assets which is generally 30 years for buildings, and five to ten
years for machinery and equipment, five to seven years for computer software and
three years for computer hardware.
Goodwill and Other Intangibles: Goodwill, which represents the excess of the
purchase price of acquired companies over the fair value of the net assets
acquired, is amortized on a straight line basis over 40 years. Other
intangibles include costs associated primarily with trademarks, sub-licensed
brand names and carton development and are amortized on a straight line basis
over periods which range from four to twenty years. Accumulated amortization at
December 31, 1999 and 1998 was approximately $3,691,000 and $2,831,000,
respectively.
The Company periodically evaluates the recoverability of material components of
goodwill and other intangibles based on expected undiscounted cash flows. Any
impairment in value would be charged to earnings in the year recognized. The
Company believes that no impairment of value exists as of December 31, 1999.
Revenue Recognition: The Company records sales when products are shipped from
its manufacturing facilities or those of its "drop ship" vendors. No right of
return exists. The Company also accrues licensing fees as they are earned based
upon the terms of the respective licensing agreements.
Advertising and Sales Promotion Expenses: The Company generally expenses
advertising and sales promotion costs in the period incurred. There were no
material capitalized advertising and sales promotion costs as of December 31,
1999 and 1998.
Product Development and Quality Control Costs: Costs for product development
and quality control, which are performed by the same personnel, are expensed as
incurred and were approximately $1,265,000 in 1999, $1,300,000 in 1998 and
$1,350,000 in 1997.
Stock Options: The Company accounts for stock options granted under incentive
stock plans in accordance with Accounting Principles Board Opinion No. 25 (APB
25), "Accounting for Stock Issued to Employees" and related interpretations.
New Accounting Standards: In 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement requires the
recognition of all derivatives on the balance sheet at fair value. This
statement is effective for the Company in 2001 and is not expected to materially
affect the consolidated balance sheet or statement of income.
Reclassifications: Certain amounts in the prior year financial statements have
been reclassified to conform with current presentation.
NOTE B - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1999,
the Company had $432,000 ($272,000 in 1998) of current deferred tax assets
included in prepaid expenses and $8,000 of long term deferred tax liabilities
included in postretirement benefits and other liabilities. At December 31,
1998, the Company had $567,000 of long term deferred tax assets included in
other assets.
The significant components of deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
As of December 31, 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
21
<PAGE>
<TABLE>
(In thousands)
<S> <C> <C>
Assets:
Bad Debt Reserves $ 95 $ 29
Inventory 238 86
Accrued postretirement benefits 718 1,277
Net operating loss carryforwards 397 429
Other amounts 204 379
------- -------
1,652 2,200
Liabilities:
Depreciation and amortization (1,228) (1,137)
Other amounts - (224)
------- -------
(1,228) (1,361)
Total deferred tax assets $ 424 $ 839
======= =======
- ----------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, there is approximately $397,000 of tax benefits
associated with approximately $1,030,000 of net operating loss (NOL)
carryforwards which expire in 2011. No valuation allowance has been recorded
against the benefits associated with the NOL as the Company believes it will
generate sufficient taxable income in the future to ensure realization of the
tax benefit.
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
For the year ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal 51 $ ( 23) $ 165
State 9 (3) 36
----- ------- -------
80 (26) 201
Deferred:
Federal 341 436 (111)
State 73 57 (24)
----- ------- -------
414 493 (135)
----- ------- -------
Total income tax provision $ 494 $ 467 $ 66
===== ======= =======
- ----------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of federal statutory and effective income tax rates is as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
For the year ended December 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
Effect of
State taxes 1.4 4.6 4.4
Permanent differences and other 1.6 (1.6) (.5)
---- ---- ----
Effective income tax rate 37.0% 37.0% 37.9%
==== ==== ====
- ----------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
NOTE C - FINANCING ARRANGEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Long Term Debt Carrying Amount
----------------------------
As of December 31, 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
(In thousands)
Revolving credit facility $3,786 $ 4,643
(variable interest rate, currently 7.0%)
Long term line of credit 115 575
(variable interest rate, currently 6.6%)
Convertible subordinated notes ___ 3,800
------ -------
(4.5% interest rate)
3,901 9,018
Less current maturities (972) (1,317)
------ -------
$2,929 $ 7,701
====== =======
- --------------------------------------------------------------------------------------------------------
</TABLE>
Based upon prevailing interest rates and after consideration of credit
risk, the carrying value of the Company's long term debt is a fair approximation
of market value. Interest expense for 1999, 1998 and 1997 was $437,000,
$591,000 and $606,000, respectively.
In 1994, the Company entered into a $6,000,000, ten year revolving credit
facility with a commercial bank which provided for renewable loans with required
principal reductions beginning in June 1997. Under the terms of the agreement,
the Company will retire the loan over the seven year period ending June 2004.
Except for the amounts due in 2000, the Company has classified all of this loan
as long term debt based upon its ability and intention to defer payment past
2000.
During 1997, the Company borrowed $1,150,000 under one of the Company's
existing long term lines of credit to finance the acquisition of computer
hardware and software. Borrowings under the line bear interest at the 30 day
LIBOR rate plus 100 basis points and will be repaid in equal monthly
installments through April 2000.
As partial consideration in connection with the 1994 acquisition of Sugar
Creek Foods, the Company issued $3,800,000 in convertible subordinated notes to
the former Sugar Creek Foods' shareholders. These notes, which became due in
February 1999, were classified as long term debt at December 31, 1998 as the
Company had the intent and ability to refinance the notes on a long-term basis.
In February 1999, the Company refinanced the $3.8 million note payment by
transferring the amount to its $10 million committed line of credit discussed
below. During 1999 the Company used cash generated from operations to pay off
the $3.8 million balance. The Company had previously reserved 162,567 shares of
its common stock for conversion of the notes (at $23 3/8 per share).
During 1999, the Company renewed its $10,000,000 committed line of credit
which is available for general corporate purposes through April 2001.
Borrowings under the line bear interest at the bank's overnight money market
rate plus 75 basis points. At December 31, 1999, there were no borrowings under
the line.
The revolving and committed credit agreements impose, among other things,
certain requirements on the ratio of total debt to net worth, the maintenance of
minimum shareholders' equity and minimum interest coverage. No assets are
pledged as security under these agreements.
The combined aggregate amount of the scheduled maturites for all long term debt
is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$972 $ 857 $ 857 $ 857 $ 358
- --------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
NOTE D - SHAREHOLDERS' EQUITY
Stock Options
Under the Company's Incentive Stock Plans (the Plans), key employees and
non-employee directors of the Company may receive grants and awards of up to a
total of 425,000 shares of stock options, stock appreciation rights and
restricted stock.
Stock options are generally granted at a price not less than the fair
market value on the date the options are granted, become exercisable at various
intervals which generally range from the date of grant to four years after the
date of the grant and expire after ten years. Effective January 7, 1999, the
Board of Directors authorized that all outstanding option agreements be amended
to be immediately vested upon a corporate change of control (as defined).
The details of stock option activity are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
Range of Weighted Average
Number of Shares Exercise Prices Exercise Price
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997
Outstanding, beginning of year 138,227 17.00 - 21.25 18.60
Granted at fair market value 125,986 10.88 - 12.50 12.49
Granted at less than fair market value 50,000 10.00 10.00
Cancelled 92,874 12.50 - 20.50 17.53
Outstanding, end of year 221,339 10.00 - 21.25 13.63
Exercisable, end of year 61,236 10.00 - 21.25 15.57
1998
Granted 81,000 13.38 - 14.50 13.39
Cancelled 58,233 10.88 - 21.25 16.45
Outstanding, end of year 244,106 10.00 - 21.25 12.87
Exercisable, end of year 55,569 10.00 - 21.25 13.25
1999
Granted 96,700 10.44 - 13.25 13.22
Cancelled 45,012 12.50 - 13.38 13.04
Outstanding, end of year 295,794 10.00 - 21.25 12.96
Exercisable, end of year 132,232 10.00 - 21.25 12.92
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Included in the amounts shown above is the effect of certain modifications
made to prior year awards during 1997. On March 4, 1997, the Board of Directors
approved a plan whereby employee stock options on a total of 48,100 shares with
a weighted average exercise price of $18.51 were exchanged for 37,486 shares of
repriced options with an exercise price of $12.50 per share. The repriced and
forfeited options, which had an equivalent value under the Black-Scholes Option
Pricing Model, are included in the 1997 "Granted at fair market value" and
"Cancelled" captions, respectively, in the above table.
On March 4, 1997, the Company also awarded 50,000 shares of stock options
at a $2.50 discount to the then fair market value of $12.50 per share. This
discount-to-market is being expensed over a three year graded scale consistent
with the terms upon which the options become exercisable. As a result of this
award, amounts expensed under this plan were approximately $19,000 in 1999,
$33,000 in 1998, and $70,000 in 1997.
As permitted by the provisions of Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock Based Compensation", the
Company continues to follow APB 25 and related interpretations in accounting for
its stock based awards. As stock options are generally issued at the fair
market value on the date of grant, the Company does not recognize compensation
cost related to its stock option plans except as discussed above as it relates
to stock option grants with exercise prices which were less than the fair market
value on the date of the grant.
24
<PAGE>
The following information is provided solely in connection with the
disclosure requirements of SFAS 123. If the Company had elected to recognize
compensation expense related to its stock options in accordance with the
provisions of SFAS 123, the additional costs from options granted since 1995
would have resulted in a pro forma net income of $ 515,000 in 1999 ($0.15 per
share), $564,000 in 1998 ($0.16 per share), and a pro forma loss of $119,000 in
1997 ($0.03 per share). These pro forma amounts are not indicative of the future
effects of applying the provisions of SFAS 123 since the respective vesting
periods are used to measure each respective period's pro forma compensation
expense.
The weighted average fair value of options granted in 1999, 1998 and 1997
was $5.51, $5.16 and $5.47 per share, respectively. The fair values were
estimated at the date of grant using the Black-Scholes Option Pricing Model with
the following weighted-average assumptions:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the year ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Volatility factor .371 .319 .333
Risk free interest rate 4.74% 5.69% 6.49%
Dividend yields 1.5% 1.5% 1.6%
Expected life (years) 7.9 7.2 7.1
- -------------------------------------------------------------------------------
</TABLE>
As of December 31, 1999, the weighted average remaining contractual life of
all outstanding stock options was 7.8 years.
The Company has also granted the following restricted stock awards in
accordance with the Plans:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the year ended December 31, 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of shares issued 1,200 1,000 11,000
Weighted average fair value $10.44 $14.13 $ 12.35
- -------------------------------------------------------------------------------
</TABLE>
At December 31, 1999, approximately 85,000 shares were available for future
grants under the Plans.
Earnings Per Share
The following table sets forth the computation of earnings per share:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 836,000 $ 795,000 $ 108,000
========== ========== ==========
Weighted average number of common shares outstanding 3,463,211 3,458,394 3,456,180
Dilutive effect of stock options - 4,283 5,687
---------- ---------- ----------
Weighted average number of common shares outstanding assuming
potential dilution 3,463,211 3,462,677 3,461,867
========== ========== ==========
Basic earnings per share $ 0.24 $ 0.23 $ 0.03
========== ========== ==========
Earnings per share - assuming dilution $ 0.24 $ 0.23 $ 0.03
========== ========== ==========
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 296,000 shares in 1999, 193,000 shares in 1998 and
170,000 shares in 1997 were not considered for their dilutive effect because the
exercise price of the options exceeded the average market price for the
respective year, and as such, the effect would be anti-dilutive.
25
<PAGE>
Additional disclosure concerning the convertible subordinated notes is
provided in Note C to the Consolidated Financial Statements. The effect of the
assumed conversion was not considered for its dilutive effect in any of the
years presented as the conversion would have been anti-dilutive.
Shareholder Rights Plan
In January 1993, the Board of Directors approved the adoption of the
Shareholder Rights Agreement wherein, effective February 5, 1993, one Right
attaches to and trades with each share of Common Stock. Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share
(Unit) of Series A Junior Participating Preferred Stock, par value $1.00 per
share. The Company has designated 100,000 shares of its Preferred Stock as
Series A Junior Participating Preferred Stock. The exercise price per Right is
$75.00, subject to adjustment. Each Unit of Preferred Stock is structured to be
the equivalent of one share of Common Stock.
The Rights are initially exercisable to purchase one Unit of Preferred
Stock at the exercise price only if a person or group (Acquiring Person)
acquires 20% or more of the Company's Common Stock or announces a tender offer
for 20% or more of the outstanding Common Stock at which time the Rights detach
and trade separately from the Common Stock. At any time thereafter, the Company
may issue 1.5 shares of Common Stock in exchange for each Right other than those
held by the Acquiring Person. Generally, if an Acquiring Person acquires 30% or
more of the Company's Common Stock or an Acquiring Person merges into or
combines with the Company, or if the Company is acquired in a merger or other
business combination in which it does not survive, or if 50% of its earnings
power or assets is sold, each Rights holder other than the Acquiring Person may
be entitled, upon payment of the exercise price, to purchase securities of the
Company or the surviving company having a market value equal to twice the
exercise price. The Rights, which do not have voting privileges, expire in 2003,
but may be redeemed under certain circumstances by the Board prior to that time
for $.01 per Right.
NOTE E - RETIREMENT PLANS
The Company currently maintains two defined benefit pension plans covering
substantially all salaried employees. These plans provide retirement benefits
based primarily on employee compensation and years of service. In addition, the
Company entered into an agreement with Reynolds Metals Company to indemnify the
cost of retiree health care and life insurance benefits for salaried employees
of the Company who had retired prior to April 1992. Under the agreement, the
Company may elect to prepay the Company's remaining obligation. The Company does
not provide postretirement health and life insurance benefits for employees who
retire subsequent to April 1992. The above mentioned plans are collectively
referred to as the "Plans."
The following table reconciles the changes in benefit obligations and plan
assets in 1999 and 1998, and reconciles the funded status to accrued benefit
cost at December 31, 1999 and 1998:
26
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
---------------- --------------
For the year ended December 31, 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year $2,052 $1,672 $2,542 $2,397
Service cost 283 268 - -
Interest cost 143 116 119 116
Actuarial (gain)/loss (409) 13 54 29
Benefit payments (44) (17) 649 -
-------------------------- --------------------------
Benefit obligation at end of year 2,025 2,052 2,066 2,542
-------------------------- --------------------------
Change in Plan assets:
Fair value of Plan assets at beginning of year 1,863 1,592 - -
Actual return on Plan assets 226 196 - -
Employer contributions 20 92 - -
Benefit payments (44) (17) - -
-------------------------- --------------------------
Fair value of Plan assets at end of year 2,065 1,863 - -
-------------------------- --------------------------
Funded status:
Benefit obligations in excess of Plan assets (40) 189 2,006 2,542
Unrecognized actuarial gains 766 285 186 300
-------------------------- --------------------------
Accrued benefit cost $ 726 $ 474 $2,252 $2,842
========================== ==========================
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company funds its ERISA qualified defined benefit plan in accordance with
guidelines established by the U.S. Department of Labor and limitations under
federal income tax regulations. Other benefit plans are funded as benefit
payments are required. The projected and accumulated benefit obligation for the
Company's unfunded, non-qualified, defined benefit pension plan were $459,000
and $337,000, respectively, as of December 31, 1999 ($400,000 and $245,000,
respectively, in 1998). At December 31, 1999 and 1998, accrued benefit costs of
$2,197,000 and $3,316,000 are included in postretirement benefits and other
liabilities; accrued benefit costs of $781,000 are included in current
liabilities at December 31, 1999.
The following table provides the components of the net periodic benefit cost:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
------------------ ----------------
For the year ended December 31, 1999 1998 1997 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Service cost $ 283 $ 268 $ 294 $ - $ - $ -
Interest cost 143 116 100 118 116 126
Expected return on Plan assets (149) (127) (101) - - -
Recognized net actuarial gain (7) (2) (2) - (83) (69)
---------------------------------------------------------
Net period benefit cost $ 270 $ 255 $ 291 $ 118 $ 33 $ 57
=========================================================
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The assumptions used in the measurement of the Company's benefit obligations
are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation, beginning of year 7% 7% 7.75% 7.25%
Rate of compensation increase, end of year 5% 5%
Expected return on plan assets, during the year 8% 8%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The weighted average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) is 6.50% for 2000 and is
assumed to decrease to 5% by 2003 and remain at that level thereafter. A one
percentage point increase or decrease in the assumed health care cost trend rate
would change the accumulated postretirement benefit obligation by approximately
$100,000 and the net periodic postretirement benefit cost by
27
<PAGE>
approximately $10,000. The Company recognizes 20% of deferred postretirement
gains or losses annually.
The Company also sponsors a defined contribution plan which covers
substantially all salaried and hourly employees. Company contributions are
generally determined as a percentage of the covered employees' contributions up
to 3% of the employees' annual salary. Amounts expensed under this plan were
approximately $109,000 in 1999, $129,000 in 1998 and $140,000 in 1997.
NOTE F - BUSINESS SEGMENTS
Effective January 1, 1998, the Company began operating under a divisional
structure aligned with separate lines of business based on the types of products
sold. Prior to 1998, the Company was operated as a single business segment under
a functional management structure (i.e. sales, production). Under the former
alignment, sales were reported and reviewed by product line but costs and assets
were aggregated on a corporate basis without reference to the respective
products. Therefore, complete segment information required by Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," is provided for 1999 and 1998, however only
sales is provided for 1997 as other financial data was not previously captured
with adequate detail to allow for accurate restatement.
The Company's reportable segments are separate divisions that offer
different products although customers are often served by more than one segment
(primarily as it relates to the National Brands, Flavors and Packaging division
customers). The National Brands division sells proprietary flavorings,
ingredients and packaging used in the licensed production of the Company's
nationally branded frozen novelties and other ice cream products. The Flavors
division blends, cooks and processes basic flavors and fruits to produce
products which subsequently are used by the Company's customers to flavor frozen
desserts, ice cream novelties and fluid dairy products. The Foodservice division
sells soft serve yogurt and premium ice cream mix to foodservice distributors.
The Other segment consists primarily of amounts relating to the Company's
Packaging division which sells flexible packaging to dairies for their frozen
novelty products. The Company generally does not require collateral or other
security from its licensees and customers.
Management measures divisional operating performance based on operating
profit before selling, general and administrative expenses. Operating profit for
the National Brands and Flavors divisions include the effects of $570,000 in
1999 and $600,000 in 1998 of inter-segment cost allocations associated with the
Flavors division's production of National Brands flavors and ingredients. This
inter-segment charge, which has no net effect on consolidated profitability,
increases Flavors' profitability with an offsetting decrease in the National
Brands profitability.
Segment assets include receivables (1999 only), inventories; property,
plant and equipment; and goodwill and other intangibles. All other assets are
managed on a corporate basis and are not considered in divisional analysis. The
accounting policies for each of the business segments are the same as those
described in the summary of significant accounting policies.
28
<PAGE>
<TABLE>
<CAPTION>
National
Business Segments Brands Flavors Foodservice Other Totals
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
1999 Segment Data
- -----------------
Sales $ 42,113 $ 13,181 $ 9,477 $ 1,681 $ 66,452
Depreciation and amortization expense 950 354 621 119 2,044
- ------------------------------------------------------------------------------------------------------------------------------
Corporate expense 368
---------
Total depreciation and amortization expenses $ 2,412
Segment profitability $ 7,500 $ 2,210 $ 1,914 $ (24) $ 11,600
- ------------------------------------------------------------------------------------------------------------------------------
Selling, general and
administrative expenses 8,109
Restructuring and other special charges 1,808
Interest income & expenses - net 356
---------
Income before income taxes $ 1,327
=========
Identifiable assets $ 12,229 $ 6,720 $ 12,377 $ 685 $ 32,011
- ------------------------------------------------------------------------------------------------------------------------------
Corporate assets 4,475
---------
Total assets $ 36,486
=========
Capital Expenditures $ 30 $ 202 $ 164 $ - $ 396
- ------------------------------------------------------------------------------------------------------------------------------
Corporate expenditures 214
---------
Total capital expenditures $ 610
=========
1998 Segment Data
- -----------------
Sales $ 41,648 $ 12,040 $ 8,127 $ 1,677 $ 63,492
Depreciation and amortization expense 1,045 363 742 122 2,272
- ------------------------------------------------------------------------------------------------------------------------------
Corporate expense 385
---------
Total depreciation and amortization $ 2,657
=========
Expenses
Segment profitability $ 7,054 $ 1,559 $ 1,848 $ (453) $ 10,008
- ------------------------------------------------------------------------------------------------------------------------------
Selling, general and
administrative expenses 8,253
Interest income & expenses - net 493
---------
Income before income taxes $ 1,262
=========
Identifiable assets $ 9,767 $ 4,773 $ 12,379 $ 991 $ 27,910
- ------------------------------------------------------------------------------------------------------------------------------
Corporate assets 12,178
---------
Total assets $ 40,088
=========
Capital Expenditures $ 145 $ 639 $ 256 $ 95 $ 1,135
- ------------------------------------------------------------------------------------------------------------------------------
Corporate expenditures 199
---------
Total capital expenditures $ 1,334
=========
1997 Segment Data
- -----------------
Sales $ 44,428 $ 12,319 $ 8,164 $ 1,481 $ 66,392
=========================================================================
</TABLE>
Due to the nature of the Company's licensing operations, four of the
licensee dairies individually account for over 10% of the Company's total net
sales. These four customers, in the aggregate, account for approximately 50% of
annual net sales, most of which occur within the National Brands division. Based
upon prior experience, management believes it could find a suitable replacement
for the loss of any of its licensees and, as a result, such loss would not have
a significant effect on the Company's operations, liquidity or capital
resources.
29
<PAGE>
NOTE G - INCOME (EXPENSE) FROM RESTRUCTURING AND OTHER ACTIVITIES
During 1999, the Company incurred $1,808,000 in restructuring and other
special charges, associated with three separate activities.
The Company incurred approximately $1,223,000 in costs associated with its
examination of strategic alternatives to enhance shareholder value, the
development of the Company's Growth and Restructuring Plan and the Company's
pursuit to sell the Company in whole or in parts. $433,000 of these costs relate
to retention bonuses to be paid to certain key employees for their continued
employment. The remaining costs consist primarily of legal, investment banking,
additional directors fees and other professional fees associated with continued
due diligence efforts of potential buyers of the Company.
The Company executed two programs to reduce overhead expenses. During the
first quarter of 1999, the Company discontinued certain non-core manufacturing
operations and terminated the employment of seven production employees at its
Bloomfield, New Jersey packaging plant. As a result, the Company incurred
related severance costs of approximately $105,000 all of which was paid as of
December 31,1999. During the second quarter of 1999, the Company eliminated two
vacant positions and terminated the employment of six employees at the Company's
corporate headquarters. The severance costs associated with the terminations
totaled $86,000, of which $30,000 remains accrued at December 31, 1999 and will
be paid during the first quarter of 2000.
The Company incurred approximately $394,000 of proxy contest expenses
associated with the Company's delayed annual meeting of shareholders held on
September 8, 1999. These costs consisted primarily of legal fees, other
professional fees and administrative costs.
During the third quarter of 1997, the Company consolidated its flavors
production in New Berlin, Wisconsin. In connection with the consolidation, the
Company discontinued flavors operations in Los Angeles, California, terminated
the employment of the plant's 14 employees and sold the plant facility. The
Company recorded third quarter 1997 income of $689,000 which included a
$1,000,000 gain from the sale of the Los Angeles plant offset primarily by
employee severances.
During the fourth quarter of 1997, the Company completed a restructuring of
its operations into a divisional operating unit alignment. In connection with
this restructuring, two senior level employees were terminated with severance
benefits of approximately $215,000. In addition, $200,000 of previously incurred
severance and other non-recurring costs associated with the Company's 1997
restructuring activities were offset against the income recognized from the
Flavors consolidation.
NOTE H - OTHER INFORMATION
The Company is subject to litigation incidental to the conduct of its
business, the disposition of which is not expected to have a significant effect
on the Company's financial condition or operations. The Company is also subject
to government agency regulations relating to food products, environmental
matters and other aspects of its business. The Company is involved in
environmental testing activities resulting from past operations. The Company has
recorded amounts which, in management's best estimate, will be sufficient to
satisfy the anticipated cost of such activities.
In September 1999, the Company's Board of Directors approved a plan which
would provide certain lump sum payments to key employees if a change in control
of the Company occurred prior to December 31, 2000. Assuming all employees
covered remain employed through a change in control, these payments would total
approximately $700,000. In addition, the plan also provides for
30
<PAGE>
certain lump sum payments as well as continued medical and healthcare benefits
to employees who are terminated subsequent to a change in control of the
Company.
In 1991, the Company sold, at its cost, approximately $1,000,000 of
machinery and equipment purchased for resale. As a result of the sale, the
Company received a ten year note, payable annually, from its customer. The long
term portion of the note receivable amounts to approximately $140,000 at
December 31, 1999 ($275,000 in 1998), which is included in other assets, and is
net of an unamortized discount of approximately $30,000 ($58,000 in 1998). The
note bears imputed interest at approximately 10% and is collateralized by the
machinery and equipment. Based upon prevailing interest rates, and after
consideration of credit risk, the carrying value is a fair approximation of
market value.
During the fourth quarter of 1998, the Company entered into negotiations
and reached a settlement of terms relating to past due rental income owed to the
Company in connection with ice cream making equipment leased to one of the
Company's licensee customers. The Company had previously received rental income
based on the "units of production" manufactured on the equipment since 1992 but
at amounts less than that required to fully amortize the Company's original
investment. The customer acknowledged its past due obligation and agreed to pay
$600,000 to bring the lease current at December 31, 1998. As collectibility of
the lease payments was not reasonably predictable, no contingent rent had been
previously recorded and the $600,000 recovery was recognized in the fourth
quarter 1998 as a reduction of cost of goods sold (consistent with the previous
rent received on this equipment). In January 1999, the Company sold the leased
equipment to the licensee customer at the Company's net carrying value of
approximately $400,000 which, management believes, approximated the fair market
value.
31
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
Shareholders and Board of Directors
Eskimo Pie Corporation
We have audited the accompanying consolidated balance sheets of Eskimo Pie
Corporation as of December 31, 1999 and 1998, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Eskimo
Pie Corporation at December 31, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Richmond, Virginia
March 2, 2000
REPORT OF MANAGEMENT
Eskimo Pie Corporation
The consolidated financial statements and other financial information of Eskimo
Pie Corporation have been prepared by management, which is responsible for their
integrity and objectivity. These statements have been prepared in accordance
with generally accepted accounting principles and, where appropriate, reflect
estimates based on judgements of management.
The Company maintains a system of internal financial controls which considers
the expected costs and benefits of specific control procedures and provides
reasonable assurance that Company assets are protected against loss or misuse,
that transactions are executed in accordance with management's authorization and
that the financial records can be relied upon to produce financial statements in
accordance with generally accepted accounting principles. The internal financial
controls system is supported by the management of the Company through the
establishment and communication of business and accounting policies, the
division of responsibility in organizational matters and the careful selection
and training of management personnel.
The consolidated financial statements have been audited by the Company's
independent auditors, Ernst & Young LLP. Their audit was conducted in accordance
with generally accepted auditing standards and their report is included
elsewhere herein. As a part of their audit, Ernst & Young LLP develops and
maintains an understanding of the Company's internal accounting controls and
conducts such tests and employs such procedures as they consider necessary to
render their opinion on the financial statements.
The Board of Directors exercises its oversight role with respect to the
Company's system of internal financial controls primarily through its Audit
Committee which consists of outside directors. The Board of Directors, upon the
recommendation of the Audit Committee, selects the independent auditors subject
to ratification by the shareholders. The Audit Committee meets periodically with
representatives of management. Ernst & Young LLP has full and free access to
meet with the Audit Committee, with or without the presence of management
representatives.
/s/ David B. Kewer /s/ Thomas M. Mishoe, Jr.
David B. Kewer Thomas M. Mishoe, Jr.
President Chief Financial Officer,
And Chief Executive Officer Vice President, Treasurer
and Corporate Secretary
32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the Company's Board of Directors is included under the
caption "Election of Directors" in the Registrant's Proxy Statement for the
Annual Meeting scheduled to be held on May 3, 2000 (Proxy Statement) and is
incorporated herein by reference. Information on Section 16(a) compliance is
included under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information on compensation is included under the captions "Compensation
Committee Interlocks and Insider Participation", "Compensation of Directors" and
"Executive Compensation" in the Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information on security ownership of certain beneficial owners and
management is included under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on certain relationships and related transactions is included
under the caption "Certain Relationships" in the Proxy Statement and is
incorporated herein by reference.
33
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) (1) The following financial statements of Eskimo Pie Corporation are
included in Item 8:
Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1999, 1998 and 1997
Consolidated Balance Sheets at December 31, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Auditors, Ernst & Young LLP
(2) Financial Statements Schedules
No financial statement schedules are required because the required
information is not present in amounts sufficient to warrant submission
of the schedules or the required information is included in the
consolidated financial statements or notes to consolidated financial
statements.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the registrant during the
last quarter of the period covered by this report.
(c) Exhibits
--------
The exhibits listed in the accompanying "Index of Exhibits" are filed
as part of this Annual Report and each management contract or
compensatory plan or arrangement included therein is identified as
such.
34
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, as of the 23/rd/ day of
March, 2000.
ESKIMO PIE CORPORATION
/s/ David B. Kewer
------------------
David B. Kewer
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities as of the 23/rd/ day of March 2000.
Signature Title
/s/ David B. Kewer President and
- -------------------------------- Chief Executive Officer
David B. Kewer (Principal Executive Officer)
/s/ Thomas M. Mishoe, Jr. Chief Financial Officer,
- -------------------------------- Vice President, Treasurer
Thomas M. Mishoe, Jr. and Corporate Secretary
(Principal Financial and Accounting
Officer)
/s/ Kathryn L. Tyler Controller
- --------------------------------
Kathryn L. Tyler
*/s/ Arnold H. Dreyfuss Chairman of the Board
- --------------------------------
Arnold H. Dreyfuss
*/s/ Wilson H. Flohr, Jr. Director
- --------------------------------
Wilson H. Flohr, Jr.
*/s/ F. Claiborne Johnston, Jr. Director
- --------------------------------
F. Claiborne Johnston, Jr.
*/s/ Daniel J. Ludeman Director
- --------------------------------
Daniel J. Ludeman
*/s/ Judith B. McBee Director
- --------------------------------
Judith B. McBee
*/s/ Robert C. Sledd Director
- --------------------------------
Robert C. Sledd
*By /s/ David B. Kewer
- --------------------------------
David B. Kewer
Attorney-in-fact
35
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
3.1 Amended and Restated Articles of Incorporation incorporated herein
by reference to Exhibit C to the Company's Proxy Statement for its
1996 Annual Meeting of Shareholders.
3.2 Amended and Restated Bylaws, amended through December 16, 1999,
filed herewith.
4.1 (a) Rights Agreement dated as of January 21, 1993, between the
Company and Mellon Securities Trust Company, incorporated herein by
reference to Exhibit 28.1 to the Company's Current Report on
Form 8-K dated January 21, 1993.
(b) Amendment No. 1, dated as of November 23, 1998, between Eskimo
Pie Corporation and First Union National Bank, as successor Rights
Agent, to Rights Agreement dated as of January 21, 1993, between
the Company and Mellon Securities Trust Company, incorporated
herein by reference to Exhibit 4.1(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
4.2 The Company agrees to furnish to the Commission upon request any
instrument with respect to long-term debt as to which the total
amount of securities authorized thereunder does not exceed 10% of
the Company's total consolidated assets.
10.1* Executive Retention and Severance Agreement between the Company and
Thomas M. Mishoe, Jr., dated October 23, 1999, filed herewith.
10.2* Executive Retention and Severance Agreement between the Company and
William J. Weiskopf, dated October 25, 1999, filed herewith.
10.3* Executive Retention and Severance Agreement between the Company and
Kimberly P. Ferryman, dated October 25, 1999, filed herewith.
10.4* Executive Retention and Severance Agreement between the Company and
Craig L. Hettrich, dated October 19, 1999, filed herewith.
10.5* Executive Retention and Severance Agreement between the Company and
V. Stephen Kangisser, dated October 25, 1999, filed herewith.
10.6* Executive Retention and Severance Agreement between the Company and
David B. Kewer, dated October 21, 1999, filed herewith.
10.7* Incentive Stock Plan dated February 17, 1992, incorporated herein
by reference to Exhibit 10.8 to the Company's Registration
Statement on Form S-1 (Registration No.33-45852).
10.8* 1996 Incentive Stock Plan, as amended effective December 16, 1999,
filed herewith.
10.9* Senior Management Annual Incentive Plan, dated as of January 1,
1993, incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.10* Salaried Retirement Plan dated as of April 6, 1992, as amended,
filed herewith.
10.11* Executive Retirement Plan and Trust dated as of April 6, 1992, as
amended, incorporated herein by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998.
36
<PAGE>
10.12 Master License Agreement between the Company and Welch Foods Inc.
dated as of August 1, 1998, incorporated herein by reference to
Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter
ended September 30, 1998.
10.13 (a) Letter Agreement, dated March 20, 1998, for a $10,000,000
revolving line of credit between the Company and Crestar Bank,
incorporated herein by reference to Exhibit 10.15 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
(b) Letter Agreement, dated May 20, 1999, between the Company and
Crestar Bank, incorporated herein by reference to Exhibit 10.1 to
the Company's Report on Form 10-Q for the quarter ended June 30,
1999.
10.14 (a) Credit Agreement, dated as of May 5, 1994, between the Company
and First Union National Bank of Virginia, incorporated herein by
reference to Exhibit 10.12 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
(b) Amendment No. 1, dated as of April 18, 1997, to the Credit
Agreement, dated as of May 5, 1994, between the Company and First
Union National Bank of Virginia, incorporated herein by reference
to Exhibit 10.16(b) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
(c) Amendment No. 2, dated as of April 28, 1998, to the Credit
Agreement, dated as of May 5, 1994, between the Company and First
Union National Bank of Virginia, incorporated herein by reference
to Exhibit 10.16(c) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
10.15 Agreement dated February 17, 1992 between the Company and Reynolds
Metals Company, incorporated herein by reference to Exhibit 10.17
to the Company's Registration Statement on Form S-1 (Registration
No. 33-45852).
10.16 Form of Reimbursement Agreement dated as of February 17, 1992
between the Company and Reynolds Metals Company, incorporated
herein by reference to Exhibit 10.18 to the Company's Registration
Statement on Form S-1 (Registration No. 33-45852).
10.17* Eskimo Pie Corporation Savings Plan and Trust, as amended, filed
herewith.
10.18* Eskimo Pie Corporation Employee Stock Purchase Plan, as amended,
incorporated herein by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors, Ernst & Young LLP.
24. Powers of Attorney.
27. Financial Data Schedules.
* Exhibits are Management Contracts or Compensatory Plans or Arrangements.
________________________________________
37
<PAGE>
In accordance with the Securities and Exchange Commission's requirements, we
will furnish copies of the exhibits listed for a copying fee of 10 cents per
page. Please direct your request to:
Corporate Secretary
Eskimo Pie Corporation
P.O. Box 26906
Richmond, Virginia 23261-6906
Phone No. (804) 560-8400
38
<PAGE>
Exhibit 3.2
Amended and Restated Bylaws
of
ESKIMO PIE CORPORATION
ARTICLE I - Stock
1. Certificates for Stock. Certificates of Stock shall be issued in
----------------------
numerical order, be signed by the Chairman of the Board of Directors, the
President or a Vice President, and by the Secretary or an Assistant Secretary,
or the Treasurer or an Assistant Treasurer, and sealed with the corporate seal;
provided, that where any Certificate of Stock is signed by a duly appointed and
authorized Transfer Agent or Registrar the signatures of the Chairman of the
Board of Directors, the President, Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer may be facsimile, engraved or
printed, and the seal of the corporation on any such Certificate of Stock may be
facsimile, engraved or printed. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the date of issue.
2. Transfers of Stock. Transfers of stock shall be made only upon the books
------------------
of the corporation, and only by the person named in the certificate or by
attorney, lawfully constituted in writing, and only upon surrender of the
certificate therefor. The directors may by resolution make reasonable
regulations for the transfers of stock. To the extent that any provision of the
Rights Agreement between the corporation and First Union National Bank, as
Successor Rights Agent, dated as of January 21, 1993, is deemed to constitute a
restriction on the transfer of any securities of the corporation, including,
without limitation, the Rights, as defined therein, such restriction is hereby
authorized by the bylaws of the corporation.
3. Holders of Record. Registered shareholders only shall be entitled to be
-----------------
treated by the corporation as the holders in fact of the stock standing in their
respective names and the corporation shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of Virginia.
4. Lost or Destroyed Certificates. In case of loss or destruction of any
------------------------------
certificate of stock another may be issued in its place upon satisfactory proof
of such loss or destruction and upon the giving of a satisfactory bond of
indemnity to the corporation, all as determined either expressly by the
directors or pursuant to general authority granted by them.
<PAGE>
ARTICLE II - Shareholders' Meetings
1. Place of Meetings. Meetings of the shareholders shall be held at such
-----------------
place, within or outside the Commonwealth of Virginia, as the Board of Directors
may determine.
2. Annual Meeting. The annual meeting of the shareholders of the
--------------
corporation, for the election of directors to succeed those whose terms expire,
and for the transaction of such other business as may come before the meeting,
shall be held on the first Wednesday in May of each year, if not a legal
holiday, and if a legal holiday, then on the first business day following, at
ten o'clock in the forenoon, or on such other date and at such other time as may
be fixed by the Board of Directors. If the annual meeting of the shareholders
be not held as herein prescribed, the election of directors may be held at any
meeting thereafter called pursuant to these Bylaws.
3. Special Meetings. Special meetings of the shareholders may be called by
----------------
the Chairman of the Board, if one is elected, or the President or the Board of
Directors.
4. Notice of Meetings. Written notice of the place, date and hour of the
------------------
annual and of all special meetings of the shareholders and, in the case of
special meetings, of the purpose or purposes for which such special meeting is
called, shall be given in the manner specified in Section 1 of Article VII of
these Bylaws not less than ten (10) nor more than sixty (60) days prior to the
meeting (except that notice of a shareholders' meeting to act on an amendment of
the articles of incorporation, a plan of merger or share exchange, a proposed
sale of assets other than in the ordinary course of business, or the dissolution
of the corporation shall be given not less then twenty-five nor more than 60
days before the meeting date), to each shareholder of record of the corporation
entitled to vote thereat. Business transacted at all special meetings shall be
confined to the purposes stated in the notice.
5. Quorum. A quorum at any annual or special meeting of the shareholders
------
shall consist of shareholders holding a majority of the capital stock of this
corporation outstanding and entitled to vote thereat, represented either in
person or by proxy, except as otherwise specifically provided by law or in the
Articles of Incorporation.
6. Adjourned Meetings. A properly called shareholders' meeting may be
------------------
adjourned from time to time by a majority in interest of those present in person
or by proxy and entitled to vote thereat. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is
for more than 120 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record entitled to vote at the meeting; otherwise, no notice
of such adjourned meeting need be given if the time and place thereof are
announced at the meeting at which the adjournment is taken. The absence from
any meeting of shareholders holding the number of shares of stock of the
corporation required by law, the Articles of Incorporation or these Bylaws for
action upon any given matter shall not prevent action at such meeting upon any
other matter or matters which may properly come before the meeting, if there
shall be present thereat in person or by proxy shareholders holding the number
of shares of stock of the corporation required in respect of such other matter
or matters.
2
<PAGE>
7. Inspectors of Election. In advance of any meeting of shareholders, the
----------------------
Chairman of the Board, President, Treasurer or Secretary of the corporation
shall appoint one or more inspectors of election to serve at such meeting and to
make a written report with respect thereto. In addition, any such officer may,
but shall not be required to, designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of shareholders, the presiding officer at
such meeting shall appoint one or more inspectors to act at the meeting. Each
inspector shall discharge his or her duties in accordance with applicable law
and shall, before entering upon the discharge of his or her duties, take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
8. List of Shareholders. A complete list of the shareholders entitled to
--------------------
vote at each annual or special meeting of the shareholders of the corporation,
arranged in alphabetical order, showing the address of record of each and the
number of voting shares held by each, shall be prepared by the Secretary or the
transfer agent, who shall have charge of the stock ledger, and at least ten
(10) days before every such meeting shall be kept on file at the principal
office of the corporation or at the office of its transfer agent or registrar,
and shall, during the usual hours for business, be open to the examination of
any shareholder in accordance with Virginia law, and during the whole time of
said meeting be open to the examination of any shareholder for the purposes
thereof.
9. Voting. Subject to the provisions of Section 10 of this Article II of
------
these Bylaws, each holder of stock of a class which is entitled to vote in any
election or on any other questions at any annual or special meeting of the
shareholders shall be entitled to one vote, in person or by written proxy, for
each share of such class held of record. Except where, and to the extent that,
a different percentage of votes and/or a different exercise of voting power is
prescribed by law, the Articles of Incorporation or these Bylaws, the following
applies:
(i) Any corporate action, except the election of directors, an
amendment or restatement of the Articles of Incorporation, a merger, a
statutory share exchange, sale or other disposition of all or substantially
all the corporation's assets otherwise than in the usual and regular course
of business, or dissolution shall, for each voting group entitled to vote on
the matter, be approved at a meeting at which a quorum of the voting group
is present if the votes cast in favor of the action exceed the votes cast
against the action;
(ii) Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present; and
(iii) An amendment or restatement of the Articles of Incorporation, a
merger, statutory share exchange, sale or other disposition of all or
substantially all the corporation's assets otherwise than in the usual and
regular course of business, or dissolution shall be approved by a majority
of the votes present and entitled to vote by
3
<PAGE>
each voting group entitled to vote on the transaction at a meeting at which
a quorum of the voting group is present.
10. Determination of Shareholders of Record. The share transfer books may
---------------------------------------
be closed by order of the board of directors for not more than 70 days for the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of the shareholders or any adjournment thereof (or entitled to receive
any distribution or in order to make a determination of shareholders for any
other purpose). In lieu of closing such books, the board of directors may fix
in advance as the record date for any such determination a date not more than 70
days before the date on which such meeting is to be held (or such distribution
made or other action requiring such determination is to be taken). If the books
are not thus closed or the record date is not thus fixed, the record date shall
be the close of business on the day before the effective date of the notice to
shareholders.
11. Matters to be Brought Before Shareholders' Meetings. Except as
---------------------------------------------------
otherwise provided by law, at any annual or special meeting of shareholders only
such business shall be conducted as shall have been properly brought before the
meeting in accordance with this Section.
In order to be properly brought before the meeting, such business must have
either been (i) specified in the written notice of the meeting (or any
supplement thereto) given to shareholders of record on the record date for such
meeting by or at the direction of the Board of Directors, (ii) brought before
the meeting at the direction of the Board of Directors or the officer presiding
over the meeting, or (iii) specified in a written notice given by or on behalf
of a shareholder of record on the record date for such meeting entitled to vote
thereat or a duly authorized proxy for such shareholder, in accordance with all
the following requirements.
A notice referred to in clause (iii) hereof must be delivered personally to,
or mailed to and received at, the principal executive office of the corporation,
addressed to the attention of the Secretary, not more than ten (10) days after
the date of the initial notice referred to in clause (i) hereof, in the case of
business to be brought before a special meeting of shareholders, and not less
than thirty (30) days prior to the first anniversary date of the initial notice
referred to in clause (i) hereof of the previous year's annual meeting, in the
case of business to be brought before an annual meeting of shareholders,
provided, however, that such notice shall not be required to be given more than
ninety (90) days prior to an annual meeting of shareholders. Such notice
referred to in clause (iii) hereof shall set forth:
(a) a full description of each such item of business proposed to be
brought before the meeting;
4
<PAGE>
(b) the name and address of the person proposing to bring such business
before the meeting;
(c) the class and number of shares held of record, held beneficially and
represented by proxy by such person as of the record date for the meeting
(if such date has been made publicly available) and as of the date of such
notice;
(d) if any item of such business involves a nomination for director, all
information regarding each such nominee that would be required to be set
forth in a definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended, or any successor thereto and the written consent of
each such nominee to serve if elected; and
(e) all other information that would be required to be filed with the
Securities and Exchange Commission if, with respect to the business
proposed to be brought before the meeting, the person proposing such
business was a participant in a solicitation subject to Section 14 of the
Securities Exchange Act of 1934, as amended, or any successor thereto.
Any matter brought before a meeting of shareholders upon the affirmative
recommendation of the Board of Directors where such matter is included in the
written notice of the meeting (or any supplement thereto) and accompanying proxy
statement given to shareholders of record on the record date for such meeting by
or at the direction of the Board of Directors is deemed to be properly before
the shareholders for a vote and does not need to be moved or seconded from the
floor of such meeting. No business shall be brought before any meeting of
shareholders of the corporation otherwise than as provided in this Section.
ARTICLE III - Board of Directors
1. Number; Term of Office; Powers. The business and affairs of the
------------------------------
corporation shall be under the direction of a Board of Directors, consisting of
a minimum of five (5) and a maximum of eight (8) persons, with the number to be
fixed or changed from time to time, within such minimum and maximum range, by
resolution of the Board of Directors. In the absence of a specific resolution
to the contrary, the number of directors shall be fixed at the number of persons
nominated by the Board of Directors for election as directors in connection with
the annual meeting of shareholders. Directors shall be elected for one year,
and shall hold office until their successors are elected and qualified.
Directors need not be shareholders. In addition to the power and authority
expressly conferred upon them by the Bylaws and the Articles of Incorporation,
the Board of Directors may exercise all such powers of the corporation and do
all such lawful acts and things as are not by law or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the shareholders.
2. Eligibility to Serve. No person shall be eligible to stand for election
--------------------
or re-election to the Board of Directors in the corporation's fiscal year in
which such person shall have his or her 70th birthday, except that any director
serving at January 1, 1996 who was then 65 years old or older shall continue to
be eligible to serve until age 72.
5
<PAGE>
3. Resignations. Any director may resign at any time by giving written
------------
notice of resignation to the Board of Directors, to the Chairman of the Board of
Directors or to the Secretary of the corporation. Any such resignation shall
take effect at the time specified therein, or if the time be not specified
therein, the upon receipt thereof. The acceptance of such resignation shall not
be necessary to make it effective.
4. Vacancies. Except as otherwise specifically provided by law, the
---------
Articles of Incorporation or these Bylaws, all vacancies in the Board of
Directors, whether caused by resignation, death, increase in the number of
authorized directors or otherwise, may be filled by a majority of the Board of
Directors then in office, even though less than a quorum, or by the shareholders
at a special meeting. A director thus elected to fill any vacancy shall hold
office until the next annual meeting of shareholders and until a successor is
elected and qualified.
5. Annual Meeting. The annual meeting of the Board of Directors, for the
--------------
election of officers and the transaction of other business, shall be held on the
same day and at the same place as, and as soon as practicable following, the
annual meeting of shareholders, or at such other date, time or place within or
outside the Commonwealth of Virginia as the directors may by resolution
designate.
6. Regular Meetings. Regular meetings of the Board of Directors shall be
----------------
held at such times, and at such place within or outside the Commonwealth of
Virginia, as the Board of Directors may from time to time by resolution
designate.
7. Special Meetings. Special meetings of the directors may be called at any
----------------
time by the Chairman of the Board of Directors or the President; or by the
Secretary upon written request of one-third of the directors, such request
stating the purpose for which the meeting is to be called. Special meetings
shall be held at the principal office of the corporation or at such office
within or outside the Commonwealth of Virginia as the directors may from time to
time designate.
8. Notice of Meetings. Except as otherwise required by law or a resolution
------------------
of the Board of Directors, notice of special meetings of the Board of Directors
or of any committee of the Board of Directors shall be given to each director or
to each committee member, as the case may be, by mail at least two days before
the day on which the meeting is to be held or by personal delivery, word-of-
mouth, telephone, telegraph, radio, cable or other comparable means at least six
hours before the time at which the meeting is to be held. Such notice shall
state the time and place of such meeting, but need not state the purposes
thereof unless otherwise required by law. No notice need be given of the annual
meeting of directors or of regular meetings of directors or of committees of the
Board of Directors, provided that, whenever the time or place of such meetings
shall be fixed or changed, notice of such action shall be given promptly to each
director or to each committee member, as the case may be, who shall not have
been present at the meeting at which such action was taken.
9. Quorum; Adjourned Meetings; Required Vote. A majority of the Board of
-----------------------------------------
Directors as constituted from time to time shall be necessary and sufficient at
all meetings to
6
<PAGE>
constitute a quorum for the transaction of business. In the absence of a quorum,
a majority of those present may adjourn the meeting from time to time and the
meeting may be held as adjourned without further notice provided a quorum be
present at such adjourned meeting. Unless otherwise specifically provided by the
Articles of Incorporation or law, the act of a majority of the directors present
at any properly convened meeting at which there is a quorum shall be the act of
the Board of Directors.
10. Committees. Standing or Temporary Committees may be appointed from
----------
their own number by the Board of Directors from time to time, and the directors
may from time to time vest such committees with such powers as the directors may
see fit, subject to such conditions as the directors may prescribe or as may be
prescribed by law. All committees shall consist of two or more directors. The
term of office of the members of each committee shall be as fixed from time to
time by the Board of Directors; provided, however, that any committee member who
ceases to be a director shall ipso facto cease to be a committee member. Any
----------
member of any committee may be removed at any time with or without cause by the
Board of Directors, and any vacancy in any committee may be filled by the Board
of Directors. All committees shall keep regular minutes of their transactions
and shall cause them to be recorded in books kept for that purpose in the office
of the corporation, and shall report the same to the Board of Directors at their
regular meetings. Subject to this Section 9 and except as otherwise determined
by the Board of Directors, each committee may make rules for the conduct of its
business.
11. Compensation. Directors, as such, may receive, pursuant to resolution
------------
of the Board of Directors, fixed fees, other compensation and expenses for their
services as directors, including, without limitation, services as chairmen or as
members of committees of the directors; provided, however, that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
12. Consents in Writing. Any action required or permitted to be taken at
-------------------
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
13. Participation by Conference Telephone. Members of the Board of
-------------------------------------
Directors or of any committee may participate in a meeting of such Board of
Directors or committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at the meeting.
14. Shareholder Instructions. The Board of Directors, in exercising its
------------------------
rights and duties with respect to the administration of the Shareholder Rights
Agreement, dated January 21, 1993, between this corporation and Mellon
Securities Trust Company, as rights agent (the "Rights Agreement") and any
rights, options or warrants for the purchase of shares of Eskimo or other
instrument of a similar type or kind, will carry out a resolution authorizing
the partial or complete redemption of, or amendment to, the Rights Agreement, if
such resolution is authorized
7
<PAGE>
and approved by the affirmative vote of shareholders owning or having the right
to vote a majority of the capital stock of Eskimo. The provisions of this
Section 14 may be repealed or amended only with the affirmative vote of holders
of (sic) owning or having the right to vote a majority of the shares of this
corporation entitled to vote thereon.
ARTICLE IV - Officers
1. Officers. The officers of the corporation shall be a Chairman of the
--------
Board of Directors, a President, one or more Vice Presidents, one or more of
whom may be an Executive Vice President, a Secretary, a Treasurer, and such
other officers and assistant officers as the Board of Directors shall deem
appropriate, all of whom shall be elected annually by the Board of Directors.
One person may hold more than one office.
2. Chairman of the Board. The Chairman of the Board of Directors shall
---------------------
preside at all meetings of shareholders and directors, shall be the chief
executive officer of the corporation and, subject to the direction of the Board
of Directors, shall have general supervision and management of the business and
affairs of the corporation and shall perform all such other duties as are
incident to such office or are properly required by the Board of Directors.
3. President. The President shall be the chief operating officer of the
---------
corporation and shall, subject to the direction of the Board of Directors and
the Chairman of the Board of Directors, direct and supervise the business and
affairs of the corporation and shall perform all such other duties as are
incident to such office or as are properly required by the Board of Directors or
the Chairman of the Board of Directors. During the absence or disability of the
Chairman of the Board of Directors, the President shall exercise all powers and
discharge all the duties of the Chairman of the Board of Directors.
4. Executive Vice Presidents and Other Vice Presidents. Each of the
---------------------------------------------------
Executive Vice Presidents and other Vice Presidents shall perform such duties as
are properly required by the Board of Directors, the Chairman of the Board of
Directors or the President.
5. Treasurer. The Treasurer shall have the custody of all moneys and
---------
securities of the corporation and shall keep or cause to be kept accurate
accounts of all money received or payments made in books kept for that purpose.
The Treasurer shall deposit or cause to be deposited funds of the corporation in
accordance with Article V, Section 2 of these Bylaws and shall disburse the
funds of the corporation by checks or vouchers as authorized by the Board of
Directors. The Treasurer shall keep or cause to be kept all books of accounts
and accounting records of the corporation and shall keep and maintain, or cause
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the corporation. The Treasurer shall prepare or cause
to be prepared appropriate financial statements for the corporation and shall
have such other powers and perform such other duties as may be incident to the
office of Treasurer.
6. Secretary. The Secretary shall keep the minutes of the meetings of the
---------
shareholders and of the Board of Directors, and, when required, the minutes of
the meetings of the committees, and shall be responsible for the custody of all
such minutes. The Secretary shall
8
<PAGE>
be responsible for the custody of the stock ledger and documents of the
corporation. The Secretary shall have custody of the corporate seal and shall
affix and attest such seal to any instrument whose execution under seal shall
have been duly authorized and enjoy all other powers incident to the office of
Secretary.
7. Other Officers and Assistant Officers. All other officers and assistant
-------------------------------------
officers shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors, the Chairman of the
Board of Directors or the President.
8. Term of Office; Vacancies. Each officer shall hold office until the
-------------------------
annual meeting of the Board of Directors following the end of the term of the
Board by which such officer is elected, except in the case of earlier death,
resignation or removal. Vacancies in any office arising from any cause may be
filled by the directors at any regular or special meeting.
9. Removal. Any officer elected or appointed by the Board of Directors may
-------
be removed at any time, with or without cause, by the Board of Directors.
10. Proxies. Unless otherwise prescribed by the Board of Directors, the
-------
Chairman of the Board of Directors or the President may from time to time
himself, by such proxy or proxies, attorney or attorneys, agent or agents of the
corporation as he shall designate in the name and on behalf of the corporation,
cast the votes to which the corporation may be entitled as a shareholder or
otherwise in any other corporation, at meetings, or consent in writing to any
action by any such other corporation; and he may instruct the individual or
individuals so appointed as to the manner of casting such votes or giving such
consent, and execute or cause to be executed on behalf of the corporation such
written proxies, consents, waivers or other instruments as he may deem necessary
or desirable.
ARTICLE V - Dividends and Finance
1. Dividends. Dividends may be declared to the full extent permitted by law
---------
at such times as the Board of Directors shall direct.
2. Deposits; Withdrawals; Notes and Other Instruments. The moneys of the
--------------------------------------------------
corporation shall be deposited in the name of the corporation in such banks or
trust companies as shall be designated by, and shall be drawn out only by check
signed by, persons designated from time to time, by the Board of Directors or by
an officer of this corporation to whom the Board of Directors has delegated such
authority. All notes and other instruments for the payment of money shall be
signed or endorsed by officers or other person authorized from time to time by
the Board of Directors or by an officer of this corporation to whom the Board of
Directors has delegated such authority.
3. Fiscal Year. The fiscal year of the corporation shall date from the
-----------
first day of January in each year.
ARTICLE VI - Books and Records; Offices
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<PAGE>
1. Books and Records. The books, accounts and records of the corporation,
-----------------
except as may be otherwise required by the laws of the Commonwealth of Virginia,
may be kept within or outside of the said State at such places as the Board of
Directors may from time to time appoint.
2. Offices. The corporation may have offices in the City of Richmond,
-------
Virginia and at such other places as the Board of Directors may from time to
time designate or the business of the corporation may require.
ARTICLE VII - Notices
1. Notices. Whenever any provision of law or these Bylaws requires notice
-------
to be given to any director, officer or shareholder, such notice may be given in
writing by mailing the same to such director, officer or shareholder at his or
her address as the same appears in the books of the corporation, unless such
shareholder shall have filed with the Secretary a written request that notices
intended for him or her be mailed to some other address, in which case it shall
be mailed to the address designated in such request. The time when the same
shall be mailed shall be deemed to be the time of the giving of such notice.
This section shall not be deemed to preclude the giving of notice by other means
if permitted by the applicable provision of law or these Bylaws.
2. Waivers of Notice. A waiver of any notice in writing, signed by a
-----------------
shareholder or director, whether before or after the time stated in said waiver
for holding a meeting, shall be deemed equivalent to a notice required to be
given to any shareholder or director.
A shareholder's or director's attendance at or participation in a meeting
waives any required notice to him of the meeting unless he at the beginning of
the meeting or promptly upon his arrival objects to the holding of the meeting
or the transaction of business at the meeting and does not thereafter vote for
or assent to the action taken at the meeting.
ARTICLE VIII - Conflict of Interest
1. Interested Directors or Officers. No contract or transaction between the
--------------------------------
corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association or other
organization in which one or more of the directors or officers of the
corporation are directors or officers, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer of the corporation is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if:
(i) the material facts of the transaction and the director's or
officer's interest are disclosed or known to the board of directors or a
committee of the board of directors, and the transaction was authorized,
approved or ratified by the affirmative vote of a majority of the directors
on the board of directors, or on the committee, who have no
10
<PAGE>
direct or indirect personal interest in the transaction; provided, however,
that a transaction shall not be authorized, approved or ratified by a single
director; or
(ii) the material facts of the transaction and the director's or
officer's interest are disclosed to the shareholders entitled to vote, and
the transaction is authorized, approved or ratified by the vote of a
majority of the shares other than shares owned by or voted under the control
of a director or officer who has a direct or indirect interest in the
transaction; or
(iii) the transaction is fair to the corporation.
ARTICLE IX - Seal
1. Seal. The corporate seal of the corporation shall be a flat-face
----
circular die containing the name of the corporation, of which there may be any
number of counterparts or facsimiles, in such form as the Board of Directors
shall from time to time adopt.
ARTICLE X - Amendments
1. Amendments. These bylaws may be amended or repealed by the Board of
----------
Directors except to the extent that: (i) this power is reserved exclusively to
the shareholders by law or the articles of incorporation; or (ii) the
shareholders in adopting or amending particular bylaws provide expressly that
the Board of Directors may not amend or repeal the same. These bylaws may be
amended or repealed by the shareholders even though the same also may be amended
or repealed by the Board of Directors.
11
<PAGE>
Exhibit 10.1
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive Retention
Bonus and Severance Program (the "Executive Retention Bonus and Severance
Program") designed to encourage executives to remain focused on their job
responsibilities and to continue employment with the Company or a subsidiary in
light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention Bonus
and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with the
-------------------------
criteria which follow, you will receive an Executive Retention Bonus consisting
of two installments - one for $56,250 (the "First Installment") and one for
$168,750 (the "Second Installment"), each subject to normal tax and other
applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention Bonus,
you must remain employed in your current position, or in one into which you are
requested by the Company to transfer, during the Retention Period for the First
Installment. In that event, if you satisfy the applicable additional eligibility
criteria described below, you will receive the First Installment on or about
January 15, 2000 (but in no event later than the date the Second Installment of
the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at or
------------------
within one year after the Sale of the Business relating to your employment under
the applicable additional eligibility criteria described below for severance
benefits for any reason (including without limitation your voluntary cessation
of employment) other than Cause (as defined below) or death, you will also be
entitled to severance benefits in the form of extended medical and dental
insurance coverage under the Company's welfare plan for you, your spouse and
your eligible dependents for one year with the Company paying the entire cost of
coverage for such extended coverage period. This extended medical and dental
coverage will not run concurrently with the COBRA coverage period under the
Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999. It
----------------
ends for the First Installment of the Executive Retention Bonus on December 31,
1999 or your earlier involuntary termination by the Company for reasons other
than death, permanent disability or Cause (as defined below). It ends for the
Second Installment of the Executive Retention Bonus on the Sale of the Company
relating to your employment or your earlier involuntary termination by the
Company for reasons other
<PAGE>
than death, permanent disability or Cause (as defined below). For purposes
hereof, you will automatically be considered involuntarily terminated by the
Company for reasons other than death, permanent disability or Cause if you
voluntarily terminate for Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term "Sale of
-------------------
the Company" means any of the following occurring before January 1, 2001:
a) a change in the ownership of the Company resulting in the possession
by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than 50% of the outstanding stock of the Company (whether by sale or
issuance of stock, reorganization, merger, consolidation or
otherwise) in connection with a transaction contemplated by the
Board of Directors of the Company (the "Board") in connection with
the Board's publicly announced intention to sell the Company or its
assets, including the assets of its subsidiaries (the "Company Sale
Announcement");
b) if you are employed by a subsidiary or a division of the Company,
the sale of the stock of , or substantially all of the assets of,
that subsidiary or that division of the Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of October
7, 1999 are effectively eliminated by reason of a sale or sales of
the assets or divisions of the Company or of its subsidiaries; or
d) if you are employed in connection with any other operations of the
Company or any subsidiary (including corporate headquarters
operations) which is the subject of or related to any other sale of
assets determined by the Company to result in a cessation of such
operations in connection with the Company Sale Announcement, the
sale of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
-----
a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential information of
the Company or any of its subsidiaries or affiliates, or
d) the willful and continued failure to substantially perform your
duties with the Company or any of its subsidiaries or affiliates
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to you by the Board, the Compensation
Committee or its delegate which specifically identifies the manner
in which you have not substantially performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
2
<PAGE>
6. Good Reason. For purposes of this Agreement, "Good Reason" shall mean
-----------
the occurrence of any of the following without Cause:
a) the assignment to you of any duties which are inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held immediately
on October 7, 1999, or a significant adverse alteration in the
nature or status of your responsibilities or the conditions of your
employment from those in effect immediately on October 7, 1999,
provided that any promotion or such change or alteration in your
duties, authority, responsibilities or conditions of employment
which is either accepted or not rejected in writing delivered to the
Board of Directors of the Company within 10 days of such promotion,
change or alteration shall be deemed to have been held or in effect
immediately on October 7, 1999;
b) a reduction by the Company in your annual base salary as in effect
on October 7, 1999 or as the same may be increased from time to
time;
c) if you are principally employed at the Company's principal executive
offices, the relocation of the Company's principal executive offices
to a location outside the Richmond Metropolitan Area or the
Company's requiring you to be based anywhere other than the
Company's principal executive offices except for required travel on
the Company's business to an extent substantially consistent with
your present business travel obligations;
d) except in the event of reasonable administrative delay, the failure
by the Company to pay to you any portion of your current
compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the
Company within seven (7) days of the date such compensation is due;
e) the failure by the Company to continue in effect any compensation
plan in which you participated on October 7, 1999 that is material
to your total compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to
continue your participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as it existed on
October 7, 1999;
f) the failure by the Company to continue to provide you with benefits
having an aggregate value of at least 75% of the aggregate value of
the benefits enjoyed by you under any of the Company's life
insurance, medical, health and accident, disability plans, or other
welfare and defined benefit plans (qualified and non-qualified) in
which you were participating on October 7, 1999, the taking of any
action by the Company which would directly or indirectly reduce by
more than 25% the aggregate value of such benefits or deprive you of
any material fringe benefit enjoyed by you on October 7, 1999, or
the failure by the Company to provide you with the number of paid
vacation days to which you are entitled on the basis of years of
service with the Company in accordance with the Company's normal
vacation policy in effect on October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in section 8.l) captioned "Successors" below.
3
<PAGE>
7. Additional Eligibility Criteria for Benefits. Eligibility for either
--------------------------------------------
installment of the Executive Retention Bonus and for severance benefits is also
conditioned on the following additional rules, as applicable to the particular
benefit:
a) Voluntary Resignation. You will not receive an Executive Retention
Bonus installment if you voluntarily resign your employment prior to
the last day of the applicable Retention Period other than for Good
Reason.
b) Death, Disability or Involuntary Termination for Cause. You will not
receive an Executive Retention Bonus installment if you die, become
permanently disabled or are involuntarily terminated for Cause by
the Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this
Agreement if you engage in any activity during the applicable
Retention Period or, in the case of severance benefits, prior to the
Sale of the Company relating to your employment, which is
inconsistent with the satisfactory performance of your duties
including, but not limited to, engaging in other full-time or
substantially full-time employment, whether as an employee,
consultant or in any other capacity, whether or not you are
compensated for such other employment, or engaging in any other
business activity, whether or not such business activity is pursued
for gain or profit, except as approved in advance in writing by an
authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality of
the existence and the terms of this Agreement and all documentation
or records relating to this Agreement and the Executive Retention
Bonus and Severance Program and not to disclose these matters to any
person or entity without the prior written consent of the Company
unless required otherwise by law or court order. You will not be
eligible for the Executive Retention Bonus or severance benefits
under this Agreement if you violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible for
severance benefits under this Agreement unless, promptly after your
cessation of employment with the Company and upon receiving a
written request to do so, you resign as a director and/or officer of
the Company (including of each subsidiary and affiliate of the
Company) for which you are then serving as a director and/or
officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any and
all other retention, termination and severance programs of the
Company and of each subsidiary and affiliate of the Company (whether
by individual agreement or otherwise) now or subsequently existing
during the period this Agreement is in effect (including without
limitation any executive or other severance agreement now in force
and the Company's general retention bonus and severance program for
rank and file employees contained in the 1999 Company Sale Severance
Program), which you may do by signing, dating and returning to the
Company one copy of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms
4
<PAGE>
of this Agreement by signing, dating and returning to the Company
one copy of this Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
--------------------------
conditions apply for purposes of this Agreement:
a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period of
time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any time
or from time to time waive any or all of the benefits provided for
herein which have not been received by you at the time of such
waiver. In addition, prior to the last day of the calendar year in
which your cessation of employment occurs, you may waive any or all
rights and benefits provided for herein which have been received by
you; provided that you repay to the Company the amount of the
benefits received (together with interest at the rate provided in
Section l274(b)(2)(B) of the Code). Any waiver of benefits pursuant
to this paragraph shall be irrevocable.
c) Severability. If any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force
and effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be approved
in writing by an authorized representative of the Company. No
reduction in your rights under this Agreement may be made without
your written consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this Agreement
and if any part or all of such benefits will be subject to the tax
("Excise Tax") imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), then the amount otherwise payable
or provided to you in accordance with this Agreement shall be
reduced as necessary so that no part of such payment shall be
subject to the Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall
not be governed by any duty to mitigate your damages by seeking
further employment nor offset by any compensation which you may
receive from future employment.
h) Interest on Delayed Payments. If payment or provision of any benefit
due to you under this Agreement is not timely made, you shall be
entitled to interest on the amount not timely paid at 120% of the
applicable federal rate, compounded semi-annually, under Section
1274(d) of the Code determined at the time the Sale of the Business
relating to your employment occurs, such interest to accrue from the
date such benefit is due through the date of payment or provision
thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of
Virginia, or in any other court of competent jurisdiction.
Alternatively, you, at your option, may seek an award in arbitration
to be conducted by a single arbitrator under the Commercial
Arbitration Rules of the American Arbitration Association.
5
<PAGE>
j) Expenses relating to the Company's Failure to Perform. If any
contest or dispute shall arise under this Agreement involving the
failure or refusal of the Company to perform fully in accordance
with the terms hereof other than in connection with a good faith
determination of the existence of Cause, the Company shall reimburse
you, on a current basis, for all legal fees and expenses, if any,
incurred by you in connection with such contest or dispute
(regardless of the result thereof), together with interest in an
amount equal to the prime rate of BankAmerica from time to time in
effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the
date the Company receives your statement for such fees and expenses
through the date of payment thereof. Such reimbursement shall
include the cost of attorney's fees in reviewing this Agreement in
connection with such contest or dispute and in negotiating or
attempting to negotiate a settlement of such contest or dispute
prior to your making such claim or commencing any action or
proceeding and in settling any matter relating to this Agreement.
k) Other Expenses. If any claim, action or proceeding (including
without limitation a claim, action or proceeding by you against the
Company) occurs with respect to this Agreement other than one
described in section 8.j) above, the Company shall pay or reimburse
you for all costs and expenses, including without limitation court
costs and attorney's fees, incurred by you as a result thereof,
provided that if the claim, action or proceeding is by you against
the Company, you are successful in whole or in part on the merits or
otherwise in such claim, action or proceeding. Such reimbursement
shall include interest in an amount equal to the prime rate of
BankAmerica from time to time in effect, but in no event higher than
the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives your statement
for such fees and expenses through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company
will require any successor which employs you in connection with a
Sale of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company
would be required to perform it if you had remained employed by the
Company. As used in this Agreement, the "Company" shall mean Eskimo
Pie Corporation as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
hereunder if you had continued to live, any such amount, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee
or, if there is no such designee, your estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ David B. Kewer
----------------------------
David B. Kewer
President and Chief Executive Officer
6
<PAGE>
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
Agreed and Accepted:
/s/ Thomas M. Mishoe, Jr. October 23, 1999
- ------------------------------------ ---------------------
(Name) (Date)
7
<PAGE>
Exhibit 10.2
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive
Retention Bonus and Severance Program (the "Executive Retention Bonus and
Severance Program") designed to encourage executives to remain focused on their
job responsibilities and to continue employment with the Company or a subsidiary
in light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention
Bonus and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with
-------------------------
the criteria which follow, you will receive an Executive Retention Bonus
consisting of two installments - one for $37,500 (the "First Installment") and
one for $112,500 (the "Second Installment"), each subject to normal tax and
other applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the First Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the First Installment on
or about January 15, 2000 (but in no event later than the date the Second
Installment of the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at or
------------------
within one year after the Sale of the Business relating to your employment under
the applicable additional eligibility criteria described below for severance
benefits for any reason (including without limitation your voluntary cessation
of employment) other than Cause (as defined below) or death, you will also be
entitled to severance benefits in the form of extended medical and dental
insurance coverage under the Company's welfare plan for you, your spouse and
your eligible dependents for one year with the Company paying the entire cost of
coverage for such extended coverage period. This extended medical and dental
coverage will not run concurrently with the COBRA coverage period under the
Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999. It
----------------
ends for the First Installment of the Executive Retention Bonus on December 31,
1999 or your earlier involuntary termination by the Company for reasons other
than death, permanent disability or Cause (as defined below). It ends for the
Second Installment of the Executive Retention Bonus on the Sale of the Company
relating to your employment or your earlier involuntary termination by the
Company for reasons other than death, permanent disability or Cause (as defined
below). For purposes hereof, you will
<PAGE>
automatically be considered involuntarily terminated by the Company for reasons
other than death, permanent disability or Cause if you voluntarily terminate for
Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term
-------------------
"Sale of the Company" means any of the following occurring before January 1,
2001:
a) a change in the ownership of the Company resulting in the
possession by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the
outstanding stock of the Company (whether by sale or issuance
of stock, reorganization, merger, consolidation or otherwise)
in connection with a transaction contemplated by the Board of
Directors of the Company (the "Board") in connection with the
Board's publicly announced intention to sell the Company or
its assets, including the assets of its subsidiaries (the
"Company Sale Announcement");
b) if you are employed by a subsidiary or a division of the
Company, the sale of the stock of , or substantially all of
the assets of, that subsidiary or that division of the
Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of
October 7, 1999 are effectively eliminated by reason of a sale
or sales of the assets or divisions of the Company or of its
subsidiaries; or
d) if you are employed in connection with any other operations of
the Company or any subsidiary (including corporate
headquarters operations) which is the subject of or related to
any other sale of assets determined by the Company to result
in a cessation of such operations in connection with the
Company Sale Announcement, the sale of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
-----
a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential
information of the Company or any of its subsidiaries or
affiliates, or
d) the willful and continued failure to substantially perform
your duties with the Company or any of its subsidiaries or
affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to you by the
Board, the Compensation Committee or its delegate which
specifically identifies the manner in which you have not
substantially performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
6. Good Reason. For purposes of this Agreement, "Good Reason" shall
-----------
mean the occurrence of any of the following without Cause:
2
<PAGE>
a) the assignment to you of any duties which are inconsistent with
the position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held
immediately on October 7, 1999, or a significant adverse
alteration in the nature or status of your responsibilities or
the conditions of your employment from those in effect
immediately on October 7, 1999, provided that any promotion or
such change or alteration in your duties, authority,
responsibilities or conditions of employment which is either
accepted or not rejected in writing delivered to the Board of
Directors of the Company within 10 days of such promotion, change
or alteration shall be deemed to have been held or in effect
immediately on October 7, 1999;
b) a reduction by the Company in your annual base salary as in
effect on October 7, 1999 or as the same may be increased from
time to time;
c) if you are principally employed at the Company's principal
executive offices, the relocation of the Company's principal
executive offices to a location outside the Richmond Metropolitan
Area or the Company's requiring you to be based anywhere other
than the Company's principal executive offices except for
required travel on the Company's business to an extent
substantially consistent with your present business travel
obligations;
d) except in the event of reasonable administrative delay, the
failure by the Company to pay to you any portion of your current
compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of
the Company within seven (7) days of the date such compensation
is due;
e) the failure by the Company to continue in effect any compensation
plan in which you participated on October 7, 1999 that is
material to your total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by
the Company to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants,
as it existed on October 7, 1999;
f) the failure by the Company to continue to provide you with
benefits having an aggregate value of at least 75% of the
aggregate value of the benefits enjoyed by you under any of the
Company's life insurance, medical, health and accident,
disability plans, or other welfare and defined benefit plans
(qualified and non-qualified) in which you were participating on
October 7, 1999, the taking of any action by the Company which
would directly or indirectly reduce by more than 25% the
aggregate value of such benefits or deprive you of any material
fringe benefit enjoyed by you on October 7, 1999, or the failure
by the Company to provide you with the number of paid vacation
days to which you are entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation
policy in effect on October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in section 8.1) captioned "Successors" below.
7. Additional Eligibility Criteria for Benefits. Eligibility for
--------------------------------------------
either installment of the Executive Retention Bonus and for severance benefits
is also conditioned on the following additional rules, as applicable to the
particular benefit:
3
<PAGE>
a) Voluntary Resignation. You will not receive an Executive
Retention Bonus installment if you voluntarily resign your
employment prior to the last day of the applicable Retention
Period other than for Good Reason.
b) Death, Disability or Involuntary Termination for Cause. You will
not receive an Executive Retention Bonus installment if you die,
become permanently disabled or are involuntarily terminated for
Cause by the Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this
Agreement if you engage in any activity during the applicable
Retention Period or, in the case of severance benefits, prior to
the Sale of the Company relating to your employment, which is
inconsistent with the satisfactory performance of your duties
including, but not limited to, engaging in other full-time or
substantially full-time employment, whether as an employee,
consultant or in any other capacity, whether or not you are
compensated for such other employment, or engaging in any other
business activity, whether or not such business activity is
pursued for gain or profit, except as approved in advance in
writing by an authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality
of the existence and the terms of this Agreement and all
documentation or records relating to this Agreement and the
Executive Retention Bonus and Severance Program and not to
disclose these matters to any person or entity without the prior
written consent of the Company unless required otherwise by law
or court order. You will not be eligible for the Executive
Retention Bonus or severance benefits under this Agreement if you
violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible
for severance benefits under this Agreement unless, promptly
after your cessation of employment with the Company and upon
receiving a written request to do so, you resign as a director
and/or officer of the Company (including of each subsidiary and
affiliate of the Company) for which you are then serving as a
director and/or officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any
and all other retention, termination and severance programs of
the Company and of each subsidiary and affiliate of the Company
(whether by individual agreement or otherwise) now or
subsequently existing during the period this Agreement is in
effect (including without limitation any executive or other
severance agreement now in force and the Company's general
retention bonus and severance program for rank and file employees
contained in the 1999 Company Sale Severance Program), which you
may do by signing, dating and returning to the Company one copy
of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms of this Agreement by
signing, dating and returning to the Company one copy of this
Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
--------------------------
conditions apply for purposes of this Agreement:
4
<PAGE>
a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period
of time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any
time or from time to time waive any or all of the benefits
provided for herein which have not been received by you at the
time of such waiver. In addition, prior to the last day of the
calendar year in which your cessation of employment occurs, you
may waive any or all rights and benefits provided for herein
which have been received by you; provided that you repay to the
Company the amount of the benefits received (together with
interest at the rate provided in Section l274(b)(2)(B) of the
Code). Any waiver of benefits pursuant to this paragraph shall be
irrevocable.
c) Severability. If any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force
and effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be
approved in writing by an authorized representative of the
Company. No reduction in your rights under this Agreement may be
made without your written consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this
Agreement and if any part or all of such benefits will be subject
to the tax ("Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), then the amount
otherwise payable or provided to you in accordance with this
Agreement shall be reduced as necessary so that no part of such
payment shall be subject to the Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall
not be governed by any duty to mitigate your damages by seeking
further employment nor offset by any compensation which you may
receive from future employment.
h) Interest on Delayed Payments. If payment or provision of any
benefit due to you under this Agreement is not timely made, you
shall be entitled to interest on the amount not timely paid at
120% of the applicable federal rate, compounded semi-annually,
under Section 1274(d) of the Code determined at the time the Sale
of the Business relating to your employment occurs, such interest
to accrue from the date such benefit is due through the date of
payment or provision thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of
Virginia, or in any other court of competent jurisdiction.
Alternatively, you, at your option, may seek an award in
arbitration to be conducted by a single arbitrator under the
Commercial Arbitration Rules of the American Arbitration
Association.
j) Expenses relating to the Company's Failure to Perform. If any
contest or dispute shall arise under this Agreement involving the
failure or refusal of the Company to perform fully in accordance
with the terms hereof other than in connection with a good faith
determination of the existence of Cause, the Company shall
reimburse you, on a
5
<PAGE>
current basis, for all legal fees and expenses, if any, incurred
by you in connection with such contest or dispute (regardless of
the result thereof), together with interest in an amount equal to
the prime rate of BankAmerica from time to time in effect, but in
no event higher than the maximum legal rate permissible under
applicable law, such interest to accrue from the date the Company
receives your statement for such fees and expenses through the
date of payment thereof. Such reimbursement shall include the
cost of attorney's fees in reviewing this Agreement in connection
with such contest or dispute and in negotiating or attempting to
negotiate a settlement of such contest or dispute prior to your
making such claim or commencing any action or proceeding and in
settling any matter relating to this Agreement.
k) Other Expenses. If any claim, action or proceeding (including
without limitation a claim, action or proceeding by you against
the Company) occurs with respect to this Agreement other than one
described in section 8.j) above, the Company shall pay or
reimburse you for all costs and expenses, including without
limitation court costs and attorney's fees, incurred by you as a
result thereof, provided that if the claim, action or proceeding
is by you against the Company, you are successful in whole or in
part on the merits or otherwise in such claim, action or
proceeding. Such reimbursement shall include interest in an
amount equal to the prime rate of BankAmerica from time to time
in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from
the date the Company receives your statement for such fees and
expenses through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The
Company will require any successor which employs you in
connection with a Sale of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
you had remained employed by the Company. As used in this
Agreement, the "Company" shall mean Eskimo Pie Corporation as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would
still be payable hereunder if you had continued to live, any such
amount, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, your
estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ David B. Kewer
--------------------------------------
David B. Kewer
President and Chief Executive Officer
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
6
<PAGE>
Agreed and Accepted:
/s/ William J. Weiskopf October 25, 1999
- -------------------------------------------- --------------------
(Name) (Date)
7
<PAGE>
Exhibit 10.3
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive Retention
Bonus and Severance Program (the "Executive Retention Bonus and Severance
Program") designed to encourage executives to remain focused on their job
responsibilities and to continue employment with the Company or a subsidiary in
light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention Bonus
and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with
--------------------------
the criteria which follow, you will receive an Executive Retention Bonus
consisting of two installments - one for $31,250 (the "First Installment") and
one for $93,750 (the "Second Installment"), each subject to normal tax and other
applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the First Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the First Installment on
or about January 15, 2000 (but in no event later than the date the Second
Installment of the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at
-------------------
or within one year after the Sale of the Business relating to your employment
under the applicable additional eligibility criteria described below for
severance benefits for any reason (including without limitation your voluntary
cessation of employment) other than Cause (as defined below) or death, you will
also be entitled to severance benefits in the form of extended medical and
dental insurance coverage under the Company's welfare plan for you, your spouse
and your eligible dependents for one year with the Company paying the entire
cost of coverage for such extended coverage period. This extended medical and
dental coverage will not run concurrently with the COBRA coverage period under
the Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999.
-----------------
It ends for the First Installment of the Executive Retention Bonus on December
31, 1999 or your earlier involuntary termination by the Company for reasons
other than death, permanent disability or Cause (as defined below). It ends for
the Second Installment of the Executive Retention Bonus on the Sale of the
Company relating to your employment or your earlier involuntary termination by
the Company for reasons other than death, permanent disability or Cause (as
defined below). For purposes hereof, you will
<PAGE>
automatically be considered involuntarily terminated by the Company for reasons
other than death, permanent disability or Cause if you voluntarily terminate for
Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term "Sale
--------------------
of the Company" means any of the following occurring before January 1, 2001:
a) a change in the ownership of the Company resulting in the possession
by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
50% of the outstanding stock of the Company (whether by sale or
issuance of stock, reorganization, merger, consolidation or otherwise)
in connection with a transaction contemplated by the Board of
Directors of the Company (the "Board") in connection with the Board's
publicly announced intention to sell the Company or its assets,
including the assets of its subsidiaries (the "Company Sale
Announcement");
b) if you are employed by a subsidiary or a division of the Company, the
sale of the stock of , or substantially all of the assets of, that
subsidiary or that division of the Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of October 7,
1999 are effectively eliminated by reason of a sale or sales of the
assets or divisions of the Company or of its subsidiaries; or
d) if you are employed in connection with any other operations of the
Company or any subsidiary (including corporate headquarters
operations) which is the subject of or related to any other sale of
assets determined by the Company to result in a cessation of such
operations in connection with the Company Sale Announcement, the sale
of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
------
a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential information of the
Company or any of its subsidiaries or affiliates, or
d) the willful and continued failure to substantially perform your duties
with the Company or any of its subsidiaries or affiliates (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is
delivered to you by the Board, the Compensation Committee or its
delegate which specifically identifies the manner in which you have
not substantially performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
6. Good Reason. For purposes of this Agreement, "Good Reason" shall
------------
mean the occurrence of any of the following without Cause:
2
<PAGE>
a) the assignment to you of any duties which are inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held immediately on
October 7, 1999, or a significant adverse alteration in the nature or
status of your responsibilities or the conditions of your employment
from those in effect immediately on October 7, 1999, provided that any
promotion or such change or alteration in your duties, authority,
responsibilities or conditions of employment which is either accepted
or not rejected in writing delivered to the Board of Directors of the
Company within 10 days of such promotion, change or alteration shall
be deemed to have been held or in effect immediately on October 7,
1999;
b) a reduction by the Company in your annual base salary as in effect on
October 7, 1999 or as the same may be increased from time to time;
c) if you are principally employed at the Company's principal executive
offices, the relocation of the Company's principal executive offices
to a location outside the Richmond Metropolitan Area or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
d) except in the event of reasonable administrative delay, the failure by
the Company to pay to you any portion of your current compensation or
to pay to you any portion of an installment of deferred compensation
under any deferred compensation program of the Company within seven
(7) days of the date such compensation is due;
e) the failure by the Company to continue in effect any compensation plan
in which you participated on October 7, 1999 that is material to your
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as it existed on October 7, 1999;
f) the failure by the Company to continue to provide you with benefits
having an aggregate value of at least 75% of the aggregate value of
the benefits enjoyed by you under any of the Company's life insurance,
medical, health and accident, disability plans, or other welfare and
defined benefit plans (qualified and non-qualified) in which you were
participating on October 7, 1999, the taking of any action by the
Company which would directly or indirectly reduce by more than 25% the
aggregate value of such benefits or deprive you of any material fringe
benefit enjoyed by you on October 7, 1999, or the failure by the
Company to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect on
October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in section 8.1) captioned "Successors" below.
7. Additional Eligibility Criteria for Benefits. Eligibility for
---------------------------------------------
either installment of the Executive Retention Bonus and for severance benefits
is also conditioned on the following additional rules, as applicable to the
particular benefit:
3
<PAGE>
a) Voluntary Resignation. You will not receive an Executive Retention
Bonus installment if you voluntarily resign your employment prior to
the last day of the applicable Retention Period other than for Good
Reason.
b) Death, Disability or Involuntary Termination for Cause. You will not
receive an Executive Retention Bonus installment if you die, become
permanently disabled or are involuntarily terminated for Cause by the
Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this Agreement
if you engage in any activity during the applicable Retention Period
or, in the case of severance benefits, prior to the Sale of the
Company relating to your employment, which is inconsistent with the
satisfactory performance of your duties including, but not limited to,
engaging in other full-time or substantially full-time employment,
whether as an employee, consultant or in any other capacity, whether
or not you are compensated for such other employment, or engaging in
any other business activity, whether or not such business activity is
pursued for gain or profit, except as approved in advance in writing
by an authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality of
the existence and the terms of this Agreement and all documentation or
records relating to this Agreement and the Executive Retention Bonus
and Severance Program and not to disclose these matters to any person
or entity without the prior written consent of the Company unless
required otherwise by law or court order. You will not be eligible
for the Executive Retention Bonus or severance benefits under this
Agreement if you violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible for
severance benefits under this Agreement unless, promptly after your
cessation of employment with the Company and upon receiving a written
request to do so, you resign as a director andor officer of the
Company (including of each subsidiary and affiliate of the Company)
for which you are then serving as a director andor officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any and
all other retention, termination and severance programs of the Company
and of each subsidiary and affiliate of the Company (whether by
individual agreement or otherwise) now or subsequently existing during
the period this Agreement is in effect (including without limitation
any executive or other severance agreement now in force and the
Company's general retention bonus and severance program for rank and
file employees contained in the 1999 Company Sale Severance Program),
which you may do by signing, dating and returning to the Company one
copy of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms of this Agreement by
signing, dating and returning to the Company one copy of this
Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
---------------------------
conditions apply for purposes of this Agreement:
4
<PAGE>
a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period of
time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any time
or from time to time waive any or all of the benefits provided for
herein which have not been received by you at the time of such waiver.
In addition, prior to the last day of the calendar year in which your
cessation of employment occurs, you may waive any or all rights and
benefits provided for herein which have been received by you; provided
that you repay to the Company the amount of the benefits received
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code). Any waiver of benefits pursuant to this paragraph shall
be irrevocable.
c) Severability. If any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be approved in
writing by an authorized representative of the Company. No reduction
in your rights under this Agreement may be made without your written
consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this Agreement
and if any part or all of such benefits will be subject to the tax
("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then the amount otherwise payable or
provided to you in accordance with this Agreement shall be reduced as
necessary so that no part of such payment shall be subject to the
Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not
be governed by any duty to mitigate your damages by seeking further
employment nor offset by any compensation which you may receive from
future employment.
h) Interest on Delayed Payments. If payment or provision of any benefit
due to you under this Agreement is not timely made, you shall be
entitled to interest on the amount not timely paid at 120% of the
applicable federal rate, compounded semi-annually, under Section
1274(d) of the Code determined at the time the Sale of the Business
relating to your employment occurs, such interest to accrue from the
date such benefit is due through the date of payment or provision
thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of Virginia,
or in any other court of competent jurisdiction. Alternatively, you,
at your option, may seek an award in arbitration to be conducted by a
single arbitrator under the Commercial Arbitration Rules of the
American Arbitration Association.
j) Expenses relating to the Company's Failure to Perform. If any contest
or dispute shall arise under this Agreement involving the failure or
refusal of the Company to perform fully in accordance with the terms
hereof other than in connection with a good faith determination of the
existence of Cause, the Company shall reimburse you, on a
5
<PAGE>
current basis, for all legal fees and expenses, if any, incurred by
you in connection with such contest or dispute (regardless of the
result thereof), together with interest in an amount equal to the
prime rate of BankAmerica from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law,
such interest to accrue from the date the Company receives your
statement for such fees and expenses through the date of payment
thereof. Such reimbursement shall include the cost of attorney's fees
in reviewing this Agreement in connection with such contest or dispute
and in negotiating or attempting to negotiate a settlement of such
contest or dispute prior to your making such claim or commencing any
action or proceeding and in settling any matter relating to this
Agreement.
k) Other Expenses. If any claim, action or proceeding (including without
limitation a claim, action or proceeding by you against the Company)
occurs with respect to this Agreement other than one described in
section 8.j) above, the Company shall pay or reimburse you for all
costs and expenses, including without limitation court costs and
attorney's fees, incurred by you as a result thereof, provided that if
the claim, action or proceeding is by you against the Company, you are
successful in whole or in part on the merits or otherwise in such
claim, action or proceeding. Such reimbursement shall include
interest in an amount equal to the prime rate of BankAmerica from time
to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the
date the Company receives your statement for such fees and expenses
through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company
will require any successor which employs you in connection with a Sale
of the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform it if you had remained employed by the Company.
As used in this Agreement, the "Company" shall mean Eskimo Pie
Corporation as hereinbefore defined and any successor to its business
andor assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
hereunder if you had continued to live, any such amount, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or, if
there is no such designee, your estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ David B. Kewer
-------------------------------
David B. Kewer
President and Chief Executive Officer
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
6
<PAGE>
Agreed and Accepted:
/s/ Kimberly P. Ferryman October 25, 1999
- -------------------------------- ----------------------
(Name) (Date)
7
<PAGE>
Exhibit 10.4
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive
Retention Bonus and Severance Program (the "Executive Retention Bonus and
Severance Program") designed to encourage executives to remain focused on their
job responsibilities and to continue employment with the Company or a subsidiary
in light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention
Bonus and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with
-------------------------
the criteria which follow, you will receive an Executive Retention Bonus
consisting of two installments - one for $56,250 (the "First Installment") and
one for $168,750 (the "Second Installment"), each subject to normal tax and
other applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the First Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the First Installment on
or about January 15, 2000 (but in no event later than the date the Second
Installment of the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at or
-------------------
within one year after the Sale of the Business relating to your employment under
the applicable additional eligibility criteria described below for severance
benefits for any reason (including without limitation your voluntary cessation
of employment) other than Cause (as defined below) or death, you will also be
entitled to severance benefits in the form of extended medical and dental
insurance coverage under the Company's welfare plan for you, your spouse and
your eligible dependents for one year with the Company paying the entire cost of
coverage for such extended coverage period. This extended medical and dental
coverage will not run concurrently with the COBRA coverage period under the
Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999. It
----------------
ends for the First Installment of the Executive Retention Bonus on December 31,
1999 or your earlier involuntary termination by the Company for reasons other
than death, permanent disability or Cause (as defined below). It ends for the
Second Installment of the Executive Retention Bonus on the Sale of the Company
relating to your employment or your earlier involuntary termination by the
Company for reasons other than death, permanent disability or Cause (as defined
below). For purposes hereof, you will
<PAGE>
automatically be considered involuntarily terminated by the Company for reasons
other than death, permanent disability or Cause if you voluntarily terminate for
Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term
-------------------
"Sale of the Company" means any of the following occurring before January 1,
2001:
a) a change in the ownership of the Company resulting in the
possession by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of more than 50% of the outstanding stock of the Company
(whether by sale or issuance of stock, reorganization, merger,
consolidation or otherwise) in connection with a transaction
contemplated by the Board of Directors of the Company (the
"Board") in connection with the Board's publicly announced
intention to sell the Company or its assets, including the assets
of its subsidiaries (the "Company Sale Announcement");
b) if you are employed by a subsidiary or a division of the Company,
the sale of the stock of, or substantially all of the assets of,
that subsidiary or that division of the Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of
October 7, 1999 are effectively eliminated by reason of a sale or
sales of the assets or divisions of the Company or of its
subsidiaries; or
d) if you are employed in connection with any other operations of
the Company or any subsidiary (including corporate headquarters
operations) which is the subject of or related to any other sale
of assets determined by the Company to result in a cessation of
such operations in connection with the Company Sale Announcement,
the sale of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
-----
a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential information
of the Company or any of its subsidiaries or affiliates, or
d) the willful and continued failure to substantially perform your
duties with the Company or any of its subsidiaries or affiliates
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for
substantial performance is delivered to you by the Board, the
Compensation Committee or its delegate which specifically
identifies the manner in which you have not substantially
performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
6. Good Reason. For purposes of this Agreement, "Good Reason" shall
-----------
mean the occurrence of any of the following without Cause:
2
<PAGE>
a) the assignment to you of any duties which are inconsistent with
the position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held
immediately on October 7, 1999, or a significant adverse
alteration in the nature or status of your responsibilities or
the conditions of your employment from those in effect
immediately on October 7, 1999, provided that any promotion or
such change or alteration in your duties, authority,
responsibilities or conditions of employment which is either
accepted or not rejected in writing delivered to the Board of
Directors of the Company within 10 days of such promotion, change
or alteration shall be deemed to have been held or in effect
immediately on October 7, 1999;
b) a reduction by the Company in your annual base salary as in
effect on October 7, 1999 or as the same may be increased from
time to time;
c) if you are principally employed at the Company's principal
executive offices, the relocation of the Company's principal
executive offices to a location outside the Richmond Metropolitan
Area or the Company's requiring you to be based anywhere other
than the Company's principal executive offices except for
required travel on the Company's business to an extent
substantially consistent with your present business travel
obligations;
d) except in the event of reasonable administrative delay, the
failure by the Company to pay to you any portion of your current
compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of
the Company within seven (7) days of the date such compensation
is due;
e) the failure by the Company to continue in effect any compensation
plan in which you participated on October 7, 1999 that is
material to your total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by
the Company to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants,
as it existed on October 7, 1999;
f) the failure by the Company to continue to provide you with
benefits having an aggregate value of at least 75% of the
aggregate value of the benefits enjoyed by you under any of the
Company's life insurance, medical, health and accident,
disability plans, or other welfare and defined benefit plans
(qualified and non-qualified) in which you were participating on
October 7, 1999, the taking of any action by the Company which
would directly or indirectly reduce by more than 25% the
aggregate value of such benefits or deprive you of any material
fringe benefit enjoyed by you on October 7, 1999, or the failure
by the Company to provide you with the number of paid vacation
days to which you are entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation
policy in effect on October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement,
as contemplated in section 8.1) captioned "Successors" below.
7. Additional Eligibility Criteria for Benefits. Eligibility for
--------------------------------------------
either installment of the Executive Retention Bonus and for severance benefits
is also conditioned on the following additional rules, as applicable to the
particular benefit:
3
<PAGE>
a) Voluntary Resignation. You will not receive an Executive
Retention Bonus installment if you voluntarily resign your
employment prior to the last day of the applicable Retention
Period other than for Good Reason.
b) Death, Disability or Involuntary Termination for Cause. You will
not receive an Executive Retention Bonus installment if you die,
become permanently disabled or are involuntarily terminated for
Cause by the Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this
Agreement if you engage in any activity during the applicable
Retention Period or, in the case of severance benefits, prior to
the Sale of the Company relating to your employment, which is
inconsistent with the satisfactory performance of your duties
including, but not limited to, engaging in other full-time or
substantially full-time employment, whether as an employee,
consultant or in any other capacity, whether or not you are
compensated for such other employment, or engaging in any other
business activity, whether or not such business activity is
pursued for gain or profit, except as approved in advance in
writing by an authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality
of the existence and the terms of this Agreement and all
documentation or records relating to this Agreement and the
Executive Retention Bonus and Severance Program and not to
disclose these matters to any person or entity without the prior
written consent of the Company unless required otherwise by law
or court order. You will not be eligible for the Executive
Retention Bonus or severance benefits under this Agreement if you
violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible
for severance benefits under this Agreement unless, promptly
after your cessation of employment with the Company and upon
receiving a written request to do so, you resign as a director
and/or officer of the Company (including of each subsidiary and
affiliate of the Company) for which you are then serving as a
director and/or officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any
and all other retention, termination and severance programs of
the Company and of each subsidiary and affiliate of the Company
(whether by individual agreement or otherwise) now or
subsequently existing during the period this Agreement is in
effect (including without limitation any executive or other
severance agreement now in force and the Company's general
retention bonus and severance program for rank and file employees
contained in the 1999 Company Sale Severance Program), which you
may do by signing, dating and returning to the Company one copy
of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms of this Agreement
by signing, dating and returning to the Company one copy of
this Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
--------------------------
conditions apply for purposes of this Agreement:
4
<PAGE>
a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period
of time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any
time or from time to time waive any or all of the benefits
provided for herein which have not been received by you at the
time of such waiver. In addition, prior to the last day of the
calendar year in which your cessation of employment occurs, you
may waive any or all rights and benefits provided for herein
which have been received by you; provided that you repay to the
Company the amount of the benefits received (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code). Any waiver of benefits pursuant to this paragraph shall be
irrevocable.
c) Severability. If any provision or portion of this Agreement shall
be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force
and effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be
approved in writing by an authorized representative of the
Company. No reduction in your rights under this Agreement may be
made without your written consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this
Agreement and if any part or all of such benefits will be subject
to the tax ("Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), then the amount
otherwise payable or provided to you in accordance with this
Agreement shall be reduced as necessary so that no part of such
payment shall be subject to the Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall
not be governed by any duty to mitigate your damages by seeking
further employment nor offset by any compensation which you may
receive from future employment.
h) Interest on Delayed Payments. If payment or provision of any
benefit due to you under this Agreement is not timely made, you
shall be entitled to interest on the amount not timely paid at
120% of the applicable federal rate, compounded semi-annually,
under Section 1274(d) of the Code determined at the time the Sale
of the Business relating to your employment occurs, such interest
to accrue from the date such benefit is due through the date of
payment or provision thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of
Virginia, or in any other court of competent jurisdiction.
Alternatively, you, at your option, may seek an award in
arbitration to be conducted by a single arbitrator under the
Commercial Arbitration Rules of the American Arbitration
Association.
j) Expenses relating to the Company's Failure to Perform. If any
contest or dispute shall arise under this Agreement involving the
failure or refusal of the Company to perform fully in accordance
with the terms hereof other than in connection with a good faith
determination of the existence of Cause, the Company shall
reimburse you, on a
5
<PAGE>
current basis, for all legal fees and expenses, if any, incurred
by you in connection with such contest or dispute (regardless of
the result thereof), together with interest in an amount equal to
the prime rate of BankAmerica from time to time in effect, but in
no event higher than the maximum legal rate permissible under
applicable law, such interest to accrue from the date the Company
receives your statement for such fees and expenses through the
date of payment thereof. Such reimbursement shall include the
cost of attorney's fees in reviewing this Agreement in connection
with such contest or dispute and in negotiating or attempting to
negotiate a settlement of such contest or dispute prior to your
making such claim or commencing any action or proceeding and in
settling any matter relating to this Agreement.
k) Other Expenses. If any claim, action or proceeding (including
without limitation a claim, action or proceeding by you against
the Company) occurs with respect to this Agreement other than one
described in section 8.j) above, the Company shall pay or
reimburse you for all costs and expenses, including without
limitation court costs and attorney's fees, incurred by you as a
result thereof, provided that if the claim, action or proceeding
is by you against the Company, you are successful in whole or in
part on the merits or otherwise in such claim, action or
proceeding. Such reimbursement shall include interest in an
amount equal to the prime rate of BankAmerica from time to time
in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from
the date the Company receives your statement for such fees and
expenses through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The
Company will require any successor which employs you in
connection with a Sale of the Company to assume expressly and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
you had remained employed by the Company. As used in this
Agreement, the "Company" shall mean Eskimo Pie Corporation as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of
and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount would
still be payable hereunder if you had continued to live, any such
amount, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, your
estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ David B. Kewer
-----------------------------------
David B. Kewer
President and Chief Executive Officer
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
6
<PAGE>
Agreed and Accepted:
/s/ Craig L. Hettrich October 19, 1999
- ----------------------------------- --------------------
(Name) (Date)
7
<PAGE>
Exhibit 10.5
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive Retention
Bonus and Severance Program (the "Executive Retention Bonus and Severance
Program") designed to encourage executives to remain focused on their job
responsibilities and to continue employment with the Company or a subsidiary in
light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention Bonus
and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with
-------------------------
the criteria which follow, you will receive an Executive Retention Bonus
consisting of two installments - one for $56,250 (the "First Installment") and
one for $168,750 (the "Second Installment"), each subject to normal tax and
other applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the First Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the First Installment on
or about January 15, 2000 (but in no event later than the date the Second
Installment of the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at
------------------
or within one year after the Sale of the Business relating to your employment
under the applicable additional eligibility criteria described below for
severance benefits for any reason (including without limitation your voluntary
cessation of employment) other than Cause (as defined below) or death, you will
also be entitled to severance benefits in the form of extended medical and
dental insurance coverage under the Company's welfare plan for you, your spouse
and your eligible dependents for one year with the Company paying the entire
cost of coverage for such extended coverage period. This extended medical and
dental coverage will not run concurrently with the COBRA coverage period under
the Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999.
----------------
It ends for the First Installment of the Executive Retention Bonus on December
31, 1999 or your earlier involuntary termination by the Company for reasons
other than death, permanent disability or Cause (as defined below). It ends for
the Second Installment of the Executive Retention Bonus on the Sale of the
Company relating to your employment or your earlier involuntary termination by
the Company for reasons other than death, permanent disability or Cause (as
defined below). For purposes hereof, you will
<PAGE>
automatically be considered involuntarily terminated by the Company for reasons
other than death, permanent disability or Cause if you voluntarily terminate for
Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term "Sale
-------------------
of the Company" means any of the following occurring before January 1, 2001:
a) a change in the ownership of the Company resulting in the possession
by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
50% of the outstanding stock of the Company (whether by sale or
issuance of stock, reorganization, merger, consolidation or otherwise)
in connection with a transaction contemplated by the Board of
Directors of the Company (the "Board") in connection with the Board's
publicly announced intention to sell the Company or its assets,
including the assets of its subsidiaries (the "Company Sale
Announcement");
b) if you are employed by a subsidiary or a division of the Company, the
sale of the stock of, or substantially all of the assets of, that
subsidiary or that division of the Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of October 7,
1999 are effectively eliminated by reason of a sale or sales of the
assets or divisions of the Company or of its subsidiaries; or
d) if you are employed in connection with any other operations of the
Company or any subsidiary (including corporate headquarters
operations) which is the subject of or related to any other sale of
assets determined by the Company to result in a cessation of such
operations in connection with the Company Sale Announcement, the sale
of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
-----
a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential information of the
Company or any of its subsidiaries or affiliates, or
d) the willful and continued failure to substantially perform your duties
with the Company or any of its subsidiaries or affiliates (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is
delivered to you by the Board, the Compensation Committee or its
delegate which specifically identifies the manner in which you have
not substantially performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
6. Good Reason. For purposes of this Agreement, "Good Reason" shall
-----------
mean the occurrence of any of the following without Cause:
2
<PAGE>
a) the assignment to you of any duties which are inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held immediately on
October 7, 1999, or a significant adverse alteration in the nature or
status of your responsibilities or the conditions of your employment
from those in effect immediately on October 7, 1999, provided that any
promotion or such change or alteration in your duties, authority,
responsibilities or conditions of employment which is either accepted
or not rejected in writing delivered to the Board of Directors of the
Company within 10 days of such promotion, change or alteration shall
be deemed to have been held or in effect immediately on October 7,
1999;
b) a reduction by the Company in your annual base salary as in effect on
October 7, 1999 or as the same may be increased from time to time;
c) if you are principally employed at the Company's principal executive
offices, the relocation of the Company's principal executive offices
to a location outside the Richmond Metropolitan Area or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
d) except in the event of reasonable administrative delay, the failure by
the Company to pay to you any portion of your current compensation or
to pay to you any portion of an installment of deferred compensation
under any deferred compensation program of the Company within seven
(7) days of the date such compensation is due;
e) the failure by the Company to continue in effect any compensation plan
in which you participated on October 7, 1999 that is material to your
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as it existed on October 7, 1999;
f) the failure by the Company to continue to provide you with benefits
having an aggregate value of at least 75% of the aggregate value of
the benefits enjoyed by you under any of the Company's life insurance,
medical, health and accident, disability plans, or other welfare and
defined benefit plans (qualified and non-qualified) in which you were
participating on October 7, 1999, the taking of any action by the
Company which would directly or indirectly reduce by more than 25% the
aggregate value of such benefits or deprive you of any material fringe
benefit enjoyed by you on October 7, 1999, or the failure by the
Company to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect on
October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in section 8.1) captioned "Successors" below.
7. Additional Eligibility Criteria for Benefits. Eligibility for
--------------------------------------------
either installment of the Executive Retention Bonus and for severance benefits
is also conditioned on the following additional rules, as applicable to the
particular benefit:
3
<PAGE>
a) Voluntary Resignation. You will not receive an Executive Retention
Bonus installment if you voluntarily resign your employment prior to
the last day of the applicable Retention Period other than for Good
Reason.
b) Death, Disability or Involuntary Termination for Cause. You will not
receive an Executive Retention Bonus installment if you die, become
permanently disabled or are involuntarily terminated for Cause by the
Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this Agreement
if you engage in any activity during the applicable Retention Period
or, in the case of severance benefits, prior to the Sale of the
Company relating to your employment, which is inconsistent with the
satisfactory performance of your duties including, but not limited to,
engaging in other full-time or substantially full-time employment,
whether as an employee, consultant or in any other capacity, whether
or not you are compensated for such other employment, or engaging in
any other business activity, whether or not such business activity is
pursued for gain or profit, except as approved in advance in writing
by an authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality of
the existence and the terms of this Agreement and all documentation or
records relating to this Agreement and the Executive Retention Bonus
and Severance Program and not to disclose these matters to any person
or entity without the prior written consent of the Company unless
required otherwise by law or court order. You will not be eligible
for the Executive Retention Bonus or severance benefits under this
Agreement if you violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible for
severance benefits under this Agreement unless, promptly after your
cessation of employment with the Company and upon receiving a written
request to do so, you resign as a director and/or officer of the
Company (including of each subsidiary and affiliate of the Company)
for which you are then serving as a director and/or officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any and
all other retention, termination and severance programs of the Company
and of each subsidiary and affiliate of the Company (whether by
individual agreement or otherwise) now or subsequently existing during
the period this Agreement is in effect (including without limitation
any executive or other severance agreement now in force and the
Company's general retention bonus and severance program for rank and
file employees contained in the 1999 Company Sale Severance Program),
which you may do by signing, dating and returning to the Company one
copy of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms of this Agreement by
signing, dating and returning to the Company one copy of this
Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
--------------------------
conditions apply for purposes of this Agreement:
4
<PAGE>
a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period of
time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any time
or from time to time waive any or all of the benefits provided for
herein which have not been received by you at the time of such waiver.
In addition, prior to the last day of the calendar year in which your
cessation of employment occurs, you may waive any or all rights and
benefits provided for herein which have been received by you; provided
that you repay to the Company the amount of the benefits received
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code). Any waiver of benefits pursuant to this paragraph shall
be irrevocable.
c) Severability. If any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be approved in
writing by an authorized representative of the Company. No reduction
in your rights under this Agreement may be made without your written
consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this Agreement
and if any part or all of such benefits will be subject to the tax
("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then the amount otherwise payable or
provided to you in accordance with this Agreement shall be reduced as
necessary so that no part of such payment shall be subject to the
Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not
be governed by any duty to mitigate your damages by seeking further
employment nor offset by any compensation which you may receive from
future employment.
h) Interest on Delayed Payments. If payment or provision of any benefit
due to you under this Agreement is not timely made, you shall be
entitled to interest on the amount not timely paid at 120% of the
applicable federal rate, compounded semi-annually, under Section
1274(d) of the Code determined at the time the Sale of the Business
relating to your employment occurs, such interest to accrue from the
date such benefit is due through the date of payment or provision
thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of Virginia,
or in any other court of competent jurisdiction. Alternatively, you,
at your option, may seek an award in arbitration to be conducted by a
single arbitrator under the Commercial Arbitration Rules of the
American Arbitration Association.
j) Expenses relating to the Company's Failure to Perform. If any contest
or dispute shall arise under this Agreement involving the failure or
refusal of the Company to perform fully in accordance with the terms
hereof other than in connection with a good faith determination of the
existence of Cause, the Company shall reimburse you, on a
5
<PAGE>
current basis, for all legal fees and expenses, if any, incurred by
you in connection with such contest or dispute (regardless of the
result thereof), together with interest in an amount equal to the
prime rate of BankAmerica from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law,
such interest to accrue from the date the Company receives your
statement for such fees and expenses through the date of payment
thereof. Such reimbursement shall include the cost of attorney's fees
in reviewing this Agreement in connection with such contest or dispute
and in negotiating or attempting to negotiate a settlement of such
contest or dispute prior to your making such claim or commencing any
action or proceeding and in settling any matter relating to this
Agreement.
k) Other Expenses. If any claim, action or proceeding (including without
limitation a claim, action or proceeding by you against the Company)
occurs with respect to this Agreement other than one described in
section 8.j) above, the Company shall pay or reimburse you for all
costs and expenses, including without limitation court costs and
attorney's fees, incurred by you as a result thereof, provided that if
the claim, action or proceeding is by you against the Company, you are
successful in whole or in part on the merits or otherwise in such
claim, action or proceeding. Such reimbursement shall include
interest in an amount equal to the prime rate of BankAmerica from time
to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the
date the Company receives your statement for such fees and expenses
through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company
will require any successor which employs you in connection with a Sale
of the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform it if you had remained employed by the Company.
As used in this Agreement, the "Company" shall mean Eskimo Pie
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
hereunder if you had continued to live, any such amount, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or, if
there is no such designee, your estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ David B. Kewer
----------------------------
David B. Kewer
President and Chief Executive Officer
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
6
<PAGE>
Agreed and Accepted:
/s/ V. Stephen Kangisser October 25, 1999
---------------------------------- ---------------------
(Name) (Date)
7
<PAGE>
Exhibit 10.6
Eskimo Pie Corporation
Executive Retention Bonus and Severance Agreement
Eskimo Pie Corporation (the "Company") has adopted an Executive Retention
Bonus and Severance Program (the "Executive Retention Bonus and Severance
Program") designed to encourage executives to remain focused on their job
responsibilities and to continue employment with the Company or a subsidiary in
light of a possible "Sale of the Company" (as that term is defined below)
relating to your employment.
In accordance with established criteria for the Executive Retention Bonus
and Severance Program, you have been selected as a participant in lieu of
participation in the Company's general retention and severance program contained
in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation
Welfare Benefit Plan (the Company's "welfare plan").
1. Executive Retention Bonus. If you are eligible in accordance with
-------------------------
the criteria which follow, you will receive an Executive Retention Bonus
consisting of two installments - one for $150,000 (the "First Installment") and
one for $450,000 (the "Second Installment"), each subject to normal tax and
other applicable withholding and deductions.
In order to receive the First Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the First Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the First Installment on
or about January 15, 2000 (but in no event later than the date the Second
Installment of the Executive Retention Bonus is due) in a lump sum payment.
In order to receive the Second Installment of the Executive Retention
Bonus, you must remain employed in your current position, or in one into which
you are requested by the Company to transfer, during the Retention Period for
the Second Installment. In that event, if you satisfy the applicable additional
eligibility criteria described below, you will receive the Second Installment
within five business days after the Sale of the Company relating to your
employment in a lump sum payment. If for any reason no Sale of the Company
relating to your employment occurs before January 1, 2001, you will not receive
the Second Installment of the Executive Retention Bonus.
2. Severance Benefits. If you cease to be employed by the Company at
------------------
or within one year after the Sale of the Business relating to your employment
under the applicable additional eligibility criteria described below for
severance benefits for any reason (including without limitation your voluntary
cessation of employment) other than Cause (as defined below) or death, you will
also be entitled to severance benefits in the form of extended medical and
dental insurance coverage under the Company's welfare plan for you, your spouse
and your eligible dependents for one year with the Company paying the entire
cost of coverage for such extended coverage period. This extended medical and
dental coverage will not run concurrently with the COBRA coverage period under
the Company's welfare plan, and the applicable COBRA coverage period under the
Company's welfare plan will be available to you and your qualifying
beneficiaries after the end of this extended medical and dental coverage period.
3. Retention Period. The Retention Period began on October 7, 1999.
----------------
It ends for the First Installment of the Executive Retention Bonus on December
31, 1999 or your earlier involuntary termination by the Company for reasons
other than death, permanent disability or Cause (as defined below). It ends for
the Second Installment of the Executive Retention Bonus on the 30th day after
the Sale of the Company relating to your employment or your earlier involuntary
termination by the Company for reasons other
<PAGE>
than death, permanent disability or Cause (as defined below). For purposes
hereof, you will automatically be considered involuntarily terminated by the
Company for reasons other than death, permanent disability or Cause if you
voluntarily terminate for Good Reason (as defined below)
4. Sale of the Company. For purposes of this Agreement, the term "Sale of
-------------------
the Company" means any of the following occurring before January 1, 2001:
a) a change in the ownership of the Company resulting in the possession
by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
50% of the outstanding stock of the Company (whether by sale or
issuance of stock, reorganization, merger, consolidation or otherwise)
in connection with a transaction contemplated by the Board of
Directors of the Company (the "Board") in connection with the Board's
publicly announced intention to sell the Company or its assets,
including the assets of its subsidiaries (the "Company Sale
Announcement");
b) if you are employed by a subsidiary or a division of the Company, the
sale of the stock of, or substantially all of the assets of, that
subsidiary or that division of the Company;
c) if you are employed in connection with Company-wide matters,
substantially all of your duties and responsibilities as of October 7,
1999 are effectively eliminated by reason of a sale or sales of the
assets or divisions of the Company or of its subsidiaries; or
d) if you are employed in connection with any other operations of the
Company or any subsidiary (including corporate headquarters
operations) which is the subject of or related to any other sale of
assets determined by the Company to result in a cessation of such
operations in connection with the Company Sale Announcement, the sale
of such assets.
5. Cause. For purposes of this Agreement, "Cause" means:
-----
a) dishonesty,
b) conviction of a felony,
c) the willful unauthorized disclosure of confidential information of the
Company or any of its subsidiaries or affiliates, or
d) the willful and continued failure to substantially perform your duties
with the Company or any of its subsidiaries or affiliates (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is
delivered to you by the Board, the Compensation Committee or its
delegate which specifically identifies the manner in which you have
not substantially performed your duties.
For purposes of this provision, no act or failure to act, on your part,
shall be considered "willful" unless it is done, or omitted to be done, by you
in bad faith or without reasonable belief that your action or omission was in
the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or any
committee of the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by you in good faith
and in the best interests of the Company.
6. Good Reason. For purposes of this Agreement, "Good Reason" shall mean
-----------
the occurrence of any of the following without Cause:
2
<PAGE>
a) the assignment to you of any duties which are inconsistent with the
position (including status, offices, titles, and reporting
requirements) or authority in the Company that you held immediately on
October 7, 1999, or a significant adverse alteration in the nature or
status of your responsibilities or the conditions of your employment
from those in effect immediately on October 7, 1999, provided that any
promotion or such change or alteration in your duties, authority,
responsibilities or conditions of employment which is either accepted
or not rejected in writing delivered to the Board of Directors of the
Company within 10 days of such promotion, change or alteration shall
be deemed to have been held or in effect immediately on October 7,
1999;
b) a reduction by the Company in your annual base salary as in effect on
October 7, 1999 or as the same may be increased from time to time;
c) if you are principally employed at the Company's principal executive
offices, the relocation of the Company's principal executive offices
to a location outside the Richmond Metropolitan Area or the Company's
requiring you to be based anywhere other than the Company's principal
executive offices except for required travel on the Company's business
to an extent substantially consistent with your present business
travel obligations;
d) except in the event of reasonable administrative delay, the failure by
the Company to pay to you any portion of your current compensation or
to pay to you any portion of an installment of deferred compensation
under any deferred compensation program of the Company within seven
(7) days of the date such compensation is due;
e) the failure by the Company to continue in effect any compensation plan
in which you participated on October 7, 1999 that is material to your
total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue your
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as it existed on October 7, 1999;
f) the failure by the Company to continue to provide you with benefits
having an aggregate value of at least 75% of the aggregate value of
the benefits enjoyed by you under any of the Company's life insurance,
medical, health and accident, disability plans, or other welfare and
defined benefit plans (qualified and non-qualified) in which you were
participating on October 7, 1999, the taking of any action by the
Company which would directly or indirectly reduce by more than 25% the
aggregate value of such benefits or deprive you of any material fringe
benefit enjoyed by you on October 7, 1999, or the failure by the
Company to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect on
October 7, 1999; or
g) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in section 8.1) captioned "Successors" below.
7. Additional Eligibility Criteria for Benefits. Eligibility for either
--------------------------------------------
installment of the Executive Retention Bonus and for severance benefits is also
conditioned on the following additional rules, as applicable to the particular
benefit:
3
<PAGE>
a) Voluntary Resignation. You will not receive an Executive Retention
Bonus installment if you voluntarily resign your employment prior to
the last day of the applicable Retention Period other than for Good
Reason.
b) Death, Disability or Involuntary Termination for Cause. You will not
receive an Executive Retention Bonus installment if you die, become
permanently disabled or are involuntarily terminated for Cause by the
Company during the applicable Retention Period.
c) No Other Employment. You will not be eligible for an Executive
Retention Bonus installment or severance benefits under this Agreement
if you engage in any activity during the applicable Retention Period
or, in the case of severance benefits, prior to the Sale of the
Company relating to your employment, which is inconsistent with the
satisfactory performance of your duties including, but not limited to,
engaging in other full-time or substantially full-time employment,
whether as an employee, consultant or in any other capacity, whether
or not you are compensated for such other employment, or engaging in
any other business activity, whether or not such business activity is
pursued for gain or profit, except as approved in advance in writing
by an authorized representative of the Company.
d) Confidentiality. You agree to maintain the utmost confidentiality of
the existence and the terms of this Agreement and all documentation or
records relating to this Agreement and the Executive Retention Bonus
and Severance Program and not to disclose these matters to any person
or entity without the prior written consent of the Company unless
required otherwise by law or court order. You will not be eligible
for the Executive Retention Bonus or severance benefits under this
Agreement if you violate this confidentially requirement.
e) Resignation as Director and/or Officer. You will not be eligible for
severance benefits under this Agreement unless, promptly after your
cessation of employment with the Company and upon receiving a written
request to do so, you resign as a director and/or officer of the
Company (including of each subsidiary and affiliate of the Company)
for which you are then serving as a director and/or officer.
f) Waiver of Other Retention, Termination and Severance Benefits and
Participant in General Retention Bonus Program. Eligibility to
receive the Executive Retention Bonus installments and severance
benefits under this Agreement is contingent upon your agreeing to
waive your rights under and terminate your participation in any and
all other retention, termination and severance programs of the Company
and of each subsidiary and affiliate of the Company (whether by
individual agreement or otherwise) now or subsequently existing during
the period this Agreement is in effect (including without limitation
any executive or other severance agreement now in force and the
Company's general retention bonus and severance program for rank and
file employees contained in the 1999 Company Sale Severance Program),
which you may do by signing, dating and returning to the Company one
copy of this Agreement
g) Acceptance of Agreement. Eligibility to receive the Executive
Retention Bonus and severance benefits under this Agreement is
contingent upon your acceptance of the terms of this Agreement by
signing, dating and returning to the Company one copy of this
Agreement no later than October 25, 1999.
8. Other Terms and Conditions. The following additional terms and
--------------------------
conditions apply for purposes of this Agreement:
4
<PAGE>
a) No Contract of Employment. This Agreement is not intended to, and
does not, create a contract of employment for any definite period of
time between you and the Company.
b) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby. You may at any time
or from time to time waive any or all of the benefits provided for
herein which have not been received by you at the time of such waiver.
In addition, prior to the last day of the calendar year in which your
cessation of employment occurs, you may waive any or all rights and
benefits provided for herein which have been received by you; provided
that you repay to the Company the amount of the benefits received
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code). Any waiver of benefits pursuant to this paragraph shall
be irrevocable.
c) Severability. If any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
d) Modification. Any modifications to this Agreement must be approved in
writing by an authorized representative of the Company. No reduction
in your rights under this Agreement may be made without your written
consent.
e) Governing law. This Agreement shall be construed, enforced and
administered in accordance with the laws of the Commonwealth of
Virginia.
f) Excise Tax. If you become entitled to benefits under this Agreement
and if any part or all of such benefits will be subject to the tax
("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then the amount otherwise payable or
provided to you in accordance with this Agreement shall be reduced as
necessary so that no part of such payment shall be subject to the
Excise Tax.
g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not
be governed by any duty to mitigate your damages by seeking further
employment nor offset by any compensation which you may receive from
future employment.
h) Interest on Delayed Payments. If payment or provision of any benefit
due to you under this Agreement is not timely made, you shall be
entitled to interest on the amount not timely paid at 120% of the
applicable federal rate, compounded semi-annually, under Section
1274(d) of the Code determined at the time the Sale of the Business
relating to your employment occurs, such interest to accrue from the
date such benefit is due through the date of payment or provision
thereof.
i) Adjudication. If a dispute or controversy arises under or in
connection with this Agreement, you shall be entitled to an
adjudication in an appropriate court of the Commonwealth of Virginia,
or in any other court of competent jurisdiction. Alternatively, you,
at your option, may seek an award in arbitration to be conducted by a
single arbitrator under the Commercial Arbitration Rules of the
American Arbitration Association.
j) Expenses relating to the Company's Failure to Perform. If any contest
or dispute shall arise under this Agreement involving the failure or
refusal of the Company to perform fully in accordance with the terms
hereof other than in connection with a good faith determination of the
existence of Cause, the Company shall reimburse you, on a
5
<PAGE>
current basis, for all legal fees and expenses, if any, incurred by
you in connection with such contest or dispute (regardless of the
result thereof), together with interest in an amount equal to the
prime rate of BankAmerica from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law,
such interest to accrue from the date the Company receives your
statement for such fees and expenses through the date of payment
thereof. Such reimbursement shall include the cost of attorney's fees
in reviewing this Agreement in connection with such contest or dispute
and in negotiating or attempting to negotiate a settlement of such
contest or dispute prior to your making such claim or commencing any
action or proceeding and in settling any matter relating to this
Agreement.
k) Other Expenses. If any claim, action or proceeding (including without
limitation a claim, action or proceeding by you against the Company)
occurs with respect to this Agreement other than one described in
section 8.j) above, the Company shall pay or reimburse you for all
costs and expenses, including without limitation court costs and
attorney's fees, incurred by you as a result thereof, provided that if
the claim, action or proceeding is by you against the Company, you are
successful in whole or in part on the merits or otherwise in such
claim, action or proceeding. Such reimbursement shall include
interest in an amount equal to the prime rate of BankAmerica from time
to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the
date the Company receives your statement for such fees and expenses
through the date of payment thereof.
l) Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. The Company
will require any successor which employs you in connection with a Sale
of the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform it if you had remained employed by the Company.
As used in this Agreement, the "Company" shall mean Eskimo Pie
Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
m) Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable
hereunder if you had continued to live, any such amount, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to your devisee, legatee or other designee or, if
there is no such designee, your estate.
n) Termination. If no Sale of the Company occurs prior to January 1,
2001, this Agreement shall then terminate.
Eskimo Pie Corporation
By /s/ Arnold H. Dreyfuss
-----------------------
Arnold H. Dreyfuss
Chairman of the Board
I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE
AGREEMENT AND AGREE TO ITS TERMS.
6
<PAGE>
Agreed and Accepted:
/s/ David B. Kewer October 21, 1999
- ---------------------------------- ----------------
David B. Kewer (Date)
7
<PAGE>
Exhibit 10.8
ESKIMO PIE CORPORATION
1996 INCENTIVE STOCK PLAN
(As Amended effective December 16, 1999)
ARTICLE I
Establishment, Purpose, and Duration
1.1 Establishment of the Plan. Eskimo Pie Corporation, hereby establishes
-------------------------
an incentive compensation plan to be known as the "1996 Incentive Stock Plan",
as set forth in this document. Unless otherwise defined herein, all capitalized
terms shall have the meanings set forth in Section 2.1 herein. The Plan permits
the grant of Incentive Stock Options, Non-qualified Stock Options, Stock
Appreciation Rights and Stock Awards.
The Plan was adopted by the Board of Directors on, and shall become
effective, as of February 23, 1996 (the "Effective Date"), subject to the
approval by vote of shareholders of the Company in accordance with applicable
laws. Awards may be granted prior to shareholder approval of the Plan, but each
such Award shall be subject to the approval of the Plan by the shareholders.
1.1 Purpose of the Plan. The purpose of the Plan is to promote the
-------------------
success of the Company and its Subsidiaries by providing incentives to Key
Employees that will promote the identification of their personal interest with
the long-term financial success of the Company and with growth in shareholder
value. The Plan is designed to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Key Employees upon
whose judgment, interest, and special effort the successful conduct of its
operation is largely dependent. The Plan is also intended to promote a greater
identity of interest between Non-Employee Directors and the Company's
shareholders by increasing the Non-Employee Director's proprietary interest in
the Company through receipt of Awards in lieu of cash payments for a portion of
each Non-Employee Director's fees.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
--------------------
as described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Article 13 herein, until February 23, 2006 (the "Term"), at which time it shall
terminate except with respect to Awards made prior to, and outstanding on, that
date which shall remain valid in accordance with their terms.
ARTICLE II.
Definitions
2.1 Definitions. Except as otherwise defined in the Plan, the following
-----------
terms shall have the meanings set forth below:
<PAGE>
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) "Agreement" means a written agreement implementing the grant of
each Award signed by an authorized officer of the Company and by the
Participant.
(c) "Automatic Grant Date" means the first business day after the
annual meeting of stockholders of the Company of each year during the Term.
(d) "Award" means, individually or collectively, a grant under this
Plan of Automatic Options, Automatic Restricted Stock Awards, Incentive
Stock Options, Non-qualified Stock Options, Stock Appreciation Rights,
Stock Awards and Stock Payment Awards. Automatic Options and Automatic
Restricted Stock Awards are collectively referred to as "Automatic Awards."
(e) "Award Date" or "Grant Date" means the date on which an Award is
made by the Committee under this Plan.
(f) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act.
(g) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(h) "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(1) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Voting Securities"). Notwithstanding the foregoing, the following
acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by, or benefit distribution from, any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company, (D)
any acquisition pursuant to any compensatory stock option or stock
purchase plan for employees, or (E) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions
-2-
<PAGE>
described in clauses (A), (B), and (C) of Subsection (3) of this
Section 2.1(h) are satisfied; or
(2) Individuals who, as of the Effective Date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the
Effective Date whose election or nomination for election was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board (with his
predecessor thereafter ceasing to be a member); or
(3) Approval by the shareholders of the Company of the
reorganization, merger, or consolidation of the Company unless,
following such reorganization, merger, or consolidation, (A) more
than 60% of the then outstanding shares of common stock and the
then outstanding voting securities of the resulting corporation
is then beneficially owned by all or substantially all of the
beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Securities immediately prior to such
reorganization, merger, or consolidation, (B) no Person
(excluding (I) the Company, (II) any employee benefit plan (or
related trust) of the Company or such corporation resulting from
such reorganization, merger, or consolidation, and (III) any
Person beneficially owning, immediately prior to such
reorganization, merger, or consolidation, 20% or more of the
Outstanding Common Stock or Outstanding Voting Securities, as the
case may be) beneficially owns 20% or more of the then
outstanding shares of common stock or the combined voting power
of the then outstanding voting securities of the resulting
corporation, and (C) at least a majority of the members of the
board of directors of the resulting corporation were members of
the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger, or
consolidation; or
(4) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company, or (B) the
sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or other disposition, (I) more than
60% of the outstanding shares of common stock and the then
outstanding voting securities of such corporation is beneficially
owned by all or substantially all of the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such sale or disposition;
(II) no Person (excluding (x) the Company , (y) any employee
benefit plan (or related trust) of the Company or such
corporation, and (z) any Person beneficially owning, immediately
prior to such sale or other disposition, 20% or more of the
Outstanding Common Stock or Outstanding Voting Securities, as
-3-
<PAGE>
the case may be) beneficially owns 20% or more of the then
outstanding shares of common stock or the combined voting power of
the then outstanding voting securities of such corporation, and
(III) at least a majority of the members of the board of directors
of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
sale or other disposition of the assets of the corporation.
(i) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(j) "Committee" means the committee of the Board appointed to
administer the Plan pursuant to Article 3 herein, all of the members of
which shall be "disinterested persons" as defined in Rule 16b-3, as
amended, under the Exchange Act or any similar or successor rule and
"outside directors" within the meaning of Section 162(m)(4)(C)(i) of the
Code, as amended.
(k) "Company" means Eskimo Pie Corporation, or any successor thereto
as provided in Article 14 herein.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" of a Share means (i) with respect to Awards
other than Stock Payment Awards, the mean between the high and low sales
price of the Stock on the relevant date if it is a trading date, or if not,
on the most recent date on which the Stock was traded prior to such date,
as reported by NASDAQ National Market System, or if, in the opinion of the
Committee, this method is inapplicable or inappropriate for any reason, the
fair market value as determined pursuant to a reasonable method adopted by
the Committee in good faith for such purpose and (ii) with respect to Stock
Payment Awards, the average closing sale price of the Stock, as reported by
the NASDAQ National Market System, for all trading dates from the beginning
of the relevant calendar quarter up through and including the Determination
Date for that quarter (as defined in Section 9.3).
(n) "Incentive Stock Option" or "ISO" means an option to purchase
Stock, granted under Article 6 herein, which is designated as an incentive
stock option and is intended to meet the requirements of Section 422 of the
Code.
(o) "Key Employee" means an officer or other key employee of the
Company or its Subsidiaries, who, in the opinion of the Committee, can
contribute significantly to the growth and profitability of, or perform
services of major importance to, the Company and its Subsidiaries. "Key
Employee" does not include Non-Employee Directors.
(p) "Non-Employee Director" means (i) with respect to Automatic Awards
an individual who is a member of the Board on the applicable Automatic
Grant Date and
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<PAGE>
who is not an employee of the Company or a Subsidiary and (ii) with respect
to Stock Payment Awards an individual who is a member of the Board at any
time during the calendar year and who is not an employee of the Company or
Subsidiary.
(q) "Non-qualified Stock Option" or "NQSO" means an option to
purchase Stock, granted under Article 6 or Article 9 herein, which is not
intended to be an Incentive Stock Option.
(r) "Option" means an Incentive Stock Option or a Non-qualified Stock
Option.
(s) "Participant" means a Key Employee or Non-Employee Director who
is granted or receives an Award under the Plan.
(t) "Performance Criteria" means one or more specified performance
goals, which may be stated in terms of the value of the Common Stock,
return on equity, earnings per share, total earnings, earnings growth,
return on assets or return on capital, with respect to awards of Restricted
Stock pursuant to Article 8.
(u) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is restricted, pursuant to Article 8
or Article 9 herein.
(v) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
(w) "Plan" means the Eskimo Pie Corporation 1996 Incentive Stock
Plan, as described herein and as hereafter from time to time amended.
(x) "Related Option" means an Option with respect to which a Stock
Appreciation Right has been granted.
(y) "Restricted Stock" means a Stock Award which is subject to a
Period of Restriction and/or satisfaction of Performance Criteria granted
to a Participant pursuant to Article 8 or Article 9 herein.
(z) "Restrictions" means any applicable Period of Restriction and/or
Performance Criteria with respect to Shares of Restricted Stock.
(aa) "Stock" or "Shares" means the Common Stock of the Company.
(bb) "Stock Appreciation Right" or "SAR" means an Award, designated as
a stock appreciation right, granted to a Participant pursuant to Article 7
herein.
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<PAGE>
(cc) "Stock Payment Awards" means an award of Stock made to a Non-
Employee Director in payment of director fees (retainer and meeting
attendance fees) in accordance with the formula and other provisions
established in Section 9.3 herein.
(dd) "Stock Awards" means an award of Stock granted to a Participant
pursuant to Article 8 herein.
(ee) "Subsidiary" shall mean a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by the
Company, either directly or through one or more of its Subsidiaries.
ARTICLE III.
Administration
3.1 The Committee. Subject to the Board's right to retain administration
-------------
of the Plan and except as otherwise provided in Section 3.4, the Plan shall be
administered by the Committee which shall have all powers necessary or desirable
for such administration. Except as otherwise provided in Section 3.4 and
Article 9, the express grant in this Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee. In
addition to any other powers and, subject to the provisions of the Plan, the
Committee shall have the following specific powers: (i) to determine the terms
and conditions upon which the Awards may be made and exercised; (ii) to
determine all terms and provisions of each Agreement, which need not be
identical; (iii) to construe and interpret the Agreements and the Plan; (iv) to
establish, amend or waive rules or regulations for the Plan's administration;
(v) to accelerate the exercisability of any Award or the termination of any
Period of Restriction; and (vi) to make all other determinations and take all
other actions necessary or advisable for the administration of the Plan.
3.2 Delegation of Certain Duties. The Committee may in its sole
----------------------------
discretion delegate all or part of its duties and obligations to designated
officer(s) to administer the Plan with respect to Awards to Key Employees who
are not subject to Section 16 of Exchange Act.
3.3 Selection of Key Employees. The Committee shall have the authority to
--------------------------
grant Awards under the Plan, from time to time, to such Key Employees as may be
selected by it. Each Award shall be evidenced by an Agreement.
3.4 Awards to Non-Employee Directors. With respect to Awards made to
--------------------------------
Non-Employee Directors pursuant to Article 9, except as otherwise provided in
Article XI, the Plan shall be administered by employee directors of the Board or
their delegate who shall have complete authority to interpret all provisions of
Article 9; to prescribe the form of Agreements for Awards to Non-Employee
Directors pursuant to Article 9; to adopt, amend and rescind rules and
regulations pertaining to Awards to Non-Employee Directors and to make all other
determinations necessary or advisable for the administration of Article 9 of the
Plan.
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<PAGE>
3.5 Decisions Binding. All determinations and decisions made by the
-----------------
Board, the Committee or the employee directors pursuant to the provisions of the
Plan shall be final, conclusive and binding.
3.6 Requirements of Rule 16b-3 and Code Section 162(m). Notwithstanding
--------------------------------------------------
any other provision of the Plan, the Board or the Committee may impose such
conditions on any Award, and amend the Plan in any such respects, as may be
required to satisfy the requirements of Rule 16b-3, as amended (or any successor
or similar rule), under the Exchange Act. Any provision of the Plan to the
contrary notwithstanding, and except to the extent that the Committee determines
otherwise: (a) transactions by and with respect to officers and directors of
the Company who are subject to Section 16(b) of the Exchange Act (hereafter,
"Section 16 Persons") shall comply with any applicable conditions of SEC Rule
16b-3; (b) transactions with respect to persons whose remuneration is subject to
the provisions of Section 162(m) of the Code shall conform to the requirements
of Section 162(m)(4)(C) of the Code; and (c) every provision of the Plan shall
be administered, interpreted and construed to carry out the foregoing provisions
of this sentence. Notwithstanding any provision of the Plan to the contrary,
the Plan is intended to give the Committee the authority to grant Awards that
qualify as performance-based compensation under Code Section 162(m)(4)(C) as
well as Awards that do not so qualify. Every provision of the Plan shall be
administered, interpreted and construed to carry out such intention and any
provision that cannot be so administered, interpreted and construed shall to
that extent be disregarded; and any provision of the Plan that would prevent an
Award that the Committee intends to qualify as performance-based compensation
under Code Section 162(m)(4)(C) from so qualifying shall be administered,
interpreted and construed to carry out such intention and any provision that
cannot be so administered, interpreted and construed shall to that extent be
disregarded.
3.7 Indemnification. In addition to such other rights of indemnification
---------------
as they may have as directors or as members of the Committee, the members of the
Committee and the employee directors or their delegate shall be indemnified by
the Company against reasonable expenses, including attorneys' fees, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Award granted or made hereunder, and against all
amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
members acted in good faith and in a manner which they believed to be in, and
not opposed to, the best interests of the Company and its Subsidiaries.
ARTICLE IV.
Stock Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.4
----------------
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 200,000. No more than one-half of
the aggregate number of such Shares shall be issued in connection with Stock
Awards. Except as provided in Sections 4.2 and 4.3 herein, the issuance of
Shares in connection with the exercise of, or as other payment for
-7-
<PAGE>
Awards, under the Plan shall reduce the number of Shares available for future
Awards under the Plan.
4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this
---------------------------------
Plan (for which no material benefits of ownership have been received, including
dividends) terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, or if Shares issued pursuant to Awards (for which no
material benefits of ownership have been received, including dividends) are
forfeited, any Stock subject to such Award again shall be available for the
grant of an Award under the Plan, subject to Section 7.2.
4.3 Delivery of Shares as Payment. In the event a Participant pays the
-----------------------------
Option Price for Shares pursuant to the exercise of an Option with previously
acquired Shares, the number of Shares available for future Awards under the Plan
solely to Key Employees who are not Section 16 Persons shall be reduced only by
the net number of new Shares issued upon the exercise of the Option.
4.4 Capital Adjustments. The number and class of Shares subject to each
-------------------
outstanding Award and each Automatic Award, the Option Price and the aggregate
number and class of Shares for which Awards thereafter may be made shall be
subject to such adjustment, if any, as the Committee in its sole discretion
deems appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations of or by the
Company.
ARTICLE V.
Eligibility
Persons eligible to participate in the Plan include all employees of the
Company and its Subsidiaries who, in the opinion of the Committee, are Key
Employees. Key Employees do not include Non-Employee Directors. Non-Employee
Directors shall receive Automatic Awards, and may elect to receive Stock Payment
Awards, under the Plan pursuant to Article 9.
ARTICLE VI.
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
----------------
Options may be granted to Key Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Key Employee, provided, however, (a) no Key Employee may be granted Options
in any calendar year for more than 50,000 shares of Common Stock and (b) that
the aggregate Fair Market Value (determined at the time the Award is made) of
Shares with respect to which any Key Employee may first exercise ISOs granted
under the Plan during any calendar year may not exceed $100,000 or such amount
as shall be specified in Section 422 of the Code and rules and regulation
thereunder.
6.2 Option Agreement. Each Option grant shall be evidenced by an
----------------
Agreement that shall specify the type of Option granted, the Option Price (as
hereinafter defined), the duration
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<PAGE>
of the Option, the number of Shares to which the Option pertains, any conditions
imposed upon the exercisability of Options in the event of retirement, death,
disability or other termination of employment, and such other provisions as the
Committee shall determine. The Agreement shall specify whether the Option is
intended to be an Incentive Stock Option within the meaning of Section 422 of
the Code, or Nonqualified Stock Option not intended to be within the provisions
of Section 422 of the Code.
6.3 Option Price. The exercise price per share of Stock covered by an
------------
Option ("Option Price") shall be determined by the Committee subject to the
following limitations. The Option Price shall not be less than 100% of the Fair
Market Value of such Stock on the Grant Date. In addition, an ISO granted to an
employee who, at the time of grant, owns (within the meaning of Section 425(d)
of the Code) Stock possessing more than 10% of the total combined voting power
of all classes of Stock of the Company, shall have an Option Price which is at
least equal to 110% of the Fair Market Value of the Stock.
6.4 Duration of Options. Each Option shall expire at such time as the
-------------------
Committee shall determine at the time of grant provided, however, that no ISO
shall be exercisable later than the tenth (10th) anniversary date of its Award
Date.
6.5 Exercisability. Options granted under the Plan shall be exercisable
--------------
at such times and be subject to such restrictions and conditions as the
Committee shall determine, which need not be the same for all Key Employees.
6.6 Method of Exercise. Options shall be exercised by the delivery of a
------------------
written notice to the Company in the form prescribed by the Committee setting
forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares which shall be deemed to include
arrangements approved by the Committee for the delivery to the Company of the
proceeds of a sale or margin loan in the case of a "cashless" exercise. The
Option Price shall be payable to the Company in full either in cash (including
the proceeds of a cashless exercise in the Committee's discretion), by delivery
of Shares of Stock valued at Fair Market Value at the time of exercise,
delivery of a promissory note (in the Committee's discretion) or by a
combination of the foregoing. As soon as practicable after receipt of written
notice and payment, the Company shall deliver to the Participant, stock
certificates in an appropriate amount based upon the number of Options
exercised, issued in the Participant's name. No Participant who is awarded
Options shall have rights as a shareholder until the date of exercise of the
Options.
6.7 Restrictions on Stock Transferability. The Committee shall impose
-------------------------------------
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under the applicable Federal securities law, under the requirements
of the National Association of Securities Dealers, Inc. or any stock exchange
upon which such Shares are then listed and under any blue sky or state
securities laws applicable to such Shares.
6.8 Nontransferability of Options. Except as specifically provided in an
-----------------------------
Agreement pursuant to 6.9 below, no Option granted under the Plan may be sold,
transferred, pledged,
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<PAGE>
assigned, or otherwise alienated or hypothecated, otherwise than by will or by
the laws of descent and distribution. Further, all Options granted to a
Participant under the Plan shall be exercisable during his lifetime only by such
Participant or his guardian or legal representative.
6.9 Transferability of Certain Options and SARs. In addition to
--------------------------------------------
nontransferable Options, the Committee may grant Nonqualified Stock Options
(with or without tandem SARs) or SARs that are transferable during the lifetime
of the Key Employee, provided that (i) no consideration is paid for the transfer
and (ii) no Options granted to Section 16 Persons may be transferable unless and
except to the extent such transferability would not result in the loss of any
Rule 16b-3 exemptions for nontransferable Options granted or to be granted under
the Plan. The transferee of an Option shall be subject to all restrictions
applicable to the Option prior to its transfer. The Agreement granting the
Option shall set forth the transfer conditions and restrictions. The Committee
may impose on any transferable Option and on Stock issued upon the exercise of
any Option such limitations and conditions as the Committee deems appropriate.
ARTICLE VII.
Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and
----------------------------------
conditions of the Plan, Stock Appreciation Rights may be granted to Key
Employees, at the discretion of the Committee (a) in connection with the grant,
and exercisable in lieu of Options ("Tandem SARs"), (b) independent of the grant
of the Options ("Freestanding SARs") or (c) in any combination of the foregoing.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect to
-----------------------
all or part of the Shares subject to the Related Option. The exercise of Tandem
SARs shall cause a reduction in the number of Shares subject to the Related
Option equal to the number of Shares with respect to which the Tandem SAR is
exercised. Conversely, the exercise, in whole or in part, of a Related Option,
shall cause a reduction in the number of Shares subject to the Tandem Option
equal to the number of Shares with respect to which the Related Option is
exercised. Shares with respect to which the SAR shall have been exercised may
not be subject again to an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, a Tandem
SAR shall expire no later than the expiration of the Related Option, shall be
transferable only when and under the same conditions as the Related Option and
shall be exercisable only when the Related Option is eligible to be exercised.
In addition, if the Related Option is an ISO, a SAR shall be exercised for no
more than 100% of the difference between the Option Price of the Related Option
and the Fair Market Value of Shares subject to the Related Option at the time
the SAR is exercised.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised
-----------------------------
upon whatever terms and conditions the Committee, in it sole discretion, imposes
upon such SARs.
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<PAGE>
7.4 Other Conditions Applicable to SARs. In no event shall the term of
-----------------------------------
any SAR granted under the Plan exceed ten years from the Grant Date. A SAR may
be exercised only when the Fair Market Value of a Share exceeds either (a) the
Option Price of the Related Option in the case of a Tandem SAR or (b) the Fair
Market Value of a Share on the Grant Date in the case of a Freestanding SAR. A
SAR shall be exercised by delivery to the Committee of a notice of exercise in
the form prescribed by the Committee.
7.5 Payment Upon Exercise of SARs. Subject to the provisions of the
-----------------------------
Agreement, upon the exercise of a SAR, the Participant is entitled to receive,
without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of Shares
with respect to which the SAR is exercised by (ii) an amount equal to the excess
of (A) the Fair Market Value per Share on the date of exercise of the SAR over
(B) either (x) the Option Price of the Related Option in the case of a Tandem
SAR or (y) the Fair Market Value per Share on the Award Date in the case of a
Freestanding SAR.
Payment to the Key Employee shall be made in Shares, valued at the Fair
Market Value on the date of exercise, in cash if the Key Employee has so elected
in his written notice of exercise and Committee has consented thereto, or a
combination thereof. To the extent required to satisfy the conditions of Rule
16b-3(e) under the Exchange Act, or any successor or similar rule, or as
otherwise provided in the Agreement, the Committee shall have the sole
discretion to consent to or disapprove the election of any Key Employee to
receive cash in full or partial settlement of a SAR. In cases where an election
of settlement in cash must be consented to by the Committee, the Committee may
consent to, or disapprove, such election at any time after such election, or
within such period for taking action as is specified in the election, and
failure to give consent shall be disapproval. Consent may be given in whole or
as to a portion of the SAR surrendered by the Key Employee. If the election to
receive cash is disapproved in whole or in part, the SAR shall be deemed to have
been exercised for Shares, or, if so specified in the notice of exercise and
election, not to have been exercised to the extent the election to receive cash
is disapproved.
7.6 Nontransferability of SARs. Unless the Committee provides otherwise
--------------------------
pursuant to Section 6.9, no SAR granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, otherwise than by
will or by the laws of descent and distribution. Further, all SARs granted to a
Key Employee under the Plan shall be exercisable during his lifetime only by
such Key Employee or his guardian or legal representative.
ARTICLE VIII.
Stock Awards
8.1 Grant of Stock Awards. Subject to the terms and provisions of the
---------------------
Plan, the Committee, at any time and from time to time, may grant Stock Awards
under the Plan to such Key Employees, which may but need not be Restricted
Stock, and in such amounts as it shall determine; provided, however, that no Key
Employee may be granted Stock Awards in any calendar year for more than 50,000
shares of Common Stock. Key Employees receiving Stock
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Awards are not required to pay the Company therefor (except for applicable tax
withholding) other than the rendering of services.
8.2 Stock Award Agreement. Each Stock Award shall be evidenced by an
---------------------
Agreement that shall specify the number of shares of Stock covered by the Stock
Award, any applicable Restrictions and such other provisions as the Committee
shall determine. The Committee may impose such other restrictions to be set
forth in the Agreement as it may deem advisable, including without limitation,
restrictions under applicable Federal or state securities laws, and may legend
the certificates representing Stock Awards to give appropriate notice of such
restrictions.
8.3 Transferability. Except as otherwise provided in the Agreement
---------------
pursuant to which Stock Awards are made and subject to the limitation in the
next sentence, the Shares of Stock granted as Stock Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
termination of any applicable Restrictions or upon earlier satisfaction of other
conditions as specified by the Committee in its sole discretion and set forth in
the Agreement. All rights with respect to the Stock Awards granted to a
Participant under the Plan shall be exercisable during his lifetime only by such
Participant or his guardian or legal representative.
8.4 Restrictions on Restricted Stock. With respect to Shares of
--------------------------------
Restricted Stock granted pursuant to the Plan, the Committee shall either (a)
impose a Period of Restriction which requires continuation of employment for a
prescribed period, or (b) require the satisfaction of one or more specified
Performance Criteria to be achieved within a stated time period, in order for
the Participant to be fully vested in the Shares of Restricted Stock. Shares of
Restricted Stock issued prior to the termination of applicable Restrictions
shall be retained by the Company until the termination of such Restrictions.
8.5 Certificate Legend. In addition to any legends placed on certificates
------------------
pursuant to Section 8.2 herein, each certificate representing shares of
Restricted Stock granted pursuant to the Plan shall bear the following legend:
The sale or other transfer of the Shares of Stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer set forth in the 1996 Incentive
Stock Plan of Eskimo Pie Corporation, in the rules and administrative
procedures adopted pursuant to such Plan, and in an Agreement dated
____________. A copy of the Plan, such rules and procedures, and such
Restricted Stock Agreement may be obtained from the Secretary of Eskimo Pie
Corporation.
8.6 Removal of Restrictions. Except as otherwise provided in this
-----------------------
Article, Shares of Restricted Stock covered by each Restricted Stock Award made
under the Plan shall become freely transferable by Participant after the last
day of the Period of Restriction or on the day immediately following the date on
which the Performance Criteria have been timely satisfied. Once the Shares are
released from the restrictions, the Company shall deliver the certificate
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representing the Restricted Stock to the Participant and the Participant shall
be entitled to have the legend required by Section 8.5 herein removed from his
Stock certificate.
8.7 Voting Rights. Participants holding Shares of Restricted Stock still
-------------
subject to Restrictions may exercise full voting rights with respect to those
Shares.
8.8 Dividends and Other Distributions. Participants holding shares of
---------------------------------
Restricted Stock still subject to Restrictions shall be entitled to receive all
dividends and other distributions paid with respect to those shares while they
are so held. If any such dividends or distributions are paid in Shares, the
Shares shall be subject to the same restrictions on transferability as the
Shares of Restricted Stock with respect to which they were distributed.
8.9 Termination of Employment Due to Retirement. Unless otherwise
-------------------------------------------
provided in the Agreement, in the event that a Key Employee terminates his
employment with the Company or one of its Subsidiaries because of normal
retirement (as defined in the plans and/or policies of the Company in effect at
the time), any remaining Restrictions applicable to the Restricted Stock Shares
pursuant to Section 8.4 herein shall automatically terminate and, except as
otherwise provided in Section 8.2 herein the Shares of Restricted Stock shall
thereby be free of restrictions and freely transferable. Unless otherwise
provided in the Agreement, in the event that a Key Employee terminates his
employment with the Company because of early retirement (as defined in the
policies and/or plans of the Company in effect at the time), the Committee, in
its sole discretion, may waive the restrictions remaining on any or all Shares
of Restricted Stock pursuant to Section 8.2 herein and add such new restrictions
to those Shares of Restricted Stock as it deems appropriate.
8.10 Termination of Employment Due to Death or Disability. In the event a
----------------------------------------------------
Key Employee's employment is terminated because of death or disability, any
remaining Restriction applicable to the Restricted Stock pursuant to Section 8.4
herein shall automatically terminate and, except as otherwise provided in
Section 8.2 herein the shares of Restricted Stock shall thereby be free of
restrictions and fully transferable.
8.11 Termination of Employment for Other Reasons. Unless otherwise
-------------------------------------------
provided in the Agreement, in the event that a Key Employee terminates his
employment with the Company for any reason other than for death, disability, or
retirement, as set forth in Sections 8.9 and 8.10 herein, then any shares of
Restricted Stock still subject to Restrictions as of the date of such
termination shall automatically be forfeited and returned to the Company.
8.12 Failure to Satisfy Performance Criteria. In the event that a Key
---------------------------------------
Employee fails to satisfy the specified Performance Criteria within the time
period established by the Committee, the Shares of Restricted Shares which were
awarded subject to the satisfaction of such Performance Goals shall be
automatically forfeited and returned to the Company.
ARTICLE IX.
Automatic Awards to Non-Employee Directors
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9.1. Automatic Options. On each Automatic Grant Date, each Non-Employee
-----------------
Director will automatically receive a Non-Qualified Stock Option covering 200
Shares ("Automatic Option") to be evidenced by an Agreement. The Option Price
of Automatic Options shall be 100% of the Fair Market Value on the Automatic
Grant Date. Unless otherwise provided in the Agreement pursuant to which they
are received, Automatic Option Awards first become exercisable 6 months after
their Automatic Grant Date, provided however that an Automatic Option Award
shall be immediately exercisable if the Non-Employee Director's membership on
the Board terminates as a result of the Non-Employee Director's retirement from
Board service in accordance with the Company's policy, death or permanent and
total disability (as such term is defined in Section 22(e)(3) of the Code). An
Automatic Option shall be forfeited if, as of the termination of the Non-
Employee Director's membership on the Board, the Automatic Option is not then
exercisable and such termination occurs for any reason other as a result of the
Non-Employee Director's retirement from Board service in accordance with the
Company's policy, death or permanent and total disability (as such term is
defined in Section 22(e)(3) of the Code). Automatic Options that are
exercisable or that become exercisable upon the Non-Employee Director's
termination of membership on the Board will remain exercisable until the tenth
anniversary of the Automatic Option's Automatic Grant Date. An Automatic
Option may be exercised with respect to any number of whole shares less than the
full number for which the Option could be exercised. A partial exercise of an
Automatic Option shall not affect the right to exercise the Automatic Option
from time to time in accordance with this Plan and the applicable Agreement with
respect to the shares remaining subject to the Automatic Option. The provisions
of Sections 6.6, 6.7 and 6.8 shall be applicable to Automatic Options.
9.2 Automatic Restricted Stock Awards. On each Automatic Grant Date, each
---------------------------------
Non-Employee Director shall automatically receive a Restricted Stock Award for
200 Shares ("Automatic Restricted Stock Award") to be evidenced by an Agreement.
The applicable Period of Restriction for each Automatic Restricted Stock Award
shall be three years from the Automatic Grant Date; provided, however, that any
remaining Period of Restriction shall automatically terminate and the shares of
Automatic Restricted Stock shall be free of restrictions and fully transferable
upon termination of the Non-Employee Director's service as a Director as a
result of the Non-employee Director's retirement from Board service in
accordance with the Company's policy, death or permanent and total disability
(as such term is defined in Section 22(e)(3) of the Code). In the event of
termination of service as a Director for any other reason during the Period of
Restriction, any shares of Restricted Stock still subject to restrictions as the
date of such termination shall automatically be forfeited and returned to the
Company. The provisions of Sections 8.5, 8.6, 8.7 and 8.8 shall be applicable
to Automatic Restricted Stock Awards.
9.3 Stock Payment Awards. Non-Employee Directors may elect to receive
--------------------
payment of their retainer and meeting attendance fees ("Fees") in the form of
Stock Payment Awards in accordance with the provisions of this Section. An
election to receive Stock Payment Awards must be made on an annual basis by
delivering written notice to the Secretary of the Company on the election form
provided by the Company for that purpose ("Election Form"). With respect to
elections for 2000, the election form must be delivered on or before December
31, 1999, and, with respect to elections for subsequent calendar years, on or
before the date of the last Board meeting in the calendar year preceding the
year to which the election relates. In the event an
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individual becomes a Non-Employee Director after the deadline for delivery of
the election notice for a particular calendar year, the Company may, but shall
not be required to, permit such Non-Employee Director to make an election to
receive Stock Payment Awards for such calendar year. Once made, an election for
a particular calendar year may not be revoked and will be effective for all Fees
owing to an electing Non-Employee Director for services to be rendered as a
director during that calendar year; provided, however, that upon the execution
-----------------
by the Company of a definitive agreement the consummation of which will result
in a Change in Control, as defined herein, any Non-Employee Director's election
to receive Stock Payment Awards will be terminated and any payment of Fees to be
made to such Non-Employee Director thereafter for such calendar year will be
made in cash form.
Stock Payment Awards shall be made on a quarterly basis, beginning with the
first quarter of the calendar year 2000. Stock Payment Awards shall be made as
soon as possible but in no event later than 30 days after the last day of the
quarter for which the Non-Employee Director's Fees are earned.
The number of Shares constituting a quarterly Stock Payment Award for each
electing Non-Employee Director shall be that number of Shares, rounded to the
nearest whole number, which results from dividing the respective Non-Employee
Director's Fees earned during that quarter by the Fair Market Value of the
Shares as of the Determination Date (as hereinafter defined). The Company shall
send each electing Non-Employee Director a letter agreement setting forth the
number of Shares constituting each Stock Payment Award and such other terms and
conditions of the Award as are consistent with this Section 9.3. Determination
Date shall mean the earlier of (a) the last day of the quarter for which the
Non-Employee Director's Fees are earned (March 31, June 30, September 30 and
December 31, respectively) or (b) the effective date of an electing Non-Employee
Director's termination as a member of the Board prior to the end of a calendar
quarter.
A Non-Employee Director shall have no voting or dividend rights with
respect to, and no right to transfer any interest in, any Stock Payment Awards
prior to the Determination Date for such Award. Following a Determination Date,
a Non-Employee Director shall be entitled to vote Stock Payment Award Shares and
to receive dividends thereafter declared and payable on such Shares. Following a
Determination Date, the Stock Payment Award Shares shall not be subject to any
restrictions on transfer and the Company shall, in accordance with each Non-
Employee Director's written request made on an Election Form, either cause a
stock certificate to be issued evidencing the Stock Payment Award Shares or
maintain a book-entry record evidencing such Shares. Stock Payment Award Shares
for which no such written request is made shall be evidenced by a book-entry
record. Dividends on Stock Payment Award Shares evidenced by a stock certificate
shall be paid in cash, and dividends on Stock Payment Award Shares evidenced by
a book entry record shall be reinvested in Shares, in each case only as and when
dividends are declared and paid to shareholders of record of Shares.
ARTICLE X.
Loans to Participants
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The Committee is authorized to make loans to Participants, upon such terms
and conditions as deemed appropriate by the Committee (including loans in
connection with cashless exercises), for the purpose of enabling Participants to
pay the Option Price for Shares or other purchase price of Awards made under the
Plan. Such loans may include amounts necessary to pay Participant's tax
liability in connection with an Award.
ARTICLE XI.
Change in Control
The Committee, as constituted before a Change in Control, in its sole
discretion may, as to any outstanding Award, either at the time the Award is
made or any time thereafter, take any one or more of the following actions with
respect to a Change in Control: (i) provide for the acceleration of any time
periods relating to the exercise or realization of any such Award so that such
Award may be exercised or realized in full on or before a date initially fixed
by the Committee; (ii) provide for the purchase or settlement of any such Award
by the Company, upon a Participant's request, for an amount of cash equal to the
amount which could have been obtained upon the exercise of such Award or
realization of such Participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any such Award then
outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in such
Change in Control.
ARTICLE XII.
Modification, Extension and Renewals of Awards
Subject to the terms and conditions and within the limitations of the Plan,
the Committee may modify, extend or renew outstanding Awards, or, if authorized
by the Board, accept the surrender of outstanding Awards (to the extent not yet
exercised) granted under the Plan and authorize the granting of new Awards
pursuant to the Plan in substitution therefor, and the substituted Awards may
specify a longer term than the surrendered Awards or may contain any other
provisions that are authorized by the Plan; provided, however, that the
substituted Awards may not specify a lower exercise price than the surrendered
Awards. The Committee may also modify the terms of any outstanding Agreement.
Notwithstanding the foregoing, however, no modification of an Award, shall,
without the consent of the Participant, adversely affect the rights or
obligations of the Participant.
ARTICLE XIII.
Amendment, Modification and Termination of the Plan
13.1 Amendment, Modification and Termination. At any time and from time to
---------------------------------------
time, the Board may terminate, amend, or modify the Plan. Such amendment or
modification may be without shareholder approval except to the extent that such
approval is required by the Code, pursuant to the rules under Section 16 of the
Exchange Act, by any national securities exchange
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or system on which the Stock is then listed or reported, by any regulatory body
having jurisdiction with respect thereto or under any other applicable laws,
rules or regulations.
13.2 Awards Previously Granted. No termination, amendment or modification
-------------------------
of the Plan other than pursuant to Section 4.4 herein shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
written consent of the Participant.
ARTICLE XIV.
Withholding
14.1 Tax Withholding. The Company shall have the power and the right to
---------------
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan.
14.2 Stock Withholding. With respect to withholding required upon the
-----------------
exercise of Nonqualified Stock Options, or upon the lapse of restrictions on
Restricted Stock, or upon the occurrence of any other similar taxable event,
participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares of Stock having a Fair Market Value equal to the amount required to be
withheld. The value of the Shares to be withheld shall be based on Fair Market
Value of the Shares on the date that the amount of tax to be withheld is to be
determined. All elections shall be irrevocable and be made in writing, signed
by the Participant on forms approved by the Committee in advance of the day that
the transaction becomes taxable.
ARTICLE XV.
Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE XVI.
General
16.1 Requirements of Law. The granting of Awards and the issuance of
-------------------
Shares of Stock under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies as may be
required.
16.2 Effect of Plan. The establishment of the Plan shall not confer upon
--------------
any Key Employee or any Non-Employee Director any legal or equitable right
against the Company, a Subsidiary, the Committee, or the employee directors,
except as expressly provided in the Plan.
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The Plan does not constitute an inducement or consideration for the employment
of any Key Employee, nor is it a contract between the Company or any of its
Subsidiaries and any Key Employee or any Non-Employee Director. Participation in
the Plan shall not give any Key Employee any right to be retained in the service
of the Company or any of its Subsidiaries.
16.3 Creditors. The interests of any Participant under the Plan or any
---------
Agreement are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered.
16.4 Governing Law. The Plan, and all Agreements hereunder, shall be
-------------
governed, construed and administered in accordance with and governed by the laws
of the Commonwealth of Virginia and the intention of the Company is that ISOs
granted under the Plan qualify as such under Section 422 of the Code.
16.5 Severability. In the event any provision of the Plan shall be held
------------
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
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Exhibit 10.10
WORKING COPY OF
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
(As Adopted Effective April 6, 1992)
Including:
1. First Amendment
2. Second Amendment
3. Third Amendment
4. Fourth Amendment
5. Fifth Amendment
6. Adoption Agreement for Eskimo Inc. -
Attached to Appendix C
7. Adoption Agreement for Sugar Creek Foods, Inc. -
Attached to Appendix C
8. Acknowledgment of Appointment of Trustee
by Thomas M. Mishoe, Jr.
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
Definition of Terms
-------------------
1.1 Accrued Benefit..................................................... 1
1.2 Act................................................................. 1
1.3 Active Participant.................................................. 1
1.4 Actuarial Equivalent or Actuarial Value............................. 1
1.5 Adjustment Factor................................................... 2
1.6 Administrator....................................................... 2
1.7 Affiliate........................................................... 2
1.8 Annuity Starting Date............................................... 2
1.9 Beneficiary......................................................... 2
1.10 Board............................................................... 2
1.11 Code................................................................ 2
1.12 Compensation........................................................ 2
1.13 Compensation Limit.................................................. 3
1.14 Contract............................................................ 4
1.15 Effective Date...................................................... 4
1.16 Eligible Employee................................................... 4
1.17 Employee............................................................ 5
1.18 Employer............................................................ 5
1.19 Family Member....................................................... 6
1.20 Fund................................................................ 6
1.21 Highly Compensated Employee......................................... 6
1.22 Hour of Service..................................................... 10
1.23 Inactive Participant................................................ 10
1.24 Insurer............................................................. 10
1.25 Investment Manager.................................................. 10
1.26 Key Employee........................................................ 10
1.27 Leased Employee..................................................... 11
1.28 Non-Highly Compensated Employee..................................... 11
1.29 Non-Key Employee.................................................... 11
1.30 Normal Retirement Age............................................... 11
1.31 Participant......................................................... 12
1.32 Plan................................................................ 12
1.33 Plan Sponsor........................................................ 12
1.34 Plan Year........................................................... 12
1.35 Policy.............................................................. 12
1.36 QDRO................................................................ 12
1.37 Salaried Employee................................................... 12
1.38 Spouse.............................................................. 12
1.39 Statutory Compensation.............................................. 12
1.40 Super Top Heavy Plan................................................ 13
1.41 Top Heavy Plan...................................................... 13
1.42 Total Compensation.................................................. 13
1.43 Trustee............................................................. 13
1.44 Year of Benefit Service............................................. 13
1.45 Year of Broken Service.............................................. 13
1.46 Year of Service..................................................... 13
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1.47 Year of Vesting Service........................................................... 14
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility and Date of Participation............................................. 14
2.2 Eligibility Service Definitions and Rules......................................... 14
ARTICLE III
Funding
-------
3.1 Funding........................................................................... 15
3.2 Timing of Contributions by the Employer........................................... 15
3.3 Determination of Funding Requirements............................................. 15
3.4 No Duty of Trustee to Determine or Enforce Contributions.......................... 15
ARTICLE IV
Determination of Accrued Benefit
--------------------------------
4.1 Accrued Benefit................................................................... 15
4.2 Accrued Benefit Service Rules..................................................... 17
4.3 Top Heavy Minimum Benefit......................................................... 17
4.4 Accrued Benefit Limitation........................................................ 19
4.5 Additional Accrued Benefit Limitations When Employer Maintains More
Than One Plan.................................................................... 19
4.6 Effect of Certain Cash-Outs on Accrued Benefit.................................... 20
4.7 No Duplication of Benefits........................................................ 20
4.8 Special Rules for Reemployed Veterans............................................. 20
ARTICLE V
Retirement Dates
----------------
5.1 Normal Retirement Date............................................................ 21
5.2 Delayed Retirement Date........................................................... 21
5.3 Early Retirement Date............................................................. 21
5.4 Disability and Retirement, Death or Separation after Disability................... 21
ARTICLE VI
Vesting
-------
6.1 Vesting at Retirement or Attainment of Normal Retirement Age...................... 23
6.2 Vesting in Accrued Benefit at Other Times......................................... 23
6.3 Vesting Service Rules............................................................. 23
6.4 Forfeiture and Restoration of Accrued Benefits.................................... 24
6.5 No Reduction in Certain Vested Accrued Benefits by Reason of Re-Employment........ 24
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ARTICLE VII
Death Benefits
--------------
7.1 Death after Annuity Starting Date................................................. 24
7.2 Death before Annuity Starting Date................................................ 24
7.3 Pre-Retirement Spouse's Death Benefit............................................. 24
7.4 Beneficiary Designation........................................................... 25
ARTICLE VIII
Payment of Benefits
-------------------
8.1 Time of Payment................................................................... 25
8.2 Form of Accrued Benefit Payment................................................... 27
8.3 Form of Death Benefit Payment..................................................... 28
8.4 Benefit Cash-Out.................................................................. 28
8.5 Plan to Plan Direct Rollover as a Distribution Option............................. 28
8.6 Notice, Election and Consent Regarding Accrued Benefit Payment.................... 29
8.7 Special Rules for Benefits on Re-employment or Continued Employment
after Normal Retirement Age....................................................... 31
8.8 Benefit Determination and Payment Procedure....................................... 32
8.9 Claims Procedure.................................................................. 33
8.10 Payments to Minors and Incompetents............................................... 34
8.11 Distribution of Benefit When Distributee Cannot Be Located........................ 34
8.12 Minimum Amount Paid Monthly....................................................... 35
ARTICLE IX
Addition Restrictions and Limitations on Payments and Benefits
--------------------------------------------------------------
9.1 Pre-termination Limitations on
Annual Payments to Certain Highly Compensated Employees.......................... 35
9.2 Restrictions on Benefits at Plan Termination...................................... 36
ARTICLE X
The Fund
--------
10.1 Trust Fund and Exclusive Benefit.................................................. 36
10.2 Plan and Fund Expenses............................................................ 36
10.3 Reversions to the Employer........................................................ 37
10.4 No Interest Other Than Plan Benefit............................................... 37
10.5 Provisions Relating to Insurer.................................................... 37
10.6 Payments from the Fund............................................................ 38
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ARTICLE XI
Fiduciaries
-----------
11.1 Named Fiduciaries and Duties and Responsibilities................................. 38
11.2 Limitation of Duties and Responsibilities of Named Fiduciaries.................... 38
11.3 Service by Named Fiduciaries in More Than One Capacity............................ 38
11.4 Allocation or Delegation of Duties and Responsibilities
Named Fiduciaries................................................................ 38
11.5 Investment Manager................................................................ 39
11.6 Assistance and Consultation....................................................... 39
11.7 Indemnification................................................................... 39
ARTICLE XII
Powers and Duties of Trustee
----------------------------
12.1 Trustee Powers and Duties......................................................... 39
12.2 Accounts.......................................................................... 41
12.3 Two or More Trustees.............................................................. 41
12.4 Management of Fund by Investment Manager.......................................... 42
12.5 Trustee Compensation and Expenses................................................. 42
12.6 Bond.............................................................................. 42
12.7 Trustee Resignation, Removal or Death an
Appointment of Successor or Additional Trustee................................... 42
12.8 Establishment of Separate Trusts.................................................. 43
12.9 Automatic Successor Trustee by Corporate Transaction.............................. 44
ARTICLE XIII
Plan Administration
-------------------
13.1 Appointment of Plan Administrator................................................. 44
13.2 Plan Sponsor as Plan Administrator................................................ 44
13.3 Compensation and Expenses......................................................... 44
13.4 Procedure if a Committee.......................................................... 44
13.5 Action by Majority Vote if a Committee............................................ 44
13.6 Appointment of Successors......................................................... 44
13.7 Additional Duties and Responsibilities............................................ 44
13.8 Power and Authority............................................................... 45
13.9 Availability of Records........................................................... 45
13.10 No Action with Respect to Own Benefit............................................. 45
13.11 Limitation on Powers and Authority................................................ 45
ARTICLE XIV
Amendment and Termination of Plan
---------------------------------
14.1 Amendment......................................................................... 46
14.2 Merger, Consolidation or Transfer of Assets....................................... 46
14.3 Plan Permanence and Termination................................................... 46
14.4 Lapse in Contributions............................................................ 46
14.5 Termination Events................................................................ 46
14.6 Benefits and Vesting upon Termination............................................. 47
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14.7 Administration of Plan after Termination.......................................... 48
14.8 Distribution of Assets after Termination.......................................... 48
14.9 Effect of Employer Merger, Consolidation or Liquidation........................... 48
ARTICLE XV
Miscellaneous
-------------
15.1 Headings.......................................................................... 49
15.2 Gender and Number................................................................. 49
15.3 Governing Law..................................................................... 49
15.4 Employment Rights................................................................. 49
15.5 Conclusiveness of Employer Records................................................ 49
15.6 Right to Require Information and Reliance Thereon................................. 49
15.7 Alienation and Assignment......................................................... 49
15.8 Notices and Elections............................................................. 49
15.9 Delegation of Authority........................................................... 50
15.10 Service of Process................................................................ 50
15.11 Construction...................................................................... 50
ARTICLE XVI
Adoption of the Plan
--------------------
16.1 Initial Adoption and Failure to Obtain Qualification.............................. 50
16.2 Adoption by Additional Employers.................................................. 50
</TABLE>
Appendices
----------
Appendix A - Elapsed Time Method of Determining Service
Appendix B - Determination of Top Heavy Plan Status
Appendix C - List of Participating Employers
Appendix D - Actuarial Equivalents and Values
Appendix E - List of Additional Excluded Positions
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THIS PLAN AND TRUST AGREEMENT, made and entered into this ______ day of
December, 1992, by and between ESKIMO PIE CORPORATION, a Delaware corporation,
and other participating employers who may adopt this agreement as provided
herein (hereinafter called the "Employer") and WILLIAM M. FARISS, JR. of
Richmond, Virginia (hereinafter called the "Trustee").
WITNESSETH:
-----------
THAT WHEREAS, the Employer by due corporate action has approved and
authorized the execution of this defined benefit pension plan and its related
trust provisions for its employees; and
WHEREAS, it is deemed desirable that money or other property contributed
for the payment of benefits hereunder be segregated and held pursuant hereto for
the exclusive benefit of such employees as shall be included hereunder; and
WHEREAS, the Trustee has consented to act as Trustee and to hold the assets
contributed to effectuate the trust provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto declare and agree as follows:
ARTICLE I
Definition of Terms
-------------------
The following words and terms as used herein shall have the meaning set
forth below, unless a different meaning is clearly required by the context:
1.1 "Accrued Benefit": That benefit determined under the provisions
of paragraph 4.1 to which a Participant is entitled.
1.2 "Act": The Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time, or the corresponding sections of any
subsequent legislation which replaces it, and, to the extent not inconsistent
therewith, the regulations issued thereunder.
1.3 "Active Participant": A Participant who is an Eligible Employee.
1.4 "Actuarial Equivalent" or "Actuarial Value":
(i) In the case of actual or deemed benefit payments to a
Participant, a benefit of equivalent value to his Accrued Benefit
commencing on the Participant's Normal Retirement Date (or as otherwise
provided in subparagraph 4.1(a)),
(ii) In the case of a Pre-Retirement Spouse's Death Benefit
commencing to a Participant's Spouse, a benefit of equivalent value to such
Death Benefit commencing on such Spouse's Earliest Commencement Date (as
determined pursuant to paragraph 7.3), and
(iii) For any other purpose, an amount or benefit of equivalent value
to another benefit or amount, based on the form(s) (which term is intended
to include the time(s)) of payment involved,
all as determined pursuant to Appendix D and the applicable sections of the
Plan.
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<PAGE>
1.5 "Adjustment Factor": The cost of living adjustment factor
prescribed by the Secretary of the Treasury or his delegate under Section 415(d)
of the Code for years beginning after December 31, 1987, applied to such items
and in such manner as the Secretary of the Treasury or his delegate shall
prescribe.
1.6 "Administrator": The Plan Administrator provided for in ARTICLE
XIII hereof.
1.7 "Affiliate": The Employer and each of the following business
entities or other organizations (whether or not incorporated) which during the
relevant period is treated (but only for the portion of the period so treated
and for the purpose and to the extent required to be so treated) together with
the Employer as a single employer pursuant to the following sections of the Code
(as modified where applicable by Section 415(h) of the Code):
(i) Any corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which includes the
Employer,
(ii) Any trade or business (whether or not incorporated) which is
under common control (as defined in Section 414(c) of the Code) with the
Employer,
(iii) Any organization (whether or not incorporated) which is a
member of an affiliated service group as defined in Section 414(m) of the
Code) which includes the Employer, and
(iv) Any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
1.8 "Annuity Starting Date": The first day of the first period for
which a benefit is paid as an annuity or in any other form (as opposed to the
actual date of payment). Notwithstanding the foregoing, the Annuity Starting
Date shall not be considered delayed because actual benefit payment is delayed
for reasonable administrative reasons as long as all benefits due are actually
made. Further, the Administrator may consider the Annuity Starting Date delayed
for notice, election and consent purposes but not for payment purposes (which
means that payment may be made retroactively to the Annuity Starting Date once
the notice, election and consent requirements are satisfied).
1.9 "Beneficiary": The person or persons designated by a Participant
or otherwise entitled pursuant to paragraph 7.4 to receive benefits under the
Plan attributable to such Participant after the death of such Participant.
1.10 "Board": The present and any succeeding Board of Directors of the
Plan Sponsor, unless such term is used with respect to a particular Employer and
its Employees, in which event it shall mean the present and any succeeding Board
of Directors of that Employer.
1.11 "Code": The Internal Revenue Code of 1986, as the same may be
amended from time to time, or the corresponding section of any subsequent
Internal Revenue Code, and, to the extent not inconsistent therewith,
regulations issued thereunder.
1.12 "Compensation":
1.12(a) The sum of:
(i) An Employee's earnings, exclusive of all awards or payments
under any stock bonus, stock option, or stock purchase plan, or any plan
involving stock appreciation rights, prizes, expense reimbursements and
allowances, severance pay, imputed income, amounts contributed for the
Employee pursuant to and benefits under the Plan or any other employee
benefit plan or program of the Employer, or any other similar remuneration,
as reportable in the Wages, Tips and Other Compensation Box (currently Box
10) on I.R.S. Form W-2 pursuant to Sections 6041, 6051 and 6052 of the Code
received by or made available to him as an Eligible Employee directly from
the Employer (but not from any Affiliate which is not a participating
employer unless otherwise expressly provided) for a Plan Year, and
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<PAGE>
(ii) The Employee's elective salary reduction or similar
contributions excluded from such earnings by reason of Sections 125,
402(a)(8) (or effective January 1, 1993, 402(e)(3)) and 402(h) of the Code
and contributed as an Eligible Employee.
Any such compensation in excess of the Compensation Limit for a Plan Year shall
be disregarded. Compensation for a Plan Year shall be rounded to the nearest
whole dollar.
1.12(b) For purposes of determining the Accrued Benefit of a Participant
who is Disabled (as provided in paragraph 5.4) as an Eligible Employee, such
Participant shall be deemed to have received Compensation during periods for
which he is considered to be Disabled, as determined pursuant to paragraph 5.4,
at his most recent actual or equivalent annual rate of Compensation in effect
prior to his becoming Disabled. A Participant's "actual or equivalent hourly
rate of Compensation" means his Compensation for the twelve (12) consecutive
calendar month period ending prior to the calendar month in which his Disability
commenced.
1.12(c) If a Participant becomes an Executive (as defined in paragraph
1.16) and thereafter ceases to be an Executive and thereupon or later becomes a
Salaried Employee who is not an Executive, his compensation and service as an
Executive shall be taken into account as compensation and service as an Eligible
Employee solely for purposes for determining his Compensation and Average
Compensation until such time, if ever, as he again becomes an Executive. This
operating rule may apply more than once.
1.13 "Compensation Limit": $200,000 (as adjusted by the Adjustment
Factor).
1.13(a) In determining the Compensation (or other amounts which may refer
to the Compensation Limit) of any Employee who is a Highly Compensated Employee
for purposes of applying the Compensation Limit in Plan Years beginning after
December 31, 1988, the Compensation (or other amounts which may refer to the
Compensation Limit) of his Family Members who are his spouse or any of his
lineal descendants who have not attained the age of nineteen (19) by the end of
the Plan Year (or other stated computation period) shall be aggregated with and
treated as part of the Employee's Compensation (or any other amounts which may
refer to the Compensation Limit). When Compensation (or any other amount which
may refer to the Compensation Limit) is limited by the Compensation Limit, it
shall be disregarded in the following order, determined on a Plan Year by Plan
Year basis:
(i) First, Compensation (or other amounts which may refer to the
Compensation Limit) of Employees who are not participants in any qualified
retirement plan maintained by any Affiliate shall be disregarded; and
(ii) Then, Compensation (or other amounts which may refer to the
Compensation Limit) shall be disregarded proportionately based on the
applicable amount determined without regard to the Compensation Limit.
1.13(b) For purposes of applying the Compensation Limit:
(i) The Compensation Limit applicable to each Plan Year (or other
applicable computation period) beginning after December 31, 1988 shall be
the Compensation Limit in effect for each such Plan Year (or other
applicable computation period), determined without increases in the
Compensation Limit for subsequent periods.
(ii) The Compensation Limit applicable to each Plan Year (or other
applicable computation period) beginning before January 1, 1989 shall be
the Compensation Limit in effect for the first Plan Year (or other
applicable computation period) beginning after December 31, 1988.
1.13(c) In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual compensation of
each employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner for increases in the cost of living in
accordance
-3-
<PAGE>
with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into account in
determining an employee's benefits accruing in the current Plan Year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
1.13(d) Notwithstanding anything to the contrary in this paragraph, the
family aggregation rules in this paragraph (providing for the aggregation of
Highly Compensated Employees and Family Members for purposes of applying the
Compensation Limit) shall cease to apply with respect to Plan Years beginning on
or after January 1, 1997.
1.14 "Contract": A group annuity contract, deposit administration
contract, immediate participation guarantee contract, or other investment-
oriented or funding contract or agreement issued by an Insurer to hold the
assets of the Plan.
1.15 "Effective Date": April 6, 1992, except that with respect to any
Employer thereafter adopting the Plan as a participating employer, such date as
may be set forth in its adoption agreement or in the Plan. The Administrator
shall maintain as Appendix C to the Plan a list of the Effective Dates of
participation of all Employers participating in the Plan.
1.16 "Eligible Employee":
1.16(a) A Salaried Employee who is not an Executive. In no event shall
Leased Employees be considered as Eligible Employees or be eligible to actively
participate in the Plan.
1.16(b) For purposes hereof, the term "Executive" means a person (i) who
is the Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer, the Chief Financial Officer, a Vice President, the
Treasurer, the Secretary, or a General Manager of the Plan Sponsor or (ii) who
holds a position described in Appendix B to the Plan, which Appendix and job
descriptions may be modified or amended at any time by the Chief Executive
Officer of the Plan Sponsor without Board approval and which exclusions shall be
effective from the later of January 1, 1993, the effective date(s) of the
addition of the exclusion(s) or the date an Employee holds any such position.
1.17 "Employee": Any individual employed in the service of the
Employer as a common law employee, any sole proprietor or partner of a
partnership constituting an Affiliate, and any Leased Employee (but only for the
purpose and to the extent treated under Section 414(n) of the Code as an
employee of the Employer).
1.18 "Employer":
1.18(a) The Plan Sponsor and each other employer heretofore or hereafter
executing or adopting the Plan as a participating employer, collectively unless
the context otherwise indicates, for as long as it remains a participating
employer; and with respect to any Employee, any one or more of such Employers by
which he is at any time employed (unless or to the extent otherwise specified by
resolution of the Board or in a merger or acquisition agreement or plan approved
by the Board or in any applicable asset transfer, plan merger or consolidation
or adoption agreement). The Administrator shall maintain as Appendix C to the
Plan a list of all such Employers who are, from time to time, participating
employers in the Plan.
1.18(b) For purposes of determining:
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<PAGE>
(i) Service for all purposes of the Plan (other than for purposes
of determining non-Top Heavy Plan benefit accrual, Eligible Employees and
Years of Benefit Service unless otherwise specifically provided) and
commencement of service and termination of employment with the Employer,
(ii) Employees, Family Members, Highly Compensated Employees, Key
Employees, and Leased Employees,
(iii) Top Heavy Plan status, contributions and benefits,
(iv) Statutory Compensation and Total Compensation, and
(v) Any limitations of Accrued Benefits hereunder,
the term "Employer" shall include each Affiliate which during any year
commencing after September 2, 1974 is treated as an Affiliate and each
predecessor employer which maintained this Plan (but not beyond the time it
ceased to maintain the Plan) within the meaning of Section 414(a) of the Code,
but only for the portion of any such year or years so treated and for the
purpose and to the extent required to be so treated.
1.18(c) For purposes of determining compensation and service with any
business entity, or predecessor thereto, which is merged into an Employer, or a
predecessor thereto, or all or substantially all the assets or the operating
assets acquired by an Employer, or predecessor thereto, compensation from and
service with such business entity and predecessor thereto shall be treated as
compensation from and service with an Employer to the extent provided by
resolution of the Board or in any corporation or plan merger, consolidation or
asset transfer agreement or any adoption agreement approved by the Board.
1.18(d) For purposes of determining service and compensation under the
Plan, service with and compensation from Reynolds Metals Company, a Delaware
corporation, and any of its "affiliates" (determined on the same basis as
Affiliates are determined, but substituting Reynolds Metals Company for the Plan
Sponsor) which was rendered or payable for service before April 6, 1992 shall be
considered as service with the Employer for all purposes of the Plan.
1.18(e) Notwithstanding any other provision of the Plan:
(i) Service with Sugar Creek Foods of Russellville, Inc., which was
the predecessor by asset acquisition on February 28, 1994 to Sugar Creek
Foods, Inc., shall not be considered service for any purpose of the Plan.
(ii) Service with Sugar Creek Foods, Inc. prior to the January 1,
1996 Effective Date of the Plan with respect to it shall not be considered
service for purposes of determining Years of Benefit Service under the
Plan.
(iii) Compensation from Sugar Creek Foods, Inc. for periods prior to
the January 1, 1996 Effective Date of the Plan with respect to it shall not
be considered Compensation for purposes of determining Accrued Benefits
under subparagraph 4.1(a) of the Plan.
1.19 "Family Member":
1.19(a) With respect to a Plan Year, an individual (whether or not
himself a Highly Compensated Employee) who is considered a family member
described in Section 414(q)(6)(A) of the Code with respect to the Employer; and,
to the extent not inconsistent therewith, an individual who is a member of the
family (consisting, with respect to an Employee, of such Employee's spouse and
lineal ascendants and descendants and the spouses of lineal ascendants and
descendants) on any day of the Determination Year or Look-Back Year with respect
to such Plan Year of a Highly Compensated Employee who is
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<PAGE>
either (i) a more than five percent (5%) owner of the Employer or (ii) in the
group consisting of the ten (10) Highly Compensated Employees with the greatest
Statutory Compensation for the relevant Determination Year or Look-Back Year.
1.19(b) For purposes hereof, the terms "Determination Year", "Look-Back
Year", and "more than five percent (5%) owner of the Employer" have the same
meaning provided herein for purposes of determining Highly Compensated
Employees.
1.20 "Fund": The trust fund, including any separate trusts, created
under and subject to the Plan, which shall be known as the "Eskimo Pie
Corporation Salaried Retirement Trust".
1.21 "Highly Compensated Employee":
1.21(a) For Plan Years beginning before January 1, 1997, an individual
who is considered a "highly compensated employee" with respect to the Employer
within the meaning of Section 414(q) of the Code; and, to the extent not
inconsistent therewith, any Employee who is considered a Highly Compensated
Active Employee or a Highly Compensated Former Employee for the Determination
Year ending with or within such Plan Year, defined as follows:
(i) The term "Highly Compensated Active Employee" means, with
respect to a Determination Year, an Employee who is an Active Employee
during the Determination Year and who during the Determination Year or the
Look-Back Year either:
(A) Was at any time a more than five percent (5%) owner of the
Employer (as defined for purposes of determining Key Employees);
(B) Received Statutory Compensation in excess of $75,000 (as
adjusted by the Adjustment Factor);
(C) Received Statutory Compensation in excess of $50,000 (as
adjusted by the Adjustment Factor), and was a member of the twenty
percent (20%) top-paid group of Employees; or
(D) Was one of the fifty (50) (or if less, the greater of three
(3) or ten percent (10%) of total Employees) officers of the Employer
having the largest annual Statutory Compensation and having Statutory
Compensation in excess of $45,000 (or fifty percent (50%) of any other
amount, as adjusted by the Adjustment Factor, in effect under Section
415(b)(1)(A) of the Code), provided, however, that if no officers
received Statutory Compensation for either such Plan Year in excess of
such dollar amount, then the officer receiving the largest annual
Statutory Compensation shall be a Highly Compensated Active Employee.
Notwithstanding the foregoing, an Employee shall not be considered
described in clauses (i)(B), (C) and (D) of this subparagraph for a
Determination Year (although he may for a Look-Back Year) unless he also is
one of the one hundred (100) Active Employees who receive the greatest
Statutory Compensation for the Determination Year.
(ii) The term "Highly Compensated Former Employee" means:
(A) With respect to a Determination Year, a Former Employee who
has had a Separation Year prior to the Determination Year and who was
a Highly Compensated Active Employee for either such Separation Year
or any Determination Year ending on or after his attainment of the age
of fifty-five (55).
(B) Notwithstanding the foregoing, an Employee shall not be
treated as a Highly Compensated Former Employee by reason of having a
Deemed Separation Year after such Employee actually separates from
service with the Employer if, after such Deemed Separation Year and
before his Actual Separation Year, his services for the Employer and
Statutory Compensation for a Determination Year increase significantly
so that the Employee is treated as having a Deemed Resumption of
Employment.
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(C) Notwithstanding the foregoing, a Former Employee who
separated from service with the Employer before the beginning of the
first Determination Year beginning on or after January 1, 1987 shall
not be treated as a Highly Compensated Former Employee unless he is
described in one or more of the following groups during either his
Actual Separation Year (or the year immediately preceding his Actual
Separation Year) or any Determination Year ending on or after his
attainment of the age of fifty-five (55) (or the last Determination
Year ending before his attainment of the age of fifty-five (55)):
(I) He was at any time a more than five percent (5%) owner
of the Employer (as defined for purposes of determining Key
Employees); or
(II) His Statutory Compensation was in excess of $50,000.
1.21(b) For Plan Years beginning on or after January 1, 1997, an
individual who is considered a "highly compensated employee" with respect to the
Employer within the meaning of Section 414(q) of the Code; and, to the extent
not inconsistent therewith, any Employee who is considered a Highly Compensated
Active Employee or a Highly Compensated Former Employee for the Determination
Year ending with or within such Plan Year, defined as follows:
(i) The term "Highly Compensated Active Employee" means, with
respect to a Determination Year, an Employee who is an Active Employee
during the Determination Year and who either:
(A) Was at any time a more than five percent (5%) owner of the
Employer (as defined for purposes of determining Key Employees) for
the Determination Year or the Look-Back Year, or
(B) Received Statutory Compensation in excess of $80,000 (as
adjusted by the Adjustment Factor, but with the base period being the
calendar quarter ending September 30, 1996) and, at the election (the
"top-paid group election") of the Plan Sponsor in accordance with
Section 414(q) of the Code, was a member of the twenty percent (20%)
top-paid group of Employees for the Look-Back Year.
The Plan Sponsor hereby makes the top-paid group election, provided,
however, that the election shall be ineffective for any Determination Year
beginning in a calendar year beginning on or after January 1, 1998 and
before January 1, 2000 unless the Employer makes the top-paid group
election with respect to the determination years beginning in such calendar
year for all of the retirement plans (which for this purpose are plans
qualified under Section 401(a) or 403(a) of the Code or described in
Section 403(b) or 408(k) of the Code) sponsored by the Employer, and
provided, further, that the election shall be ineffective for any
Determination Year beginning in a calendar year beginning on or after
January 1, 2000 unless the Employer makes the top-paid group election with
respect to the determination years beginning in such calendar year for all
of the retirement plans and nonretirement plans (which for this purpose are
employee benefit arrangements to which the definition of highly compensated
employees under Section 414(q) of the Code is applicable and which are not
plans qualified under Section 401(a) or 403(a) of the Code or described in
Section 403(b) or 408(k) of the Code) sponsored by the Employer.
(ii) The term "Highly Compensated Former Employee" means:
(A) With respect to a Determination Year, a Former Employee who
has had a Separation Year prior to the Determination Year and who was
a Highly Compensated Active Employee for either such Separation Year
or any Determination Year ending on or after his attainment of the age
of fifty-five (55) (based on the rules under Section 414(q) in effect
for the applicable Separation Year or Determination Year).
(B) Notwithstanding the foregoing, an Employee shall not be
treated as a Highly Compensated Former Employee by reason of having a
Deemed Separation Year after such Employee actually separates from
service with the Employer if, after such Deemed Separation Year and
before his Actual Separation
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<PAGE>
Year, his services for the Employer and Statutory Compensation for a
Determination Year increase significantly so that the Employee is
treated as having a Deemed Resumption of Employment.
1.21(c) For purposes hereof:
(i) The term "Active Employee" means, with respect to a
Determination Year, a current Employee who performs services for the
Employer as an Employee at any time during the Determination Year.
(ii) The term "Deemed Resumption of Employment" means an increase in
both services performed for the Employer as an Employee and Statutory
Compensation, based on the facts and circumstances, and at a minimum shall
include an increase in Statutory Compensation to the extent that such
increased Statutory Compensation would not result in a Deemed Separation
Year.
(iii) The term "Determination Year" means the Plan Year.
(iv) The term "Former Employee" means, with respect to a
Determination Year, a current or former Employee who performs no services
for the Employer as an Employee during the Determination Year.
(v) The term "Look-Back Year" means:
(A) With respect to a Determination Year beginning before
January 1, 1997, the year immediately preceding the Determination Year
in question, provided, however, that if the Determination Year is the
calendar year and the Administrator elects in accordance with Section
414(q) of the Code to determine the status of individuals as Highly
Compensated Employees on the basis of a Look-Back Year and
Determination Year which are the same year, then the Look-Back Year
shall be the Determination Year.
(B) With respect to a Determination Year beginning on or after
January 1, 1997, the year immediately preceding the Determination Year
in question.
(vi) The term "Separation Year" means:
(A) An "Actual Separation Year" which is a Determination Year in
which a Former Employee last performed services for the Employer as an
Employee prior to becoming a Highly Compensated Former Employee; or
(B) A "Deemed Separation Year" which is a Determination Year
prior to the Employee's attainment of the age of fifty-five (55) in
which he is an Active Employee and in which his Statutory Compensation
is less than fifty percent (50%) of his average annual Statutory
Compensation for the three (3) consecutive calendar years preceding
the Determination Year during which his Statutory Compensation was the
highest (or the total period of the Employee's service with the
Employer if less). A Deemed Separation Year is relevant for purposes
of determining whether an Employee is a Highly Compensated Former
Employee after he has an Actual Separation Year, but is not relevant
for purposes of identifying him as an Active or Former Employee.
1.21(d) For purposes hereof:
(i) The Adjustment Factor for a Determination Year or a Look-Back
Year shall be applied on the basis of the calendar year in which such
Determination Year or Look-Back Year begins.
(ii) The Administrator may adopt any rounding or tie-breaking rules
it desires in making relevant determinations so long as such rules are
reasonable, non-discriminatory and uniformly and consistently applied.
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(iii) An Employee is a member of the twenty percent (20%) top-paid
group for a year if he is one of the top twenty percent (20%) of Active
Employees for the year when ranked on the basis of descending Statutory
Compensation for such year (whether or not the Employee in question is
excluded in determining the number of Employees in the twenty percent (20%)
top-paid group). For this purpose, if bargaining unit Employees are not
taken into account in determining the number of Employees in the twenty
percent (20%) top-paid group pursuant to clause (iv)(E) of this
subparagraph, they also shall not be taken into account in determining
other Employees who are in twenty percent (20%) top-paid group.
(iv) For purposes of determining the number of persons in the twenty
percent (20%) top-paid group and the number of persons who may be
considered officers for a year, the following rules shall apply:
(A) The number of Employees who are in the twenty percent (20%)
top-paid group for a year is twenty percent (20%), rounded to the
nearest integer, of the total number of Active Employees who are not
excluded Employees for such year.
(B) The number of Employees equal to ten percent (10%) of total
Employees for a year is ten percent (10%), rounded to the nearest
integer, of the total number of Active Employees who are not excluded
Employees for such year.
(C) All Former Employees for the year are excluded.
(D) Employees who are non-resident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) of the Code)
from the Employer that constitutes income from sources within the
United States for the year are excluded.
(E) Employees who are in a unit of employees covered by a
collective bargaining agreement between the Employer and employee
representatives for the year are excluded if and only if ninety
percent (90%) or more of the total Employees for the year are covered
by a collective bargaining agreement with the Employer and the Active
Participants in the Plan do not include any such bargaining unit
Employees.
(F) Employees shall not be excluded on the basis of age or
length of prior service.
(v) If any Plan Year is a period of less than twelve (12) months,
then any dollar amount referred to in this paragraph shall be prorated by
multiplying the otherwise applicable dollar amount for such Plan Year by a
fraction, the numerator of which is the number of months in such Plan Year
and the denominator of which is twelve (12).
1.22 "Hour of Service": An hour for which an Employee is paid by the
Employer, or entitled to payment, for the performance of duties, including each
hour for which credit has not theretofore been given and for which back pay,
irrespective of mitigation of damages, has either been awarded or agreed to by
the Employer.
1.23 "Inactive Participant": A Participant who is not an Eligible
Employee.
1.24 "Insurer": Any insurance company which issues a Contract to hold
assets of the Plan or a Policy to provide for payment of benefits under the Plan
or to provide life insurance pursuant to the Plan.
1.25 "Investment Manager": A fiduciary of the Plan appointed to manage
all or part of the assets of the Fund and serving pursuant to ARTICLE X and
qualifying as an "investment manager" within the meaning of Section 3(38) of the
Act.
1.26 "Key Employee":
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1.26(a) With respect to a Plan Year, any Employee or former Employee (or
his Beneficiary if he is deceased) considered to be a "key employee" with
respect to the Employer at the time in question within the meaning of Section
416(i)(1) of the Code; and to the extent not inconsistent therewith, any
Employee or former Employee (or his Beneficiary if he is deceased) who at any
time during such Plan Year, or any of the preceding four (4) Plan Years, is
either:
(i) One of the fifty (50) (or if less, the greater of three (3) or
ten percent (10%) of total Employees, as determined for purposes of
determining Highly Compensated Employees) officers of the Employer having
the largest annual Statutory Compensation during any such Plan Year and
having Statutory Compensation in excess of $45,000 (or fifty percent (50%)
of any other amount, as adjusted by the Adjustment Factor, in effect for
the relevant Plan Year under Section 415(b)(1)(A) of the Code);
(ii) One of the ten (10) Employees having Statutory Compensation in
excess of $30,000 (or any other amount, as adjusted by the Adjustment
Factor, in effect for the relevant Plan Year under Section 415(c)(1)(A) of
the Code) and owning more than a one-half percent (.5%) interest in the
Employer, who owns the largest interests in the Employer, provided that if
two such Employees have the same interest in the Employer, the Employee
having the greater Statutory Compensation shall be treated as having a
larger interest;
(iii) A more than five percent (5%) owner of the Employer; or
(iv) A more than one percent (1%) owner of the Employer having an
annual Statutory Compensation of more than $150,000.
1.26(b) In determining ownership in the Employer for purposes hereof the
constructive ownership rules of Section 318 of the Code (as modified by Section
416(i)(1)(B)(iii) of the Code) shall apply, and the rules of Sections 414(b),
(c), (m) and (o) of the Code shall not apply.
1.27 "Leased Employee":
1.27(a) An individual who is considered a leased employee of the Employer
within the meaning of Section 414(n)(2) of the Code and, to the extent not
inconsistent therewith, any person:
(i) Who, pursuant to an agreement between the recipient Employer
and any other person (the "leasing organization"), has performed services
for the recipient Employer or for the recipient Employer and related
persons (determined in accordance with Section 414(n)(6) of the Code),
(ii) Whose services are performed on a substantially full-time basis
for a period of at least one year, and
(iii) For years beginning before January 1, 1997, whose services are
of a type historically performed by employees in the business field of the
recipient Employer; and for years beginning after December 31, 1996, whose
services are performed under the primary control or direction of the
recipient Employer.
1.27(b) Notwithstanding the foregoing, if such leased employees
constitute less than twenty percent (20%) of the Employer's non-highly
compensated work force within the meaning of Section 414(n)(1)(C)(ii) of the
Code, individuals otherwise considered to be Leased Employees shall not include
those leased employees covered by a plan described in Section 414(n)(5) of the
Code (unless otherwise provided by the terms of the Plan) and, to the extent not
inconsistent therewith, which:
(i) Is maintained by the leasing organization,
(ii) Is a money purchase pension plan with a non-integrated employer
contribution rate of at least seven and one-half percent (7-1/2%) of
compensation in the case of services performed before January 1, 1987 or
ten percent (10%) of compensation in the case of services performed after
December 31, 1986,
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(iii) Provides full and immediate vesting, and
(iv) Provides for immediate participation by each employee of the
leasing organization (other than employees who perform substantially all
their services for the leasing organization or whose compensation from the
leasing organization in each of the four (4) Plan Years ending with the
Plan Year in question is less than $1,000).
For purposes hereof, "compensation" means compensation as defined in Section
415(c)(3) of the Code, but determined without regard to Sections 125, 402(e)(3)
and 402(h)(1)(B) of the Code and without regard to employer contributions made
pursuant to salary reduction agreements under Section 403(b) of the Code for
Plan Years beginning before January 1, 1998.
1.29 "Non-Key Employee": Any Employee (including the Beneficiary of
such Employee) who is not a Key Employee.
1.30 "Normal Retirement Age": With respect to a Participant, the later
of:
(i) The age of sixty-five (65), or
(ii) The Participant's attained age on the fifth anniversary of his
first becoming an Employee.
1.31 "Participant": An Eligible Employee or other person qualified to
participate in the Plan for so long as he is considered a Participant as
provided in ARTICLE II hereof.
1.32 "Plan": This Agreement, including the Appendices hereto, as
contained herein or duly amended. The defined benefit plan maintained pursuant
hereto shall be known as the "Eskimo Pie Corporation Salaried Retirement Plan".
1.33 "Plan Sponsor": Eskimo Pie Corporation, a Delaware corporation
(or its corporate successor).
1.34 "Plan Year": A year commencing upon the first day of January of
each year.
1.35 "Policy": A group or individual policy, contract or other
agreement (including a certificate) issued by an Insurer which is not a Contract
and which is obtained to provide for the accumulation and/or payment of benefits
under the Plan or to provide life insurance pursuant to the Plan.
1.36 "QDRO": A qualified domestic relations order within the meaning
of Section 206(d)(3) of the Act and Section 414(p) of the Code and as determined
by the Administrator pursuant to the Plan.
1.37 "Salaried Employee": Any common law employee of the Employer
(exclusive of any Affiliate which is not a participating employer unless
otherwise expressly provided) who is employed on a salaried basis.
1.38 "Spouse": For the purpose of qualifying to receive survivor
annuity benefits under the Plan, an individual to whom a Participant was
married:
(i) On his Annuity Starting Date, or
(ii) If he has not reached his Annuity Starting Date, throughout the
one year period ending on his date of death.
The determination of the marital status of a Participant shall be made pursuant
to applicable local law; provided, however, that a Participant's former spouse
shall continue to be considered married to the Participant, and a Participant's
current spouse shall be considered not married to the Participant, to the extent
provided under a QDRO.
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1.39 "Statutory Compensation":
1.39(a) For Plan Years beginning before January 1, 1998, an Employee's
Total Compensation plus employee elective salary reduction or similar
contributions excluded from Total Compensation by reason of Sections 125,
402(e)(3), 402(h), 403(b), 414(h)(2) and 457(b) of the Code. Statutory
Compensation for a Plan Year (or other applicable computation period) shall be
limited by the Compensation Limit for all purposes other than determining Family
Members, Highly Compensated Employees and Key Employees.
1.39(b) For Plan Years beginning on or after January 1, 1998, an
Employee's Total Compensation. Statutory Compensation for a Plan Year (or other
applicable computation period) shall be limited by the Compensation Limit for
all purposes other than determining Highly Compensated Employees and Key
Employees.
1.40 "Super Top Heavy Plan": The Plan, if it would still be considered
a Top Heavy Plan if ninety percent (90%) were substituted for sixty percent
(60%) in each place it appears in the definition of a Top Heavy Plan.
1.41 "Top Heavy Plan": The Plan, for any Plan Year beginning after
December 31, 1983, if the sum of the present values of the cumulative Accrued
Benefits of Key Employees under the Plan, and the present values of the
cumulative accrued benefits of Key Employees under all plans aggregated with it,
exceeds sixty percent (60%) of the aggregate of the present value of the
cumulative Accrued Benefits under this Plan and accrued benefits under such
plan(s) at the applicable determination date. For purposes hereof, aggregation,
accrued benefits (including Accrued Benefits) taken into account, the
determination date and all other standards and criteria for determining top-
heaviness under this Plan and such other plan(s) shall be determined under
Section 416 of the Code. Subject to the foregoing, more specific rules for
determining whether the Plan is a Top Heavy Plan are provided in Appendix B.
1.42 "Total Compensation":
1.42(a) For Plan Years (or Limitation Years, as applicable) beginning
before January 1, 1998, the total earnings from the Employer reportable in the
Wages, Tips and Other Compensation Box (currently Box 10) on I.R.S. Form W-2
pursuant to Sections 6041, 6051 and 6052 of the Code received by or made
available to an Employee during any Plan Year or, for purposes of the
limitations imposed by Section 415 of the Code, any Limitation Year (as defined
in paragraph 4.5).
1.42(b) For Plan Years (or Limitation Years, as applicable) beginning on
or after January 1, 1998, the total earnings from the Employer reportable in the
Wages, Tips and Other Compensation Box (currently Box 10) on I.R.S. Form W-2
pursuant to Sections 6041, 6051 and 6052 of the Code received by or made
available to an Employee during any Plan Year or, for purposes of the
limitations imposed by Section 415 of the Code, any Limitation Year (as defined
in paragraph 4.5) plus, to the extent not included therein, employee elective
salary reduction or similar deferral contributions excluded from W-2
compensation by reason of Section 125, 402(g)(3) or 457(b) of the Code (and
elective deferrals or contributions under any other sections of the Code covered
by Section 415(c)(3)(D) of the Code).
1.43 "Trustee": William M. Fariss, Jr.; and any successor or
additional Trustee or Trustees, including any Co-Trustee or Separate Trustee as
provided in ARTICLE XII, appointed and serving in accordance herewith.
1.44 "Year of Benefit Service":
1.44(a) A Period of Service (as defined in Appendix A) as an Eligible
Employee of one year, excluding all service before April 6, 1992. For purposes
hereof, where a Period of Service as an Eligible Employee is longer than one
year, it shall be treated as that number of Years of Benefit Service (and
fractional part thereof) equal to the whole number of years (and fractional part
thereof) in such Period of Service.
1.44(b) Notwithstanding anything to the contrary herein, if a Salaried
Employee is an Executive (as defined in paragraph 1.16) during a Plan Year, no
part of such Plan Year shall be taken into account in determining such person's
Years of Benefit Service.
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<PAGE>
1.45 "Year of Broken Service": A Break in Service (as defined in
Appendix A) of one year. For purposes hereof, where a Break in Service is longer
than one year, it shall be treated as that number of Years of Broken Service
(and fractional part thereof) equal to the whole consecutive number of years
(and fractional part thereof) in the Period of Severance.
1.46 "Year of Service": A year, based on the applicable computation
period stated when used in the Plan and expressed in terms of a whole and
partial year, which is included in a Period of Service (as defined in Appendix
A).
1.47 "Year of Vesting Service": A Period of Service (as defined in
Appendix A) of one year. For purposes hereof, when a Period of Service is
longer than one year, it shall be treated as that number of Years of Vesting
Service (and fractional parts thereof) equal to the whole number of years (and
fractional parts thereof) in the Period of Service.
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility and Date of Participation.
-------------------------------------
2.1(a) Each Eligible Employee who has attained the age of twenty-one
(21) years prior to an Entry Date shall become a Participant on the earlier of
the following dates, provided he is then credited with at least one Year of
Eligibility Service:
(i) On the first Entry Date on which he is an Eligible Employee
following his completion of such age and service requirements.
(ii) If he is not an Eligible Employee on the first Entry Date
following his completion of such age and service requirements, on the first
day he thereafter becomes an Eligible Employee.
Notwithstanding the foregoing, each Employee who is an Eligible Employee at the
time of a "change in control" of the Plan Sponsor shall become a Participant in
the Plan as of the date for such change in control. For purposes hereof, the
term "change in control" means "Change in Control" as defined in the Plan
Sponsor's 1996 Incentive Stock Plan.
2.1(b) An individual who was, but ceased to be, a Participant shall
again be a Participant at the first to occur of the following:
(i) If and when he again becomes an Eligible Employee,
(ii) If all or part of his Accrued Benefit is considered cashed-out
and forfeited pursuant to paragraph 4.6, if and when the cashed-out amount
is reinstated pursuant thereto, or
(iii) If his forfeited Accrued Benefit is restored pursuant to
paragraph 6.4, if and when he again becomes an Employee.
2.1(c) An individual who becomes a Participant shall be or remain a
Participant for so long as he remains an Eligible Employee and thereafter while
he is entitled to future benefits under the terms of the Plan.
2.2 Eligibility Service Definitions and Rules. For purposes of this
-----------------------------------------
ARTICLE II, the following terms shall have the following meanings:
2.2(a) The term "Entry Date" means the Effective Date of the Plan and
thereafter the first day of each calendar month of each Plan Year.
Notwithstanding the foregoing, the first Entry Date with respect to an Employee
of an Employer
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which adopts the Plan as a participating employer as of a date after the
Effective Date of the Plan shall be the Effective Date of the adoption of the
Plan as to such Employer. Additional Entry Dates may be provided in a
participating employer's adoption agreement.
2.2(b) The term "Year of Eligibility Service" means a Period of Service
(as defined in Appendix A) of one year. For purposes hereof, when a Period of
Service is longer than one year, it shall be treated as that number of Years of
Eligibility Service (and fractional parts thereof) equal to the whole number of
years (and fractional parts thereof) in the Period of Service.
ARTICLE III
Funding
-------
3.1 Funding.
-------
3.1(a) All costs of benefits under the Plan shall be borne by
contributions by the Employer and any assets transferred to the Plan. Such
contributions by the Employer shall equal amounts actuarially determined to be
sufficient to satisfy the requirements of Section 302 of the Act and Section 412
of the Code, but shall not exceed amounts deductible by the Employer under
Section 404 of the Code. Each contribution shall be conditioned upon such
deductibility. Funds released through the forfeiture of Accrued Benefits shall
be applied first to pay administrative expenses of the Plan and Fund, if so
directed by the Plan Sponsor, and then to reduce the Employer's contributions.
Each Employer's contribution shall be in such amount as the Plan Sponsor shall
determine.
3.1(b) In the event that any Employer is unable to make all or any part
of any contribution to the Fund, the Plan Sponsor shall direct that one or more
other Employers (including itself) contribute to the Fund on behalf of such
Employer the amount prohibited by such limitation, and for purposes of
administering the Plan such contribution shall be deemed made by the Employer on
whose behalf it was made.
3.2 Timing of Contributions by the Employer. The contribution by the
---------------------------------------
Employer for any Plan Year shall be made in quarterly payments and as otherwise
required under Section 302 of the Act and Section 412 of the Code, provided that
the total amount of the contribution with respect to any taxable year of the
Employer shall be paid not later than the date, including extensions thereof, on
which the Employer's federal income tax return for such taxable year is due to
be filed.
3.3 Determination of Funding Requirements. The amount of the
-------------------------------------
Employer's contribution for any Plan Year shall be determined by the enrolled
actuary for the Plan who shall be selected by, and may from time to time be
changed by, the Plan Sponsor. The Trustee shall provide to the Plan's enrolled
actuary and the Plan Sponsor, or to its duly appointed representative, such
information regarding the income, disbursements and value of the Fund as may be
reasonably required for the purpose of making such determination. The Plan
Sponsor and the Plan's enrolled actuary shall select the appropriate funding
method and assumptions for determining the amount of the Employer's
contribution.
3.4 No Duty of Trustee to Determine or Enforce Contributions. The
--------------------------------------------------------
Trustee shall not be required to determine the amount of the Employer's
contribution for any Plan Year or to enforce the duty of the Employer to make
such contributions; but the Trustee shall provide the Employer with such
information as it may reasonably require to determine the amount of its
contribution.
ARTICLE IV
Determination of Accrued Benefit
--------------------------------
4.1 Accrued Benefit.
---------------
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4.1(a) The Accrued Benefit of a Participant shall be an amount,
expressed in the form of a single life annuity payable monthly for the life of
the Participant, commencing upon his Normal Retirement Date or as otherwise
provided in this subparagraph 4.1(a), and equal to the amount determined under
the Benefit Formula, calculated as follows:
(i) A Participant who retires on his Normal Retirement Date shall
be entitled to his Accrued Benefit calculated under the Benefit Formula to
his Normal Retirement Date.
(ii) A Participant whose employment with the Employer terminates
after his Normal Retirement Date shall be entitled to an Accrued Benefit
commencing on his Delayed Retirement Date (or, where applicable, his other
benefit commencement date determined as though he had separated from
service and had a Delayed Retirement Date) equal to the sum of:
(A) His Accrued Benefit calculated under the Benefit Formula to
his Normal Retirement Date, and
(B) The sum of the greater, determined for each Plan Year (or
portion thereof) ending after his Normal Retirement Date, of:
(I) The excess, if any, of (a) his Accrued Benefit calculated
under the Benefit Formula as of the end of such Plan Year (or if
earlier and as applicable, his Delayed Retirement Date or his
other benefit commencement date determined as though he had
separated from service and had a Delayed Retirement Date) over
(b) his Accrued Benefit calculated as of the end of the
immediately preceding Plan Year (or his Normal Retirement Date,
if later), or
(II) The excess, if any, of (a) the Actuarial Equivalent of
his Accrued Benefit calculated under the Benefit Formula as of
the end of the immediately preceding Plan Year (or his Normal
Retirement Date, if later), where the Actuarial Equivalent
adjustment is determined as of the end of such Plan Year (or,
where applicable, his Delayed Retirement Date or his other
benefit commencement date determined as though he had separated
from service and had a Delayed Retirement Date) over (b) his
Accrued Benefit calculated as of the end of the immediately
preceding Plan Year (or his Normal Retirement Date, if later).
(iii) A Participant who retires on his Early Retirement Date shall
be entitled to his Accrued Benefit calculated under the Benefit Formula to
his Early Retirement Date.
(iv) The Accrued Benefit of each other Participant shall be
calculated under the Benefit Formula as of the applicable date for which
such determination is made.
4.1(b) Notwithstanding the foregoing, the amount of a Participant's
Accrued Benefit derived from contributions by the Employer, expressed in the
form of a single life annuity payable monthly for his life and commencing on his
Normal Retirement Date, shall not be less than the Actuarial Equivalent of any
Top Heavy Minimum Benefit required to be provided by the Plan to him under
paragraph 4.3.
4.1(c) For purposes hereof:
(i) A Participant's "Average Compensation" is the average of his
Compensation for the five (5) consecutive Plan Years within the last ten
(10) Plan Years prior to the date as of which his Accrued Benefit is
determined (or if earlier, when he last is an Eligible Employee), during
each of which he has Compensation and is credited with a full Year of
Service as an Eligible Employee (with the Plan Year as the computation
period) and which produce the highest average or, if they are less than
five (5) such consecutive Plan Years, for all Plan Years during each of
which he has Compensation and is credited with a full Year of Service as an
Eligible Employee (based on the Plan Year). Plan Years shall be deemed to
be consecutive even though interrupted by one or more Plan Years for
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each of which the Employee had no Compensation or was not credited with a
full Year of Service as an Eligible Employee (based on the Plan Year). For
purposes hereof:
(A) Average Compensation shall be rounded to the nearest whole
dollar.
(B) If a Participant becomes an Executive (as defined in
paragraph 1.16) and thereafter ceases to be an Executive and thereupon
or later becomes a Salaried Employee who is not an Executive, his
compensation and service as an Executive shall be taken into account
as compensation and service as an Eligible Employee solely for
purposes for determining his Compensation and Average Compensation
until such time, if ever, as he again becomes an Executive. This
operating rule may apply more than once.
(ii) The "Benefit Formula" is the greater of:
(A) One-twelfth (1/12) of the product obtained by multiplying
one and one-half percent (1-1/2%) of a Participant's Average
Compensation by his Years of Benefit Service, or
(B) The product obtained by multiplying Thirty-Six Dollars ($36)
by the Participant's Years of Benefit Service.
4.2 Accrued Benefit Service Rules. For purposes of determining the
-----------------------------
Accrued Benefit of a Participant under subparagraph 4.1(a), all Years of Benefit
Service shall be included.
4.3 Top Heavy Minimum Benefit.
-------------------------
4.3(a) If the Plan is or has been a Top Heavy Plan, each Participant who
is credited with at least one Year of Service (determined on the basis of a Plan
Year as the computation period), who is not covered by a collective bargaining
agreement under which retirement benefits were the subject of good faith
bargaining with the Employer and who is a Non-Key Employee during the period the
Plan is a Top Heavy Plan shall be entitled to a Top Heavy Minimum Benefit. For
purposes hereof:
(i) The Top Heavy Minimum Benefit is an amount, expressed in the
form of a single life annuity payable monthly for the life of the
Participant (with no ancillary benefits) commencing at his Normal
Retirement Date, equal to one-twelfth (1/12) of the product obtained by
multiplying:
(A) His Top Heavy Average Compensation, by
(B) The product (not in excess of twenty percent (20%)) obtained
by multiplying his aggregate full Years of Top Heavy Service by two
percent (2%).
(ii) If such a Participant's employment with the Employer terminates
after his Normal Retirement Date, he shall be entitled to the greater of:
(A) His Top Heavy Minimum Benefit calculated under clause (i) of
this subparagraph to and commencing at his termination of employment
with the Employer, or
(B) The Actuarial Equivalent his Top Heavy Minimum Benefit
commencing upon his termination of employment and calculated to his
Normal Retirement Date or, if later, the end of the Plan Year
immediately preceding the determination date.
(iii) If the Plan is a Top Heavy Plan during more than one continuous
period of time, the rules of this paragraph 4.3 shall be applied separately
to each such period of time, but the maximum aggregate Top Heavy
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Minimum Benefit provided hereunder shall not exceed twenty percent (20%) of
his highest Top Heavy Average Compensation in such periods of time.
4.3(b) For purposes of determining a Participant's Top Heavy Minimum
Benefit, the term "Top Heavy Average Compensation" means the average of an
Employee's Total Compensation for the five (5) consecutive Plan Years (or all
consecutive Plan Years if there are not five (5) such Plan Years) during which
he has Total Compensation and is credited with a full Year of Service (with the
Plan Year as the computation period) and which produce the highest average,
computed as of the end of any Plan Year during which the Plan is a Top Heavy
Plan (but not thereafter) and without taking into account Total Compensation for
any Plan Year to the extent that it exceeds the Compensation Limit. Plan Years
shall be deemed to be consecutive even though interrupted by one or more Plan
Years for each of which the Employee had no Total Compensation or was not
credited with a full Year of Service (based on the Plan Year).
4.3(c) For purposes of determining a Participant's Top Heavy Minimum
Benefit, the term "Year of Top Heavy Service" means each Plan Year for which the
Participant is credited with a Year of Service determined on the basis of the
Plan Year as the computation period, counting only Hours of Service as an
Eligible Employee, and excluding the following service, to the extent not
inconsistent with Section 416 of the Code:
(i) Any Year of Service credited for Plan Years beginning before
January 1, 1984.
(ii) Any Year of Service credited for a Plan Year for which the Plan
is not a Top Heavy Plan.
(iii) Any Year of Service credited for a Plan Year for which the
Participant is a Key Employee.
(iv) Any Year of Service credited for a Plan Year for which the
Participant is not an Active Participant (or does not accrue a benefit
under the Plan) for reasons other than because his compensation is less
than a stated amount or because of his failure to make mandatory
contributions to the Plan.
4.3(d) It is the specific intent of this paragraph that only the minimum
required benefit under Section 416 of the Code be provided and, notwithstanding
any other provision hereof, the aggregate benefits provided for a Participant by
this paragraph and the corresponding provisions of all other qualified
retirement plans maintained by the Employer shall not exceed such minimum
required for such Participant. For purposes hereof:
(i) In the event such minimum for such Participant would otherwise
be exceeded, the minimum benefit provided by this paragraph and such other
corresponding provisions of a defined benefit plan shall be reduced pro
rata until only the minimum required for such Participant is provided.
(ii) In applying this subparagraph to the accrued benefit provided
by a defined contribution plan, the following rules shall apply:
(A) No such accrued benefit attributable to salary reduction
contributions under Section 401(k) of the Code considered made by the
Employer or matching contributions within the meaning of Section
401(m)(4)(A) of the Code shall be taken into account.
(B) No such accrued benefit under a plan which does not provide
payment of benefits in the form of a life annuity as the normal form
of payment or which is not subject to the survivor annuity
requirements of Section 417 of the Code shall be taken into account.
(C) Otherwise, any minimum required benefit under this paragraph
shall be reduced under a floor offset approach by the Actuarial Value
of such accrued benefit attributable to contributions by the Employer
under such plans by applying the Actuarial Equivalent factors
hereunder for cash-outs to convert the amount of such accrued benefit
determined at the earlier of the commencement of benefits under this
Plan or under such other plan into a Top Heavy Minimum Benefit.
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4.4 Accrued Benefit Limitation.
--------------------------
4.4(a) To the extent not otherwise provided herein or to the extent
inconsistent with the provisions hereof and except as prohibited by applicable
regulations under the Code, the applicable limitations on contributions and
benefits under Section 415, as modified where applicable by Section 416 of the
Code, are incorporated by reference and shall control over any contrary or
omitted provisions in the Plan. As applicable to this Plan, the limitations on
benefit of Section 415 of the Code generally limit a Participant's annual
benefit (as defined in Section 415 of the Code) to the lesser of $90,000 (as
adjusted by the Adjustment Factor) or 100% of his highest three consecutive year
average Total Compensation.
4.4(b) To the extent a death benefit with respect to a Participant is
determined on the basis of his Accrued Benefit, or a projection thereof, such
death benefit shall be determined on a basis which appropriately reflects the
limitations imposed by Section 415 of the Code.
4.4(c) Notwithstanding the foregoing, adjustments in the $90,000 limit
under Section 415 of the Code shall only be applicable to benefits provided by
this Plan with respect to a Participant who is an Employee or Disabled (as
provided in paragraph 5.4) at the time the adjustment is effective.
4.4(d) In complying with the limitations of Section 415 of the Code, all
other transitional rules under any law enacting or amending Section 415, or
Section 416 as applicable to Section 415, of the Code shall be applicable as
determined by the Plan Sponsor.
4.5 Additional Accrued Benefit Limitations When Employer Maintains
--------------------------------------------------------------
More Than One Plan.
- ------------------
4.5(a) If any Participant is or has been a participant in more than one
Qualified Defined Benefit Plans (whether or not terminated), the limitations
contained in paragraph 4.4 and this paragraph shall apply as if all such plans
were one plan. In such case, the annual benefits (as defined in Section 415 of
the Code) payable to the Participant under this Plan and such other plan(s)
shall be reduced proportionately so that the total annual benefits payable to
the Participant under this Plan (if a Qualified Defined Benefit Plan) and such
other plan(s) do not exceed the Maximum Permissible Benefit.
4.5(b) If any Participant is or has been a Participant in both a
Qualified Defined Benefit Plan and a Qualified Defined Contribution Plan, then
the annual additions (as defined in Section 415 of the Code) for such
Participant shall be reduced (after the accrued benefit, the annual benefit, the
projected annual benefit and the rate of accrual under all Qualified Defined
Benefit Plans are reduced) to the extent necessary so that the sum of the
defined benefit plan fraction (as defined in Section 415 of the Code) and the
defined contribution plan fraction (as defined in Section 415 of the Code) shall
not exceed 1.0 for such Participant for any Plan Year and in order to achieve
the objective of compliance with the applicable rules of limitation contained in
Section 415(e) of the Code and, if the Plan is a Top Heavy Plan or a Super Top
Heavy Plan, in Section 416(h) of the Code. Notwithstanding anything to the
contrary in this paragraph, the limitations provision of this subparagraph shall
not apply with respect to Limitation Years beginning on or after January 1,
2000.
4.5(c) Solely for purposes of paragraphs 4.4 and 4.5, the following
words and terms shall have the meaning set forth below in this subparagraph:
(i) The term "Limitation Year" means the calendar year and is the
year used to apply the limitations of section 415 of the Code.
(ii) The term "Qualified Defined Contribution Plan" shall mean any
plan maintained by the Employer or portion thereof described or treated as
a defined contribution plan within the meaning of Sections 414(i) and
415(k) of the Code, including, but not limited to, defined contribution
plans qualified under Section 401(a) of the Code, tax sheltered annuity
contracts described in Section 403(b) of the Code, simplified employee
pension plans described in Section 408(k) of the Code, any employee
contribution portion of and any cost-of-living protection arrangement under
a defined benefit plan qualified under Section 401(a) of the Code, any
individual medical account under a pension or
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<PAGE>
annuity plan within the meaning of Section 415(l) of the Code, and any
welfare benefit fund within the meaning of Section 419(e) of the Code.
(iii) The term "Qualified Defined Benefit Plan" shall mean any plan
maintained by the Employer or portion thereof described or treated as a
defined benefit plan within the meaning of Sections 414(j) and 415(k) of
the Code.
4.6 Effect of Certain Cash-Outs on Accrued Benefit.
----------------------------------------------
4.6(a) In the case of a Participant who has ceased to be an Employee and
who has received not later than one year after he incurs a Year of Broken
Service either:
(i) A distribution of the Actuarial Value of his entire non-
forfeitable Accrued Benefit which includes an amount not exceeding $3,500
in the case of a distribution during Plan Years Beginning on or after
January 1, 1985 and before January 1, 1998 or $5,000 in the case of a
distribution during Plan Years beginning on or after January 1, 1998 and
representing the Actuarial Value of his entire non-forfeitable Accrued
Benefit derived from contributions by the Employer at the time of such
distribution, or
(ii) A distribution which he voluntarily elects to receive and which
represents all or a portion of the Actuarial Value of his non-forfeitable
Accrued Benefit at the time of such distribution,
the Accrued Benefit (including any Top Heavy Minimum Benefit) of such
Participant which is derived from contributions by the Employer shall be
determined at any time thereafter without regard to his service with respect to
which such distribution was made.
4.6(b) If a Participant who has no non-forfeitable interest in his
Accrued Benefit ceases to be an Employee, he shall be deemed to have had his
Accrued Benefit cashed-out pursuant to the provisions of subparagraph 4.6(a) and
his Accrued Benefit shall be forfeited. If a Participant who is affected by the
provisions of this subparagraph again becomes an Employee before he incurs five
(5) consecutive Years of Broken Service commencing after the date of the deemed
distribution and forfeiture (but in no event after the date of termination of
the Plan), his forfeited Accrued Benefit shall be restored.
4.7 No Duplication of Benefits. Notwithstanding any other provision
--------------------------
of the Plan, the total Actuarial Value of the Accrued Benefit which may be
earned by any Participant shall not exceed the Actuarial Value of his Accrued
Benefit under the Plan, calculated without regard to any prior distributions of
his Accrued Benefit, and then reduced by the Actuarial Value of any prior
distributions not repaid to the Plan.
4.8 Special Rules for Reemployed Veterans.
-------------------------------------
4.8(a) Notwithstanding any provision of the Plan to the contrary,
benefits and service credit with respect to qualified military service shall be
provided in accordance with Section 414(u) of the Code. To the extent not
inconsistent with the foregoing, effective December 12, 1994, the following
special rules shall apply in case of Reemployed Veterans notwithstanding any
other provision of the Plan:
(i) A Reemployed Veteran shall not be considered to have incurred a
Year of Broken Service by reason of his Qualified Military Service.
(ii) Qualified Military Service of a Reemployed Veteran shall be
counted as service for vesting and benefit accrual under the Plan.
(iii) Compensation to be used for purposes of determining benefit
accrualwith respect to a period of Qualified Military Service shall mean
the Compensation (as otherwise defined in the Plan but based on rate of
pay)
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<PAGE>
which the Reemployed Veteran would have received but for his Qualified
Military Service. If a Reemployed Veteran's pay is not readily
determinable, the Reemployed Veteran's Compensation shall then be his
average Compensation for the 12-month period (or actual shorter period of
employment) immediately preceding his Qualified Military Service.
4.8(b) For purposes of this paragraph, the following terms have the
following meanings:
(i) "Qualified Military Service" means any service in the uniformed
services (as defined in chapter 43 of title 38, United States Code) by any
individual if such individual is entitled to reemployment rights under such
chapter with respect to such service and to the Employer.
(ii) "Reemployed Veteran" means a person who is or, but for his
Qualified Military Service, would have been a Participant at some time
during his Qualified Military Service and who is entitled to the
restoration benefits and protections of the USERRA with respect to his
Qualified Military Service and the Plan.
(iii) "USERRA" means the Uniformed Services Employment and
Reemployment Rights Act of 1994.
ARTICLE V
Retirement Dates
----------------
5.1 Normal Retirement Date. The Normal Retirement Date of a
----------------------
Participant shall be the first day of the calendar month coinciding with or next
following the date on which the Participant attains his Normal Retirement Age.
5.2 Delayed Retirement Date. A Participant who continues in the
-----------------------
active employment of the Employer beyond his Normal Retirement Date shall
continue to participate in the Plan, and his Delayed Retirement Date shall be
the first day of the calendar month coinciding with or next following the date
of termination of his employment with the Employer.
5.3 Early Retirement Date. A Participant who has attained the age of
---------------------
fifty-five (55) years or more while a Salaried Employee or Disabled (as provided
in paragraph 5.4) and has completed at least ten (10) Years of Vesting Service
as determined for vesting purposes under paragraph 6.3 may retire from the
employment of the Employer prior to his Normal Retirement Date and his Early
Retirement Date shall be the first day of the calendar month coinciding with or
next following the date of such retirement.
5.4 Disability and Retirement, Death or Separation after Disability.
---------------------------------------------------------------
5.4(a) If a Participant becomes Disabled while a Salaried Employee with
at least one Year of Vesting Service, the determination of the Participant's
Accrued benefit and Death Benefit, as applicable, shall be subject to the
special rules contained in this paragraph.
5.4(b) For purposes hereof:
(i) With respect to a Participant, the existence of a "Disability"
or the status of being "Disabled":
(A) Shall begin and be considered present during the period for
which an Employee or former Employee is determined by the applicable
fiduciary to be disabled for purposes of entitlement to disability
benefits under any long term disability plan which is maintained by
the Employer and under which he is covered, and for which he receives
such benefits prior to his Normal Retirement Date, provided the cause
of such disability occurred when the Employee was both a Salaried
Employee and credited with one Year of Vesting Service, but
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<PAGE>
(B) Shall end in any event on the earlier of (I) the date he
ceases to be Disabled (as determined above), whether by death or
otherwise, or (II) his Normal Retirement Date.
(ii) The Administrator shall have the right to require proof of
continuing Disability.
(iii) Failure by the Participant to provide such evidence as may
from time to time be required by the Administrator prior to such
Participant's attainment of his Normal Retirement Date shall result in the
discontinuance of his Disability status and the termination of his status
as Disabled under the Plan.
(iv) The determination of Disability shall be made by the
Administrator in accordance with standards uniformly applied to all
Participants, on the advice of one or more physicians appointed or approved
by the Plan Sponsor if deemed necessary or advisable by the Administrator,
and the Administrator shall have the right to require further medical
examinations from time to time to determine whether there has been any
change in the Participant's physical condition.
5.4(c) If the period of a Participant's Disability continues until his
Normal Retirement Date, the Participant shall be considered for purposes of the
Plan to have retired on such date and to be entitled to his Accrued Benefit
determined in accordance with paragraph 4.1 as a Participant who retires on his
Normal Retirement Date.
5.4(d) If the period of a Participant's Disability ceases before the
Participant's Normal Retirement Date but after the later of the Participant's
attainment of the age of fifty-five (55) years or completion of ten (10) Years
of Vesting Service as determined for vesting purposes under paragraph 6.3, other
than by reason of the Participant's death, and the Participant does not return
to active employment with the Employer, the Participant shall be considered for
purposes of the Plan to have retired with the first day of the month thereafter
as his Early Retirement Date and to be entitled to his Accrued Benefit
determined in accordance with paragraph 4.1 as a Participant who retires on his
Early Retirement Date.
5.4(e) If the period of a Participant's Disability ceases before the
later of the Participant's attainment of the age of fifty-five (55) years or
completion of ten (10) Years of Vesting Service as determined for vesting
purposes under paragraph 6.3, and the Participant does not return to active
employment with the Employer, the Participant's entitlement to his Accrued
Benefit shall be determined as though he terminated employment with the Employer
at such time.
5.4(f) If the period of a Participant's Disability ceases by reason of
his death, the only benefit payable under the Plan shall be the Pre-Retirement
Spouse's Death Benefit, if any, to which his Spouse is entitled.
ARTICLE VI
Vesting
-------
6.1 Vesting at Attainment of Normal Retirement Age. The Accrued
----------------------------------------------
Benefit of a Participant shall be fully vested and non-forfeitable upon the
Participant's having attained his Normal Retirement Age while employed by the
Employer or while Disabled (as provided in paragraph 5.4).
6.2 Vesting in Accrued Benefit at Other Times.
-----------------------------------------
6.2(a) At any time when a Participant is not fully vested in his Accrued
Benefit under paragraph 6.1, he shall have a non-forfeitable interest in a
percentage of his Accrued Benefit derived from contributions by the Employer
depending upon the number of Years of Vesting Service with which he is credited
at such time in accordance with the schedule below:
Years of Vesting Service Non-Forfeitable Percentage
------------------------ --------------------------
Less than 5 0%
5 or more 100%
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<PAGE>
6.2(b) In addition to the vesting provisions provided in subparagraph
6.2(a), for each Plan Year the Plan is a Top Heavy Plan, the following schedule
shall also apply with respect to each Participant's Accrued Benefit derived from
contributions by the Employer, and each Participant to whom such schedule
applies shall be entitled to the greater of the non-forfeitable interest in such
Accrued Benefit determined under subparagraph 6.2(a) or the following schedule:
(i) A Participant who is credited with an Hour of Service during
the period that the Plan is a Top Heavy Plan and who is not covered by a
collective bargaining agreement under which retirement benefits were the
subject of good faith bargaining with the Employer shall have a non-
forfeitable interest in his Accrued Benefit derived from contributions by
the Employer and the percentage of such non-forfeitable interest shall
depend upon the number of Years of Vesting Service with which he is
credited in accordance with the schedule below:
Years of Vesting Service Non-Forfeitable Percentage
------------------------ --------------------------
Less than 3 0%
3 or more 100%
(ii) In the event the Plan is a Top Heavy Plan for a Plan Year or
Years and subsequently ceases to be a Top Heavy Plan, the vesting
provisions of this subparagraph as applicable to the last such Plan Year
the Plan is a Top Heavy Plan during such period shall continue to apply
only to such Participants who were credited with at least three (3) Years
of Vesting Service at the end of the last such Plan Year.
6.2(c) Notwithstanding the foregoing, a Participant (including those for
whom immediate commencement of participation in the Plan is provided under
subparagraph 2.1(a) as a result of a "change in control" of the Plan Sponsor)
who is an Employee at the time of a "change in control" of the Plan Sponsor
shall have a 100% non-forfeitable interest in his Accrued Benefit. For purposes
hereof, the term "change in control" means "Change in Control" as defined in the
Plan Sponsor's 1996 Incentive Stock Plan.
6.3 Vesting Service Rules. For the purpose of computing a
---------------------
Participant's non-forfeitable right to a percentage of his Accrued Benefit
derived from contributions by the Employer, all Years of Vesting Service shall
be included.
6.4 Forfeiture and Restoration of Accrued Benefits. A Participant's
----------------------------------------------
Accrued Benefit in excess of his non-forfeitable Accrued Benefit shall be
forfeited by such Participant upon the first to occur of his ceasing to be an
Employee (or, if applicable, Disabled as provided in paragraph 5.4) or his
death; provided, however, that, subject to the provisions of the Plan requiring
prior service to be disregarded, any such forfeited Accrued Benefit of a
Participant shall be restored upon such individual's thereafter again becoming
an Employee prior to the date of any termination of the Plan with respect to
such Participant or Employee. In no event shall forfeited Accrued Benefits or
assets of the Fund released as a result of any forfeiture of Accrued Benefits be
applied or used to increase the Accrued Benefit of any Participant.
6.5 No Reduction in Certain Vested Accrued Benefits by Reason of Re-
---------------------------------------------------------------
Employment. Notwithstanding any provisions hereof to the contrary, in the case
- ----------
of a Participant who has a non-forfeitable interest in his Accrued Benefit under
the Plan and who separates from the service of the Employer whether by
retirement, disability or other termination, the dollar amount of his non-
forfeitable interest in his Accrued Benefit at the time of his separation from
service and the commencement of his benefit payments thereafter shall not be
reduced by reason of his re-employment (except as may be provided in the event
of a suspension or deferral of benefit payments pursuant to paragraph 8.7
hereof).
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<PAGE>
ARTICLE VII
Death Benefits
--------------
7.1 Death after Annuity Starting Date. If a Participant dies after
---------------------------------
his Annuity Starting Date, the only benefits payable under the Plan after his
death shall be those, if any, provided under the form of payment being made to
him at his death.
7.2 Death before Annuity Starting Date. If a Participant dies before
----------------------------------
his Annuity Starting Date, no benefit shall be paid under the Plan except any
Death Benefit which may be provided under this ARTICLE VII.
7.3 Pre-Retirement Spouse's Death Benefit.
-------------------------------------
7.3(a) In the event that a Participant has a Spouse and dies before his
Annuity Starting Date at a time when he has a non-forfeitable interest in his
Accrued Benefit, then the Spouse of such Participant shall be entitled to
receive as a Death Benefit under the Plan (referred to as the "Pre-Retirement
Spouse's Death Benefit") a survivor annuity, expressed in the form of a single
life annuity payable monthly for the life of such Spouse commencing on the
Spouse's Earliest Commencement Date, equal to the Pre-Retirement Spouse's
Annuity if the Participant had died on the day following his Annuity Starting
Date under the appropriate one of the following assumptions:
(i) If the Participant dies after attaining his Earliest Retirement
Age, it shall be assumed both that he retired and that his Annuity Starting
Date occurred as of the first day of the month in which he died, but the
benefit payment amount of the Pre-Retirement Spouse's Death Benefit shall
be calculated as first day of the month immediately following the month in
which he died, or
(ii) If the Participant dies on or before attaining his Earliest
Retirement Age, it shall be assumed that he merely separated from the
service of the Employer on the date of his death but survived until his
Earliest Retirement Age which was also his Annuity Starting Date.
If the Participant was actually separated from the service of the Employer at
his death, such assumption shall not increase his or her Spouse's benefit
entitlement or accelerate the time of payment or the date which is the
Participant's Earliest Retirement Age.
7.3(b) For purposes hereof:
(i) A Participant's "Earliest Retirement Age" is the earliest date
under the Plan as of which he could elect to commence receiving his Accrued
Benefit, on the assumption that he had merely separated from the service of
the Employer on the date of his death and had continued to survive.
(ii) A Spouse's "Earliest Commencement Date" is the first day of the
first month in which the Participant would have reached his Earliest
Retirement Age or, if he has already reached that date at his death, the
first day of the month immediately following the month in which the
Participant died.
(iii) The "Pre-Retirement Spouse's Annuity" means the survivor
annuity to which the Spouse would have been entitled under the Joint and
50% Spouse Survivor Annuity form of payment described in subparagraph
8.2(a).
7.4 Beneficiary Designation.
-----------------------
7.4(a) Subject to the rights of his Spouse to receive a survivor life
annuity under paragraph 8.2 or a Pre-Retirement Spouse's Death Benefit under
subparagraph 7.3 (for which purposes the Participant's Spouse shall be
considered a Beneficiary) and the right of his Spouse to consent to specific
non-spouse Beneficiaries, if any, under subparagraph 8.6(b), each Participant
shall have the right to notify the Administrator in writing of any designation
of a Beneficiary to receive, if alive, benefits under the Plan in the event of
his death. Such designation may be changed from time to time by notice in
writing to the Administrator, subject where specifically required to consent by
his Spouse.
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<PAGE>
7.4(b) If a Participant dies without having designated a Beneficiary, or
if the Beneficiary so designated has predeceased the Participant or, except when
his Beneficiary is his Spouse entitled to a survivor life annuity or Pre-
Retirement Spouse's Death Benefit, cannot be located by the Administrator within
one year after the date when the Administrator commenced making a reasonable
effort to locate such Beneficiary, then his surviving spouse, or if none, then
his descendants, per stirpes, or if none, then the executor or the administrator
--- -------
of his estate shall be deemed to be his Beneficiary.
7.4(c) Any Beneficiary designation may include multiple, contingent or
successive Beneficiaries and may specify the proportionate distribution to each
Beneficiary. If a Beneficiary shall survive the Participant, but shall die
before the entire benefit payable to such Beneficiary has been distributed, then
absent any other provision by the Participant, the unpaid amount of such benefit
shall be distributed to the estate of the deceased Beneficiary. If multiple
Beneficiaries are designated, absent provisions by the Participant, those named
or the survivors of them shall share equally any benefits payable under the
Plan. Any Beneficiary, including the Participant's spouse, shall be entitled to
disclaim any benefit otherwise payable to him under the Plan.
ARTICLE VIII
Payment of Benefits
-------------------
8.1 Time of Payment.
---------------
8.1(a) The non-forfeitable Accrued Benefit of a Participant shall become
payable to the Participant, if then alive, at the earliest of the following
applicable times:
(i) The Participant's Normal or Delayed Retirement Date on which he
retires under the Plan.
(ii) The Participant's Normal Retirement Date if he is not then an
Employee for reasons other than death.
(iii) The April 1 (sometimes referred to as the "Required Beginning
Date") following the calendar year in which occurs the later of the
following applicable event (the "Required Beginning Event"):
(A) The date the Participant attains the age seventy and one-
half (70-1/2), or
(B) Effective January 1, 1997 if the Participant's non-
forfeitable Accrued Benefit is not in pay status on December 31, 1996
and the Participant is not a 5% Owner, the date the Participant
retires from the service of the Employer or otherwise ceases to be
employed by the Employer. For purposes hereof a "5% Owner" means a
Participant who is a more than five percent (5%) owner of the Employer
(as defined for purposes of determining Key Employees) with respect to
the Plan Year ending in the calendar year in which the Participant
attains the age seventy and one-half (70-1/2) (a "5% Owner").
As an alternative to the foregoing, a Participant who is not a 5% Owner and
who reaches age seventy and one-half (70-1/2) while employed by the
Employer and on or before December 31, 1999 may elect to begin to receive
his non-forfeitable Accrued Benefit at the April 1 of the calendar year
following the calendar year in which he attains the age of seventy and one-
half (70-1/2). The non-forfeitable Accrued Benefit of a Participant for
each Plan Year after his Accrued Benefit commences pursuant to this clause
shall commence to be paid as soon as possible after each such Plan Year.
(iv) The first day of any calendar month designated by the
Participant if he is neither an Employee nor Disabled (as provided in
paragraph 5.4), which date shall not be earlier than:
(A) His Early Retirement Date, nor later than his Normal
Retirement Date, if the Participant retires on his Early Retirement
Date, or
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<PAGE>
(B) The date on which the Participant attains the age required
for Early Retirement, nor later than his Normal Retirement Date, if
the Participant has satisfied the service requirement for Early
Retirement.
In order for payment to begin, the Participant must file a written
application therefor with the Administrator no later than thirty (30) days
(or such other date as the Administrator may determine or permit on a
uniform and non-discriminatory basis) before such designated date.
(v) The sixtieth (60th) day after the end of the Plan Year in which
occurs the later of:
(A) The date on which the Participant attains his Normal
Retirement Age, or
(B) The date on which he ceases to be an Employee.
8.1(b) The Pre-Retirement Spouse's Death Benefit with respect to a
Participant shall become payable to his Spouse at the following applicable time:
(i) The date which would have been the Participant's Normal
Retirement Date, if he dies before then.
(ii) The date which would have been the Participant's next available
Delayed Retirement Date, if he dies on or after his Normal Retirement Date.
(iii) The first day of any calendar month coinciding with or
following the Participant's Spouse's Earliest Commencement Date (as
determined pursuant to subparagraph 7.3(b)), if his Spouse requests in
writing payment in annuity form at that time and if earlier than the time
for payment otherwise provided under this subparagraph. Any such request
shall be filed with the Administrator at least thirty (30) days (or such
other date as the Administrator may determine or permit on a uniform and
non-discriminatory basis) before the date such Death Benefit is requested
to be paid.
8.1(c) Notwithstanding the foregoing provisions of this paragraph,
payment may be delayed for a reasonable period of time in the event the
recipient cannot be located or is not competent to receive the benefit payment,
there is a dispute as to the proper recipient of such benefit payment,
additional time is needed to calculate the Accrued Benefit or Death Benefit, or
additional time is necessary to properly explain the recipient's options.
8.2 Form of Accrued Benefit Payment. A Participant shall be paid the
-------------------------------
non-forfeitable Accrued Benefit to which he is entitled in one of the forms
hereafter provided in this paragraph 8.2, commencing as provided in paragraph
8.1, and having the same Actuarial Value as the form stated in subparagraph
4.1(a).
8.2(a) Accrued Benefit payments to a Participant who has a Spouse shall
be in the form of a joint and survivor annuity which provides for the payment to
the Participant entitled thereto of equal monthly amounts on the first day of
each calendar month during his lifetime and continuing thereafter for the
lifetime of his Spouse at the rate of fifty percent (50%) of such monthly
amounts payable to the Participant. This annuity is sometimes referred to herein
as a "Joint and 50% Spouse Survivor Annuity".
8.2(b) Accrued Benefit payments to a Participant who does not have a
Spouse shall be in the form of a single annuity for the life of the Participant,
payable in equal monthly amounts on the first day of each calendar month during
the lifetime of such Participant. This annuity is sometimes referred to herein
as a "Single Life Annuity".
8.2(c) Each Participant shall have the right to elect in accordance with
the provisions of subparagraph 8.6(c) and, except in the case of a Joint and 75%
or 100% Spouse Survivor Annuity described in clause (iii) below, with the
consent of his Spouse (where necessary as determined under subparagraph 8.6(b)),
in lieu of the normal form of benefit provided in subparagraph 8.2(a) or (b), to
receive his non-forfeitable Accrued Benefit in one of the following optional
forms:
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<PAGE>
(i) The Single Life Annuity for the life of the Participant
described in subparagraph 8.2(b).
(ii) A single annuity for the life of the Participant payable in
equal monthly amounts on the first day of each calendar month during the
lifetime of the Participant, but with one hundred twenty (120) monthly
payments guaranteed and with any portion of the unpaid guaranteed payments
at the Participant's death payable as a continuing term certain annuity to
his Beneficiary. This annuity is sometimes referred to herein as a "Ten-
Year Certain and Life Annuity".
(iii) A joint and survivor annuity in the form described in
subparagraph 8.2(a), but continuing as a survivor annuity for the life of
the Participant's Spouse at (A) seventy-five percent (75%) or (B) one
hundred percent (100%) of the amount of each monthly payment to the
Participant. These annuities are sometimes referred to herein as a "Joint
and 75% Spouse Survivor Annuity" and a "Joint and 100% Spouse Survivor
Annuity", respectively.
8.2(d) If the Participant's Annuity Starting Date occurs after the
January 1 of the calendar year in which the Participant's Required Beginning
Event (as defined in clause (iii) of subparagraph 8.1(a)) occurs, the following
rules shall apply:
(i) If the Participant has ceased to be employed by the Employer by
such Annuity Starting Date, the amount payable shall be calculated as of
the Participant's termination of such employment.
(ii) If the Participant has not ceased to be employed by the
Employer by such Annuity Starting Date, the amount payable shall be
calculated as of the immediately preceding December 31.
(iii) Thereafter, the Participant's additional Accrued Benefit
attributable to active participation in the Plan for Plan Years ending in
or after the calendar year in which his Annuity Starting Date occurs shall
be calculated as of the December 31 immediately preceding the January 1 as
of which such additional benefit will commence to be paid.
8.2(e) To the extent the payment provisions of the Plan are inconsistent
with and violative of the requirements of Section 401(a)(9) of the Code, the
provisions of Section 401(a)(9) of the Code are hereby incorporated by reference
and shall control.
8.3 Form of Death Benefit Payment. The Pre-Retirement Spouse's Death
-----------------------------
Benefit shall be paid in the form of a single annuity for the life of the Spouse
entitled thereto payable in equal monthly amounts on the first day of each
calendar month during the lifetime of the Spouse, commencing as provided in
paragraph 8.1 and having the same Actuarial Value as the form stated in
subparagraph 7.3(a).
8.4 Benefit Cash-Out.
----------------
8.4(a) Notwithstanding the time and form of payment provided for
elsewhere in this ARTICLE VIII and in lieu of payment pursuant to paragraph 8.2
(but only at or prior to the time the benefit would otherwise commence to be
paid thereunder), the Actuarial Value of the non-forfeitable Accrued Benefit of
a Participant (determined as of the date of termination of employment or
required benefit commencement) shall be paid in the form of a lump sum in cash
(a "cash-out") as soon as reasonably practicable (generally during the last
month of each Plan Year) after the Participant's termination of employment with
the Employer or, if earlier, any required time for benefit commencement under
subparagraph 8.1(a) if the Actuarial Value of such Participant's entire non-
forfeitable Accrued Benefit does not, and did not at the time of any prior
payment thereof, exceed $3,500 (or $5,000 for Plan Years beginning on or after
January 1, 1998).
8.4(b) Notwithstanding the time and form of payment provided for
elsewhere in this ARTICLE VIII and in lieu of payment pursuant to paragraph 8.3
(but only at or prior to the time the benefit would otherwise commence to be
paid thereunder), the Actuarial Value of the Pre-Retirement Spouse's Death
Benefit with respect to a Participant (determined as of the date of the
Participant's death) shall be paid in the form of a lump sum in cash (a "cash-
out") as soon as reasonably practicable (generally during the last month of each
Plan Year) after the Participant's death if the Actuarial Value of the
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<PAGE>
Pre-Retirement Spouse's Death Benefit with respect to such Participant does not
exceed $3,500 (or $5,000 for Plan Years beginning on or after January 1, 1998).
8.5 Plan to Plan Direct Rollover as a Distribution Option.
-----------------------------------------------------
8.5(a) Notwithstanding any contrary provision of the Plan, but subject
to any de minimis or other exceptions or limitations provided for under Section
401(a)(31) of the Code, effective for distributions made from the Plan after
December 31, 1992, any prospective recipient of a distribution from the Plan
which constitutes an "eligible rollover distribution" (to the extent otherwise
includible in the recipient's gross income) may direct the Trustee to pay the
distribution directly to an individual retirement plan or another "eligible
retirement plan" as defined in Section 401(a)(31)(D) of the Code. The term
"eligible rollover distribution" has the meaning assigned to it in Section
401(a)(31)(C) of the Code and, to the extent not inconsistent therewith, means
any distribution other than:
(i) A distribution which is one of a series of substantially equal
periodic payments (not less frequently than annually) made either for the
life (or life expectancy) of the Participant or the joint lives (or joint
life expectancies) of the Participant and his Beneficiary who is an
individual or for a specified period of ten (10) or more years, or
(ii) A distribution to the extent it is required under the minimum
distribution requirement of Section 401(a)(9) of the Code.
8.5(b) Any such direction shall be filed with the Administrator in such
form and at such time as the Administrator may require and shall adequately
specify the eligible retirement plan to which the payment shall be made.
8.5(c) The Trustee shall make payment as directed only if the proposed
transferee plan will accept the payment.
8.5(d) Any such plan to plan transfer shall be considered a distribution
option under this Plan and shall be subject to all the usual distribution rules
of this Plan (including but not limited to the requirement of spousal consent,
where applicable, and an advance explanation of the option).
8.5(e) Within a reasonable time (generally not more than ninety (90) nor
less than thirty (30) days) before the Annuity Starting Date of a prospective
recipient of an eligible rollover distribution from the Plan, the Administrator
shall by mail or personal delivery provide the prospective recipient with a
written explanation of the rollover and tax rules required by Section 402(f) of
the Code.
8.6 Notice, Election and Consent Regarding Accrued Benefit Payment.
--------------------------------------------------------------
Any election authorized by subparagraph 8.2(c) and any designation or consent to
a date for payment by a Participant shall be in writing, shall clearly indicate
the election or designation being made or the consent being given, and shall be
filed with the Administrator within the time and in accordance with the
procedures provided in the following subparagraphs to this paragraph.
8.6(a) Within a reasonable time (generally not more than ninety (90) nor
less than thirty (30) days) before a Participant's Annuity Starting Date, the
Administrator shall by mail or personal delivery provide the Participant with a
written explanation of:
(i) The terms and conditions of the applicable forms of payment,
including his normal form of payment under subparagraph 8.2(a) or (b), as
the case may be, and including the relative financial effects of the
applicable forms of payment,
(ii) The Participant's right to make, and the effect of, an election
to waive his normal form of payment under subparagraph 8.2(a) or (b), as
the case may be, by electing another form of payment for his Accrued
Benefit,
(iii) The rights of the Participant's Spouse regarding any such
election as provided in subparagraph 8.6(b),
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<PAGE>
(iv) The Participant's right to make, and the effect of, a
revocation of an election to waive his normal form of payment under
subparagraph 8.2(a) or (b), as the case may be, and
(v) The Participant's right to delay receipt of his non-forfeitable
Accrued Benefit until such later date allowed under paragraph 8.1,
including the right to modify or revoke any election thereunder.
8.6(b) Any election by a Participant regarding the form of his benefit
payment where consent by his Spouse is specifically required shall be subject to
the following rules:
(i) Such election shall not be given effect unless either:
(A) The Participant's Spouse consents in writing thereto and the
Spouse's consent acknowledges the effect of such election and is
witnessed by a representative of the Plan or a notary public (or the
equivalent) or both if required by the Administrator, or
(B) It is established to the satisfaction of the Administrator
that such consent may not be obtained because there is no Spouse,
because the Spouse cannot be located, because the Participant has been
abandoned by the Spouse (which fact shall be determined under
applicable law and evidenced by a court order so specifying), or
because of such other circumstances as may be provided under Section
417(a)(2)(B) of the Code.
For purposes hereof, a representative of the Plan is any officer of the
Employer, the Administrator or any other person designated as such in
writing by any of the foregoing.
(ii) If a Spouse consents to a Participant's election, such consent
regarding a form of payment under which benefits could be paid to the
Participant's Beneficiary shall either be in the form of:
(A) A limited consent which acknowledges the specific non-spouse
Beneficiary or class of non-spouse Beneficiaries (including any
multiple, contingent or successive Beneficiary or class of
Beneficiaries), if any, and the applicable form(s) of payment under
the Plan (including the form of payment to the Beneficiary), or
(B) If permitted by the Administrator on a uniform and non-
discriminatory basis, a general consent which acknowledges the
Spouse's right (and awareness thereof) to limit consent only to a
specific Beneficiary or class of Beneficiaries or a specific form of
payment (if there is more than one) and in which the Spouse
voluntarily elects to relinquish one or both of such rights.
(iii) If a Spouse consents to a Participant's election, any change
(other than a timely revocation by the Participant of an election regarding
the form of payment of his Accrued Benefit or a change to a form of payment
that does not require a spousal consent) by the Participant to his
Beneficiary designation or the form of payment to his Beneficiary shall
require the further consent of his Spouse in accordance with the applicable
provisions of this subparagraph (unless the Spouse has given a general
consent which expressly permits changes therein by the Participant without
any requirement of further consent by the Spouse).
(iv) Any such consent by a Spouse may not be revoked by such Spouse
but shall be automatically revoked in connection with a revocation or
election or consent change by the Participant.
(v) Any such consent by a Spouse, or the establishment that the
consent of a Spouse need not be obtained, shall be effective only with
respect to such Spouse.
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<PAGE>
8.6(c) A Participant's designation of, consent to or election of payment
before his Normal Retirement Date under paragraph 8.1 and his election
authorized by subparagraph 8.2(c) (together with any necessary consent by his
Spouse) must be filed with the Administrator during the ninety (90) day period
ending on his Annuity Starting Date. If the written explanation required by
subparagraph 8.6(a) is not provided to the Participant at least thirty (30) days
before the scheduled Annuity Starting Date, the Annuity Starting Date may be
deferred by the Administrator until at least thirty (30) days after the written
explanation is provided. Such election may be revoked in writing during such
election period, and another election may be made during such election period,
at any time and any number of times.
8.6(d) If a Participant elects an optional form of payment under
subparagraph 8.2(c) and dies before his Annuity Starting Date, the elected form
of payment shall not be given effect and no benefit under the Plan shall be
payable with respect to the Participant except the Death Benefit as may be
provided under ARTICLE VII.
8.6(e) If a Participant elects an optional form of payment under
subparagraph 8.2(c) which provides for a life annuity to a contingent annuitant
after his death and if the contingent annuitant dies before the Participant's
Annuity Starting Date, such optional form of payment shall not be given effect
and such Participant's Accrued Benefit shall be paid in the form otherwise
applicable to or subsequently elected by him.
8.6(f) Notwithstanding the other distribution timing rules herein, such
distribution may commence less than thirty (30) days after any notice or
explanation required by subparagraph 8.6(a) is given, provided that:
(i) The Administrator clearly informs the recipient that, where
applicable, the recipient has a right to a period of at least thirty (30)
days after receiving the notice or explanation to consider the decision of
whether or not to elect or consent to a distribution (and, if applicable, a
particular distribution option),
(ii) The recipient, after receiving the notice or explanation,
affirmatively elects a distribution, and
(iii) If the distribution is one to which Section 417 of the Code
applies, the distribution commences more than seven (7) days after the
notice or explanation is given.
8.7 Special Rules for Benefits on Re-employment or Continued Employment
-------------------------------------------------------------------
after Normal Retirement Age.
- ---------------------------
8.7(a) Notwithstanding any other provision of the Plan:
(i) If a Participant is re-employed by the Employer during any Plan
Year, benefit payments to which he is then entitled and being paid shall
continue to be paid as if he were not so re-employed. Such Participant
shall be considered to become a new Participant in the Plan immediately on
his re-employment as an Eligible Employee and shall be treated as a new
Participant with respect to any additional Accrued benefit he earns. Upon
such Participant's subsequent death, retirement, other termination of
employment with the Employer or required commencement of benefits while
employed by the Employer, such Participant's additional non-forfeitable
Accrued Benefit or Death Benefit, as the case may be, shall be determined
and paid as though he were a new Participant with respect to such period of
re-employment.
(ii) If a Participant is re-employed by the Employer during any Plan
Year, benefit payments to which he is not then being paid shall not commence
to be paid until his subsequent cessation of employment or as otherwise
required under clause (iii) of subparagraph 8.1(a).
(iii) If a Participant continues in the employment of the Employer at
a time when his benefits under the Plan are required to be in pay status by
reason of clause (iii) of subparagraph 8.1(a), his benefits under the Plan
with respect to his prior employment and payment thereof shall not be
affected by such continued employment, but any additional benefit under the
Plan to which he may be entitled by reason of such continued employment
shall be added
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<PAGE>
to his previously earned benefits as of the end of each Plan Year in which
the same is accrued and shall thereafter be paid in the same manner and at
the same time as his benefits earned with respect to his prior employment.
8.7(b) Notwithstanding any other provision of the Plan, if a Participant
continues in the employment of the Employer after his Normal Retirement Date,
his benefit entitlement shall be subject to the following rules:
(i) Benefit payments to which such Participant is entitled under
the Plan if he had terminated employment with the Employer and which are not
then in pay status shall be deferred, and the amounts otherwise payable
during such continued employment shall be forfeited, during the period of
such employment, subject, however, to the benefit commencement requirements
of subparagraph 8.1(a). In connection with this deferral:
(A) The Administrator shall deliver to the Participant a
Notice of Benefit Deferral, which shall be delivered by first class
mail or by personal delivery.
(B) If a Participant's benefit payments are deferred pursuant
to this subparagraph, such benefit payments shall commence no later
than the first day of the third calendar month following the
calendar month in which the Participant ceases to be employed by the
Employer or, if earlier, the required time for payment under
subparagraph 8.1(a). The initial payment upon such commencement
shall include the payment scheduled to occur in the calendar month
of such commencement and, if applicable, any amounts withheld during
the period between the Participant's cessation of employment and the
calendar month of such commencement.
(ii) Upon such Participant's subsequent death, retirement, other
termination of employment with the Employer or commencement of benefits
while employed by the Employer, such Participant's non-forfeitable Accrued
Benefit or Death Benefit, as the case may be, shall be commenced in the form
then applicable or elected (subject to appropriate actuarial adjustment, if
any, and to increase in the same for any additional benefits earned under
the Plan).
(iii) Each Participant shall have the right to request a
determination under the claims procedure set forth in paragraph 8.9 hereof
whether specific contemplated employment constitutes service subject to the
rules of this subparagraph.
(iv) For purposes hereof, the term "Notice of Benefit Deferral"
means either:
(A) A written notice which states that the Participant's
benefit payments are deferred and which contains (I) the reason and
a general description of the authority for the deferral, together
with a copy of the applicable Plan provisions containing the benefit
deferral rules, (II) the method by which a deferral may be reviewed,
which shall be the claims procedure set forth in paragraph 8.9
hereof, and (III) a statement that the applicable Department of
Labor regulations may be found in Section 2530.203-3 of the Code of
Federal Regulations, or
(B) A written notice which refers the Participant to the
relevant pages of the Plan's summary plan description concerning
deferral of benefit rules if (I) the summary plan description
contains information which substantially is the same as that
required under clause (A) above, (II) the Participant is informed
how to obtain a copy of the summary plan description, or the
relevant pages thereof, and (III) any request by the Participant for
referenced information is fulfilled within a reasonable period of
time, not to exceed thirty (30) days.
8.8 Benefit Determination and Payment Procedure.
-------------------------------------------
8.8(a) The Administrator shall make all determinations concerning
eligibility for benefits under the Plan, the time or terms of payment, and the
forms or manner of payment to the Participant or the Participant's Beneficiary,
in the event of the death of a Participant. The Administrator shall promptly
notify the Trustee of each such determination that benefit
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<PAGE>
payments are due or should cease to be made and provide to the Trustee all other
information necessary to allow the Trustee to carry out said determination,
whereupon the Trustee shall pay or cease to pay such benefits from the Fund in
accordance with the Administrator's determination.
8.8(b) Benefit payment due to the Participant or his Beneficiary, in the
event of the death of the Participant, shall be determined as of the Annuity
Starting Date. Any payments actually commencing more than two (2) months after
the Annuity Starting Date shall bear interest for each whole month during which
not paid at the applicable interest rate used for determining the Actuarial
Equivalent of the Accrued Benefit under the Plan.
8.8(c) In making the determinations described in subparagraph 8.8(a), the
Administrator shall take into account the terms of any QDRO received with
respect to the non-forfeitable Accrued Benefit of the Participant or any Death
Benefit with respect to the Participant. The time and form of payment with
respect to the QDRO and the time and form of payment chosen by the Participant
or his Beneficiary or required by the Plan shall not be altered by the terms of
the QDRO (except as required under Section 414(p)(4) of the Code). The
Administrator shall make all determinations regarding benefit payments to be
made pursuant to a QDRO. Any benefit payment which may be subject to the terms
of a domestic relations order received by the Administrator shall be suspended
during the period the Administrator is considering whether the order is a QDRO.
In the event that benefits are in pay status at the time that a domestic
relations order is received, the Administrator shall promptly notify the Trustee
of the amount, if any, of the benefit payments that must be suspended for the
period required by the Administrator to determine the status of the order. Upon
the completion of the Administrator's review or other determination of the
status of the order, the Administrator shall promptly notify the Trustee of the
time benefit payments are to commence or resume, and of the identity of, and the
amount and form of benefits to be paid to the person or persons to whom payment
is to be made.
8.8(d) The Administrator shall have the right to direct the Trustee to
purchase from an Insurer and either hold in the Fund or distribute to any
Participant or his Beneficiary entitled thereto a Policy which will provide the
annuity or other benefits under the Plan to which such Participant or his
Beneficiary is entitled or elects to receive, provided proper application
therefor is delivered to the Trustee. In the event such Policy provides for a
deferred, as opposed to an immediate, annuity, it shall provide annuity or other
benefits at the time and in the form required under the Plan, and in the event
such Policy is distributed to a Participant or his Beneficiary, it shall provide
for an election as to each time and form of payment provided in the Plan (unless
otherwise determined by the Administrator), which election shall be subject
where applicable to the requirement of spousal consent described in subparagraph
8.6(b) and shall be consistent with the other applicable requirements of
paragraph 8.1, 8.4 and 8.6 determined as of the annuity starting date under the
Policy. Each such Policy shall be owned by and transferable only by the Trustee
and, if distributed, shall provide that the Participant or his Beneficiary
entitled thereto is the retirement payee and death beneficiary thereunder. Any
such Policy may contain such feature or features, including, but not limited to,
whether guaranteed or not guaranteed or participating or not participating, as
the Administrator deems advisable in its discretion.
8.9 Claims Procedure.
----------------
8.9(a) A Participant or Beneficiary (the "claimant") shall have the right to
request any benefit under the Plan by filing a written claim for any such
benefit with the Administrator on a form provided by the Administrator for such
purpose. The Administrator shall give such claim due consideration and shall
either approve or deny it in whole or in part. Within ninety (90) days
following receipt of such claim by the Administrator, notice of any approval or
denial thereof, in whole or in part, shall be delivered to the claimant or his
duly authorized representative or such notice of denial shall be sent by mail to
the claimant or his duly authorized representative at the address shown on the
claim form or such individual's last known address. The aforesaid ninety (90)
day response period may be extended to one hundred eighty (180) days after
receipt of the claimant's claim if special circumstances exist and if written
notice of the extension to one hundred eighty (180) days indicating the special
circumstances involved and the date by which a decision is expected to be made
is furnished to the claimant within ninety (90) days after receipt of the
claimant's claim. Any notice of denial shall be written in a manner calculated
to be understood by the claimant and shall:
(i) Set forth a specific reason or reasons for the denial,
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<PAGE>
(ii) Make specific reference to the pertinent provisions of the Plan
on which any denial of benefits is based,
(iii) Describe any additional material or information necessary for
the claimant to perfect the claim and explain why such material or
information is necessary, and
(iv) Explain the claim review procedure of subparagraph 8.9(b).
If a notice of approval or denial is not provided to the claimant within the
applicable ninety (90) day or one hundred eighty (180) day period, the
claimant's claim shall be considered denied for purposes of the claim review
procedure of subparagraph 8.9(b).
8.9(b) A Participant or Beneficiary whose claim filed pursuant to
subparagraph 8.9(a) has been denied, in whole or in part, may, within sixty (60)
days following receipt of notice of such denial, or following the expiration of
the applicable period provided for in subparagraph 8.9(a) for notifying the
claimant of the decision on the claim if no notice of denial is provided, make
written application to the Administrator for a review of such claim, which
application shall be filed with the Administrator. For purposes of such review,
the claimant or his duly authorized representative may review Plan documents
pertinent to such claim and may submit to the Administrator written issues and
comments respecting such claim. The Administrator may schedule and hold a
hearing. The Administrator shall make a full and fair review of any denial of a
claim for benefits and issue its decision thereon promptly, but no later than
sixty (60) days after receipt by the Administrator of the claimant's request for
review, or one hundred twenty (120) days after such receipt if a hearing is to
be held or if other special circumstances exist and if written notice of the
extension to one hundred twenty (120) days is furnished to the claimant within
sixty (60) days after the receipt of the claimant's request for a review. Such
decision shall be in writing, shall be delivered or mailed by the Administrator
to the claimant or his duly authorized representative in the manner prescribed
in subparagraph 8.9(a) for notices of approval or denial of claims, and shall:
(i) Include specific reasons for the decision,
(ii) Be written in a manner calculated to be understood by the
claimant, and
(iii) Contain specific references to the pertinent Plan provisions
on which the decision is based.
The Administrator's decision made in good faith shall be final.
8.10 Payments to Minors and Incompetents. If a Participant or Beneficiary
-----------------------------------
entitled to receive any benefits hereunder is a minor or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, or is
deemed so by the Administrator, benefits will be paid to such person as the
Administrator may designate for the benefit of such Participant or Beneficiary.
Such payments shall be considered a payment to such Participant or Beneficiary
and shall, to the extent made, be deemed a complete discharge of any liability
for such payments under the Plan.
8.11 Distribution of Benefit When Distributee Cannot Be Located. The
----------------------------------------------------------
Administrator shall make all reasonable attempts to determine the identity
and/or whereabouts of a Participant or Participant's spouse entitled to a
survivor life annuity or Pre-Retirement Spouse's Death Benefit under the Plan or
a Participant's Beneficiary entitled to any other benefit under the Plan,
including the mailing by certified mail of a notice to the last known address
shown on the Employer's, the Administrator's or the Trustee's records. If the
Administrator is unable to locate such a person entitled to benefits hereunder,
or if there has been no claim made for such benefits, the Trustee shall continue
to hold the benefit due such person, subject to any applicable statute of
escheats.
8.12 Minimum Amount Paid Monthly. Notwithstanding any other provisions of
---------------------------
this ARTICLE VIII, monthly benefits equal to Ten Dollars ($10.00) or less need
not be paid monthly, but may be accumulated and paid annually on the last day of
each Plan Year.
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<PAGE>
ARTICLE IX
Additional Restrictions and Limitations on Payments and Benefits
----------------------------------------------------------------
9.1 Pre-termination Limitations on Annual Payments to Certain Highly
----------------------------------------------------------------
Compensated Employees. In the event of the payment of benefits prior to the
- ---------------------
termination of the Plan, the Annual Payment to each Participant who is among the
twenty-five (25) Highly Compensated Employees who have the greatest Statutory
Compensation and his Beneficiary shall be limited as follows:
9.1(a) No Annual Payment may exceed the sum of:
(i) An amount determined as if payments had been made in the form
of a Single Life Annuity (as defined in subparagraph 8.2(b)) which is the
Actuarial Equivalent of the sum of the Participant's Accrued Benefit and any
other Restricted Benefit under the Plan (other than a Social Security
Supplement), and
(ii) The amount of the payments to which the Participant is entitled
to receive for the Plan Year under a Social Security Supplement.
9.1(b) The limitation described in subparagraph 9.1(a) shall not apply if
one of the following conditions is met:
(i) The value of the assets of the Plan equals or exceeds one
hundred ten percent (110%) of the value of Current Liabilities of the Plan
after the payment to such Participant or Beneficiary of all Restricted
Benefits otherwise due under the Plan,
(ii) The Actuarial Value of such individual's Restricted Benefit is
less than one percent (1%) of the Current Liabilities of the Plan, or
(iii) The Actuarial Value of such individual's Restricted Benefit
does not, and did not at the time of any prior payment thereof, exceed
$3,500 (or $5,000 for Plan Years beginning on or after January 1, 1998).
9.1(c) For purposes of this paragraph:
(i) "Annual Payment" means the sum of the value of all
distributions of Restricted Benefits, whether in cash or in assets, made
with respect to a Plan Year to or on behalf of a Participant.
(ii) "Current Liabilities" shall be determined pursuant to Section
412(l)(7) of the Code for purposes of determining the required and/or
permissible contributions under Section 302 of the Act and Sections 412 and
404 of the Code and in a manner consistent with Inc. Tax Reg. Section
1.401(a)(4)-5(b).
(iii) "Restricted Benefit" means all benefits due under the Plan
(whether vested Accrued Benefits, Death Benefits or other benefits),
including loans in excess of the amount set forth in Section 72(p)(2)(A) of
the Code, any periodic income, any withdrawal values payable to a living
Participant and any death benefits not provided for by insurance on the life
of the Participant but excluding Death Benefits provided for by insurance on
the life of the Participant and the value of current life insurance
protection provided under the Plan to a Participant.
(iv) "Social Security Supplement" means a Participant's benefit
which both commences and terminates before the Participant's Social Security
Retirement Age and does not exceed the old age insurance benefit under the
Federal Social Security Act to which the Participant is entitled. For
purposes hereof, "Social Security Retirement Age" means the age used as the
retirement age for the Participant under Section 216(l) of the Federal
Social Security Act, except that such section shall be applied without
regard to the age increase factor, and as if the early retirement
<PAGE>
age under Section 216(l)(2) of such Act were sixty-two (62). As of the
Effective Date of this Restatement of the Plan, the Social Security
Retirement Age is determined on the basis of a Participant's calendar year
of birth as follows:
Social Security Calendar
Retirement Age Year of Birth
-------------- -------------
65 Before 1938
66 After 1937,
but before 1955
67 After 1954
(v) The value of the assets of the Plan and the Current Liabilities
shall be determined as of the same date for purposes of applying this
paragraph.
9.2 Restrictions on Benefits at Plan Termination. In the event of the
--------------------------------------------
termination of the Plan, the Restricted Benefits (as defined in paragraph 9.1)
of the Highly Compensated Employees shall be limited to a benefit which is non-
discriminatory as determined under Section 401(a)(4) of the Code.
ARTICLE X
The Fund
--------
10.1 Trust Fund and Exclusive Benefit. The Trustee shall receive all
--------------------------------
contributions under and all assets transferred to the Plan and shall invest and
administer them as a trust fund (the "Fund") for the exclusive benefit of the
Participants and Beneficiaries hereunder in accordance with the Plan. Except as
otherwise expressly provided herein, no part of the corpus or income of the Fund
shall revert to or be used or enjoyed by the Employer or be used for, or
diverted to, purposes other than the exclusive benefit of the Participants or
their Beneficiaries and the defrayal of reasonable expenses of the Plan and
Fund. The rights of all persons hereunder are subject to the terms of the Plan.
10.2 Plan and Fund Expenses. Unless or to the extent not paid by the
----------------------
Employer without being advanced subject to reimbursement (which shall make such
payments as directed by the Plan Sponsor) or unless prohibited by the Act or
the Code, all expenses of the Plan and the Fund, including reasonable legal,
accounting, actuarial, custodial, brokerage, consulting and other fees and
expenses incurred in the establishment, amendment, administration and
termination of the Plan or the Fund and/or the compensation of the Trustee and
other fiduciaries of the Plan to the extent provided under the Plan, and all
taxes of any nature whatsoever, including interest and penalties, assessed
against or imposed upon the Fund or the income thereof shall be paid out of the
Fund and shall constitute a charge upon the Fund. The Plan Sponsor may cause
the Employer to advance any or all such expenses and/or taxes on behalf of the
Fund, subject to the Employer's right of reimbursement from the Fund if so
directed by the Plan Sponsor and to the applicable prohibited transaction
provisions of the Act and the Code.
10.3 Reversions to the Employer.
--------------------------
10.3(a) If a contribution by the Employer is made under a mistake of fact,
upon written direction by the Plan Sponsor, the Trustee shall return to the
Employer an amount equal to such mistaken contribution, less any losses
attributable to such mistaken contribution, within one year after payment of
such contribution. If a contribution by the Employer is made conditioned upon
its deductibility for federal income tax purposes and there is a final
determination of the disallowance of a deduction under Section 404 of the Code
for such contribution or portion thereof, upon written direction by the Plan
Sponsor, the Trustee shall return to the Employer an amount equal to the amount
of such contribution or portion thereof so disallowed, less any losses
attributable to such contribution, within one year after such final
determination.
10.3(b) If it is finally determined by the Internal Revenue Service or a
court of competent jurisdiction on review of the Internal Revenue Service's
determination that the Plan as initially adopted (if an application for a
determination is timely
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<PAGE>
filed with the Internal Revenue Service by the date, including extensions
thereof, on which the Employer's federal income tax return for its taxable year
in which the Plan was adopted is due to be filed) does not qualify under Section
401 of the Code, the Trustee shall return to the Employer within one year after
the date of notice of such disqualification all assets attributable to its
contributions to the Plan received by the Trustee and made since the date the
Plan was adopted, except to the extent otherwise directed by the Plan Sponsor.
10.3(c) After the termination of the Plan as a whole and after all fixed
and contingent liabilities of the Fund to Participants and their Beneficiaries
have been satisfied, any remaining assets of the Fund shall be distributed to
the Employer as the Plan Sponsor may direct.
10.4 No Interest Other Than Plan Benefit. Nothing contained herein shall
-----------------------------------
be deemed to give any Participant or Beneficiary any interest in any specific
part of the Fund or any interest other than his right to receive benefits in
accordance with the provisions of the Plan.
10.5 Provisions Relating to Insurer.
------------------------------
10.5(a) No Insurer shall be deemed a party to the Plan or responsible for
the validity thereof.
10.5(b) No Insurer shall be required to determine either:
(i) That a person for whom the Trustee applies for a Policy is,
in fact, eligible for participation or entitled to benefits under the Plan,
(ii) Any fact necessary for the proper issuance of any Policy or
Contract, or
(iii) The proper distributions or further application of any moneys
paid by it to the Trustee in accordance with the written direction of the
Trustee;
and with respect to each of the foregoing, the Insurer shall be fully
indemnified and protected in relying upon the advice and direction of the
Trustee.
10.5(c) Any notice, direction, application or other communication
whatsoever shall be accepted by the Insurer as duly authorized and executed if
signed by the Trustee. The Insurer shall be fully protected in assuming that
the Trustee is as shown in the latest notification received by it at its home
office.
10.5(d) Except as may be otherwise provided in any binding receipt issued
by the Insurer, there shall be no coverage and no annuity or death benefit
payable under any Policy to be purchased from any Insurer until such Policy
shall have been issued and the premium therefor shall have been paid.
10.6 Payments from the Fund. The Trustee shall make all payments from
----------------------
the Fund which become due hereunder in accordance with the written instructions
or directions of the Administrator. In directing the Trustee to make any
payments or deliveries out of the Fund, the Administrator shall follow the
provisions of the Plan. The Trustee acting in accordance with such instructions
or directions shall be fully protected and indemnified by the Employer in
relying upon any such written instruction or direction which the Trustee
reasonably and in good faith believes to be proper.
ARTICLE XI
Fiduciaries
-----------
11.1 Named Fiduciaries and Duties and Responsibilities.
-------------------------------------------------
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<PAGE>
11.1(a) Authority to control and manage the operation and administration of
the Plan shall be vested in the following, who, together with their membership,
if any, shall be the Named Fiduciaries under the Plan with those powers, duties,
and responsibilities specifically allocated to them by the Plan:
(i) Trustee - The Trustee in connection with its fiduciary
-------
obligations relating to the Plan and the Fund.
(ii) Plan Sponsor - The Plan Sponsor in connection with its
------------
fiduciary obligations and rights relating to the Plan and the Fund.
(iii) Plan Administrator - The Plan Administrator in connection
------------------
with its fiduciary obligations and rights relating to the Plan and the Fund.
11.1(b) In addition, the Board shall be a Named Fiduciary for the sole
purpose of appointing, or terminating the appointment of, an Investment Manager.
11.2 Limitation of Duties and Responsibilities of Named Fiduciaries. The
--------------------------------------------------------------
duties and responsibilities, and any liability therefor, of the Named
Fiduciaries provided for in paragraph 11.1 shall be severally limited to the
duties and responsibilities specifically allocated to each such Named Fiduciary
in accordance with the terms of the Plan, and there shall be no joint duty,
responsibility, or liability among any such groups of Named Fiduciaries in the
control and management of the operation and administration of the Plan.
11.3 Service by Named Fiduciaries in More Than One Capacity. Any person
------------------------------------------------------
or group of persons may serve in more than one Named Fiduciary capacity with
respect to the Plan (including both service as Trustee and Plan Administrator).
11.4 Allocation or Delegation of Duties and Responsibilities by Named
----------------------------------------------------------------
Fiduciaries. By written agreement filed with the Plan Administrator and the
- -----------
Plan Sponsor, the duties and responsibilities of the Trustee with respect to the
management and control of the assets of the Fund may, with the written consent
of the Plan Sponsor, be allocated among the Trustees (if there are two or more
persons so serving) and any other duties and responsibilities of any Named
Fiduciary may be allocated among Named Fiduciaries or may, with the consent of
the Plan Sponsor, be delegated to persons other than Named Fiduciaries. The
delegation permitted under this paragraph includes the Trustee's right to
select a custodian to hold the assets of the Fund. Any written agreement shall
specifically set forth the duties and responsibilities so allocated or
delegated, shall contain reasonable provisions for termination, and shall be
executed by the parties thereto.
11.5 Investment Manager. The Board may appoint one or more Investment
------------------
Managers to manage all or any portion of the Fund. The appointment of any such
Investment Manager shall be by written agreement, which shall specify the scope
of the powers and duties of such Investment Manager, shall contain reasonable
provisions for the termination of such appointment, may require or allow any
Investment Manager to perform asset custodial services for all or part of the
Fund, and shall be executed by the parties thereto and acknowledged by the
Trustee. An Investment Manager appointed pursuant to any such agreement shall
acknowledge therein its status as a fiduciary with respect to the Plan.
11.6 Assistance and Consultation. A Named Fiduciary, and any delegate
---------------------------
named pursuant to paragraph 11.4, may engage agents to assist in its duties and
may consult with counsel, who may be counsel for the Employer, with respect to
any matter affecting the Plan or its obligations and responsibilities hereunder,
or with respect to any action or proceeding affecting the Plan. All
compensation and expenses of such agents and counsel shall be paid or reimbursed
from the Fund, except to the extent prohibited by the Act or the Code and except
to the extent paid or reimbursed by the Employer.
11.7 Indemnification. The Employer shall indemnify and hold harmless any
---------------
individual who is a Named Fiduciary or a member of a Named Fiduciary under the
Plan and any other individual to whom duties of a Named Fiduciary are delegated
pursuant to paragraph 11.4, to the extent permitted by law, from and against any
liability, loss, cost or expense arising from their good faith action or
inaction in connection with their responsibilities under the Plan.
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ARTICLE XII
Powers and Duties of Trustee
----------------------------
12.1 Trustee Powers and Duties. Subject to the following provisions of
-------------------------
this ARTICLE XII, the Trustee shall commingle and jointly invest, or where
specifically provided herein shall segregate and separately invest, the assets
of the Fund, without distinction between corpus and income.
12.1(a) The Trustee shall hold the Fund in trust, shall have the following
general powers granted in this paragraph, subject to the directions,
limitations, restrictions or prohibitions imposed hereunder, and, except as
otherwise specifically provided herein, shall have exclusive authority and
discretion in its management and control of the Fund.
(i) The Trustee shall invest and reinvest the Fund in such stocks,
stock options (whether or not covered), warrants and rights, puts, calls,
stock-index futures, bonds, securities, commodities, commodity futures and
options, real estate mortgages, real estate investment trusts or funds, real
estate, partnership interests, mutual funds, closed-end investment
companies, regulated investment companies or trusts, common, collective or
group trust funds (except as otherwise limited hereunder) and other
investments, and in such proportion, as may be deemed suitable for the
purposes and the funding policy hereof.
(ii) Such investments shall not be restricted to property and
securities of the character authorized for investment by trustees under any
present or future laws, with the exception of the Act.
(iii) To the extent permitted by law, the Trustee is expressly
authorized to invest and reinvest the Fund and to execute any joinder or
similar agreement therefor on behalf of the Plan:
(A) In any general common trust fund qualifying under Section
584 of the Code and maintained by any person, including but not
limited to the Trustee or any affiliate of the Trustee in the same
bank holding system affiliated group, as defined in Section 1504 of
the Code, as the Trustee (if the Trustee and any such affiliate are
banks or trust companies supervised by a state or federal agency)
and/or the Investment Manager or any affiliate of the Investment
Manager;
(B) In any other collective or group trust fund maintained by
any person, including but not limited to any such bank or trust
company and/or the Investment Manager or any affiliate of the
Investment Manager, and consisting solely of assets of qualified
retirement trusts and/or individual retirement accounts exempt from
federal income taxation under the Code, as the Trustee or, where
applicable, the Investment Manager in its discretion may determine
(whether or not the Trustee or, where applicable, the Investment
Manager is such a bank or trust company), provided such collective
or group trust is so qualified and exempt under the Code;
(C) In qualifying employer securities, qualifying employer
real property, or both, as defined by Section 407(d)(4) and (5) of
the Act, the aggregate fair market value of which does not exceed
ten percent (10%) of the fair market value of the assets of the
Fund;
(D) In Contracts or Policies (not containing or providing life
insurance) issued to provide or fund benefits under the Plan, and in
Policies of life insurance on the lives of Participants if the Plan
expressly provides for the purchase of such Policies and the
Administrator so directs, (whether or not the Insurer is the Plan
Sponsor or any affiliate of the Plan Sponsor, or the Investment
Manager or any affiliate of the Investment Manager, if an insurance
company); or
(E) In whole or in part in deposits with any bank or similar
financial institution supervised by the United States or a State,
regardless of whether such bank or other institution is a Trustee or
other fiduciary hereunder, provided such deposits shall bear a
reasonable rate of interest, except that funds may be
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<PAGE>
deposited in non-interest bearing accounts to such extent and for
such time as may be reasonably required for the orderly
administration of the Plan.
(iv) If an investment is made in a common, collective or group
trust, the Trustee is expressly authorized to incorporate the terms thereof
as an investment medium under and as a part of the Plan, and the terms of
such trust shall govern the investment, disposition and distribution of the
assets of such trust.
12.1(b) Subject to the requirements imposed by law, and in furtherance and
not in limitation of the Trustee's investment authority, the Trustee shall have
all powers and authority necessary or advisable to carry out the provisions of
the Plan, and all inherent, implied and statutory powers now or subsequently
provided by law, including specifically the power to do any of the following:
(i) To deal with all or any part of the Fund, including, without
limitation, to invest, reinvest and change investment;
(ii) To acquire any property by purchase, subscription, lease or
other means;
(iii) To sell for cash or on credit, convey, lease for long or
short terms, or convert, redeem or exchange all or any part of the Fund;
(iv) To borrow money for the purpose of the Fund, and for any sum
so borrowed to issue its promissory note as Trustee and to secure the
repayment thereof by pledging all or any part of the Fund;
(v) To enforce by suit or otherwise, or to waive its rights on
behalf of the Fund, and to defend claims asserted against him or the Fund;
(vi) To compromise, adjust and settle any and all claims against
or in favor of it or the Fund;
(vii) To renew, extend or foreclose any mortgage or other
security;
(viii) To bid in property on foreclosure;
(ix) To take deeds in lieu of foreclosure, with or without paying
a consideration therefor;
(x) To vote, or give proxies to vote, any stock or other
security, and to oppose, participate in and consent to the reorganization,
merger, consolidation or readjustment of the finances of any enterprise, to
pay assessments and expenses in connection therewith, and to deposit
securities under deposit agreements;
(xi) To hold Plan assets unregistered (including in bearer form),
or to register them in its own name, in street name or in the names of
nominees who are within the jurisdiction of the district courts of the
United States and are either banks or trust companies that are subject to
supervision by the United States or a state thereof, brokers or dealers
registered under the Securities Exchange Act of 1934, clearing agencies as
defined in Section 3(a)(23) of the Securities Exchange Act of 1934,
permissible nominees of any of the foregoing, or any other persons or
entities permitted to act as nominee for the Trustee under Section 403 of
the Act, provided the books and records of the Fund shall at all times
reflect that the Fund is the beneficial owner of such securities;
(xii) To make, execute, acknowledge and deliver any and all
instruments that it shall deem necessary or appropriate to carry out the
powers herein granted; and generally to exercise any of the powers of an
owner with respect to all or any part of the Fund; and
(xiii) Generally to exercise any of the powers of an owner with
respect to all or any portion of the Fund.
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<PAGE>
Except as provided in the Act, no person dealing with the Trustee shall be bound
to see to the application of any money or property paid or delivered to the
Trustee or to inquire into the validity or propriety of any transaction.
12.1(c) The Trustee shall not have the power or duty to inquire into the
correctness of the amount tendered to it as required by the Plan nor to enforce
the payment of contributions thereunder by the Employer. The Trustee shall be
responsible only for such sums and assets that it actually receives as Trustee.
12.1(d) In the exercise of its authority under this paragraph 12.1, the
Trustee shall take cognizance of and be inhibited by those limitations and
prohibitions contained in Section 406 of the Act and the prohibited transaction
provisions of Section 4975 of the Code, for which no exemption is applicable.
12.2 Accounts. The Trustee shall keep true and accurate accounts of all
--------
investments, receipts, and disbursements and other transactions hereunder, and
all accounts, books and records relating thereto shall be open to inspection and
audit at all reasonable times by any person or persons designated by the Plan
Sponsor. Within sixty (60) days after the removal or resignation of the Trustee
and as of each Valuation Date, the Trustee shall file with the Plan Sponsor a
valuation of the assets of the Trust, and an accounting of its transactions
since the last previous such accounting. In addition, the Plan Sponsor may
require an accounting from the Trustee at any other reasonable time. No
employee and no person other than those designated by the Plan Sponsor shall
have the right to demand or be entitled to any accounting by the Trustee except
as otherwise provided by law.
12.3 Two or More Trustees. Except in the case of the appointment of a
--------------------
Separate Trustee pursuant to paragraph 12.8, in the event two or more persons
are at any time serving as Trustee hereunder, such Trustees shall jointly manage
and control the Fund; provided, however, that pursuant to paragraph 11.4 such
Trustees may enter into an agreement in writing with respect to the allocation
of specific responsibilities, obligations or duties among themselves. Any
written agreement entered into pursuant to this paragraph shall be attached to
and made a part of the Plan.
12.4 Management of Fund by Investment Manager. In the event an
----------------------------------------
Investment Manager is appointed for all or part of the assets of the Fund, the
Trustee shall follow the directions of the Investment Manager in managing and
controlling the assets of the Fund subject to the direction and control of the
Investment Manager. The Investment Manager shall be governed by the powers and
restrictions imposed on the Trustee in its management and control of the Fund.
12.5 Trustee Compensation and Expenses. The Trustee shall be paid such
---------------------------------
reasonable compensation and shall be reimbursed for its reasonable expenses as
shall from time to time be agreed upon by the Plan Sponsor and the Trustee.
12.6 Bond. Except as may be provided under Section 412 of the Act, the
----
Trustee shall not otherwise be required to give any bond or other security for
the faithful performance of its duties hereunder.
12.7 Trustee Resignation, Removal or Death and Appointment of Successor
------------------------------------------------------------------
or Additional Trustee.
- ---------------------
12.7(a) In the event the Trustee or Trustees serving hereunder have been
named Trustee by virtue of any office they may hold in connection with their
employment by the Plan Sponsor or any other Employer, upon leaving any such
office, such Trustee shall at once cease to be a Trustee and shall be discharged
from all further duties and responsibilities as Trustee. Upon acceptance in
writing of its status as Trustee hereunder by the successor in office of any
such Trustee, he shall become a Trustee hereunder.
12.7(b) The Trustee may resign at any time upon delivering to the Plan
Sponsor a written notice of such resignation to take effect not less than sixty
(60) days after the delivery thereof unless the Plan Sponsor shall accept as
adequate a shorter notice. The Trustee may be removed by the Plan Sponsor, by
mailing notice by registered mail addressed to the Trustee at his last known
address, or by delivery of same to the Trustee to take effect not less than
sixty (60) days after mailing or delivery of such notification unless notice of
a shorter duration shall be accepted as adequate. The Administrator shall be
notified by the Plan Sponsor of any such resignation or removal.
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<PAGE>
12.7(c) In case of the resignation or removal of a Trustee, such Trustee
shall transfer, assign, convey and deliver to the successor or other Trustee the
trust estate as it may then be constituted and shall execute all documents
necessary for transferring the trust estate.
12.7(d) The Plan Sponsor shall forthwith appoint a successor Trustee in
case of resignation, removal or death of all Trustees appointed and then
serving. Any successor Trustee shall qualify as such by executing,
acknowledging, and delivering to the Plan Sponsor an instrument accepting such
appointment hereunder in such form as may be satisfactory to the Plan Sponsor,
which form shall become a part of this Trust document, and thereupon such
successor Trustee shall become vested with the rights, powers, discretion,
duties and obligation of its predecessor Trustee. The Administrator shall be
notified by the Plan Sponsor of any such successor Trustee.
12.7(e) In the event of the resignation, removal or death of a Trustee, the
surviving Trustee shall continue to be a Trustee hereunder.
12.7(f) The Plan Sponsor may at any time and from time to time appoint one
or more additional Trustees. The Administrator shall be notified by the Plan
Sponsor of any such additional Trustee or Trustees.
12.7(g) The Trustee may, with the written consent of the Plan Sponsor, or
shall, at the written direction of the Plan Sponsor, or the Plan Sponsor may by
written direction, appoint a bank with trust powers or a trust company
(including any Trustee) as a Co-Trustee for the custody and/or investment of all
or a portion of the assets of the Fund and enter into a trust agreement with
such bank, and the Trustee shall thereafter deliver assets of the Fund to such
bank or trust company for such custody and/or investment in accordance with such
written consent or direction of the Plan Sponsor. Any such trust agreement
shall be attached to the Plan. For purposes hereof and except as otherwise
required by Section 405(b)(2) of the Act with respect to co-fiduciary
responsibility and liability:
(i) The duties and responsibilities with respect to the assets of
the Fund held by any Co-Trustee appointed pursuant to this subparagraph
shall be allocated solely to such Co-Trustee, and such Co-Trustee shall have
no duties or responsibilities with respect to the other assets of the Fund
by reason of its appointment pursuant to this subparagraph; and
(ii) Conversely, any Trustee which is not appointed as such Co-
Trustee for such assets of the Fund shall have no duties and
responsibilities with respect to the assets of the Fund held by such Co-
Trustee pursuant to this subparagraph.
Any appointment of a Co-Trustee pursuant to this subparagraph shall
automatically be considered an allocation of duties and responsibilities under
paragraph 4.4 without further action being required and is intended to be an
allocation described in Section 405(b)(1) of the Act. The Administrator shall
be notified by the Plan Sponsor of any appointment of a Co-Trustee pursuant to
this subparagraph.
12.8 Establishment of Separate Trusts.
--------------------------------
12.8(a) The Plan Sponsor may establish one or more separate trusts and
appoint a bank with trust powers or a trust company (including any Trustee) as a
Separate Trustee for the custody and/or investment of all or a portion of the
assets of the Fund and enter into a separate trust agreement with such bank or
trust company and the Trustee shall thereafter deliver assets of the Fund to
such bank or trust company for such custody and/or investment in accordance with
such separate trust agreement and any written directions of the Plan Sponsor.
If agreed to by the parties, this Agreement shall be considered a separate trust
agreement for the purpose of establishing one or more separate trusts pursuant
to this paragraph. Otherwise, any such trust agreement shall be attached to the
Plan.
12.8(b) For purposes hereof:
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<PAGE>
(i) The duties and responsibilities of the Separate Trustee with
respect to the assets of the Fund held pursuant to the separate trust
agreement shall be allocated solely to such Separate Trustee, and such
Separate Trustee shall have no duties or responsibilities with respect to
the other assets of the Fund by reason of its appointment pursuant to this
subparagraph; and
(ii) Conversely, any Trustee which is not appointed as such
Separate Trustee for such assets of the Fund shall have no duties and
responsibilities with respect to the assets of the Fund held by such
Separate Trustee pursuant to this subparagraph.
12.8(c) Any appointment of a Separate Trustee pursuant to this subparagraph
is intended to be an establishment of a separate trust as described in Section
405(b)(3) of the Act. Upon the establishment of such a separate trust, any
Trustee currently serving as a sole Trustee shall automatically become a
Separate Trustee in accordance with the provisions of this paragraph.
12.8(d) The Administrator shall be notified by the Plan Sponsor of any
appointment of a Separate Trustee pursuant to this paragraph.
12.9 Automatic Successor Trustee by Corporate Transaction. If any
----------------------------------------------------
corporate Trustee at any time shall be merged, or consolidated with, or shall
sell or transfer substantially all of its assets and business to another
employer, domestic or foreign, or shall be in any manner reorganized or
reincorporated, then the resulting or acquiring employer shall be substituted
ipso facto for such corporate Trustee without the execution of any instrument
- ---- -----
and without any action upon the part of the Plan Sponsor, any Participant or
Beneficiary, or any other person having or claiming to have an interest in the
Fund.
ARTICLE XIII
Plan Administration
-------------------
13.1 Appointment of Plan Administrator. The Plan Sponsor may appoint one
---------------------------------
or more persons to serve as the Plan Administrator (the "Administrator") for the
purpose of carrying out the duties specifically imposed on the Administrator by
the Plan, the Act and the Code. In the event more than one person is appointed,
the persons shall form an administrative committee for the Plan. The person or
committeemen serving as Administrator shall serve for indefinite terms at the
pleasure of the Plan Sponsor, and may, by sixty (60) days prior written notice
to the Plan Sponsor, terminate such appointment. The Plan Sponsor shall inform
the Trustee of any such appointment or termination and the Trustee may assume
that any person appointed continues in office until notified of any change.
13.2 Plan Sponsor as Plan Administrator. In the event that no
----------------------------------
Administrator is appointed or in office pursuant to paragraph 13.1, the Plan
Sponsor shall be the Administrator.
13.3 Compensation and Expenses. Unless otherwise determined and paid by
-------------------------
the Employer (as directed by the Plan Sponsor), the person or committeemen
serving as the Administrator shall serve without compensation for service as
such. All expenses of the Administrator shall be paid as provided in paragraph
10.2, provided no compensation shall be paid the Administrator from the Fund to
the extent prohibited by the Code or the Act.
13.4 Procedure if a Committee. If the Administrator is a committee, it
------------------------
shall appoint from its members a Chairman and a Secretary. The Secretary shall
keep records as may be necessary of the acts and resolutions of such committee
and be prepared to furnish reports thereof to the Trustee. Except as otherwise
provided, all instruments executed on behalf of such committee may be executed
by its Chairman or Secretary and the Trustee may assume that such committee, its
Chairman or Secretary are the persons who were last designated as such to the
Trustee in writing by the Plan Sponsor.
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<PAGE>
13.5 Action by Majority Vote if a Committee. If the Administrator is a
--------------------------------------
committee, its action in all matters, questions and decisions shall be
determined by a majority vote of its members qualified to act thereon. They may
meet informally or take any action without the necessity of meeting as a group.
13.6 Appointment of Successors. Upon the death, resignation or removal
-------------------------
of a person serving as, or on a committee which is, the Administrator, the Plan
Sponsor may, but need not, appoint a successor.
13.7 Additional Duties and Responsibilities. The Administrator shall
--------------------------------------
have the following duties and responsibilities in addition to those expressly
provided elsewhere in the Plan:
13.7(a) The Administrator shall be responsible for the fulfillment of all
relevant reporting and disclosure requirements set forth in the Act and the
Code, including but not limited to the preparation of necessary plan
descriptions, summary plan descriptions, annual reports, summary annual reports,
employee benefit statements, notice of forfeitability of benefits, notice of
special tax treatment (rollover, five-year or ten-year averaging and capital
gains) for distributions, and other statements or reports, the distribution
thereof to Participants and their Beneficiaries and the filing thereof with the
appropriate governmental officials and agencies.
13.7(b) The Administrator shall maintain and retain necessary records
respecting administration of the Plan and matters upon which disclosure is
required under the Act and the Code.
13.7(c) The Administrator shall make any elections for the Plan under the
Act or the Code.
13.7(d) The Administrator shall provide to Participants and Beneficiaries
such notices, including but not limited to the notice to interested parties, and
information as are required by the Plan, the Act and the Code.
13.7(e) The Administrator shall make all determinations regarding
eligibility for participation in and benefits under the Plan.
13.7(f) The Administrator shall establish and communicate to the Trustee a
funding policy consistent with the current and long-term financial needs of the
Plan with respect to the ages of the Participants in the Plan and other such
relevant information; provided, however, that nothing in this subparagraph shall
be construed as granting to the Plan Administrator any power or authority with
respect to the control and management of the Fund.
13.7(g) The Administrator shall have the right to settle claims against the
Plan and to make such equitable adjustments in a Participant's or Beneficiary's
rights or entitlements under the Plan as it deems appropriate in the event an
error or omission is discovered or claimed in the operation or administration of
the Plan.
13.8 Power and Authority.
-------------------
13.8(a) The Administrator is hereby vested with all the power and authority
necessary in order to carry out its duties and responsibilities in connection
with the administration of the Plan, including the power to interpret the
provisions of the Plan. For such purpose, the Administrator shall have the power
to adopt rules and regulations consistent with the terms of the Plan.
13.8(b) The Administrator shall exercise its power and authority in its
discretion. It is intended that a court review of the Administrator's exercise
of its power and authority with respect to matters relating to claims for
benefits by, and to eligibility for participation in and benefits of,
Participants and Beneficiaries shall be made only on an arbitrary and capricious
standard.
13.9 Availability of Records. The Employer and the Trustee shall, at the
-----------------------
request of the Administrator, make available necessary records or other
information they possess which may be required by the Administrator in order to
carry out its duties hereunder.
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<PAGE>
13.10 No Action with Respect to Own Benefit. No Administrator who is a
-------------------------------------
Participant shall take any part as the Administrator in any discretionary action
in connection with his participation as an individual. Such action shall be
taken by the remaining Administrator, if any, or otherwise by the Plan Sponsor.
13.11 Limitation on Powers and Authority. The Administrator shall have no
----------------------------------
power in any way to modify, alter, add to or subtract from any provisions of the
Plan.
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ARTICLE XIV
Amendment and Termination of Plan
---------------------------------
14.1 Amendment. The Plan may be amended in whole or in part at any time
---------
by action of the Board; provided, however, that:
(i) Except to the extent permitted or required by the Act or the
Code, neither the Accrued Benefit (nor any subsidy, early retirement
benefit, optional form of payment or any other benefit considered to be an
accrued benefit for purposes of Section 411(d)(6)(B) of the Code) of a
Participant, nor the percentage thereof which is non-forfeitable, at the
time of any such amendment shall be adversely affected thereby.
(ii) Except to the extent permitted or required by the Act or the
Code, no such amendment shall have the effect of revesting in the Employers
any part of the Fund prior to the termination of the Plan and the
satisfaction of all fixed and contingent liabilities thereunder with respect
to Participants and their Beneficiaries.
(iii) The duties and obligations of the Trustee hereunder shall not
be increased nor its compensation decreased without its written consent.
14.2 Merger, Consolidation or Transfer of Assets. The merger or
-------------------------------------------
consolidation of or transfer of assets or liabilities between this Plan and any
other plan shall be permitted upon action by the Board or as expressly provided
elsewhere in the Plan so long as, immediately after such merger, consolidation
or transfer of assets or liabilities, each Participant who is or may become
eligible to receive an accrued benefit of any type from this Plan (or whose
Beneficiaries may be eligible to receive any such benefit) would, if such
surviving or transferee plan was then terminated, be entitled to receive an
accrued benefit at least equal to the accrued benefit to which such Participant
(and each such Beneficiary) would have been entitled had this Plan terminated
immediately prior to such merger, consolidation or transfer of assets or
liabilities.
14.3 Plan Permanence and Termination. The Employers have established the
-------------------------------
Plan with the intention and expectation that they will be able to make their
contributions indefinitely, but none of the Employers are or shall be under any
obligation or liability to any Participant or Employee to continue their
contributions or to maintain the Plan for any given length the time, and each
may in its sole and absolute discretion discontinue its contributions or
otherwise terminate its participation in the Plan at any time without any such
liability for such discontinuance or termination.
14.4 Lapse in Contributions. Failure by any Employer to make
----------------------
contributions to the Fund in any year or years, unless the same shall be coupled
with any other event causing a termination of its participation in the Plan,
shall not terminate the Plan or operate to vest the rights of any Participants
or to accelerate any payments or distributions to or for the benefit of any
Participants or their Beneficiaries.
14.5 Termination Events.
------------------
14.5(a) The Plan shall terminate in whole or in part as the case may be
upon the happening of any of the following events:
(i) With respect to any Employer, action by its Board terminating
the Plan as to it and specifying the date of such termination. Notice of
such termination shall be delivered to the Trustee and the Administrator.
(ii) With respect to any Employer other than the Plan Sponsor,
upon its ceasing to be an Affiliate of the Plan Sponsor.
(iii) With respect to any Employer, its adjudication as a bankrupt
or its general assignment to or for the benefit of its creditors or its
dissolution, unless within sixty (60) days after such event a successor
employer shall assume the terms and conditions hereof in writing.
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<PAGE>
(iv) Termination of the Plan pursuant to Section 4042 of the Act.
(v) Termination or partial termination of the Plan within the
meaning of Section 411(d)(3) of the Code, provided, however, that in the
case of a partial termination, paragraphs 14.5 through 14.8 shall only
apply to that part of the Plan which is partially terminated.
(vi) Action by the Board of the Plan Sponsor terminating the Plan as
a whole and specifying the date of such termination. Notice of such
termination shall be delivered to the Trustee, the Administrator and all
Employers.
14.5(b) For purposes of paragraphs 14.6 through 14.8 hereof, any action
by the Board terminating the Plan shall also specify whether the Plan is
thereafter to be operated as a "terminated plan" or a "frozen plan". Such terms
are defined as follows:
(i) A "terminated plan" is one that has been formally terminated,
has ceased crediting service for benefit accrual purposes and vesting, and
has been or is distributing Plan assets to Participants and Beneficiaries
entitled thereto as soon as administratively possible. For purposes hereof,
a Plan will be considered a terminated plan when Plan assets are required
to be distributed pursuant to paragraph 14.8 hereof.
(ii) A "frozen plan" is one in which benefit accruals have ceased
but all Plan assets are not being distributed to Participants or
Beneficiaries entitled thereto as soon as administratively possible. For
purposes hereof, a Plan will be considered a frozen plan when Plan assets
are not required to be distributed pursuant to paragraph 14.8 hereof.
If a Plan is a frozen plan, it must continue to provide for accrual of Top Heavy
Minimum Benefits as required under Section 416 of the Code.
14.6 Benefits and Vesting upon Termination.
-------------------------------------
14.6(a) In the event of a termination or a partial termination of the
Plan, so much of the Plan as has been terminated shall be automatically amended
without any action required by the Plan Sponsor or any other person as of and
immediately prior to the effective time of such termination by reducing or
eliminating the incidental and ancillary benefits, other than Pre-Retirement
Spouse's Death Benefits, of Participants and their Beneficiaries under so much
of the Plan as has terminated, but only if payment thereof has not commenced or
is not subject only to the expiration of a waiting period, to the fullest extent
permitted by paragraph 14.1.
14.6(b) Under no circumstances shall all or any portion of the Accrued
Benefit of any such Participant under the Plan to the extent terminated (except
Top Heavy Minimum Benefits required by Section 416 of the Code) be increased by
reason of continued service as an Employee with any Employer with respect to
which the Plan has been terminated.
14.6(c) Each affected Participant's Accrued Benefit shall be non-
forfeitable upon the effective date of any termination or partial termination of
the Plan within the meaning of Section 411(d)(3) of the Code or, if the Board so
resolves, after any other termination. However, no Participant or Beneficiary
shall have any recourse toward payment or satisfaction of an Accrued Benefit or
any Death Benefit or other benefit liability under so much of the Plan as has
terminated from any source other than assets of the Fund or the Pension Benefit
Guaranty Corporation.
14.7 Administration of Plan after Termination. Upon the effective date
----------------------------------------
of the complete or partial termination of the Plan, the Trustee shall continue
to administer the assets used to fund the Accrued Benefits of all Participants
and Beneficiaries as part of the Fund, and, where an allocation of assets is
required under paragraph 14.8, shall pay or provide for all accrued expenses of
the Plan and the Fund and shall value the assets held by the Fund, both as of
such date. Where applicable, the Administrator shall suspend benefit payments
and take all reasonable efforts to recoup overpaid benefits to the extent
required by or permitted under the Act, including Section 4044 thereof if
applicable, and shall use the
-45-
<PAGE>
assets of the Plan to fund the Accrued Benefits and any Death Benefits or other
benefit liabilities under the Plan in the manner provided in, but only if
required by, Section 4044 of the Act.
14.8 Distribution of Assets after Termination.
----------------------------------------
14.8(a) In the event the Plan is considered a terminated plan, the
Administrator shall forthwith allocate the assets of the Fund to fund the
Accrued Benefits and any Death Benefits or other benefit liabilities which may
thereafter be payable under the Plan in the manner provided in Section 4044 of
the Act if applicable, or otherwise on the basis of the relative Actuarial
Values of such benefits.
14.8(b) After the allocation referred to in subparagraph 14.8(a), the
Trustee shall then distribute or pay to the Participants or their Beneficiaries
entitled thereto, in accordance with such allocation of assets, but subject to
the applicable time and form of benefit payment provisions in ARTICLE VIII
(which if the Board so directs shall include for such purpose a lump sum payment
option conditioned upon any spousal consent thereto required by the Code or the
Act), and subject to such action as may be taken by the Pension Benefit Guaranty
Corporation pursuant to the Act, either a lump sum amount equal to their
respective allocations (in cash or in assets valued at current fair market
value, or both) or Policies to provide such Accrued Benefits or Death Benefits,
purchased as provided in the Plan, or a combination of the foregoing, upon the
happening of any of the following events which occur on or after or result in
the termination of the Plan:
(i) Delivery to the Trustee of a notice executed on behalf of the
Employer by authority of the Board directing that such distribution or
payment be made, which direction may be made with respect to the entire
Fund or with respect to assets needed to fund the benefits of Participants
affected by a partial termination of the Plan.
(ii) Adjudication of the Plan Sponsor as a bankrupt or general
assignment by the Plan Sponsor to or for the benefit of creditors or
dissolution of the Plan Sponsor, unless, within sixty (60) days after such
event, either a successor or other employer shall assume the terms and
conditions hereof in writing, or the Trustee (or a successor Trustee
appointed within such sixty (60) day period) shall agree to continue to
hold and administer the Fund as provided in paragraph 14.7 and
additionally, unless otherwise agreed with or directed by the Plan Sponsor,
to assume all the powers and duties imposed upon the Named Fiduciaries
under the Plan. In assuming such powers and duties, the Trustee (or any
successor Trustee) shall be vested with all authority granted by the Plan
without any limitation imposed upon such authority by the Plan except the
requirement that its actions shall be governed by the other provisions of
the Plan and by the Act and the Code. If the Trustee (or any successor
Trustee) shall so agree to continue the trust, all expenses of the Plan and
the Fund and reasonable compensation to the Trustee (or any successor
Trustee) and any successor shall be paid from the Fund. In the event of the
death, resignation or removal of the Trustee (or any successor Trustee) who
shall have so agreed to continue the trust, a court of competent
jurisdiction over the Fund shall appoint a successor or the benefits
payable under the Plan shall forthwith be distributed as hereinabove
provided at the direction of such court.
14.9 Effects of Employer Merger, Consolidation or Liquidation.
--------------------------------------------------------
Notwithstanding the foregoing provisions of this ARTICLE XIV, the merger or
liquidation of any Employer into any other Employer or the consolidation of two
(2) or more of the Employers shall not cause the Plan to terminate with respect
to the merging, liquidating or consolidating Employers, provided that the Plan
has been adopted or is continued by and has not terminated with respect to the
surviving or continuing Employer.
ARTICLE XV
Miscellaneous
-------------
15.1 Headings. The headings in the Plan have been inserted for
--------
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
-46-
<PAGE>
15.2 Gender and Number. In the construction of the Plan, the masculine
-----------------
shall include the feminine or neuter and the singular shall include the plural
and vice-versa in all cases where such meanings would be appropriate.
15.3 Governing Law. The Plan and the Fund created hereunder shall be
-------------
construed, enforced and administered in accordance with the laws of the
Commonwealth of Virginia, and any federal law pre-empting the same. Unless
federal law specifically addresses the issue, federal law shall not pre-empt
applicable state law preventing an individual or person claiming through him
from acquiring property or receiving benefits as a result of the death of a
decedent where such individual caused the death.
15.4 Employment Rights. Participation in the Plan shall not give any
-----------------
employee the right to be retained in the Employer's employ nor, upon dismissal
or upon his voluntary termination of employment, to have any right or interest
in the Fund other than as herein provided.
15.5 Conclusiveness of Employer Records. The records of the Employer
----------------------------------
with respect to age, service, employment history, compensation, absences,
illnesses and all other relevant matters shall be conclusive for purposes of the
administration of the Plan.
15.6 Right to Require Information and Reliance Thereon. The Employer,
-------------------------------------------------
Administrator and Trustee shall have the right to require any Participant,
Beneficiary or other person receiving benefit payments to provide it with such
information, in writing, and in such form as it may deem necessary to the
administration of the Plan and may rely thereon in carrying out its duties
hereunder. Any payment to or on behalf of a Participant or Beneficiary in
accordance with the provisions of the Plan in good faith reliance upon any such
written information provided by a Participant or any other person to whom such
payment is made shall be in full satisfaction of all claims by such Participant
and his Beneficiary; and any payment to or on behalf of a Beneficiary in
accordance with the provisions of the Plan in good faith reliance upon any such
written information provided by such Beneficiary or any other person to whom
such payment is made shall be in full satisfaction of all claims by such
Beneficiary.
15.7 Alienation and Assignment. Except as otherwise permitted by the
-------------------------
Act and the Code and as expressly permitted by the Plan or the Administrator, no
benefit hereunder shall be subject in any manner to alienation, sale,
anticipation, transfer, assignment, pledge, encumbrance, garnishment,
attachment, execution or levy of any kind. As provided in the Act and the Code,
this prohibition shall not apply to any QDRO entered on or after January 1,
1985, and the Administrator shall have all rights granted thereunder in
determining the existence of such an order, in establishing and following
procedures therefor and in complying with any such order. The Administrator
shall treat any domestic relations order entered before January 1, 1985 as a
QDRO entered on January 1, 1985 if the Plan is paying benefits pursuant to such
order on January 1, 1985 or if the Administrator in its discretion deems such
treatment warranted.
15.8 Notices and Elections. All notices required to be given in
---------------------
writing and all elections required to be made in writing, under any provision of
the Plan, shall be invalid unless made on such forms as may be provided or
approved by the Administrator and, in the case of a notice or election by a
Participant or Beneficiary, unless executed by the Participant or Beneficiary
giving such notice or making such election.
15.9 Delegation of Authority. Whenever the Plan Sponsor or any
-----------------------
Employer is permitted or required to perform any act, such act may be performed
by any of its officers or any other person duly authorized by its Chief
Executive Officer, its President or its Board of Directors.
15.10 Service of Process. The Administrator, as well as the Trustee,
------------------
shall be the agent for service of process on the Plan.
15.11 Construction. This Plan is created for the exclusive benefit of
------------
Employees of the Employer and their Beneficiaries and shall be interpreted and
administered in a non-discriminatory manner consistent with its being an
employees' defined benefit pension plan and trust as defined in Sections 401 and
414 of the Code.
-47-
<PAGE>
ARTICLE XVI
Adoption of the Plan
--------------------
16.1 Initial Adoption and Failure to Obtain Qualification. If it is
----------------------------------------------------
finally determined by the Internal Revenue Service or by a court of competent
jurisdiction on review of the Internal Revenue Service's determination that the
Plan does not qualify initially under Section 401 of the Code, the Plan shall
have no force or effect and the Trustee shall return to the Employer all assets
attributable to its contribution received by the Trustee as provided in ARTICLE
III. Upon return of such contributions, the Plan shall terminate and the Trustee
shall be discharged from all obligations under the Plan.
16.2 Adoption by Additional Employers. Any employer which is an Affiliate
--------------------------------
and which, with the consent of the Board, desires to adopt the Plan, may do so
by executing the Plan or an adoption agreement in a form authorized and approved
by such employer's Board of Directors and the Board. In the event that such
Affiliate has established and has been maintaining a defined benefit plan for
the benefit of its employees which qualifies under Section 401 or 404(a)(2) of
the Code, an adoption or other agreement may provide, subject to the
requirements of paragraph 14.2, that such plan is amended and restated by the
provisions of this Plan (such prior plan being deemed a predecessor plan to this
Plan) or that such plan is to be merged or consolidated with this plan; and, in
such event, the assets of such plan shall be paid over to the Trustee to be
administered as a part of the Fund pursuant to the provisions of this Plan.
IN WITNESS WHEREOF, the Employer, pursuant to the resolution duly adopted
by its Board of Directors, has caused its name to be signed to this Plan and
Trust Agreement by its duly authorized officer with its corporate seal hereunto
affixed and attested by its Secretary or Assistant Secretary, and the Trustee
has caused his name to be signed and his seal hereunto affixed as of the day and
year above written.
-48-
<PAGE>
ESKIMO PIE CORPORATION,
Plan Sponsor and participating Employer
By:____________________________(SEAL)
Its___________________________
Attest:
___________________________
Its_______________________
_______________________________(SEAL)
WILLIAM M. FARISS, JR., Trustee
-49-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Appendix A
Elapsed Time Method of Determining Service
------------------------------------------
A-1.1 Elapsed Time Method of Determining Service. The following
------------------------------------------
definitions and rules shall apply in determining service under the "Elapsed
Time" method of determining service:
A-1.1(a) For purposes hereof, the following terms have the following
meanings:
(i) "Break in Service": The period of time commencing on an
Employee's Severance Date and ending on his first Re-employment
Commencement Date thereafter. In the case of an individual who is absent
from work on a Maternity or Paternity Absence, the 12-consecutive month
period beginning on the first anniversary of the first date of such absence
shall not constitute a Break in Service for purposes of eligibility to
participate or vesting under the Plan.
(ii) "Employment Commencement Date": The date on which an Employee
first completes an Hour of Service for the performance of duties.
(iii) "Leave of Absence": Any absence authorized by a participating
Employer under rules established by the participating Employer and
uniformly applied to all persons similarly situated, provided, however,
that the Employee resumes active employment with the participating Employer
within the period specified in the authorization for the leave of absence.
(iv) "Maternity or Paternity Absence": An absence commencing on or
after the first day of the first Plan Year beginning after December 31,
1984:
(A) By reason of pregnancy of the individual,
(B) By reason of the birth of a child of the individual,
(C) By reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or
(D) For the purpose of caring for such child for a period
beginning immediately following such birth or placement.
Notwithstanding the foregoing, no Maternity or Paternity Absence shall be
considered to exist unless the Employee furnishes to the Administrator such
timely information as the Administrator may reasonably require to establish
that the absence from work is for one of the foregoing reasons or purposes
and the number of days for which there was such an absence.
(v) "Period of Service": The period of time beginning on an
Employee's Employment Commencement Date or Re-employment Commencement Date,
as the case may be, and ending on his first Severance Date thereafter.
(vi) "Re-employment Commencement Date": The date on which an
Employee first completes an Hour of Service for the performance of duties
after a Break in Service.
(vii) "Severance Date": The earlier of (A) or (B) as set forth
below, except as otherwise provided below:
-A-1-
<PAGE>
(A) The date on which an Employee ceases to be employed by the
Employer by reason of resignation, discharge, retirement, or death; or
(B) The first anniversary of the first day of a period during
which the Employee is continuously absent from service with the
Employer (with or without pay) for any reason other than resignation,
discharge, retirement, or death, such as vacation, holiday, sickness,
Disability (as provided in paragraph 5.4) or other disability, layoff,
or Leave of Absence.
(C) In no event shall a Severance Date occur during a period of
absence described below:
(I) Leave of Absence, provided the Employee returns to
employment with the Employer at the expiration of such leave;
(II) Temporary layoff for the convenience of the Employer,
provided the Employee is recalled to employment with the Employer
and returns to such employment when recalled; or
(III) Any period during which the Employee is Disabled (as
provided in paragraph 5.4).
Notwithstanding the foregoing definitions, if an Employee's Period of
Service ends, and a Break in Service begins, and if such Employee is re-
employed before incurring a one year Break in Service, no Break in Service
shall be considered to have occurred, and the period of time otherwise
treated as a Break in Service shall be considered a Period of Service, for
eligibility, vesting and forfeiture purposes (e.g., Years of Eligibility
Service, Years of Vesting Service, and Years of Broken Service). However,
the period which otherwise would be considered a Break in Service shall not
be considered a Period of Service for benefit accrual purposes (e.g., Years
of Benefit Service).
A-1.1(b) The following rules shall apply in determining service:
(i) A stated Break in Service (such as "one year" or "five years")
means a continuous Break in Service of the stated required time.
(ii) Separate Periods of Service not disregarded under the break in
service rules of the Plan shall be aggregated in determining completion of
any stated required Period of Service, and such aggregation shall be
calculated on the basis that three hundred sixty-five (365) days equals a
whole year.
(iii) When comparing the length of a Period of Service to a Break in
Service for purposes of the Plan, whole and partial years shall be
compared, with partial years being based on days in the period.
(iv) Partial or fractional years shall be calculated to three (3)
decimal places.
(v) A "full" or "whole" year means a complete year, every day of
which constitutes a Period of Service.
(vi) Nothing contained in the service counting provisions of this
paragraph shall be construed to alter, amend, modify, invalidate, impair or
supersede any law of the United States or any valid rule or regulation
issued under any such law so as to deny an individual credit for service in
the employment of the Employer where such credit is required by any federal
law other than the Act.
(vii) Periods for which severance pay (including any termination
allowance which is severance pay) is paid shall not be considered service
under the Plan unless the payee's employment relationship has not been
ended, and in no event shall any such period be taken into account for
benefit accrual purposes (e.g., Years of Benefit Service).
-A-2-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Appendix B
Determination of Top Heavy Plan Status
--------------------------------------
B-1.1 Introduction. The Plan will be a Top Heavy Plan for any Plan Year
------------
beginning after December 31, 1983 if the sum of the present values of the
cumulative accrued benefits of Key Employees under the Plan, and the present
values of the cumulative accrued benefits of Key Employees under all plans
aggregated with it, exceeds sixty percent (60%) of the aggregate of the present
value of the cumulative Accrued Benefits under the Plan and accrued benefits
under such plan(s) at the applicable determination date. For purposes hereof,
aggregation, accrued benefits (including Accrued Benefits) taken into account,
the determination date and all other standards and criteria for determining top-
heaviness under this Plan and such other plan(s) shall be determined under
Section 416 of the Code. Subject to the foregoing, the determination of Top
Heavy Plan status shall be made each Plan Year in accordance with the rules and
definitions contained in this Appendix.
B-1.2 Determination Date. The determination date with respect to a plan
------------------
means the last day of its preceding plan year or, in the case of the first plan
year of a plan, the last day of such first plan year.
B-1.3 Value of Accrued Benefits.
-------------------------
B-1.3(a) The value of an accrued benefit at a determination date is the
value thereof at the most recent valuation date occurring within the twelve (12)
month period ending on the determination date, plus, in the case of a defined
contribution plan, an appropriate adjustment for contributions made or due
thereafter and on or before the determination date.
B-1.3(b) If the plan is a defined benefit plan, the present value of
accrued benefits thereunder shall be determined on the basis of the actuarial
assumptions stated in such plan for such purpose or, if none are stated, on the
basis of the applicable actuarial equivalent benefit payment factors of such
plan, in any case taking into account post-retirement mortality, interest, non-
proportional subsidies (the benefits of which are assumed to commence at the age
when the benefit is most valuable), pre-retirement mortality and future
increases in cost of living, but not taking into account proportional subsidies,
future withdrawals or salary increases, future increases in the maximum dollar
limitation of Section 415 of the Code, and benefits not relating to retirement.
B-1.3(c) If the plan is a defined contribution plan, the value of an
accrued benefit shall be determined as follows:
(i) An individual's account balance in a plan not subject to Section
412 of the Code is the sum of his actual account balance on the applicable
valuation date and all contributions actually made after the applicable
valuation date but on or before the determination date; provided, however,
for such a plan's first plan year, the amount determined in the preceding
sentence shall be added to the amount of any contributions made after the
determination date that are allocated as of a date in that first plan year.
(ii) An individual's account balance in a defined contribution plan
that is subject to Section 412 of the Code is the sum of his account balance
on the applicable valuation date, all contributions due as of the
determination date (that is, contributions that would be allocated as of a
date not later than the determination date, even though those amount are not
yet required to be contributed), and, for the plan year that contains the
determination date, all amounts actually contributed (or due to be
contributed) after the extended payment period in Section 412(c)(10) of the
Code.
B-1.3(d) The accrued benefit of a Non-Key Employee shall be determined (i)
under the method which is uniformly used for accrual purposes for all plans of
the Employer or (ii) if there is no method described in clause (i), as if such
benefit accrued not more rapidly than the slowest applicable accrual rate
permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
B-1.4 Accrued Benefits Excluded from Determination. In determining the
--------------------------------------------
value of accrued benefits, there shall be excluded:
-B-1-
<PAGE>
(i) Any rollover contribution or plan-to-plan transfer initiated by
the participant and made after December 31, 1983 so long as the rollover
contribution or transfer was not derived from a plan maintained by the
Employer,
(ii) Any accumulated deductible employee contributions,
(iii) The accrued benefit of any individual who was a Key Employee
for a prior plan year but who is no longer a Key Employee, and
(iv) For plan years beginning after December 31, 1984, the accrued
benefit of any individual who has not performed service for any Employer
maintaining the plan at any time during the five (5) plan year period ending
on the determination date.
B-1.5 Distributions and Transfers Taken into Account in Determination.
---------------------------------------------------------------
In determining the value of accrued benefits, there shall be included any
distributions made under the plan at any time during the five (5) plan year
period ending on the determination date:
(i) Including distributions from any terminated plan which if it
had not been terminated would have been required to be aggregated with this
Plan under clause (i) or (ii) of subparagraph 1.6(b) of this Appendix, but
(ii) Excluding:
(A) Distributions made on account of death, to the extent the
benefits do not exceed the present value of accrued benefits existing
immediately prior to death (in the case of a defined contribution
plan, a distribution made on account of death is the participant's
accrued account balance (including the cash value of life insurance
policies)), and
(B) Distributions and plan-to-plan transfers which are rolled
over into a plan maintained by the Employer or initiated by the
participant.
B-1.6 Aggregation of Plans.
--------------------
B-1.6(a) When aggregating plans, the value of accrued benefits shall be
calculated with reference to the determination dates of such aggregated plans
that fall within the same calendar year. When aggregating defined benefit plans
the same actuarial assumptions shall be used with respect to all such plans and,
if the stated assumptions of such plans are not the same, the plan sponsor(s) of
such plans shall select and agree on one plan's assumptions.
B-1.6(b) The plans to be aggregated with this Plan for purposes hereof for
a plan year are:
(i) Each other plan intended to meet the applicable requirements of
Section 401(a)(10)(B) of the Code and maintained by the Employer and each
simplified employee pension plan maintained by the Employer in which a Key
Employee participates for the plan year containing the determination date
with respect to such plan year or for any of the preceding four (4) plan
years,
(ii) Each other qualified or simplified employee pension plan of the
Employer which, during the applicable five (5) plan year period described in
clause (i) of this subparagraph, enables any such plan described in clause
(i) of this subparagraph to meet the requirements of Section 401(a)(4) or
410 of the Code, and
(iii) Solely in the discretion of the Employer, any additional
qualified or simplified employee pension plan(s) of the Employer if the
plans described in clauses (i) and (ii) of this subparagraph would continue
to meet the requirements of Sections 401(a)(4) and 410 of the Code with such
plan(s) being included in the aggregation group.
-B-2-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Appendix C
(As of January 1, 1996)
List of Participating Employers
-------------------------------
Effective Date Effective Date
Place of of Commencement of Termination
Name Incorporation of Participation of Participation
---- ------------- ---------------- ----------------
Eskimo Pie Corporation Delaware April 6, 1992 ----
Eskimo Inc. Virginia January 1, 1995 ----
Sugar Creek Foods, Inc. Virginia January 1, 1996 ----
-C-1-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Adoption Agreement
------------------
This ADOPTION AGREEMENT, executed the __ day of _______, 1994 by ESKIMO
INC., a Virginia corporation, (hereinafter referred to as the "Adopting
Employer") with the consent of the Board of Directors (the "Board") of ESKIMO
PIE CORPORATION ("Eskimo Pie"), a Delaware corporation, provides:
WHEREAS, Eskimo Pie maintains a defined benefit pension plan and trust in
the form of the Eskimo Pie Corporation Salaried Retirement Plan under agreement
dated December 29, 1992, as amended, (the "Plan"), which Plan permits
participation therein by other corporations with the approval of the Board; and
WHEREAS, the Adopting Employer is an affiliate of Eskimo Pie, is eligible
to adopt the Plan with the consent of the Board, and desires to evidence its
adoption of and participation in the Plan and the consent of the Board thereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
undertakings contained in the Plan, which are hereby incorporated herein by
reference:
1. Adoption of the Plan. The Adopting Employer does hereby evidence its
--------------------
adoption of the Plan as a participating employer for the benefit of its
employees who are or from time to time will be eligible under the provisions of
the Plan to participate therein, commencing with the Plan Year containing the
Effective Date of the Plan as to the Adopting Employer.
2. Agreement to Be Governed by the Plan. The Adopting Employer agrees
------------------------------------
that it shall be an "Employer" and a participating employer, as defined in the
Plan, commencing January 1, 1995, and as such it shall henceforth comply with
and be governed by the provisions of the Plan as they pertain to an Employer, as
now contained in the Plan or as hereafter altered or added by amendment to the
Plan.
3. Effective Date of Adoption as to the Adopting Employer. The Adopting
------------------------------------------------------
Employer agrees that this adoption of the Plan shall be effective for all
purposes of the Plan as of and from January 1, 1995; and that wherever in the
Plan the term "Effective Date of the Plan" is now used, it shall with respect to
the Adopting Employer mean January 1, 1995.
4. Updated Appendix C. An updated Appendix C to the Plan, listing the
------------------
Adopting Employer as a participating employer, is attached hereto and is hereby
made a part of the Plan.
IN WITNESS WHEREOF, the Adopting Employer has caused its name to be signed
and its seal affixed hereto by its duly authorized officers; and the consent
hereto by the Board is evidenced by the signature of its duly authorized
representative.
ESKIMO INC., Adopting Employer
By:___________________________________ (SEAL)
Its_________________________________
ATTEST:
______________________________
Its___________________________
The Board of Directors of ESKIMO PIE CORPORATION consents.
-C-2-
<PAGE>
____________________________________
Title:___________________________
-C-3-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Adoption Agreement
------------------
This ADOPTION AGREEMENT, executed the __ day of _______, 1995 by SUGAR CREEK
FOODS, INC., a Virginia corporation, (hereinafter referred to as the "Adopting
Employer") with the consent of the Board of Directors (the "Board") of ESKIMO
PIE CORPORATION ("Eskimo Pie"), a Delaware corporation, provides:
WHEREAS, Eskimo Pie maintains a defined benefit pension plan and trust in
the form of the Eskimo Pie Corporation Salaried Retirement Plan under agreement
dated December 29, 1992, as amended (the "Plan"), which Plan permits
participation therein by other corporations with the approval of the Board; and
WHEREAS, the Adopting Employer is an affiliate of Eskimo Pie, is eligible to
adopt the Plan with the consent of the Board, and desires to evidence its
adoption of and participation in the Plan and the consent of the Board thereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
undertakings contained in the Plan, which are hereby incorporated herein by
reference:
1. Adoption of the Plan. The Adopting Employer does hereby evidence its
--------------------
adoption of the Plan as a participating employer for the benefit of its
employees who are or from time to time will be eligible under the provisions of
the Plan to participate therein, commencing with the Plan Year containing the
Effective Date of the Plan as to the Adopting Employer.
2. Agreement to Be Governed by the Plan. The Adopting Employer agrees that
------------------------------------
it shall be an "Employer" and a participating employer, as defined in the Plan,
commencing January 1, 1996, and as such it shall henceforth comply with and be
governed by the provisions of the Plan as they pertain to an Employer, as now
contained in the Plan or as hereafter altered or added by amendment to the Plan.
3. Effective Date of Adoption as to the Adopting Employer. The Adopting
------------------------------------------------------
Employer agrees that this adoption of the Plan shall be effective for all
purposes of the Plan as of and from January 1, 1996; and that wherever in the
Plan the term "Effective Date of the Plan" is now used, it shall with respect to
the Adopting Employer mean January 1, 1996.
4. Pre-March 1, 1994 Service. Service with Sugar Creek Foods of
-------------------------
Russellville, Inc., which was the predecessor by asset acquisition on February
28, 1994 to the Adopting Employer, shall not be considered service for any
purpose of the Plan.
5. Pre-January 1, 1996 Benefit Accrual Service. Notwithstanding any other
-------------------------------------------
provision of the Plan, service with the Adopting Employer prior to the January
1, 1996 Effective Date of the Plan with respect to it shall not be considered
service for purposes of determining Years of Benefit Service under the Plan.
6. Pre-January 1, 1996 Compensation. Notwithstanding any other provision
--------------------------------
of the Plan, compensation from the Adopting Employer for periods prior to the
January 1, 1996 Effective Date of the Plan with respect to it shall not be
considered Compensation for purposes of determining Accrued Benefits under
subparagraph 4.1(a) of the Plan.
7. Exclusion of President and General Manager from Participation. The
-------------------------------------------------------------
President and the General Manager of the Adopting Employer shall be listed on
Appendix B of the Plan as being excluded from being considered Eligible
Employees and shall be excluded from participation in the Plan.
8. Updated Appendix C. An updated Appendix C to the Plan, listing the
------------------
Adopting Employer as a participating employer, is attached hereto and is hereby
made a part of the Plan.
-C-4-
<PAGE>
IN WITNESS WHEREOF, the Adopting Employer has caused its name to be signed
and its seal affixed hereto by its duly authorized officers; and the consent
hereto by the Board is evidenced by the signature of its duly authorized
representative.
SUGAR CREEK FOODS, INC.,
Adopting Employer
By:___________________________ (SEAL)
Its_________________________
ATTEST:
________________________
Its_____________________
The Board of Directors of ESKIMO PIE CORPORATION consents.
_________________________
Title: ________________
-C-5-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Appendix D
Actuarial Equivalents and Values
--------------------------------
D-1.1 General Factors and Definitions.
-------------------------------
D-1.1(a) Actuarial Equivalents and Values, and all actuarial calculations
regarding benefit equivalencies under the Plan (except as expressly otherwise
provided), shall be determined on the basis of:
(i) Interest at an assumed rate of eight and one-half percent
(8.5%), compounded annually, and
(ii) The 1984 Unisex Pension Mortality Table,
which factors are sometimes referred to herein as the "actuarial factors" or
separately as the "interest factor" or the "mortality factor", respectively.
D-1.1(b) For purposes hereof, the term "Applicable Interest Rate" means the
applicable interest rate or rates (deferred or immediate whichever is
appropriate) which would be used as of the first day of the Plan Year in which
the distribution occurs or commences by the Pension Benefit Guaranty Corporation
for purposes of determining the present value of the Participant's benefit under
the Plan pursuant to Part 2619 of 29 Code of Federal Regulations if the Plan had
terminated on the date distribution commences with insufficient assets to
provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that
date.
D-1.1(c) For purposes hereof, the term "Maximum Interest Rate" means:
(i) The Applicable Interest Rate if the Actuarial Value of the
benefit (using such rate or rates) is not in excess of $25,000; or
(ii) One hundred twenty percent (120%) of the Applicable Interest
Rate if the Actuarial Value of the benefit exceeds $25,000 (as determined
under clause (i)).
D-1.1(d) For purposes hereof, the term "GATT Interest Rate" means the
annual rate of interest on 30-year Treasury securities in effect as of the first
day of the Plan Year for which an Actuarial Equivalent or Value is determined,
as published by the Secretary of the Treasury for purposes of determining
present values pursuant to Section 417(e)(3)(A) of the Code, based on a look-
back month of the second calendar month preceding the Plan Year for which the
Actuarial Equivalent or Value is determined.
D-1.1(e) For purposes hereof, the term "GATT Mortality Table" means the
mortality table in effect as of the first day of the calendar month for which an
Actuarial Equivalent or Value is determined, as prescribed by the Secretary of
the Treasury for purposes of determining present values pursuant to Section
417(e)(3)(A) of the Code.
D-1.2 Development and Use of Tables. The Administrator is authorized to
-----------------------------
develop, and utilize on a uniform basis consistently applied, tables for
determinations of Actuarial Equivalents and Values. Any such table or tables
may include more than one age for a factor, shall round factors to the nearest
decimal, shall provide for linear proration based on either nearest or completed
months of age or any other reasonable determination of age, shall provide
factors based on either nearest or attained age or any other reasonable
determination of age, and may include such other interpolations and variables,
all as determined by the Administrator in its discretion. Any such table or
tables shall produce substantially consistent results applied in a non-
discriminatory manner.
D-1.3 Correction of Errors. In determining Actuarial Equivalents or
--------------------
Values for the purpose of correcting or recouping erroneous payments, the amount
to be paid or recouped may be determined on a uniform and non-discriminatory
-D-1-
<PAGE>
basis consistently applied either by application of the appropriate factors to
provide an amount as of the actual date of payment or recoupment or by
application of the appropriate factors to provide a value as of the date of the
erroneous underpayment or overpayment, to which shall be added interest at the
applicable rate to the date of payment or recoupment, as determined in the
discretion of and on a uniform and non-discriminatory basis by the fiduciary of
the Plan determining how the error should be corrected.
D-1.4 Special Actuarial Factors and Rules. Notwithstanding the provisions
-----------------------------------
of subparagraph 1.1(a) of this Appendix, the rules and factors set forth in this
paragraph shall be used to determine Actuarial Equivalents and Values under the
circumstances described herein.
D-1.4(a) In the case of the valuation of a benefit for purposes of
paragraph 4.6 of the Plan, in the case of the cash-out of a benefit in a lump
sum payment pursuant to paragraph 8.4 of the Plan and in the case of the
determination and payment of benefits on termination of the Plan (except to the
extent any otherwise applicable special actuarial adjustment factor hereunder is
considered an accrued benefit under Section 411(d)(6)(B) of the Code, in which
case the special actuarial factor otherwise applicable at such times shall apply
and, if directed by the Plan Sponsor, any special actuarial factor hereunder
otherwise available, but not then applicable at such time, shall apply), the
Actuarial Equivalent or Value shall be based on:
(i) For Plan Years beginning before January 1, 2000, the appropriate
mortality factor determined pursuant to subparagraph 1.1(a) of this Appendix
and the Maximum Interest Rate, or
(ii) For Plan Year beginning on or after January 1, 2000, the GATT
Mortality Table and the GATT Interest Rate.
D-1.4(b) In the case of the valuation or payment of an Accrued Benefit or a
Pre-Retirement Spouse's Death Benefit which is not covered by subparagraph
1.4(a) of this Appendix and which is paid in a form other than a Single Life
Annuity, a Joint and 50% (or more) Spouse Survivor Annuity, a Ten-Year Certain
and Life Annuity, or any non-decreasing annuity (determined without regard to
decreases on account of Social Security supplements or qualified disability
payments as defined in Section 411(a)(9) of the Code) payable for a period not
less than the life of the Participant or, in the case of a Pre-Retirement
Spouse's Death Benefit, the life of the Participant's Spouse, the Actuarial
Equivalent or Value adjustment shall not be less favorable to the recipient than
a factor based on:
(i) For Plan Years beginning before January 1, 2000, the appropriate
mortality factor determined pursuant to subparagraph 1.1(a) of this Appendix
and the Maximum Interest Rate, or
(ii) For Plan Years beginning on or after January 1, 2000, the GATT
Mortality Table and the GATT Interest Rate.
D-1.4(c) There shall be no actuarial increase in a Participant's Accrued
Benefit determined under subparagraph 4.1(a) of the Plan for the commencement or
re-commencement of the Participant's benefit after his Normal Retirement Date
except in the following instances:
(i) There shall be an appropriate actuarial increase in any required
Top Heavy Minimum Benefit under paragraph 4.3 of the Plan.
(ii) There shall be an appropriate actuarial increase in the case of
a Participant whose benefit payment is deferred while employed after his
Normal Retirement Date (as provided in subparagraph 8.7(b) of the Plan) for
each and any calendar month of such deferral for which he is not credited
with forty (40) or more Hours of Service for which he is directly or
indirectly paid or entitled to payment. For this purpose, the term "Hour of
Service" shall include each hour for which an Employee is paid by the
Employer, or entitled to payment, for the performance of duties for the
Employer or for periods during which no duties are required to be performed,
including each hour for which credit has not theretofore been given and for
which back pay, irrespective of mitigation of damages, has either been
awarded or agreed to by the Employer. Hours of Service shall be determined
for this purpose without regard to
-D-2-
<PAGE>
the 501 hour limit on any single continuous period of absence. Otherwise,
the hour of service calculation and crediting rules of (S) 2530.200b-2 of
the U.S. Department of Labor Regulations are incorporated herein by this
reference for this purpose.
(iii) If a Participant (other than a five percent (5%) owner of the
Employer (as defined for purposes of determining Key Employees) with respect
to the Plan Year ending in the calendar year in which the Participant
attains the age seventy and one-half (70-1/2)) retires in a calendar year
beginning on or after January 1, 1997 which is after the calendar year he
attains age 70-1/2, the Participant's Accrued Benefit shall be actuarially
increased based on the appropriate actuarial factors provided herein to take
into account the period after both January 1, 1997 and his attainment of the
age 70-1/2, if any, in which he was not receiving benefit payments under the
Plan.
In the event, an actuarial increase is required hereunder in connection with the
suspension, commencement or re-commencement of a Member's benefit after his
Normal Retirement Date, the Actuarial Equivalent adjustment or Value shall be
determined on the basis of an increase in the Member's Accrued Benefit of five-
twelfths of one percent (5/12%) for each month for which an adjustment is due
during the first fifteen (15) years after the Member's Normal Retirement Date
and thereafter shall be determined on the basis of the interest and mortality
factors in subparagraph 1.1(a) of this Appendix.
D-1.4(d) In the case of a benefit commencing in annuity form before a
Participant's Normal Retirement Date, the Actuarial Equivalent or Value thereof
shall be determined by reducing the benefit to which the Participant would be
entitled at his Normal Retirement Date by five-twelfths of one percent (5/12%)
for each month by which his Annuity Starting Date precedes his Normal Retirement
Date.
D-1.5 Application to Pre-Retirement Spouse's Death Benefit. The Pre-
----------------------------------------------------
Retirement Spouse's Death Benefit shall be calculated to the Spouse's Earliest
Commencement Date pursuant to paragraph 7.3 of the Plan as though the
Participant had commenced to receive his Accrued Benefit as an annuity prior to
his death. After the dollar amount of the Pre-Retirement Spouse's Death Benefit
is determined, any actuarial adjustment or determination shall be made by
applying the appropriate actuarial factors to the dollar amount of such Death
Benefit commencing at the Spouse's Earliest Commencement Date based on the form
of payment as hereinabove provided in the case of payment to a Participant.
-D-3-
<PAGE>
ESKIMO PIE CORPORATION
SALARIED RETIREMENT PLAN
Appendix E
(As of January 1, 1996)
List of Additional Excluded Positions
-------------------------------------
Description of Position Effective Date of Exclusion
- ----------------------- ---------------------------
President of Sugar Creek Foods, Inc. January 1, 1996
General Manager of Sugar Creek Foods, Inc. January 1, 1996
-E-1-
<PAGE>
ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN
Acknowledgment of Appointment of Trustee
----------------------------------------
Eskimo Pie Corporation, as the plan sponsor of the following named employee
benefit plan and related trust fund maintained for the benefit of its employees,
hereby evidences its appointment of the following person to serve as trustee
(sometimes referred to as the "Trustee") of the trust fund for the plan:
1. Name of Plan: Eskimo Pie Corporation Salaried Retirement Plan
------------
2. Name of Trust Fund: Eskimo Pie Corporation Salaried Retirement Trust
------------------
3. Name of Trustee Appointed: Thomas M. Mishoe, Jr.
-------------------------
4. Effective Date: This acknowledgment evidences the appointed person's
--------------
appointment effective as of July 31, 1996. The appointment shall
automatically terminate if and when the appointed person ceases to be
employed by the plan sponsor or any of its affiliates.
IN WITNESS WHEREOF, the plan sponsor of the plan, by its duly authorized
representative, has executed this instrument.
Dated: ________________ ESKIMO PIE CORPORATION
By_________________________________
David B. Kewer
Its President and Chief Executive
Officer
ATTEST:
______________________________
Its___________________________
By execution hereof, the above named person acknowledges his acceptance of
his appointment as trustee of the plan and the trust fund.
___________________________________
Thomas M. Mishoe, Jr.
<PAGE>
Exhibit 10.17
WORKING COPY OF
ESKIMO PIE CORPORATION
SAVINGS PLAN AND TRUST
(As Restated Effective January 1, 1997)
Including:
1. First Amendment
2. Second Amendment
3. Third Amendment
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
Definition of Terms
-------------------
1.1 Accrued Benefit................................................... 1
1.1(a) After-Tax Account................................................. 1
1.1(b) Matching Account or Matching Accounts............................. 2
1.1(c) Pre-Tax Account................................................... 2
1.1(d) Profit Sharing Account or Profit Sharing Accounts................. 2
1.1(e) QNEC Account...................................................... 3
1.1(f) Rollover Account.................................................. 3
1.2 Act............................................................... 3
1.3 Active Participant................................................ 3
1.4 Adjustment Factor................................................. 3
1.5 Administrator..................................................... 3
1.6 Affiliate......................................................... 3
1.7 Beneficiary....................................................... 4
1.8 Board............................................................. 4
1.9 Code.............................................................. 4
1.10 Company Stock..................................................... 4
1.11 Compensation...................................................... 4
1.12 Compensation Limit................................................ 4
1.13 Contract.......................................................... 5
1.14 Covered Participant............................................... 5
1.15 Custodian......................................................... 5
1.16 Date of Hire...................................................... 5
1.17 Effective Date.................................................... 5
1.18 Eligible Employee................................................. 6
1.19 Employee.......................................................... 6
1.20 Employer.......................................................... 6
1.21 Family Member..................................................... 7
1.22 Fund.............................................................. 7
1.23 Highly Compensated Employee....................................... 8
1.24 Hour of Service................................................... 10
1.25 Inactive Participant.............................................. 10
1.26 Insurer........................................................... 10
1.27 Investment Manager................................................ 10
1.28 Key Employee...................................................... 10
1.29 Leased Employee................................................... 11
1.30 Non-Highly Compensated Employee................................... 12
1.31 Non-Key Employee.................................................. 12
1.32 Normal Retirement Age............................................. 12
1.33 Participant....................................................... 12
1.34 Plan.............................................................. 12
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1.35 Plan Sponsor............................................................................. 12
1.36 Plan Year................................................................................ 12
1.37 Policy................................................................................... 12
1.38 QDRO..................................................................................... 12
1.39 Spouse................................................................................... 12
1.40 Statutory Compensation................................................................... 13
1.41 Super Top Heavy Plan..................................................................... 13
1.42 Top Heavy Plan........................................................................... 13
1.43 Total Compensation....................................................................... 13
1.44 Trustee.................................................................................. 14
1.45 Valuation Date........................................................................... 14
1.46 Year of Broken Service................................................................... 14
1.47 Year of Vesting Service.................................................................. 14
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility and Date of Participation as a Regular Participant........................... 14
2.2 Eligibility for Rollover Contributions as a Rollover Eligible Participant................ 15
2.3 Length of Participation.................................................................. 15
ARTICLE III
Funding
-------
3.1 Amount and Timing of Employer Contributions.............................................. 15
3.2 Special Rules for Employer's Share of and Form of Contribution........................... 17
3.3 Participant After-Tax and Pre-Tax Contributions.......................................... 18
3.4 Elective Deferral Dollar Limitation on Pre-Tax Contributions............................. 18
3.5 Participant Rollover Contributions....................................................... 19
3.6 Procedure for and Time of Making Participant Contributions............................... 19
3.7 Use of Forfeitures and Unallocated Annual Additions...................................... 20
3.8 No Duty of Trustee to Determine or Enforce Contributions................................. 20
ARTICLE IV
Participants' Accounts and Adjustments
--------------------------------------
4.1 Accounts................................................................................. 21
4.2 Allocation of Contributions.............................................................. 22
4.3 Dollar/25% Limitations on Annual Additions............................................... 22
4.4 Additional Limitations on Annual Additions Where Employer Maintains More Than One Plan... 23
4.5 Special Account for Unallocated Annual Additions......................................... 24
4.6 Valuation of Assets and Allocation of Valuation Adjustments.............................. 25
4.7 Determination of Account Balances........................................................ 27
4.8 Suspense Accounts........................................................................ 28
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4.9 Equitable Adjustment in Case of Error or Omission......................................... 29
4.10 Special Rules for Reemployed Veterans..................................................... 29
4.11 Limitation on and Distribution of After-Tax, Pre-Tax and Matching Contributions
Made by or on behalf of Highly Compensated Employees..................................... 31
ARTICLE V
Retirement Dates
----------------
5.1 Normal Retirement Date.................................................................... 31
5.2 Delayed Retirement Date................................................................... 31
5.3 Early Retirement Date..................................................................... 31
5.4 Disability Retirement Date................................................................ 31
ARTICLE VI
Vesting
-------
6.1 Vesting at Retirement or Attainment of Normal Retirement Age.............................. 32
6.2 Vesting at Death.......................................................................... 32
6.3 Vesting in Matching and Profit Sharing Active Accounts at Other Times..................... 32
6.4 Vesting in Accrued Benefit Other Than Matching and Profit Sharing Active Accounts......... 33
6.5 Vesting Service Rules..................................................................... 33
6.6 Forfeiture and Restoration of Matching and Profit Sharing Active Accounts................. 33
ARTICLE VII
Death Benefits
--------------
7.1 Death after Benefit Commencement Date..................................................... 34
7.2 Death before Benefit Commencement Date.................................................... 34
7.3 Beneficiary Designation................................................................... 34
7.4 Consent to Beneficiary Designation........................................................ 34
</TABLE>
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ARTICLE VIII
Payment of Benefits
-------------------
8.1 Time of Payment........................................................................... 35
8.2 Form of Payment When Participant Is the Initial Recipient................................. 38
8.3 Form of Payment When Beneficiary Is the Initial Recipient................................. 38
8.4 Payment Definitions and Rules............................................................. 38
8.5 Plan to Plan Direct Rollover as a Distribution Option..................................... 39
8.6 Notice, Election and Consent Procedures Regarding Accrued Benefit Payment................. 40
8.7 Benefit Determination and Payment Procedure............................................... 41
8.8 Claims Procedure.......................................................................... 41
8.9 Payments to Minors and Incompetents....................................................... 42
8.10 Distribution of Benefit When Distributee Cannot Be Located................................ 42
ARTICLE IX
Withdrawals and Loans
---------------------
9.1 In-Service Non-Hardship Withdrawals from
After-Tax Optional Account and/or Rollover Account....................................... 43
9.2 In-Service Non-Hardship Withdrawals from
Matching Optional Account and/or Profit Sharing Account.................................. 43
9.3 In-Service Non-Hardship Withdrawals from After-Tax Basic Account,
Pre-Tax Optional Account and/or QNEC Account............................................. 43
9.4 In-Service Hardship Withdrawals from After-Tax Basic Account,
Pre-Tax Account, Matching Account and/or Profit Sharing Account.......................... 43
9.5 Withdrawal Restrictions and Procedure..................................................... 45
9.6 Payment of Withdrawals.................................................................... 45
9.7 No Withdrawal Restoration................................................................. 46
9.8 Loans..................................................................................... 46
9.9 Instructions to Trustee................................................................... 49
ARTICLE X
The Fund
--------
10.1 Trust Fund and Exclusive Benefit.......................................................... 49
10.2 Plan and Fund Expenses.................................................................... 49
10.3 Reversions to the Employer................................................................ 50
10.4 No Interest Other Than Plan Benefit....................................................... 50
10.5 Payments from the Fund.................................................................... 50
10.6 Fund Divisions............................................................................ 50
10.7 Participant Investment Directions......................................................... 51
10.8 Investment Authority of the Administrator................................................. 52
10.9 Provisions Relating to Insurer............................................................ 53
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ARTICLE XI
Fiduciaries
-----------
11.1 Named Fiduciaries and Duties and Responsibilities......................................... 53
11.2 Limitation of Duties and Responsibilities of Named Fiduciaries............................ 54
11.3 Service by Named Fiduciaries in More Than One Capacity.................................... 54
11.4 Allocation or Delegation of Duties and Responsibilities by Named Fiduciaries.............. 54
11.5 Investment Manager........................................................................ 54
11.6 Assistance and Consultation............................................................... 54
11.7 Indemnification........................................................................... 54
11.8 Funding Policy............................................................................ 55
11.9 Standard of Conduct....................................................................... 55
ARTICLE XII
The Trust Fund
--------------
12.1 Trustee Powers and Duties................................................................. 55
12.2 Accounts.................................................................................. 58
12.3 Two or More Trustees...................................................................... 58
12.4 Management of Fund by Investment Manager.................................................. 58
12.5 Trustee Compensation and Expenses......................................................... 58
12.6 Bond...................................................................................... 58
12.7 Trustee Resignation, Removal or Death and Appointment of Successor or Additional Trustee.. 58
12.8 Establishment of Separate Trusts.......................................................... 59
12.9 Automatic Successor Trustee by Corporate Transaction...................................... 60
ARTICLE XIII
Plan Administration
-------------------
13.1 Appointment of Plan Administrator......................................................... 60
13.2 Plan Sponsor as Plan Administrator........................................................ 61
13.3 Compensation and Expenses................................................................. 61
13.4 Procedure if a Committee.................................................................. 61
13.5 Action by Majority Vote if a Committee.................................................... 61
13.6 Appointment of Successors................................................................. 61
13.7 Additional Duties and Responsibilities.................................................... 61
13.8 Power and Authority....................................................................... 62
13.9 Availability of Records................................................................... 62
13.10 No Action with Respect to Own Benefit..................................................... 62
13.11 Limitation on Powers and Authority........................................................ 62
ARTICLE XIV
Amendment and Termination of Plan
---------------------------------
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14.1 Amendment................................................................................. 62
14.2 Merger, Consolidation or Transfer of Assets............................................... 62
14.3 Plan Permanence and Termination........................................................... 63
14.4 Lapse in Contributions.................................................................... 63
14.5 Termination Events........................................................................ 63
14.6 Termination Allocations and Separate Accounts............................................. 64
14.7 Holding of Separate Accounts.............................................................. 65
14.8 Distribution of Separate Accounts after Termination....................................... 65
14.9 Effect of Employer Merger, Consolidation or Liquidation................................... 66
ARTICLE XV
Matters Relating to Company Stock
---------------------------------
15.1 Voting Directions......................................................................... 66
15.2 Acquisitions and Dispositions of Company Stock............................................ 67
15.3 Sales Prohibited if Registration or Qualification Required................................ 68
15.4 Limitation on Insiders' Interests in Company Stock........................................ 68
15.5 No Guarantee of Values.................................................................... 68
15.6 Legend Regarding Securities Laws Restriction on Sale or Transfer.......................... 68
15.7 Confidentiality of Participant Directions regarding and Holdings of Company Stock......... 68
ARTICLE XVI
Miscellaneous
-------------
16.1 Headings.................................................................................. 69
16.2 Gender and Number......................................................................... 69
16.3 Governing Law............................................................................. 69
16.4 Employment Rights......................................................................... 69
16.5 Conclusiveness of Employer Records........................................................ 69
16.6 Right to Require Information and Reliance Thereon......................................... 69
16.7 Alienation and Assignment................................................................. 70
16.8 Notices and Elections..................................................................... 70
16.9 Delegation of Authority................................................................... 70
16.10 Service of Process........................................................................ 70
16.11 Construction.............................................................................. 70
ARTICLE XVII
Adoption of the Plan
--------------------
17.1 Restated Adoption and Failure to Obtain Qualification..................................... 71
17.2 Adoption by Additional Employers......................................................... 71
</TABLE>
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<PAGE>
Appendices
----------
Appendix A - Determination of Hours of Service
Appendix B - Determination of Top Heavy Plan Status
Appendix C - List of Participating Employers
Appendix D - Rules Pertaining to Limitations on After-Tax, Pre-Tax and Matching
Contributions
Appendix E - List of Named Fund Divisions
-vii-
<PAGE>
THIS PLAN AND TRUST is executed as of the date noted below by ESKIMO PIE
CORPORATION, a Virginia corporation (the "Plan Sponsor"), for itself and for
other participating employers who may participate in the Plan as provided herein
(collectively or individually hereinafter called the "Employer"), FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, as Separate Trustee for all Fund divisions
other than the Company Stock Fund and as Custodian for the Company Stock Fund,
and THOMAS M. MISHOE, JR., as Separate Trustee for the Company Stock Fund;
WITNESSETH:
----------
THAT, WHEREAS, effective April 6, 1992, the Plan Sponsor adopted the Eskimo
Pie Corporation Savings Plan and a related trust for its employees, which Plan
and trust have been subsequently amended and restated; and
WHEREAS, effective January 1, 1995, Eskimo, Inc. and Sugar Creek Foods, Inc.
adopted the Plan; and
WHEREAS, the Plan Sponsor deems it desirable to further amend and restate
the Plan and related trust as hereinafter set forth (sometimes referred to as
this "Restatement of the Plan"); and
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree that the Plan, as it affects any
rights in respect to any person entitled to benefits under the Plan on or after
January 1, 1997, shall be amended and restated in its entirety as herein set
forth, provided, however, that any new provision of this Restatement of the Plan
shall have no force and effect if the Internal Revenue Service determines that
it causes the Plan to cease to meet the applicable qualification requirements of
a defined contribution plan under Section 401 of the Internal Revenue Code
unless the same is amended to so qualify:
(i) The Accrued Benefit (including any benefit considered as an
accrued benefit for purposes of Section 411(d)(6)(B) of the Code) of any
Participant (or the benefit payable to his Beneficiary) shall not be
decreased by virtue of this Restatement of the Plan.
(ii) The non-forfeitable percentage of the Accrued Benefit of any
Participant shall not be decreased by virtue of this Restatement of the
Plan.
(iii) The form of payment of benefits in pay status on December 31,
1995 shall not be affected by virtue of this Restatement of the Plan, except
as may be expressly provided herein in the case of re-employment or
continued employment.
ARTICLE I
Definition of Terms
-------------------
The following words and terms as used herein shall have the meaning set
forth below, unless a different meaning is clearly required by the context:
1.1 "Accrued Benefit": The sum of the balances of the following accounts
of a Participant under the Plan as of the most recent Valuation Date (or as
otherwise provided herein):
1.1(a) "After-Tax Account": The account of a Participant in the Fund
attributable to his After-Tax Contributions, consisting of his After-Tax Basic
Account and his After-Tax Optional Account as follows:
<PAGE>
(i) "After-Tax Basic Account": The Participant's account in the
Fund attributable to his After-Tax Basic Contributions to the Plan. This
account was last referred to as the "Mandatory Contributions Account" in the
Plan as in effect immediately prior to this Restatement of the Plan.
(ii) "After-Tax Optional Account": The Participant's account in the
Fund attributable to his After-Tax Optional Contributions to the Plan. This
account was last referred to as the "Employee Contributions Account" in the
Plan as in effect immediately prior to this Restatement of the Plan.
1.1(b) "Matching Account" or "Matching Accounts": The account or accounts
of a Participant in the Fund attributable to Matching and Supplemental
Contributions by the Employer, consisting of his Matching Active Account and his
Matching Non-forfeitable Account as follows:
(i) "Matching Active Account": The Participant's account in the
Fund attributable to allocations of Matching and Supplemental Contributions
by the Employer made with respect to his service since his most recent
forfeiture and loss of forfeiture restoration rights under the Plan or, if
he has incurred no forfeiture and loss of forfeiture restoration rights
under the Plan, since his commencement of participation in the Plan.
(ii) "Matching Non-forfeitable Account": In the case of a
Participant who has incurred a forfeiture and loss of forfeiture restoration
rights under the Plan, the vested portion of his Matching Active Account
transferred to this account and attributable to allocations of Matching and
Supplemental Contributions by the Employer and made with respect to his
service prior to such forfeiture and loss of forfeiture restoration rights.
Each Matching Active and Non-forfeitable Account shall be subdivided into two
accounts. One account shall be known as the "Company Stock Matching Account"
and consists of contributions made thereto for periods after February, 1997
allocated thereto pursuant to subparagraph 3.2(c) which are required to be
invested in the Company Stock Fund; and the other account shall be known as the
"Unrestricted Matching Account" and consists of contributions which are not
required to, but may, be invested in the Company Stock Fund. The Matching
Account was last referred to as the "Regular Matching Contributions Account" in
the Plan as in effect immediately prior to this Restatement of the Plan.
1.1(c) "Pre-Tax Account": The account of a Participant in the Fund
attributable to his Pre-Tax Contributions (whether Basic or Optional). This
account was last referred to as the "Deferral Contributions Account" in the Plan
as in effect immediately prior to this Restatement of the Plan.
1.1(d) "Profit Sharing Account" or "Profit Sharing Accounts": The account
or accounts of a Participant in the Fund attributable to Profit Sharing,
Supplemental and Top Heavy Contributions by the Employer, consisting of his
Profit Sharing Active Account and his Profit Sharing Non-forfeitable Account as
follows:
(i) "Profit Sharing Active Account": The Participant's account in
the Fund attributable to allocations of Profit Sharing, Supplemental and Top
Heavy Contributions by the Employer made with respect to his service since
his most recent forfeiture and loss of forfeiture restoration rights under
the Plan or, if he has incurred no such forfeiture and loss of forfeiture
restoration rights, since his commencement of participation in the Plan.
(ii) "Profit Sharing Non-forfeitable Account": In the case of a
Participant who has incurred a forfeiture and loss of forfeiture restoration
rights under the Plan, the vested portion of his Profit Sharing Active
Account transferred to this account and attributable to allocations of
Profit Sharing, Supplemental and Top Heavy Contributions by the Employer
made with respect to his service prior to such forfeiture and loss of
forfeiture restoration rights.
Each Profit Sharing Active and Non-forfeitable Account shall be subdivided into
two accounts. One account shall be known as the "Company Stock Profit Sharing
Account" and consists of contributions made thereto for periods after February,
1997 allocated thereto pursuant to subparagraph 3.2(c) which are required to be
invested in the Company Stock Fund; and the other
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account shall be known as the "Unrestricted Profit Sharing Account" and consists
of contributions which are not required to, but may, be invested in the Company
Stock Fund. This account was last referred to as the "Employer Contributions
Account" in the Plan as in effect immediately prior to this Restatement of the
Plan.
1.1(e) "QNEC Account": The account of a Participant in the Fund
attributable to QNEC Contributions by the Employer. The QNEC Account shall be
subdivided into two accounts. One account shall be known as the "Company Stock
QNEC Account" and consists of contributions made thereto for periods after
February, 1997 allocated thereto pursuant to subparagraph 3.2(c) which are
required to be invested in the Company Stock Fund; and the other account shall
be known as the "Unrestricted QNEC Account" and consists of contributions which
are not required to, but may, be invested in the Company Stock Fund. This
account was last referred to as the "Qualified Nonelective Contributions
Account" in the Plan as in effect immediately prior to this Restatement of the
Plan.
1.1(f) "Rollover Account": The account of a Participant in the Fund
attributable to his Rollover Contributions. This account was last referred to as
the "Rollover Contributions Account" in the Plan as in effect immediately prior
to this Restatement of the Plan.
1.2 "Act": The Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time, or the corresponding sections of any
subsequent legislation which replaces it, and, to the extent not inconsistent
therewith, the regulations issued thereunder.
1.3 "Active Participant": A Participant who is an Eligible Employee.
There are two classes of Active Participants - Regular Participants (described
in paragraph 2.1) who are eligible to make After-Tax, Pre-Tax and Rollover
Contributions and receive a share of any contributions by the Employer to the
Plan or forfeitures, and Rollover Eligible Participants (described in paragraph
2.2) who are only eligible to and have made one or more Rollover Contributions
to the Plan.
1.4 "Adjustment Factor": The cost of living adjustment factor prescribed
by the Secretary of the Treasury or his delegate under Section 415(d) of the
Code for years beginning after December 31, 1987, applied to such items and in
such manner as the Secretary of the Treasury or his delegate shall prescribe.
1.5 "Administrator": The Plan Administrator provided for in ARTICLE XIII
hereof.
1.6 "Affiliate": The Employer and each of the following business
entities or other organizations (whether or not incorporated) which during the
relevant period is treated (but only for the portion of the period so treated
and for the purpose and to the extent required to be so treated) together with
the Employer as a single employer pursuant to the following sections of the Code
(as modified where applicable by Section 415(h) of the Code):
(i) Any corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which includes the
Employer,
(ii) Any trade or business (whether or not incorporated) which is
under common control (as defined in Section 414(c) of the Code) with the
Employer,
(iii) Any organization (whether or not incorporated) which is a
member of an affiliated service group as defined in Section 414(m) of the
Code) which includes the Employer, and
(iv) Any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code.
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1.7 "Beneficiary": The person or persons designated by a Participant or
otherwise entitled pursuant to paragraph 7.3 to receive benefits under the Plan
attributable to such Participant after the death of such Participant.
1.8 "Board": The present and any succeeding Board of Directors of the
Plan Sponsor, unless such term is used with respect to a particular Employer and
its Employees, in which event it shall mean the present and any succeeding Board
of Directors of that Employer.
1.9 "Code": The Internal Revenue Code of 1986, as the same may be
amended from time to time, or the corresponding section of any subsequent
Internal Revenue Code, and, to the extent not inconsistent therewith,
regulations issued thereunder.
1.10 "Company Stock": The common stock of the Plan Sponsor.
1.11 "Compensation": An Employee's:
(i) Regular base salary for salaried employees,
(ii) Straight time earnings for all hours worked and paid non-work
hours, which shall include shift differential, vacation, sick, jury,
witness, bereavement and non-worked holiday pay, for hourly employees,
(iii) Guaranteed commissions for salespersons who are not
compensated strictly on a commissioned basis (i.e., who have a guaranteed
base), and
(iv) Ninety percent (90%) of commissions for salespersons who are
compensated strictly on a commissioned basis (i.e., who have no guaranteed
base),
payable to the Employee for services as an Eligible Employee and while a Regular
Participant, directly from the Employer (but not from any Affiliate which is not
a participating employer unless otherwise expressly provided) for a Plan Year,
including in any case employee elective salary reduction or similar
contributions under a cafeteria plan described in Section 125 of the Code and
employee elective salary reduction or similar contributions (such as Pre-Tax
Contributions) under a cash or deferred arrangement described in Section 401(k)
of the Code (to the extent not already included therein), and not including in
any case any contribution by the Employer to or benefits under this Plan or any
other employee benefit plan or trust in connection therewith, nor any amount
otherwise paid as compensation but finally determined not to be deductible as
compensation in determining the Employer's federal taxable income. Any such
compensation in excess of the Compensation Limit for a Plan Year shall be
disregarded.
1.12 "Compensation Limit":
1.12(a) $150,000 (as adjusted in $10,000 increments by the applicable
Adjustment Factor determined on the basis of a base period of the calendar
quarter beginning October 1, 1993).
1.12(b) For purposes of applying the Compensation Limit:
(i) The Compensation Limit applicable to each Plan Year (or other
applicable computation period) shall be the Compensation Limit in effect for
each such Plan Year (or other applicable computation period), determined
without increases in the Compensation Limit for subsequent periods.
(ii) If any Plan Year is a period of less than twelve (12) months,
then any dollar limitation referred to in this paragraph shall be prorated
by multiplying the otherwise applicable dollar limitation for such Plan Year
by a
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fraction, the numerator of which is the number of months in such Plan Year
and the denominator of which is twelve (12).
(iii) The Compensation Limit shall be applied on a plan by plan
basis, except that a group of plans which are treated as a single plan for
applicable non-discrimination purposes under Section 410(b) of the Code
shall share a single Compensation Limit.
1.13 "Contract": A group annuity contract, deposit administration
contract, immediate participation guarantee contract, or other investment-
oriented or funding contract or agreement issued by an Insurer to hold the
assets of the Plan.
1.14 "Covered Participant": With respect to a Plan Year, a Regular
Participant:
(i) Who is an Eligible Employee on the last day of such Plan Year,
or
(ii) Who died or retired under the Plan while an Eligible Employee
during such Plan Year.
1.15 "Custodian": Any custodian for any separate trust constituting part
of the Fund and established pursuant to paragraph 12.8. For periods prior to
March 31, 1997, none; for periods on or after March 31, 1997, First Union
National Bank of North Carolina, serving in the capacity as a Separate Trustee
(as provided in paragraph 12.8) First Union National Bank of North Carolina for
the Company Stock Fund, for so long as and to the extent serving; or any
successor or additional person(s) or entity(ies) appointed pursuant hereto as
Custodian of any separate trust constituting part of the Fund and currently
serving.
1.16 "Date of Hire": The date on which an Employee is first credited
with an Hour of Service, determined without regard to any cessation of
employment.
1.17 "Effective Date":
(i) The Effective Date of the Plan is April 6, 1992.
(ii) The Effective Date of this Restatement of the Plan is January
1, 1997, provided, however, that any provision which is contained in this
Restatement of the Plan (as the same may be amended) and which is required
to be effective before January 1, 1997 in order to retain the qualification
of the Plan under Section 401 of the Code shall nevertheless be effective as
of its required effective date under the Code.
(iii) With respect to any employer adopting the Plan as a
participating employer as of a date after the Effective Date of this
Restatement of the Plan, the Effective Date of the Plan as to such Employer
is the same as may be set forth in its adoption agreement or in the Plan.
The Administrator shall maintain as Appendix C to the Plan a list of the
Effective Dates of participation of all Employers participating in the Plan.
1.18 "Eligible Employee":
1.18(a) Any common law employee of the Employer other than:
(i) An employee who is a non-resident alien and who receives no
earned income (within the meaning of Section 911(d)(2) of the Code) from the
Employer which constitutes income from sources within the United States
(within the meaning of Section 861(a)(3) of the Code),
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(ii) An employee who is included in a unit of persons covered by a
collective bargaining agreement between representatives of such unit and the
Employer, unless such collective bargaining agreement provides for
participation in the Plan, or
(iii) An employee who is classified by the Employer under its
standard personnel policies and practices as a straight-time hourly paid
employee.
1.18(b) For purposes hereof, a "straight-time hourly paid employee"
generally is an employee whose pay is calculated on an hourly basis and who
normally is not compensated for time off due to holidays, vacation or illness.
1.18(c) In no event shall Leased Employees be considered as Eligible
Employees or be eligible to actively participate in the Plan.
1.19 "Employee": Any individual employed in the service of the Employer
as a common law employee, any sole proprietor or partner of a partnership
constituting an Affiliate, and any Leased Employee (but only for the purpose and
to the extent treated under Section 414(n) of the Code as an employee of the
Employer).
1.20 "Employer":
1.20(a) The Plan Sponsor and each other employer heretofore or hereafter
executing or adopting the Plan as a participating employer, collectively unless
the context otherwise indicates, for as long as it remains a participating
employer; and with respect to any Employee, any one or more of such Employers by
which he is at any time employed (unless or to the extent otherwise specified by
resolution of the Board or in a merger or acquisition agreement or plan approved
by the Board or in any applicable asset transfer, plan merger or consolidation
or adoption agreement). The Administrator shall maintain as Appendix C to the
Plan a list of all such Employers who are, from time to time, participating
employers in the Plan.
1.20(b) For purposes of determining:
(i) Service for all purposes of the Plan (other than for purposes
of determining non-Top Heavy Plan benefit accrual, Eligible Employees,
Covered Participants and Years of Benefit Service unless otherwise
specifically provided) and commencement of service and termination of
employment with the Employer,
(ii) Employees, Family Members, Highly Compensated Employees, Key
Employees, and Leased Employees,
(iii) Top Heavy Plan status, contributions and benefits,
(iv) Statutory Compensation and Total Compensation,
(v) Any limitations of contributions and forfeitures or on loans
hereunder, and
(vi) Maintenance of or participation in other qualified plans under
Section 401(a) of the Code, tax sheltered annuities under Section 403(b) of
the Code, simplified employee pensions under Section 408(k) of the Code, and
any other plan required or, as applicable, permitted to be aggregated with
this Plan for purposes of the Code,
the term "Employer" shall include each Affiliate which during any year
commencing after December 31, 1975 is treated as an Affiliate and each
predecessor employer which maintained this Plan (but not beyond the time it
ceased to maintain the Plan) within the meaning of Section 414(a) of the Code,
but only for the portion of any such year or years so treated and for the
purpose and to the extent required to be so treated.
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<PAGE>
1.20(c) For purposes of determining compensation and service with any
business entity, or predecessor thereto, which is merged into an Employer, or a
predecessor thereto, or all or substantially all the assets or the operating
assets acquired by an Employer, or predecessor thereto, compensation from and
service with such business entity and predecessor thereto shall be treated as
compensation from and service with an Employer to the extent provided by
resolution of the Board or in any corporation or plan merger, consolidation or
asset transfer agreement or any adoption agreement approved by the Board.
1.20(d) For purposes of determining service and compensation under the
Plan, service with and compensation from Reynolds Metals Company, a Delaware
corporation, and any of its "affiliates" (determined on the same basis as
Affiliates are determined, but substituting Reynolds Metals Company for the Plan
Sponsor) which was rendered or payable for service before April 6, 1992 shall be
considered as service with the Employer for all purposes of the Plan.
1.20(e) Notwithstanding anything to the contrary in the forgoing, service
prior to March 1, 1994 with Sugar Creek Foods of Russellville, Inc. (which is
the predecessor to Sugar Creek Foods, Inc.) shall not be considered service with
an Employer or Affiliate for purposes of the Plan
1.21 "Family Member":
1.21(a) With respect to a Plan Year, an individual (whether or not himself
a Highly Compensated Employee) who is considered a family member described in
Section 414(q)(6)(A) of the Code with respect to an Employer; and, to the extent
not inconsistent therewith, an individual who is a member of the family
(consisting, with respect to an Employee, of such Employee's spouse and lineal
ascendants and descendants and the spouses of lineal ascendants and descendants)
on any day of the Determination Year or Look-Back Year with respect to such Plan
Year of a Highly Compensated Employee who is either (i) a more than five percent
(5%) owner of the Employer or (ii) in the group consisting of the ten (10)
Highly Compensated Employees with the greatest Statutory Compensation for the
relevant Determination Year or Look-Back Year.
1.21(b) For purposes hereof, the terms "Determination Year", "Look-Back
Year", and "more than five percent (5%) owner of the Employer" have the same
meaning provided herein for purposes of determining Highly Compensated
Employees.
1.22 "Fund": The trust fund, including any separate trusts, created
under and subject to the Plan. The Fund shall be held in divisions (sometimes
referred to as "divisions of the Fund", "Fund divisions" or "investments funds"
herein) as described in paragraph 10.6 and Appendix E to the Plan.
1.23 "Highly Compensated Employee":
1.23(a) For Plan Years beginning on or after January 1, 1997, an individual
who is considered a "highly compensated employee" with respect to the Employer
within the meaning of Section 414(q) of the Code; and, to the extent not
inconsistent therewith, any Employee who is considered a Highly Compensated
Active Employee or a Highly Compensated Former Employee for the Determination
Year ending with or within such Plan Year, defined as follows:
(i) The term "Highly Compensated Active Employee" means, with respect
to a Determination Year, an Employee who is an Active Employee during the
Determination Year and who either:
(A) Was at any time a more than five percent (5%) owner of the
Employer (as defined for purposes of determining Key Employees) for
the Determination Year or the Look-Back Year, or
(B) Received Statutory Compensation in excess of $80,000 (as
adjusted by the Adjustment Factor, but with the base period being the
calendar quarter ending September 30, 1996) and, at the election of
the Plan Sponsor or the Administrator in accordance with Section
414(q) of the Code, was a member of the twenty percent (20%) top-paid
group of Employees for the Look-Back Year.
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(ii) The term "Highly Compensated Former Employee" means:
(A) With respect to a Determination Year, a Former Employee
who has had a Separation Year prior to the Determination Year and
who was a Highly Compensated Active Employee for either such
Separation Year or any Determination Year ending on or after his
attainment of the age of fifty-five (55).
(B) Notwithstanding the foregoing, an Employee shall not be
treated as a Highly Compensated Former Employee by reason of having
a Deemed Separation Year after such Employee actually separates
from service with the Employer if, after such Deemed Separation
Year and before his Actual Separation Year, his services for the
Employer and Statutory Compensation for a Determination Year
increase significantly so that the Employee is treated as having a
Deemed Resumption of Employment.
1.23(b) For purposes hereof:
(i) The term "Active Employee" means, with respect to a
Determination Year, a current Employee who performs services for the
Employer as an Employee at any time during the Determination Year.
(ii) The term "Deemed Resumption of Employment" means an increase
in both services performed for the Employer as an Employee and Statutory
Compensation, based on the facts and circumstances, and at a minimum shall
include an increase in Statutory Compensation to the extent that such
increased Statutory Compensation would not result in a Deemed Separation
Year.
(iii) The term "Determination Year" means the Plan Year.
(iv) The term "Former Employee" means, with respect to a
Determination Year, a current or former Employee who performs no services
for the Employer as an Employee during the Determination Year.
(v) The term "Look-Back Year" means, with respect to a
Determination Year, the immediately preceding year to the Determination Year
in question, provided, however, that if the Determination Year is the
calendar year and the Administrator elects in accordance with Section 414(q)
of the Code to determine the status of individuals as Highly Compensated
Employees on the basis of a Look-Back Year and Determination Year which are
the same year, then the Look-Back Year shall be the Determination Year.
(vi) The term "Separation Year" means:
(A) An "Actual Separation Year" which is a Determination Year
in which a Former Employee last performed services for the Employer
as an Employee prior to becoming a Highly Compensated Former
Employee; or
(B) A "Deemed Separation Year" which is a Determination Year
prior to the Employee's attainment of the age of fifty-five (55) in
which he is an Active Employee and in which his Statutory
Compensation is less than fifty percent (50%) of his average annual
Statutory Compensation for the three (3) consecutive calendar years
preceding the Determination Year during which his Statutory
Compensation was the highest (or the total period of the Employee's
service with the Employer if less). A Deemed Separation Year is
relevant for purposes of determining whether an Employee is a
Highly Compensated Former Employee after he has an Actual
Separation Year, but is not relevant for purposes of identifying
him as an Active or Former Employee.
1.23(c) For purposes hereof:
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(i) The Adjustment Factor for a Determination Year or a Look-Back
Year shall be applied on the basis of the calendar year in which such
Determination Year or Look-Back Year begins.
(ii) The Administrator may adopt any rounding or tie-breaking rules
it desires in making relevant determinations so long as such rules are
reasonable, non-discriminatory and uniformly and consistently applied.
(iii) An Employee is a member of the twenty percent (20%) top-paid
group for a year if he is one of the top twenty percent (20%) of Active
Employees for the year when ranked on the basis of descending Statutory
Compensation for such year (whether or not the Employee in question is
excluded in determining the number of Employees in the twenty percent (20%)
top-paid group). For this purpose, if bargaining unit Employees are not
taken into account in determining the number of Employees in the twenty
percent (20%) top-paid group pursuant to clause (iv)(E) of this
subparagraph, they also shall not be taken into account in determining other
Employees who are in twenty percent (20%) top-paid group.
(iv) For purposes of determining the number of persons in the
twenty percent (20%) top-paid group and the number of persons who may be
considered officers for a year, the following rules shall apply:
(A) The number of Employees who are in the twenty percent
(20%) top-paid group for a year is twenty percent (20%), rounded to
the nearest integer, of the total number of Active Employees who
are not excluded Employees for such year.
(B) The number of Employees equal to ten percent (10%) of
total Employees for a year is ten percent (10%), rounded to the
nearest integer, of the total number of Active Employees who are
not excluded Employees for such year.
(C) All Former Employees for the year are excluded.
(D) Employees who are non-resident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) of the Code)
from the Employer that constitutes income from sources within the
United States for the year are excluded.
(E) Employees who are in a unit of employees covered by a
collective bargaining agreement between the Employer and employee
representatives for the year are excluded if and only if ninety
percent (90%) or more of the total Employees for the year are
covered by a collective bargaining agreement with the Employer and
the Active Participants in the Plan do not include any such
bargaining unit Employees.
(F) Employees shall not be excluded on the basis of age or
length of prior service.
(v) If any Plan Year is a period of less than twelve (12) months,
then any dollar amount referred to in this paragraph shall be prorated by
multiplying the otherwise applicable dollar amount for such Plan Year by a
fraction, the numerator of which is the number of months in such Plan Year
and the denominator of which is twelve (12).
1.24 "Hour of Service":
(i) Each hour for which an Employee is paid by the Employer, or
entitled to payment, for the performance of duties for the Employer or for
periods during which no duties are required to be performed, including each
hour for which credit has not theretofore been given and for which back pay,
irrespective of mitigation of damages, has either been awarded or agreed to
by the Employer, and
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(ii) Solely for purposes of determining Years of Broken Service,
each hour of absence from work for which credit is expressly given under the
Plan,
all as more specifically provided in Appendix A.
1.25 "Inactive Participant": A Participant who is not an Eligible
Employee.
1.26 "Insurer": Any insurance company which issues a Contract to hold
assets of the Plan or a Policy to provide for payment of benefits under the
Plan.
1.27 "Investment Manager": A fiduciary of the Plan appointed to manage
all or part of the assets of the Fund and serving pursuant to ARTICLE XI and
qualifying as an "investment manager" within the meaning of Section 3(38) of the
Act.
1.28 "Key Employee":
1.28(a) With respect to a Plan Year, any Employee or former Employee (or
his Beneficiary if he is deceased) considered to be a "key employee" with
respect to the Employer at the time in question within the meaning of Section
416(i)(1) of the Code; and to the extent not inconsistent therewith, any
Employee or former Employee (or his Beneficiary if he is deceased) who at any
time during such Plan Year, or any of the preceding four (4) Plan Years, is
either:
(i) One of the fifty (50) (or if less, the greater of three (3) or
ten percent (10%) of total Employees, as determined for purposes of
determining Highly Compensated Employees) officers of the Employer having
the largest annual Statutory Compensation during any such Plan Year and
having Statutory Compensation in excess of $45,000 (or fifty percent (50%)
of any other amount, as adjusted by the Adjustment Factor, in effect for the
relevant Plan Year under Section 415(b)(1)(A) of the Code);
(ii) One of the ten (10) Employees having Statutory Compensation in
excess of $30,000 (or any other amount, as adjusted by the Adjustment
Factor, in effect for the relevant Plan Year under Section 415(c)(1)(A) of
the Code) and owning more than a one-half percent (.5%) interest in the
Employer, who owns the largest interests in the Employer, provided that if
two such Employees have the same interest in the Employer, the Employee
having the greater Statutory Compensation shall be treated as having a
larger interest;
(iii) A more than five percent (5%) owner of the Employer; or
(iv) A more than one percent (1%) owner of the Employer having an
annual Statutory Compensation of more than $150,000.
1.28(b) In determining ownership in the Employer for purposes hereof the
constructive ownership rules of Section 318 of the Code (as modified by Section
416(i)(1)(B)(iii) of the Code) shall apply, and the rules of Sections 414(b),
(c), (m) and (o) of the Code shall not apply.
1.29 "Leased Employee":
1.29(a) An individual who is considered a leased employee of the Employer
within the meaning of Section 414(n)(2) of the Code and, to the extent not
inconsistent therewith, any person:
(i) Who, pursuant to an agreement between the recipient Employer
and any other person (the "leasing organization"), has performed services
for the recipient Employer or for the recipient Employer and related persons
(determined in accordance with Section 414(n)(6) of the Code),
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(ii) Whose services are performed on a substantially full-time
basis for a period of at least one year, and
(iii) For years beginning before January 1, 1997, whose services are
of a type historically performed by employees in the business field of the
recipient Employer; and for years beginning after December 31, 1996, whose
services are performed under the primary control or direction of the
recipient Employer.
1.29(b) Notwithstanding the foregoing, if such leased employees constitute
less than twenty percent (20%) of the Employer's non-highly compensated work
force within the meaning of Section 414(n)(1)(C)(ii) of the Code, individuals
otherwise considered to be Leased Employees shall not include those leased
employees covered by a plan described in Section 414(n)(5) of the Code (unless
otherwise provided by the terms of the Plan) and, to the extent not inconsistent
therewith, which:
(i) Is maintained by the leasing organization,
(ii) Is a money purchase pension plan with a non-integrated
employer contribution rate of at least seven and one-half percent (7-1/2%)
of compensation in the case of services performed before January 1, 1987 or
ten percent (10%) of compensation in the case of services performed after
December 31, 1986,
(iii) Provides full and immediate vesting, and
(iv) Provides for immediate participation by each employee of the
leasing organization (other than employees who perform substantially all
their services for the leasing organization or whose compensation from the
leasing organization in each of the four (4) Plan Years ending with the Plan
Year in question is less than $1,000).
For purposes hereof, "compensation" means compensation as defined in Section
415(c)(3) of the Code, but determined without regard to Sections 125, 402(e)(3)
and 402(h)(1)(B) of the Code and without regard to employer contributions made
pursuant to salary reduction agreements under Section 403(b) of the Code for
Plan Years beginning before January 1, 1998.
1.30 "Non-Highly Compensated Employee": Any Employee who is not a Highly
Compensated Employee.
1.31 "Non-Key Employee": Any Employee (including the Beneficiary of such
Employee) who is not a Key Employee.
1.32 "Normal Retirement Age": The age of sixty-five (65) years.
1.33 "Participant": An Eligible Employee or other person qualified to
participate in the Plan for so long as he is considered a Participant as
provided in ARTICLE II hereof. There are two classes of Participants - Active
Participant and Inactive Participants.
1.34 "Plan": This Plan and Trust Agreement, including the Appendices
hereto, as contained herein or duly amended. The Plan maintained pursuant
hereto shall be known as the "Eskimo Pie Corporation Savings Plan".
1.35 "Plan Sponsor": Eskimo Pie Corporation, a Virginia corporation (or
its corporate successor).
1.36 "Plan Year": The year commencing upon the first day of January of
each year
1.37 "Policy": A group or individual policy, contract or other agreement
(including a certificate) issued by an Insurer which is not a Contract and which
is obtained to provide for the accumulation and/or payment of benefits under the
Plan.
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1.38 "QDRO": A qualified domestic relations order within the meaning of
Section 206(d)(3) of the Act and Section 414(p) of the Code and as determined by
the Administrator pursuant to the Plan.
1.39 "Spouse":
1.39(a) For the purpose of entitlement to receive death benefits as a
Spouse under subparagraph 7.3(a) of the Plan and consenting to a Beneficiary
designation as a Spouse under subparagraph 7.3(a) and paragraph 7.4 of the Plan,
the individual to whom the Participant was married throughout the one year
period ending on the date of his death.
1.39(b) The determination of the marital status of a Participant shall be
made pursuant to applicable local law; provided, however, that a Participant's
former spouse shall continue to be considered married to the Participant, and a
Participant's current spouse shall be considered not married to the Participant,
to the extent provided under a QDRO.
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1.40 "Statutory Compensation":
1.40(a) For Plan Years beginning before January 1, 1998, an Employee's
Total Compensation plus employee elective salary reduction or similar
contributions excluded from Total Compensation by reason of Sections 125,
402(e)(3), 402(h), 403(b), 414(h)(2) and 457(b) of the Code. Statutory
Compensation for a Plan Year (or other applicable computation period) shall be
limited by the Compensation Limit for all purposes other than determining Family
Members, Highly Compensated Employees and Key Employees.
1.40(b) For Plan Years beginning on or after January 1, 1998, an Employee's
Total Compensation. Statutory Compensation for a Plan Year (or other applicable
computation period) shall be limited by the Compensation Limit for all purposes
other than determining Highly Compensated Employees and Key Employees.
1.41 "Super Top Heavy Plan": The Plan, if it would still be considered a
Top Heavy Plan if ninety percent (90%) were substituted for sixty percent (60%)
in each place it appears in the definition of a Top Heavy Plan.
1.42 "Top Heavy Plan": The Plan, for any Plan Year beginning after
December 31, 1983, if the sum of the present values of the cumulative Accrued
Benefits of Key Employees under the Plan, and the present values of the
cumulative accrued benefits of Key Employees under all plans aggregated with it,
exceeds sixty percent (60%) of the aggregate of the present value of the
cumulative Accrued Benefits under this Plan and accrued benefits under such
plan(s) at the applicable determination date. For purposes hereof, aggregation,
accrued benefits (including Accrued Benefits) taken into account, the
determination date and all other standards and criteria for determining top-
heaviness under this Plan and such other plan(s) shall be determined under
Section 416 of the Code. Subject to the foregoing, more specific rules for
determining whether the Plan is a Top Heavy Plan are provided in Appendix B.
1.43 "Total Compensation":
1.43(a) For Plan Years (or Limitation Years, as applicable) beginning
before January 1, 1998, the total compensation from the Employer received by or
made available to an Employee during any Plan Year or, for purposes of the
limitations imposed by Section 415 of the Code, any Limitation Year (as defined
in paragraph 4.3):
(i) Including, but not limited to, wages, salary, earned income
(in the case of self-employed individuals), vacation pay, sick pay, overtime
pay, bonuses and commissions, and as reportable to the Internal Revenue
Service on Form W-2 (or its successor), where applicable, for federal income
tax purposes, but
(ii) Excluding paid or reimbursed expenses, contributions or
benefits under a simplified employee pension plan, contributions (to the
extent not includible in the Employee's gross income when contributed) or
benefits under this or any other plan of deferred compensation (other than
an unfunded, non-qualified plan), contributions or benefits under any other
employee benefit plan or arrangement (to the extent excludible from or not
includible in gross income), now, heretofore or hereafter adopted, amounts
paid or received or deemed received in connection with stock options or
rights, other amounts which receive special tax benefits, or any amount
otherwise paid as compensation but finally determined not to be deductible
as compensation in determining the Employer's federal taxable income.
1.43(b) For Plan Years (or Limitation Years, as applicable) beginning on or
after January 1, 1998, the total compensation from the Employer received by or
made available to an Employee during any Plan Year or, for purposes of the
limitations imposed by Section 415 of the Code, any Limitation Year (as defined
in paragraph 4.3):
(i) Including, but not limited to, wages, salary, earned income
(in the case of self-employed individuals), vacation pay, sick pay, overtime
pay, bonuses and commissions, and as reportable to the Internal Revenue
Service on Form W-2 (or its successor), where applicable, for federal income
tax purposes, but
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<PAGE>
(ii) Including employee elective salary reduction or similar
deferral contributions excluded from W-2 compensation by reason of Section
125, 402(g)(3) or 457(b) of the Code (and elective deferrals or
contributions under any other sections of the Code covered by Section
415(c)(3)(D) of the Code), and
(iii) Excluding, except as otherwise expressly included by clause
(ii) above, paid or reimbursed expenses, contributions or benefits under a
simplified employee pension plan, contributions (to the extent not
includible in the Employee's gross income when contributed) or benefits
under this or any other plan of deferred compensation (other than an
unfunded, non-qualified plan), contributions or benefits under any other
employee benefit plan or arrangement (to the extent excludible from or not
includible in gross income), now, heretofore or hereafter adopted, amounts
paid or received or deemed received in connection with stock options or
rights, other amounts which receive special tax benefits, or any amount
otherwise paid as compensation but finally determined not to be deductible
as compensation in determining the Employer's federal taxable income.
1.44 "Trustee": For periods prior to March 31, 1997, First Union
National Bank of North Carolina, serving in the capacity as sole Trustee; for
periods on or after March 31, 1997, First Union National Bank of North Carolina,
serving in the capacity as a Separate Trustee (as provided in paragraph 12.8)
for all Fund divisions other than the Company Stock Fund, and Thomas M. Mishoe,
Jr., serving in the capacity as a Separate Trustee (as provided in paragraph
12.8) for the Company Stock Fund, for so long as and to the extent each is
serving under such Trustee; or any other Trustee, Separate Trustees (as provided
in paragraph 12.8), any Co-Trustee (as provided in subparagraph 15.1(e)), or any
successor or additional person(s) or entity(ies) appointed pursuant hereto as
trustee of the Fund and currently serving. Any reference to a Trustee herein is
intended to be a reference to any sole Trustee, any separate Trustee or any Co-
Trustee then serving unless the context indicates otherwise.
1.45 "Valuation Date": Each business day (based on the days the
underlying investment funds are valued and transactions are effectuated in the
applicable financial markets) of the Plan Year, or such other dates (which must
be at least annually) as the Administrator may designate from time to time.
1.46 "Year of Broken Service": A Plan Year (which is the computation
period), commencing with or after the date an individual becomes an Employee,
during which such Employee is not credited with more than five hundred (500)
Hours of Service.
1.47 "Year of Vesting Service": A Plan Year (which is the computation
period), commencing with or after the date an individual becomes an Employee,
during which such Employee is credited with at least one thousand (1,000) Hours
of Service.
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility and Date of Participation as a Regular Participant.
--------------------------------------------------------------
2.1(a) Each individual who has met the age and service requirements for
participation in the Plan and has become a Participant in the Plan entitled to
make After-tax and Pre-Tax Contributions and receive a share of any
contributions by the Employer (that is, he is a Regular Participant) on the day
before the Effective Date of this Restatement of the Plan shall continue to be a
Regular Participant in the Plan at the Effective Date of this Restatement of the
Plan.
2.1(b) Each other Eligible Employee who is not a Regular Participant at the
Effective Date of this Restatement of the Plan shall become a Regular
Participant on the earlier of the following dates:
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(i) The first day of the first calendar month (A) which occurs both
twelve (12) months after his Date of Hire and by which he has attained the
age of twenty one (21) years and (B) on which he is an Eligible Employee, or
(ii) If he is not an Eligible Employee on the date referred to in
clause (i) above, on the first day he becomes an Eligible Employee
thereafter.
2.1(c) An individual who was, but ceased to be, a Regular Participant shall
again be a Regular Participant if and when he again becomes an Eligible
Employee.
2.1(d) An individual who becomes a Regular Participant shall be or remain a
Regular Participant for so long as he remains an Eligible Employee.
2.2 Eligibility for Rollover Contributions as a Rollover Eligible
-------------------------------------------------------------
Participant. Notwithstanding the foregoing, an Employee who is not a Regular
- -----------
Participant shall be eligible to become a Rollover Eligible Participant whenever
he is an Eligible Employee. An Eligible Employee who is not a Regular
Participant may become a Rollover Eligible Participant by making a Rollover
Contribution to the Plan. A Rollover Eligible Participant shall not be eligible
to make After-Tax or Pre-Tax Contributions or receive a share of any
contributions by the Employer or forfeitures unless and until he becomes a
Regular Participant pursuant to paragraph 2.1 A Participant shall cease to be a
Rollover Eligible Participant when he becomes a Regular Participant.
2.3 Length of Participation. An individual who becomes a Participant
-----------------------
shall be or remain a Participant for so long as he remains an Eligible Employee
and thereafter while he is entitled to future benefits under the terms of the
Plan.
ARTICLE III
Funding
-------
3.1 Amount and Timing of Employer Contributions.
-------------------------------------------
3.1(a) With respect to each Allocation Period of a Plan Year, each Employer
shall make a Matching Contribution to the Fund on behalf of each Regular
Participant who has made After-Tax and/or Pre-Tax Contributions to the Plan at
any time during such Allocation Period in the amount equal to fifty-percent
(50%) of the lesser of (i) the Regular Participant's aggregate After-Tax and
Pre-Tax Contributions for such Allocation Period or (ii) six percent (6%) of his
Compensation for such Allocation Period. The "Allocation Period" is each
calendar month.
3.1(b) With respect to each Plan Year, each Employer's Profit Sharing
Contribution to the Fund shall be such amount, if any, as the Plan Sponsor may
determine.
3.1(c) With respect to each Plan Year, each Employer's QNEC Contribution to
the Fund shall be such amount, if any, as the Plan Sponsor may determine. QNEC
Contributions are intended to be non-elective contributions within the meaning
of Section 401(m)(4)(C) of the Code (that is, employer contributions (other than
matching contributions) which an Employee may not elect to have paid to him
instead of being contributed to the Plan, which are subject to the restrictions
on distributions contained in Section 401(k)(2)(B) of the Code (generally
prohibiting distribution before separation from service, death, or disability
unless, if the Plan permits such payment, the Employee has a hardship or has
reached age fifty-nine and one-half (59-1/2) or after plan termination), and
which are immediately fully vested and non-forfeitable.
3.1(d) For any Plan Year for which the Plan is a Top Heavy Plan, the Plan
Sponsor shall cause a Top Heavy Contribution by the Employer to be made on
behalf of each Non-Key Employee who is a Regular Participant for such Plan Year,
who is an Eligible Employee on the last day of such Plan Year and who is not
covered by a collective bargaining agreement under which retirement benefits
were the subject of good faith bargaining with the Employer so that the total
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allocation of contributions by the Employer (other than Supplemental
Contributions to the Plan and similar contributions to other plans) and
forfeitures for each such Non-Key Employee is at least equal to the lesser of:
(i) Three percent (3%) of his Top Heavy Compensation for such Plan
Year, or
(ii) Such lesser percentage of his Top Heavy Compensation for such
Plan Year which is equal to the percentage of Top Heavy Compensation of the
Key Employee for such Plan Year for whom an allocation of contributions by
the Employer (other than Supplemental Contributions to this Plan and similar
contributions to other plans) and forfeitures under this Plan and any other
qualified defined contribution plan or simplified employee pension plan
maintained by the Employer is made which is the highest such percentage for
such Plan Year (calculated by aggregating all such contributions and
forfeitures); provided, however, that this clause (ii) shall not apply if
this Plan enables a defined benefit plan to meet the requirements of Section
401(a)(4) or 410 of the Code.
For purposes hereof, contributions considered made by the Employer which are
attributable to a salary reduction or similar arrangement (such as Pre-Tax
Contributions) and matching contributions within the meaning of Section 401(m)
of the Code (such as Matching Contributions) shall only be taken into account
for purposes of determining the highest percentage of any Key Employee pursuant
to clause (ii) of this subparagraph. For purposes hereof, "Top Heavy
Compensation" means a Regular Participant's Total Compensation, not in excess of
the Compensation Limit, for a Plan Year.
3.1(e) With respect to each Plan Year, the Employer shall make a
Supplemental Contribution to the Fund on behalf of Participants in such amount
as may be required pursuant to paragraph 6.6.
3.1(f) In no event shall the sum of the Matching, QNEC, Profit Sharing and
Top Heavy Contributions made by the Employer and the Pre-Tax Contributions
considered made by the Employer for purposes of Section 404 of the Code for any
taxable year of the Employer exceed the maximum amount deductible from the
Employer's income for such taxable year under the Code, including the maximum
amount deductible under the "carry over" provisions relating to contributions in
previous years of more or less than the maximum amount permissible and any
amount deductible as a contribution on behalf of an Affiliate, in which latter
case any such contribution shall be deemed, for purposes of this Plan, to have
been made by such Affiliate. Each contribution by the Employer shall be
conditioned on its deductibility. If a reduction is thereby required, the
excess amount shall be reduced in the following manner:
(i) First, to the extent directed by the Plan Sponsor by the date,
including extensions thereof, on which its federal income tax return is due
to be filed for such taxable year, the Pre-Tax Contributions for such
taxable year of the Eligible Participants (as defined in Appendix D to the
Plan) who are Highly Compensated Employees for such taxable year shall first
be refunded to such Eligible Participant and shall be considered as gross
income to the Participant. Among such Participants, the reduction shall be
effected by reducing contributions in order of the highest Deferral
Percentages (as defined in Appendix D to the Plan),
(ii) Then, the Profit Sharing Contribution for such taxable year
shall be reduced,
(iii) Then, the QNEC Contribution for such taxable year shall be
reduced,
(iv) Then, the Matching Contribution for such taxable year shall be
reduced,
(v) Then, the Top Heavy Contribution for such taxable year shall
be reduced, and
(vi) Then the Supplemental Contributions for such taxable year
shall be reduced,
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<PAGE>
to the extent necessary to reduce the excess amount to zero. Unless otherwise
directed by the Plan Sponsor, any such reductions (other than those referred to
in clause (i) of this subparagraph) shall be effected pro rata based on the
entire class of contributions for such taxable year to be reduced.
3.1(g) The contribution by the Employer for any Plan Year may be made in one
or more payments at any time, subject to the prohibition of paragraph 4.5,
provided that the total amount of the contribution with respect to any taxable
year of the Employer shall be paid not later than the date, including extensions
thereof, on which the Employer's federal income tax return for such taxable year
is due to be filed. Notwithstanding the foregoing, if a contribution is not
timely made, it may still be allocated as a contribution for the Plan Year for
which contributed if so directed by the Plan Sponsor.
3.2 Special Rules for Employer's Share of and Form of Contribution.
--------------------------------------------------------------
3.2(a) Unless some other allocation of the contributions by the Employer is
directed by the Plan Sponsor, each Employer shall contribute to the Fund for
each Plan Year:
(i) That portion of the Matching Contribution made with respect to
each Participant's After-Tax and Pre-Tax Contributions for an Allocation
Period (as defined in subparagraph 3.1(a)) determined by multiplying the
Matching Contribution for such Participant for such Allocation Period by a
fraction, the numerator of which is the After-Tax and Pre-Tax Contribution
made by such Participant out of his Compensation payable by it for such
Allocation Period and the denominator of which is the aggregate After-Tax
and Pre-Tax Contributions of such Participant for such Allocation Period;
plus
(ii) That portion of the QNEC Contribution for a Plan Year
determined to be made by it; plus
(iii) That portion of the Profit Sharing Contribution for a Plan
Year determined to be made by it; plus
(iv) That portion of the Supplemental and Top Heavy Contribution
for a Plan Year equal to its proportion of the Matching Contribution made by
it for such Plan Year.
3.2(b) Notwithstanding the foregoing allocation provisions of subparagraph
3.2(a), if or to the extent an Employer is unable for any reason to make its
share of the contribution for a Plan Year, such share or portion thereof shall
be made by the other participating Employers for such Plan Year either in
proportion to their relative shares of their otherwise due contribution for such
Plan Year or in such proportion or amount as the Plan Sponsor otherwise directs.
3.2(c) The contributions made by the Employer for any Allocation Period (as
defined in subparagraph 3.1(a)) beginning on or after March 1, 1997 or any Plan
Year may be made in cash and in cash, Company Stock or some combination thereof,
as determined by the Plan Sponsor. If a contribution is made by the Employer in
cash, the Plan Sponsor may direct the Trustee to treat the cash contribution as
a contribution made for the purpose of acquiring Company Stock by directing that
it be allocated to the Company Stock Fund; and such cash contributions and all
contributions made in the form of Company Stock shall be considered to be
Company Stock contributions for purposes of allocations under the Plan. It is
the intent that Company Stock contributions (and cash contributions treated as
Company Stock contributions) shall be allocated to the Company Stock Fund, and
the appropriate Company Stock Matching Account, Company Stock Profit Sharing
Account, or Company Stock QNEC Account, without regard to any Participant
contribution investment direction otherwise then in effect.
3.3 Participant After-Tax and Pre-Tax Contributions. Subject to
-----------------------------------------------
applicable suspensions as provided in ARTICLE IX, Regular Participants may make
After-Tax Contributions and Pre-Tax Contributions as follows:
3.3(a) Each Regular Participant may make After-Tax Contributions and/or Pre-
Tax Contributions to the Plan through payroll deduction while he is an Eligible
Employee.
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<PAGE>
(i) The aggregate amount of a Regular Participant's After-Tax
Contributions and Pre-Tax Contributions for any payroll period shall be an
amount equal to the product obtained by multiplying (A) such Participant's
rate of contribution by (B) his Compensation for such payroll period.
(ii) A Regular Participant's rate of contribution may be any rate,
in whole multiples of one percent (1%), from one percent (1%) through twelve
percent (12%).
(iii) Each Regular Participant shall designate the type(s) of
contribution, whether After-Tax or Pre-Tax, and rate(s) thereof he is
making.
3.3(b) For each payroll period contributed, each Regular Participant's
After-Tax and Pre-Tax Contributions made by payroll deduction contributions
shall automatically be designated as follows, subject however to such other
designation by the Participant as the Administrator may from time to time permit
and subject further to redesignation as provided in other applicable provisions
of the Plan.
(i) Such Pre-Tax Contributions shall be designated as "Pre-Tax
Basic Contributions" to the extent of the lesser of (A) six percent (6%) of
the Regular Participant's Compensation for such payroll period or (B) the
amount of such Pre-Tax Contributions;
(ii) Such After-Tax Contributions shall be designated as "After-Tax
Basic Contributions" to the extent of the lesser of (A) the excess of six
percent (6%) of the Regular Participant's Compensation for such payroll
period over the amount of his Pre-Tax Basic Contributions for such payroll
period or (B) the amount of such After-Tax Contributions for such payroll
period; and
(iii) The balance of the After-Tax Contributions and Pre-Tax
Contributions of the Regular Participant for such payroll period shall be
designated as "After-Tax Optional Contributions" and "Pre-Tax Optional
Contributions", respectively.
3.3(c) All Pre-Tax Contributions are intended to be payments to the Plan by
the Employer under a cash or deferred arrangement described in Section 401(k) of
the Code, and any reference herein to such contributions as employee or
Participant contributions is for convenience only and is not intended as a
designation of such contributions as employee contributions within the meaning
of Section 414(h)(1) of the Code.
3.4 Elective Deferral Dollar Limitation on Pre-Tax Contributions. The
------------------------------------------------------------
aggregate amount of a Participant's Pre-Tax Contributions made to the Plan for a
Plan Year shall not exceed the applicable limits thereon under Section 402(g) of
the Code and in Appendix D to the Plan.
3.5 Participant Rollover Contributions.
----------------------------------
3.5(a) Any Participant who is an Eligible Employee may make or direct there
to be made a Rollover Contribution in the form of a lump sum in cash.
3.5(b) For purposes hereof, a "Rollover Contribution" is a qualifying
rollover amount distributed from or attributable to a distribution, including a
plan to plan direct rollover of an eligible rollover distribution under Section
402(c) of the Code, from a plan qualified under Section 401 or 403(a) of the
Code. Notwithstanding the foregoing, no Rollover Contribution may consist of
any amount constituting "accumulated deductible employee contributions" within
the meaning of Section 72(o)(5)(B) of the Code or an eligible rollover
distribution from an annuity contract described in Section 403(b)(1) of the
Code, a custodial account described in Section 403(b)(7) of the Code or a
retirement income account described in the Section 402(e) of the Code.
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<PAGE>
3.5(c) The Administrator may require as a condition of any such Rollover
Contribution that the Participant, and/or the trustee, custodian or issuer of
any plan, trust, bond, annuity or account from which the amount to be rolled
over or transferred is attributable, make such certification as the
Administrator deems necessary respecting the qualification of the distributing
or transferor plan, trust, or annuity, the amount and nature of the distribution
or transfer, the qualification of the Rollover Contribution as a rollover amount
with respect to this Plan, and any other information the Administrator may
reasonably require.
3.5(d) In the event it is discovered that any Rollover Contribution made by
or on behalf of a Participant is not a qualifying rollover amount or an eligible
rollover distribution or otherwise is a contribution or transfer which is not
permitted to be received as a Rollover Contribution under the Plan, the Accrued
Benefit of the Participant attributable to such non-qualifying Rollover
Contribution shall be returned to the Participant (or if deceased, his
Beneficiary).
3.6 Procedure for and Time of Making Participant Contributions.
----------------------------------------------------------
3.6(a) A Participant's contributions which may be made by payroll deduction
shall commence to be made starting as of the effective date of his application
to make such contribution. A Participant who is an Eligible Employee may
commence making payroll deduction contributions initially as of the date he
first becomes a Participant and thereafter he may commence, change the rate or
recommence his payroll deduction contributions as of the first day of any
calendar month (or at such other time as the Administrator may permit on a
uniform and non-discriminatory basis) by delivering a payroll deduction election
to the Administrator no later than the fifteenth (15th) day of the calendar
month immediately preceding the date it is to become effective (or such shorter
period as the Administrator may permit on a uniform and non-discriminatory
basis) and prior to the time the amounts in question are payable or otherwise
made available to the Participant.
3.6(b) A Participant may terminate his payroll deduction contributions as of
the end of any calendar month (or at such other time as the Administrator may
permit on a uniform and non-discriminatory basis) by delivering an election to
the Administrator at least fifteen (15) days (or such other period as the
Administrator may permit on a uniform and non-discriminatory basis) before the
end of the calendar month (or other time) such contributions will be terminated,
which notice shall specify the date of termination. A Participant who has
voluntarily terminated his payroll deduction contributions to the Plan may
recommence his payroll deduction contributions as of the first day of any
calendar month (or at such other time as the Administrator may permit on a
uniform and non-discriminatory basis) by delivering a new payroll deduction
election to the Administrator no later than the fifteenth (15th) day of the
calendar month immediately preceding the date it is to become effective (or such
shorter period as the Administrator may permit on a uniform and non-
discriminatory basis) and prior to the time that the amounts in question are
payable or otherwise made available to the Participant.
3.6(c) If a Participant ceases to be an Eligible Employee, his contributions
to the Plan shall cease to be made. Except as otherwise prohibited herein, if
such individual again becomes an Eligible Employee, he shall again be entitled
to recommence his payroll deduction contributions at a rate designated by him as
of the date he again becomes an Eligible Employee by delivering a new payroll
deduction election to the Administrator no later than the fifteenth (15th) day
of the calendar month immediately preceding the date it is to become effective
(or such shorter period as the Administrator may permit on a uniform and non-
discriminatory basis) and prior to the time that the amounts in question are
payable or otherwise made available to the Participant.
3.6(d) A Participant's Rollover Contributions shall be made by delivering
the same to the Administrator together with an appropriate contribution
election.
3.6(e) Each Participant shall when electing to make contributions designate
the rate and type(s) of contribution in the applicable election.
3.6(f) Participant contributions received by the Administrator or withheld
by the Employer shall be paid over to the Trustee as soon as is reasonably
practical after the applicable election is received in the case of lump sum
contributions and as
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<PAGE>
soon as is reasonably practical after the amount can be segregated from the
general assets of the Employer and in no event later than the fifteen (15)
business days after the calendar month of contribution, in the case of payroll
deduction contributions. In all events, After-Tax and Pre-Tax Contributions
shall be paid over to the Trustee not later than the end of the Plan Year
immediately following the Plan Year for which withheld by the Employer.
3.6(g) Notwithstanding anything to the contrary herein, the Administrator
may on a non-discriminatory basis at any time and from time to time:
(i) Permit changes by Participants in the rate of their payroll
deduction contributions prospectively, and/or
(ii) Unilaterally and prospectively limit After-Tax and/or Pre-Tax
Contributions which may be made to the Plan,
to the extent considered advisable by the Administrator in order to satisfy the
requirements of paragraphs 4.3 and/or 4.11 and/or to prevent the sum of Pre-Tax
Contributions by Participants and Matching, QNEC, Profit Sharing and Top Heavy
Contributions by the Employer for a taxable year of the Employer from exceeding
the amount thereof deductible for such taxable year by the Employer for federal
income tax purposes.
3.7 Use of Forfeitures and Unallocated Annual Additions. Forfeitures
---------------------------------------------------
shall be held in the Fund and applied to reduce the next due contributions by
the Employer in the Plan Year following the Plan Year in which the forfeiture
occurs on a pro rata basis without regard to which Employer's contributions the
forfeitures are attributable as hereinafter provided until exhausted, and to the
extent thus used to reduce contributions by the Employer shall be treated as a
contribution by the Employer for purposes of administering the Plan. In lieu
of the foregoing use of forfeitures, forfeitures may be used to pay Plan
administrative expenses if so directed by the Plan Sponsor. In no event shall
any such forfeitures be used to otherwise increase the benefits to which a
Participant is entitled under the Plan. In the event that the amount of
forfeitures at any time exceed the required contribution, such excess
forfeitures shall be held in the special account in the Fund provided for in
subparagraph 4.5 and applied to reduce future contributions by the Employer.
3.8 No Duty of Trustee to Determine or Enforce Contributions. The
--------------------------------------------------------
Trustee shall not be required to determine the amount of any contribution for
any Plan Year or to enforce the duty of the Employer to make or pay over such
contributions; but the Trustee shall provide the Employer with such information
as it may reasonably require to determine the amount of its contribution.
ARTICLE IV
Participants' Accounts and Adjustments
--------------------------------------
4.1 Accounts.
--------
4.1(a) The Administrator shall establish and maintain on the books of the
Fund for all Participants and all other persons having an interest therein
separate accounts reflecting the Accrued Benefit of each Participant. Such
accounts of each Participant shall be separate with respect to the Accrued
Benefit of such Participant represented by his accounts in each Fund division.
4.1(b) As of each Valuation Date (or as otherwise provided herein), accounts
shall generally be adjusted in accordance with the applicable provisions of the
Plan as follows:
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(i) Benefit payments, withdrawals and other distributions and
transfers out of the Fund shall be determined and allocated.
(ii) The net increase or decrease in value of accounts and Fund
divisions shall be determined and allocated.
(iii) Contributions, amounts held in the special account under
paragraph 4.5 and direct transfers shall be allocated.
(iv) Company Stock acquisitions by purchase or internal adjustment
shall be determined and allocated.
(v) Other adjustments required under the Plan shall be made.
4.1(c) The Administrator shall establish procedures for, and may thereafter
from time to time modify such procedures for, accounting for interests in each
Fund division. Such procedures may include dollar or unit accounting for one or
more of the Fund divisions.
4.1(d) The Administrator shall establish procedures for, and may thereafter
from time to time modify such procedures for, making the adjustments to accounts
required under the Plan. Such procedures shall include records of the cost or
other basis of Company Stock.
4.1(e) Whenever the Plan's Valuation Date is daily, the Administrator may
utilize such rules as it deems appropriate for crediting valuation and other
adjustments to Participants' accounts and the Fund divisions and for determining
balances therein which reflect the time amounts are actually received or
charged, rather than the time as of which an allocation is normally provided for
under the Plan.
4.1(f) If the Administrator determines in making any valuation, allocation
or other adjustments to any Participant's account under the provisions of the
Plan that the strict application of the provisions of the Plan will not produce
equitable and non-discriminatory allocations among the Participants' accounts,
it may modify any procedures specified in the Plan for the purpose of achieving
an equal and non-discriminatory allocation in accordance with the general
concepts and purposes of the Plan; provided, however, that any such modification
shall not be inconsistent with the provisions of Section 401(a)(4) and, where
applicable, Section 401(k) or (m) of the Code and other qualification and excise
tax sections of the Code applicable to the Plan.
4.2 Allocation of Contributions. Subject to the applicable limitations
---------------------------
contained herein:
4.2(a) Each Regular Participant's Pre-Tax Contributions to the Fund for a
Plan Year shall be allocated to his Pre-Tax Account as of the last Valuation
Date of the period in such Plan Year for which such contributions are made.
4.2(b) Each Participant's Rollover Contribution shall be allocated to his
Rollover Account when made.
4.2(c) The Employer's Matching Contribution to the Fund made on behalf of a
Regular Participant for an Allocation Period (as defined in subparagraph 3.1(a))
shall be allocated to the Matching Active Account (including the Company Stock
Matching Account or the Unrestricted Matching Account, as applicable) of such
Participant as of the last Valuation Date of the Allocation Period for which
such contribution is made.
4.2(d) Each Employer's Profit Sharing Contribution to the Fund for a Plan
Year shall be allocated as of the last Valuation Date of such Plan Year among
the Profit Sharing Active Accounts (including the Company Stock Profit Sharing
Account or the Unrestricted Profit Sharing Account, as applicable) of the
Covered Participants for such Plan Year in proportion to their Compensation for
such Plan Year.
4.2(e) The Employer's QNEC Contribution to the Fund for a Plan Year shall be
allocated as of the last Valuation Date of such Plan Year among the QNEC
Accounts (including the Company Stock QNEC Account or the QNEC Account, as
- 21 -
<PAGE>
applicable) of the Regular Participants who are Non-Highly Compensated Employees
for such Plan Year in proportion to their Compensation for such Plan Year.
4.2(f) The Employer's Top Heavy Contribution to the Fund made on behalf of a
Regular Participant for a Plan Year shall be allocated to the Profit Sharing
Active Account (including the Company Stock Profit Sharing Account or the
Unrestricted Profit Sharing Account, as applicable) of such Participant as of
the last Valuation Date of such Plan Year.
4.2(g) Each Employer's Supplemental Contribution made to the Fund on behalf
of a Participant for each Plan Year and amounts repaid to the Plan by the
Participant pursuant to paragraph 6.6 shall be allocated to the account of such
Participant as of the last Valuation Date of such Plan Year and when repaid,
respectively, from which forfeited or distributed (including the Company Stock
Matching Account or the Unrestricted Matching Account, as applicable, and the
Company Stock Profit Sharing Account or the Unrestricted Profit Sharing Account,
as applicable).
4.2(h) If a contribution by the Employer is made in cash and Company Stock,
the same proportions of each shall be allocated to each Participant receiving an
allocation of the contribution in question.
4.3 Dollar/25% Limitations on Annual Additions.
------------------------------------------
4.3(a) Notwithstanding any other provision of the Plan, the sum of all
Annual Additions (as defined in subparagraph 4.3(c)) allocated to the accounts
of any Participant for any Limitation Year may not exceed the lesser of:
(i) $30,000 (referred to herein as the "Dollar Limitation"), or
(ii) Twenty-five percent (25%) of such Participant's Total
Compensation for such Limitation Year,
which limitations are jointly referred to herein as the "Dollar/25%
Limitations".
4.3(b) The Dollar Limitation shall be automatically adjusted by the
Adjustment Factor, from time to time, to reflect any annual cost of living
adjustments and any such adjustment (which with the original Dollar Limitation
is referred to herein as the "adjusted Dollar Limitation") shall be effective
for the Limitation Year which ends with or within the calendar year for which
such increase is effective.
4.3(c) The term "Annual Additions" means the sum of the following amounts
allocated to a Participant's account under the Plan for a Limitation Year:
(i) All contributions by the Employer other than Supplemental
Contributions;
(ii) All forfeitures other than those used to restore accounts
pursuant to paragraph 6.6;
(iii) All After-Tax Contributions and Pre-Tax Contributions by
Participants; and
(iv) Any other amounts defined as "annual additions" under Section
415 of the Code.
Notwithstanding anything to the contrary herein, amounts repaid by a Participant
pursuant to paragraph 6.6 in order to have a forfeiture restored and amounts
which are excluded from being "annual additions" under Section 415 of the Code
shall not be considered Annual Additions for purposes hereof.
4.3(d) For purposes hereof, the term "Limitation Year" means the Plan Year.
- 22 -
<PAGE>
4.3(e) For purposes hereof, the rules of Section 415 of the Code are
incorporated by reference for purposes of determining "Annual Additions" and
applying the "Dollar/25% Limitations".
4.4 Additional Limitations on Annual Additions Where Employer Maintains
-------------------------------------------------------------------
More Than One Plan.
- ------------------
4.4(a) If any Participant is or has been a participant in another Qualified
Defined Contribution Plan or in a Qualified Defined Benefit Plan (whether or not
terminated), the limitations contained in paragraph 4.3 shall be appropriately
adjusted when and as required by Section 415 of the Code, as modified where
applicable by Section 416 of the Code, which provisions are incorporated by
reference and shall control over any contrary or omitted or inconsistent
provisions in the Plan.
4.4(b) If any Participant is or has been a participant in more than one
Qualified Defined Contribution Plan (whether or not terminated), the limitations
under Section 415 of the Code apply as if all such Qualified Defined
Contribution Plans were one plan. The following rules shall also apply:
(i) In the event that the Dollar/25% Limitations would otherwise
be exceeded for a Limitation Year, the applicable limitation shall be
applied for such Participant by limiting the allocation of Annual Additions
to the accounts of such Participant in the following order: first,
allocations under all plans not hereinafter described, then profit sharing
plan allocations, then stock bonus plan allocations, then money purchase
pension plan allocations, then target benefit plan allocations, then
employee stock ownership plan allocations, then tax credit employee stock
ownership plan allocations, and lastly welfare benefit fund and individual
medical benefit account allocations.
(ii) If such Participant is a participant in two or more plans of
the same type, the applicable limitation shall be applied to non-
contributory plans or aspects thereof first and thereafter to contributory
plans or aspects thereof and shall be applied pro rata among such plans or
aspects thereof in the same limitation category on the basis of allocations
thereunder before operation of the applicable limitation.
4.4(c) If any Participant is or has been a Participant in both a Qualified
Defined Benefit Plan and a Qualified Defined Contribution Plan, then the Annual
Additions for such Participant shall be reduced (after the accrued benefit, the
annual benefit, the projected annual benefit and the rate of accrual under all
Qualified Defined Benefit Plans are reduced) to the extent necessary so that the
sum of the defined benefit plan fraction (not to exceed one) and the defined
contribution plan fraction (not to exceed one) determined pursuant to section
415(e) of the Code shall not exceed 1.0 for such Participant for any Plan Year
and in order to achieve the objective of compliance with the applicable rules of
limitation contained in Section 415(e) of the Code and, if the Plan is a Top
Heavy Plan or a Super Top Heavy Plan, in Section 416(h) of the Code.
Notwithstanding anything to the contrary in this paragraph, the limitations
provision of this subparagraph shall not apply with respect to Plan Years
beginning on or after January 1, 2000.
4.4(d) Solely for purposes of paragraphs 4.3, 4.4 and 4.5, the following
words and terms shall have the meaning set forth below in this subparagraph:
(i) The term "Qualified Defined Contribution Plan" means any plan
maintained by the Employer or portion thereof described or treated as a
defined contribution plan within the meaning of Sections 414(i) and 415(k)
of the Code, including, but not limited to, defined contribution plans
qualified under Section 401(a) of the Code, tax sheltered annuity contracts
described in Section 403(b) of the Code, simplified employee pension plans
described in Section 408(k) of the Code, any employee contribution portion
of and any cost-of-living protection arrangement under a defined benefit
plan qualified under Section 401(a) of the Code, any individual medical
account under a pension or annuity plan within the meaning of Section 415(l)
of the Code, and any welfare benefit fund within the meaning of Section
419(e) of the Code.
(ii) The term "Qualified Defined Benefit Plan" means any plan
maintained by the Employer or portion thereof described or treated as a
defined benefit plan within the meaning of Sections 414(j) and 415(k) of the
Code.
- 23 -
<PAGE>
4.4(e) In complying with the limitations of Section 415 of the Code, all
other transitional rules under any law enacting or amending Section 415, or
Section 416 as applicable to Section 415, of the Code shall be applicable as
determined by the Plan Sponsor.
4.5 Special Account for Unallocated Annual Additions.
------------------------------------------------
4.5(a) In the event a Participant's Annual Additions for a Plan Year exceed
his Dollar/25% Limitations of paragraph 4.3, the excess Annual Additions of such
Participant shall be eliminated by refunding to him that amount of his After-Tax
and Pre-Tax Contributions for the Plan Year which are included in the Annual
Additions taken into account under the provisions of paragraph 4.3 in the
following order:
(i) First, there shall be returned to such Participant first that
amount of his After-Tax Optional Contributions, if any, and then of his Pre-
Tax Optional Contributions, if any (including in each case any income
allocable thereto for such Limitation Year), and
(ii) Then, there shall be returned to such Participant first that
amount of his After-Tax Basic Contributions, if any, and then of his Pre-Tax
Basic Contributions, if any, (including in each case any income allocable
thereto for such Limitation Year),
and by the loss of Matching Contributions otherwise to be allocated to him with
respect to such After-Tax and Pre-Tax Contributions, to the extent necessary to
achieve compliance with the Dollar/25% Limitations of paragraph 4.3. Any such
After-Tax and Pre-Tax Contributions so returned shall be disregarded for
purposes of determining Excess Elective Deferrals in Appendix D to the Plan,
actual deferral percentages under Section 401(k) of the Code (and Deferral
Percentages in Appendix D to the Plan) and, if ever recharacterized and then
returned, actual contribution percentages under Section 401(m) of the Code (and
Contribution Percentages in Appendix D to the Plan). After the return to such
Participant of any After-Tax and Pre-Tax Contributions and loss of Matching
Contributions pursuant to the preceding provisions of this subparagraph, any
elimination of allocations to his accounts made in accordance with this
subparagraph shall be made first from Profit Sharing Contributions allocated to
him, next from QNEC Contributions allocated to him, and then from Top Heavy
Contributions allocated to him for such Plan Year.
4.5(b) Any Annual Additions allocable to Participants' accounts for the Plan
Year which consist of the Profit Sharing Contribution or QNEC Contributions and
which exceed the Dollar/25% Limitations of paragraph 4.3 shall be withdrawn for
the affected Participants' accounts and retained as an undesignated account on
the books of the Fund for allocation among the accounts of the Participants as a
part of the Employer's contribution next due for the next following Plan Year.
Any such amounts so used shall be treated for allocation purposes of the Plan as
a part of the contribution by the Employer.
4.5(c) The undesignated special account maintained pursuant to this
paragraph shall be adjusted at each Valuation Date for its share of net increase
or decrease in value of the Fund, and such account shall be held in such Fund
divisions as the Administrator shall direct.
4.5(d) Notwithstanding any other provisions of the Plan, no contributions by
the Employer which would constitute amounts subject to the Dollar/25%
Limitations of paragraph 4.3 for a Plan Year may be made to the Plan until any
balance at the beginning of such Plan Year in the undesignated account
maintained pursuant to this paragraph 4.5 has been allocated among the accounts
of Participants.
4.6 Valuation of Assets and Allocation of Valuation Adjustments.
-----------------------------------------------------------
Earnings, losses and valuation change adjustments (referred to herein
collectively as the "net increase or decrease in value" or as the "valuation
adjustments") shall be made at least annually to Participants' accounts as
hereinafter provided.
- 24 -
<PAGE>
4.6(a) As of and within a reasonable time after each Valuation Date and as
of the date of any transfer out of or benefit payment from a segregated account
in the Loan Fund, the Trustee shall value the assets held in each such affected
segregated account in the Loan Fund and the Administrator shall adjust each such
account to reflect its net increases and decreases in value since the last
valuation thereof. Expenses incurred and paid out of Plan assets in connection
with the administration and investment by such a segregated account shall be
charged to the segregated account incurring the same in such non-discriminatory
manner as determined by the Administrator.
4.6(b) Within a reasonable time after each Valuation Date, the Trustee shall
determine the value of assets (including Company Stock) held by the Fund in
unsegregated accounts in each Fund division other than the Loan Fund as of such
Valuation Date and the Administrator shall then adjust each such account on the
books of the Fund proportionately to reflect the net increase or decrease in
such value since the last Valuation Date. Such valuation and adjustments shall
be made separately with respect to each such Fund division and with respect to
each of the Participant's accounts in such Fund division. Solely for purposes
of determining such net increase or decrease in value and the proportionate
adjustment to each such account, the rules set forth in either (i) or (ii) below
will apply with respect to "post-valuation additions" and "post-valuation
reductions". "Post-valuation additions" are the amounts of the following
additions or allocations made to such accounts as of a date after the last
Valuation Date: contributions by the Employer; transfers from accounts in
another Fund division; Participant contributions; Participant loan repayments;
and direct transfers. "Post-valuation reductions" are the amounts of
distributions or other payments which have been made from the Fund and charged
to such accounts and transfers to accounts in another Fund division since the
last Valuation Date.
(i) Except as otherwise provided in clause (ii) of this
subparagraph, in determining such values and in making such adjustments
there shall not be taken into consideration any post-valuation additions or
reductions.
(ii) Notwithstanding the foregoing provisions of clause (i), if the
Administrator shall so determine, the determination of such values and
adjustments shall be made by considering a portion of any one or more
individual items of post-valuation additions which have not been distributed
or otherwise paid out of the Fund since the last Valuation Date and a
portion of any one or more individual items of post-valuation reductions for
transfers to accounts in another Fund division on a uniform and non-
discriminatory basis to reflect their contribution to the net increase or
decrease in value. The portion of any such item taken into account for such
purposes shall be determined in one of the following two ways:
(A) By multiplying such item by a fraction, the numerator of which
is the number of whole calendar months (or payroll periods or calendar
weeks or days as determined by the Administrator) since the last
Valuation Date during which such item was held in an account in the
Fund and the denominator of which is the number of whole calendar
months (or payroll periods or calendar weeks or days) since the last
Valuation Date; or
(B) By multiplying such item by a fraction, the numerator of which
is one and the denominator of which is the number of whole calendar
months since the last Valuation Date.
4.6(c) The valuation adjustment contemplated by this paragraph shall be made
before amounts are forfeited from accounts each Plan Year.
4.6(d) Notwithstanding anything to the contrary in the foregoing:
(i) In making such adjustments, expenses of the Plan and Fund in
connection with any Participant or Beneficiary (such as for loan fees or
charges) may, after direction of the Administrator on a uniform and non-
discriminatory basis and then only if permitted by the Act and the Code, be
charged directly to the account of the Participant or Beneficiary to whom
the expense relates.
- 25 -
<PAGE>
(ii) In making such adjustments, expenses allocable to each Fund
division as a whole shall be borne by such Fund division as a whole, and
expenses allocable to the Fund as a whole shall be borne by each Fund
division on a pro rata basis (determined on the basis of account balances to
which such adjustments are made). Such allocation of expenses shall be made
in the manner determined by the Administrator.
(iii) At each Valuation Date, the Administrator in its discretion
shall cause any negative balance in each Participant's account in the Fund
to be eliminated by means of a transfer thereto of amounts held in the same
classification of account of the Participant in another Fund division, and a
corresponding pro rata transfer from the accounts of other Participants
between Fund divisions.
(iv) Promissory notes of Participants or Beneficiaries held by the
Trustee in the Loan Fund shall be valued at the face amount of their unpaid
principal balances and, in the event the accrual method of accounting is
used for such purpose, any interest accrued but unpaid thereon; and other
assets of the Fund shall be valued at their fair market value as of each
Valuation Date or other valuation thereof.
4.6(e) The Administrator shall select the method of accounting (either the
cash method or the accrual method or some permissible combination thereof) to be
used for purposes hereof.
4.6(f) The value of the assets shall be at their fair market value as of the
Valuation Date and such other valuation thereof; provided, however, that the
value of some or all Policies and Contracts may be their cash surrender value as
of their respective last anniversary or other valuation date coinciding with or
immediately preceding the Valuation Date if so directed by the Administrator.
4.6(g) Whenever the Plan accounting is based on daily Valuation Dates,
contributions creditable to Participants' accounts shall be accounted for on as
received basis by the Trustee and the valuation adjustments to Participants'
accounts shall be effected on such basis and subject to such rules and
procedures as the Administrator may determine to reflect daily accounting
(without regard to the proration or partial allocation rules or other
inconsistent rules of the foregoing provisions of this paragraph).
4.7 Determination of Account Balances.
---------------------------------
4.7(a) The value of any account on the books of the Fund at any time shall
be that amount determined by adding the amount of all contributions which have
been allocated to such account and all adjustments and transfers (including all
acquisitions of Company Stock made by cash purchase) by which such account has
been increased, and further by subtracting all amounts forfeited from such
account, all adjustments by which such account has been decreased and all
distributions, other payments and transfers (including all cash payments from it
to purchase Company Stock) made from such account, all as provided in the Plan.
4.7(b) In determining account balances in the Company Stock Fund:
(i) As of each Valuation Date, the Administrator shall allocate to
each such account the number of full shares and the fractional interest
(calculated to the second, third or fourth decimal place, as determined by
the Administrator) of Company Stock transferred to or acquired by the
account and shall decrease the number thereof at the last preceding
Valuation Date by the shares or interest sold by, distributed from or
otherwise removed from such account.
(ii) In the event of a Company Stock dividend or Company Stock
split or a change in the number of shares of Company Stock held by the Plan
as a result of a reorganization or other recapitalization of the Plan
Sponsor, there shall be credited to each affected account a proportionate
number of full and fractional shares of Company Stock
- 26 -
<PAGE>
received by the Plan as a result of such dividend, split or other change
based on the number of shares and fraction thereof in such account as of the
Valuation Date (or such date as the Administrator may direct) coinciding
with or next following the ex-dividend or record date as applicable.
4.7(c) A record of the basis of the shares of Company Stock and fractions
thereof shall be maintained as follows unless another method permitted by
Section 402 of the Code is directed to be used by the Administrator:
(i) The basis of Company Stock purchased by the Trustee shall be
the actual cost of the Company Stock to the Trustee. The basis of all other
Company Stock acquired by the Trustee (including Company Stock contributed
by the Employer to the Fund) shall be the fair market value of the Company
Stock on the date of the acquisition.
(ii) All shares of Company Stock that are held unallocated in the
special account maintained pursuant to paragraph 4.5 shall retain their
original basis, without regard to when the shares are allocated to the
accounts of the Participants.
(iii) As of each Valuation Date, the basis of all Company Stock that
is made available for allocation to the accounts of the Participants shall
be calculated by averaging the basis of all Company Stock to be allocated as
of that date, as determined pursuant to clauses (i) and (ii) above.
(iv) The basis of all Company Stock allocated to an account of a
Participant shall be calculated by averaging the basis of all Company Stock
allocated to such account as of that date, determined as hereinabove
provided.
4.7(d) Unless otherwise directed by the Administrator for Plan
administrative purposes such as making benefit payments or causing substantially
the same proportions of each account balance in the Company Stock Fund to be
held in cash and in Company Stock, acquisitions and dispositions of Company
Stock by Participants' accounts shall generally be effected pro rata based on
account balances held in the Company Stock Fund and available for the period
used.
4.8 Suspense Accounts.
-----------------
4.8(a) If any in-service withdrawal or other distribution of an Accrued
Benefit is made to a Participant from his Matching or Profit Sharing Active
Account before such Participant has a non-forfeitable right to his entire
Accrued Benefit and before such Participant has permanently forfeited and lost
his restoration rights under the Plan pursuant to subparagraph 6.6(b) (referred
to herein as the "requisite break in service"), the balance of such Matching or
Profit Sharing Active Account after each such distribution shall be maintained
as a suspended portion of his Matching or Profit Sharing Active Account until
either:
(i) Such Participant has incurred the requisite break in service,
in which event his non-forfeitable interest in each such suspended portion
shall be designated as or added to his Matching or Profit Sharing Non-
forfeitable Account pursuant to subparagraph 6.3(c), or
(ii) Such Participant has become entitled to a non-forfeitable
interest in his entire Accrued Benefit, in which event such portion shall no
longer be suspended.
In no event shall any contributions or forfeitures be allocated to that part of
a Participant's Matching or Profit Sharing Active Account which has been so
suspended, but such suspended portion shall nevertheless be adjusted to reflect
the increases or decreases in the value of the Fund pursuant to paragraph 4.6.
4.8(b) A Participant's non-forfeitable interest at any relevant time in any
suspended portion of his Matching or Profit Sharing Active Account shall be
determined by first determining:
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<PAGE>
(i) A "factor", which is the ratio of the value of such suspended
portion at such relevant time to the value of the balance in such suspended
portion immediately after such distribution, and
(ii) The "adjusted distribution", which is the product obtained by
multiplying such factor by the sum of the last adjusted distribution, if
any, plus the amount of the distribution which brought about the suspension
of such portion of such account.
The Participant's non-forfeitable interest in any suspended portion of his
Matching or Profit Sharing Active Account at any relevant time shall equal the
excess of:
(iii) The product obtained by multiplying such Participant's non-
forfeitable percentage, determined under subparagraph 6.3 at such relevant time,
by the sum obtained by adding the adjusted distribution to the value of the
suspended portion at such relevant time, over
(iv) The adjusted distribution.
4.9 Equitable Adjustment in Case of Error or Omission.
-------------------------------------------------
4.9(a) When an error or omission is discovered in the account of a
Participant, the Administrator shall be authorized to make such equitable
adjustments as are practical and as are determined by it as of the Plan Year in
which the error or omission is discovered or corrected, including but not
limited to actual retroactive reallocations, reallocations based on reasonable
estimates, and other corrections described in this paragraph.
4.9(b) In the event that the error or omission is the erroneous forfeiture
from a Participant's account or the failure to permit contributions to be made
or to properly allocate contributions, forfeitures or valuation adjustments to a
Participant's account, the Plan Sponsor in its sole discretion may contribute or
cause there to be contributed by any Employer funds or assets to the Plan or may
permit a make-up contribution by the Participant to be made to correct such
error or omission and such funds, assets or contributions shall be allocated to
the account or accounts of any such affected Participant as the Administrator
may direct the Trustee in writing. Any such contributed amounts (other than the
portion thereof intended to compensate for previously unallocated investment
gain which shall not be considered an allocation subject to the Dollar/25%
Limitations of paragraph 4.3) shall be considered allocated to the Participant's
account for the Plan Year or Limitation Year to which they relate, rather than
the Plan Year or Limitation Year in which actually made, for purposes of such
limitations.
4.9(c) In the event that the error or omission is the understatement or
overstatement of Fund earnings and losses, the Administrator is expressly
authorized to determine the appropriate equitable adjustment on the basis of a
standard of materiality therefor. If the understatement or overstatement does
not exceed the standard, the Administrator may direct that no correction in the
allocation for the valuation period of the understatement or overstatement be
made and that such error or omission be corrected solely by treating the amount
of the understatement or overstatement as additional earnings or loss for a
subsequent valuation period (which generally shall be the valuation period
immediately following the valuation period as of which both the error or
omission is discovered and a determination is made of the equitable adjustment
to correct the error or omission). Unless otherwise determined in writing by
the Administrator, the standard of materiality for purposes hereof for a monthly
valuation period shall be an aggregate amount (determined on a monthly basis)
equal to the greater of Three Dollars ($3.00) per Participant in the affected
Fund division or one tenth of one percent (.1%) of the fair market value of the
affected Fund division at the Valuation Date of the understatement or
overstatement. This subparagraph shall apply to all such errors or omissions
not yet corrected as of the Effective Date of this Restatement of the Plan.
4.10 Special Rules for Reemployed Veterans.
-------------------------------------
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<PAGE>
4.10(a) Effective December 12, 1994, notwithstanding any other provision of
the Plan, the following special rules shall apply in order to provide Make-up
Contributions to the Plan on behalf of Reemployed Veterans:
(i) Make-up Contributions shall be made to the Plan by the
Employer on behalf of a Reemployed Veteran, and allocated to the appropriate
account of the affected Participant's Accrued Benefit, in such amount and at
such time or times as is required by the USERRA.
(ii) Make-up Contributions with respect to a Reemployed Veteran
shall not be subject to any otherwise applicable contribution limits under
Sections 402(g), 402(h), 403(b), 408, 415, or 457 of the Code or any
otherwise limit on deductible contributions under Sections 404(a) or 404(h)
of the Code as applied with respect to the Plan Year or taxable year, as
applicable to the relevant section of the Code, in which the contribution is
made. A Make-up Contribution shall not be taken into account in applying the
contribution or deductible contribution limits to any other contribution
made during the Plan Year or taxable year, as applicable to the relevant
section of the Code. Make-up Contributions shall not exceed the aggregate
amount of contributions that would have been permitted under the Plan
contribution and deductible contribution limits for the Plan Year or taxable
year, as applicable to the relevant section of the Code, to which the
contribution relates had the Reemployed Veteran continued to be employed by
the Employer during the period of his Qualified Military Service.
(iii) Make-up Contributions shall not be treated as contributions
for purposes of determining Top Heavy Contributions required to be made by
the Employer for either the Plan Year in which they are made or for the Plan
Year to which they relate.
(iv) Compensation to be used for purposes of determining Make-up
Contributions with respect to a period of Qualified Military Service shall
mean the Compensation (as otherwise defined in the Plan but based on rate of
pay) which the Reemployed Veteran would have received but for his Qualified
Military Service. If a Reemployed Veteran's pay is not readily
determinable, the Reemployed Veteran's Compensation shall then be his
average Compensation for the 12-month period (or actual shorter period of
employment) immediately preceding his Qualified Military Service.
(v) The following service counting rules shall apply:
(A) A Reemployed Veteran shall not be considered to have incurred a
Year of Broken Service by reason of his Qualified Military Service.
(B) Qualified Military Service of a Reemployed Veteran shall be
counted as service for vesting and benefit accrual under the Plan.
(vi) A Reemployed Veteran shall be entitled to Matching
Contributions that are contingent on elective deferrals or employee
contributions for the period of his Qualified Military Service only if he
timely makes those contributions following his return to the Employer's
service as provided in this paragraph.
4.10(b) Notwithstanding any other provision of the Plan, a Reemployed
Veteran shall be entitled to make After-Tax and Pre-Tax Contributions for the
period of his Qualified Military Service following his return to the Employer's
service as follows:
(i) Such contributions must be made during the period which begins
on the date of reemployment with the Employer following such Qualified
Military Service and is equal to the lesser of (A) three times the
Reemployed Veteran's period of Qualified Military Service or (B) five (5)
years.
- 29 -
<PAGE>
(ii) The amount of such contributions shall be determined by the
Reemployed Veteran but shall not exceed the maximum amount which the
Reemployed Veteran could have made during the period of his Qualified
Military Service in accordance with the applicable limitations and rules of
the Plan as though the Reemployed Veteran had continued to be employed by
the Employer and received the Compensation during such period in the amount
determined pursuant to this paragraph.
(iii) The maximum amount of such contributions determined in clause
(ii) above shall be reduced by the amount of any such contributions actually
made for during the Reemployed Veteran's period of Qualified Military
Service.
4.10(c) For purposes of this paragraph, the following terms have the
following meanings:
(i) "Make-up Contributions" means the contributions which are
required to be made to the Plan for a Reemployed Veteran pursuant to the
USERRA and Section 414(u) of the Code. These contributions generally are
the contributions by the Employer that would have accrued to the Reemployed
Veteran under the Plan, but for his absence due to his Qualified Military
Service. Neither the Make-up Contribution obligation nor this paragraph
requires that (A) any earnings be credited to the account of a Reemployed
Veteran with respect to any Make-up Contribution before such contribution is
actually made or (B) the Plan provide for any make-up allocation of any
forfeitures that occurred during the period of a Reemployed Veteran's
Qualified Military Service.
(ii) "Qualified Military Service" means any service in the
uniformed services (as defined in chapter 43 of title 38, United States
Code) by any individual if such individual is entitled to reemployment
rights under such chapter with respect to such service and to the Employer.
(iii) "Reemployed Veteran" means a person who is or, but for his
Qualified Military Service, would have been a Participant at some time
during his Qualified Military Service and who is entitled to the restoration
benefits and protections of the USERRA with respect to his Qualified
Military Service and the Plan.
(iv) "USERRA" means the Uniformed Services Employment and
Reemployment Rights Act of 1994.
4.11 Limitation on and Distribution of After-Tax, Pre-Tax and Matching
-----------------------------------------------------------------
Contributions Made by or on behalf of Highly Compensated Employees. After-Tax,
- ------------------------------------------------------------------
Pre-Tax and Matching Contributions made by or on behalf of Highly Compensated
Employees shall be subject to the non-discrimination rules of Sections 401(k)
and (m) of the Code and shall be limited, refunded or forfeited as provided in
Appendix D to the Plan.
ARTICLE V
Retirement Dates
----------------
5.1 Normal Retirement Date. The Normal Retirement Date of a Participant
----------------------
shall be the first day of the calendar month coinciding with or next following
the date on which the Participant attains his Normal Retirement Age.
5.2 Delayed Retirement Date. A Participant who continues in the active
-----------------------
employment of the Employer beyond his Normal Retirement Date shall continue to
participate in the Plan, and his Delayed Retirement Date shall be the first day
of the calendar month coinciding with or next following the date of termination
of his employment with the Employer.
5.3 Early Retirement Date. A Participant who has attained the age of
---------------------
fifty-five (55) years or more while an Eligible Employee and has completed at
least ten (10) Years of Vesting Service as determined for vesting purposes under
paragraph 6.5 may retire from the employment of the Employer prior to his Normal
Retirement Date and his Early Retirement Date shall be the first day of the
calendar month coinciding with or next following the date of such retirement.
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<PAGE>
5.4 Disability Retirement Date. A Participant who becomes Disabled while
--------------------------
employed by the Employer and ceases to be employed by the Employer as a result
of his Disability shall be considered to retire on Disability Retirement for
purposes of this Plan and his Disability Retirement Date shall be the first day
of the calendar month coinciding with or next following the date of such
retirement.
5.4(b) For purposes hereof:
(i) With respect to a Participant, the existence of a "Disability"
or the status of being "Disabled" means the occurrence of either (A) the
Participant's inability, because of a physical or mental impairment, either
to perform the duties of his customary employment or to engage in any
gainful activity for an indefinite period or (B) the Participant's permanent
loss or loss of use of a member of function of the body or permanent
disfigurement.
(ii) The Administrator shall have the right to require proof of
Disability.
(iii) Failure by the Participant to provide such evidence as may be
required by the Administrator shall result in the determination that the
Participant is not Disabled under the Plan.
(iv) The determination of Disability shall be made by the
Administrator in accordance with standards uniformly applied to all
Participants, on the advice of one or more physicians appointed or approved
by the Plan Sponsor if deemed necessary or advisable by the Administrator,
and the Administrator shall have the right to require further medical
examinations from time to time to determine whether there has been any
change in the Participant's physical condition.
ARTICLE VI
Vesting
-------
6.1 Vesting at Retirement or Attainment of Normal Retirement Age.
------------------------------------------------------------
6.1(a) Upon either:
(i) A Participant's having attained his Normal Retirement Age
while employed by the Employer,
(ii) His satisfaction of the age and service requirements for Early
Retirement while an Eligible Employee, or
(iii) His retirement from the employment of the Employer on his
Disability Retirement Date,
the Accrued Benefit of such Participant shall be fully vested and non-
forfeitable.
6.2 Vesting at Death. If a Participant dies while employed by the
----------------
Employer, the Accrued Benefit of such Participant shall be fully vested and non-
forfeitable.
6.3 Vesting in Matching and Profit Sharing Active Accounts at Other
---------------------------------------------------------------
Times. At any time when a Participant is not fully vested in his Matching and
Profit Sharing Active Accounts under paragraphs 6.1 or 6.2, he shall have a non-
forfeitable interest in a percentage of his Matching and Profit Sharing Active
Accounts depending upon the number of his Years of Vesting Service with which he
is credited at such time in accordance with the applicable schedule below:
Years of Vesting Service Non-Forfeitable Percentage
------------------------ --------------------------
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<PAGE>
Less than 3 0%
3 or more 100%
Notwithstanding the foregoing, a Participant who is an Employee at the time of a
"change in control" of the Plan Sponsor shall have a non-forfeitable interest in
a percentage of his Matching and Profit Sharing Active Accounts. For purposes
hereof, the term "change in control" means "Change in Control" as defined in the
Plan Sponsor's 1996 Incentive Stock Plan.
6.4 Vesting in Accrued Benefit Other Than Matching and Profit Sharing
-----------------------------------------------------------------
Active Accounts. A Participant shall at all times have a fully vested and non-
- ---------------
forfeitable interest in his Accrued Benefit other than his Matching and Profit
Sharing Active Accounts.
6.5 Vesting Service Rules. For purposes of computing a Participant's
---------------------
non-forfeitable right to his Matching and Profit Sharing Active Accounts, all
Years of Vesting Service, whether or not consecutive, shall be included.
6.6 Forfeiture and Restoration of Matching and Profit Sharing Active
----------------------------------------------------------------
Accounts.
- --------
6.6(a) The balance of a Participant's Matching and Profit Sharing Active
Accounts in excess of his non-forfeitable interest therein shall be forfeited as
of the earlier (his "Forfeiture Date") of:
(i) The last day of the Plan Year in which he incurs five (5)
consecutive Years of Broken Service (a "Forfeiture Break in Service), or
(ii) The date he dies, or
(iii) The date he receives payment of his entire non-forfeitable
Accrued Benefit under the Plan (a "cash-out").
After a Participant's Forfeiture Date (and the loss of his right of restoration
described in subparagraph 6.6(b), if applicable), his non-forfeitable interest
in his Matching or Profit Sharing Active Account, if any, shall then be
designated as or added to his Matching or Profit Sharing Non-forfeitable Account
and no further allocations of any part of the Matching, Profit Sharing or Top
Heavy Contributions by the Employer or of any forfeitures shall be made to such
account thereafter.
6.6(b) If a Participant incurs a Forfeiture Date because of a cash-out and
again becomes an Employee prior to the termination of the Plan (the date of
which is referred to herein as the "Re-employment Date"), an amount equal to
such forfeited account balance (without increase or decrease for valuation
adjustments in the Fund after the forfeiture) shall be restored to his Matching
and Profit Sharing Active Accounts through a Supplemental Contribution made by
the Employer for such Plan Year in which both:
(i) While an Employee, he repays to the Fund the amount of the
distributions from his Matching and Profit Sharing Accounts, and
(ii) Such repayment is made before the earlier of (A) the date he
incurs five (5) consecutive Years of Broken Service after the date of his
cash-out or (B) the date which is five (5) years after his Re-employment
Date (at which earlier date his restoration right expires).
6.6(c) For purposes of this paragraph, a Participant who has no non-
forfeitable interest in his Accrued Benefit shall be deemed to have been cashed-
out pursuant to the provisions of this paragraph upon his ceasing to be an
Employee and shall be deemed to have repaid such cashed-out benefit upon his Re-
employment Date provided that such Re-employment Date occurs before his
restoration right expires.
- 32 -
<PAGE>
6.6(d) If a Participant incurs a Forfeiture Date, and if he later is
entitled to an allocation of Matching, Profit Sharing or Top Heavy Contributions
or forfeitures, new Matching and Profit Sharing Active Accounts shall be
established for such Participant.
6.6(e) If a Participant incurs a forfeiture because of a Forfeiture Break in
Service or he incurs a forfeiture because of a cash-out and his restoration
rights with respect to a separately established Matching or Profit Sharing
Account expire, Years of Vesting Service after the occurrence of his Forfeiture
Break in Service or the expiration of his restoration rights, respectively,
shall not be taken into consideration in determining the amount of such
Participant's vested interest in such separately established Matching and Profit
Sharing Active or Non-forfeitable Accounts.
ARTICLE VII
Death Benefits
--------------
7.1 Death after Benefit Commencement Date. If a Participant dies after
-------------------------------------
his Accrued Benefit has begun to be paid to him, the only benefits payable under
the Plan after his death shall be those, if any, provided under the form of
payment being made to him at his death.
7.2 Death before Benefit Commencement Date. If a Participant dies before
--------------------------------------
his Accrued Benefit has begun to be paid to him, his non-forfeitable Accrued
Benefit under the Plan shall be paid to his Beneficiary at the time and in the
manner described in ARTICLE VIII.
7.3 Beneficiary Designation.
-----------------------
7.3(a) Subject to the rights of his Spouse as hereinafter provided, each
Participant shall have the right to notify the Administrator in writing of any
designation of a Beneficiary to receive, if alive, benefits under the Plan in
the event of his death. Such designation may be changed from time to time by
notice in writing to the Administrator. Notwithstanding anything to the
contrary in the foregoing, the Beneficiary of any Participant shall be the
Participant's surviving Spouse, if any, and no contrary Beneficiary designation
shall be given effect unless the Beneficiary designation is consented to by the
Participant's Spouse.
7.3(b) If a Participant dies without having designated a Beneficiary, or if
the Beneficiary so designated has predeceased the Participant or, except when
his Beneficiary is his Spouse, cannot be located by the Administrator within one
year after the date when the Administrator commenced making a reasonable effort
to locate such Beneficiary, then his surviving spouse, or if none, then his
surviving children, including adopted children, in equal shares, or if none,
then his surviving parents in equal shares, or if none, then his estate shall be
deemed to be his Beneficiary.
7.3(c) Unless otherwise provided by the Administrator, any Beneficiary
designation may include multiple, contingent or successive Beneficiaries and may
specify the proportionate distribution to each Beneficiary. If a Beneficiary
shall survive the Participant, but shall die before the entire benefit payable
to such Beneficiary has been distributed, then absent any other provision by the
Participant, the unpaid amount of such benefit shall be distributed to the
estate of the deceased Beneficiary. If multiple Beneficiaries are designated,
absent provisions by the Participant, those named or the survivors of them shall
share equally any benefits payable under the Plan. Any Beneficiary, including
the Participant's spouse, shall be entitled to disclaim any benefit otherwise
payable to him under the Plan.
7.4 Consent to Beneficiary Designation. Any Beneficiary designation by
----------------------------------
the Participant for purposes of paragraph 7.3 and shall be subject to the
following rules:
7.4(a) Such Beneficiary designation shall not be given effect unless either:
- 33 -
<PAGE>
(i) The Participant's Spouse consents in writing to the
designation and the Spouse's consent acknowledges the effect of the
designation and is witnessed by a representative of the Plan or a notary
public (or the equivalent) or both if required by the Administrator, or
(ii) It is established to the satisfaction of the Administrator
that such consent may not be attained because there is no Spouse, because
the Spouse cannot be located, because the Participant has been abandoned by
the Spouse (which fact shall be determined under applicable law and
evidenced by a court order so specifying), or because of such other
circumstances as may be provided under Section 417(a)(2)(B) of the Code.
For purposes hereof, a representative of the Plan is any officer of the
Employer, the Administrator or any other person designated as such in writing by
any of the foregoing.
7.4(b) If a Spouse consents to a Participant's Beneficiary designation, such
consent shall either be in the form of:
(i) A limited consent which acknowledges any specific non-Spouse
Beneficiary or class of non-Spouse Beneficiaries (including any multiple,
contingent or successive Beneficiary or class of Beneficiaries), if any, or
(ii) If permitted by the Administrator on a uniform non-
discriminatory basis, a general consent which acknowledges the Spouse's
right (and awareness thereof) to limit consent only to a specific
Beneficiary or class of Beneficiaries and in which the Spouse voluntarily
elects to relinquish such right.
7.4(c) If a Spouse consents to a Participant's Beneficiary designation, any
change of the Beneficiary thereunder (other than a revocation altogether of the
designation) by the Participant shall require the further consent of his Spouse
in accordance with the applicable provisions of this subparagraph (unless the
consent of the Spouse expressly permits such change by the Participant without
any requirement of further consent by the Spouse). However, reaffirmation of
the Spouse's consent to the designation shall not be required.
7.4(d) Any such consent by a Spouse, or the establishment that the consent
of a Spouse may not be obtained, shall be effective only with respect to such
Spouse.
7.4(e) Any such consent by a Spouse shall continue to be effective for so
long as the Participant's designation remains in force and may not be revoked by
the Spouse.
ARTICLE VIII
Payment of Benefits
-------------------
8.1 Time of Payment.
---------------
8.1(a) The non-forfeitable Accrued Benefit of a Participant shall become
payable to the Participant, if then alive, or otherwise to his Beneficiary, no
earlier than his cessation of employment with the Employer and at a time
determined by the Administrator in accordance with the following rules:
(i) The non-forfeitable Accrued Benefit of the Participant shall
normally commence to be paid as soon as practicable after:
(A) The Participant separates from the service of the Employer
for any reason; or
- 34 -
<PAGE>
(B) If later, and the Participant's non-forfeitable Accrued Benefit
exceeds, or at the time of any prior distribution exceeded, $3,500 (or
$5,000 for Plan Years beginning after December 31, 1998), the earlier
of (I) the date on which the Participant delivers to the Administrator
a written consent to payment or (II) the date on which the Participant
attains age sixty-five (65).
(ii) Notwithstanding the foregoing, the non-forfeitable Accrued
Benefit of a Participant shall not commence to be paid later than the
sixtieth (60th) day after the end of the Plan Year in which occurs the later
of the:
(A) The date on which the Participant attains the age of sixty-five
(65), or
(B) The date he ceases to be employed by the Employer.
(iii) Notwithstanding the foregoing, the non-forfeitable Accrued
Benefit of a Participant shall commence to be paid by the April 1 (sometimes
referred to as the "Required Beginning Date") following the calendar year in
which occurs the later of the following applicable event (the "Required
Beginning Event"):
(A) The date the Participant attains the age seventy and one-half
(70-1/2), or
(B) Effective January 1, 1997 if the Participant's non-forfeitable
Accrued Benefit is not in pay status on December 31, 1996 and the
Participant is not a 5% Owner, the date the Participant retires from
the service of the Employer or otherwise ceases to be employed by the
Employer. For purposes hereof a "5% Owner" means a Participant who is
a more than five percent (5%) owner of the Employer (as defined for
purposes of determining Key Employees) with respect to the Plan Year
ending in the calendar year in which the Participant attains the age
seventy and one-half (70-1/2) (a "5% Owner").
As an alternative to the foregoing, a Participant who is not a 5% Owner and
who reaches age seventy and one-half (70-1/2) while employed by the Employer
and on or before December 31, 1999 may elect to begin to receive his non-
forfeitable Accrued Benefit at any time after he attains the age of seventy
and one-half (70-1/2) and at or before the April 1 of the calendar year
following the calendar year in which he attains the age of seventy and one-
half (70-1/2). The non-forfeitable Accrued Benefit of a Participant for
each Plan Year after his Accrued Benefit commences pursuant to this clause
shall commence to be paid as soon as possible after each such Plan Year.
(iv) Notwithstanding the foregoing other than clause (iii), except as
provided in ARTICLE IX, the non-forfeitable Accrued Benefit of a Participant
shall not commence to be paid before the earlier of:
(A) The date such Participant ceases to be employed by the Employer
by reason of death, disability, retirement or other separation from
service,
(B) The date of transfer of such Participant to the employment of a
corporate employer which is not an Affiliate acquiring by sale or
other disposition of substantially all the assets used in a trade or
business conducted by a selling corporate Affiliate which employed the
Participant,
(C) The date of sale or other disposition of a corporate
Affiliate's interest in a subsidiary to an entity or person which is
not an Affiliate when such Participant continues employment with such
subsidiary, or
(D) The date of termination of the Plan without the establishment
of a successor plan as determined for purposes of Section 401(k) of
the Code. A "successor plan" generally means any other defined
contribution plan (other than an employee stock ownership plan as
defined in Section 409 or 4975(e)(7) of the Code, other than a
simplified employee pension plan described in Section 408(k) of the
Code, and other than a plan under which fewer than two percent (2%) of
the Employees eligible to participate in the Plan at the date
- 35 -
<PAGE>
of its termination are or were eligible to participate at any time
during the twenty-four (24) month period beginning twelve (12) months
before its termination) maintained by the Employer which is in
existence at the date of termination of the Plan or established within
the 12-month period after all benefits under the Plan are distributed.
Clauses (iv)(B), (C) and (D) of this subparagraph shall not apply unless the
distribution occurring by reason of an event described therein is a Lump Sum
Payment. Clauses (iv)(B) and (C) of this subparagraph shall not apply
unless the Plan continues to be maintained by the selling Affiliate or any
other Affiliate after the sale or other disposition referred to therein,
unless the purchaser does not after the sale or other disposition adopt or
maintain the Plan or another plan with the Plan is merged or consolidated or
to which Plan assets are transferred (other than by means of a rollover
contribution), and unless the distribution occurs in connection with the
sale or other disposition (which means that the distribution normally is
made no later than the end of the second calendar year after the calendar
year in which the sale or other disposition occurred).
8.1(b) The non-forfeitable Accrued Benefit of a Participant who dies before
such Accrued Benefit commences to be paid to him shall become payable to his
Beneficiary as soon as practicable after the Participant's death.
8.1(c) Notwithstanding the foregoing provisions of this paragraph, a
Participant whose non-forfeitable Accrued Benefit exceeds, or at the time of any
prior distribution exceeded, $3,500 (or $5,000 for Plan Years beginning after
December 31, 1998), or the Beneficiary of a Participant who dies before his non-
forfeitable Accrued Benefit becomes payable and whose non-forfeitable Accrued
Benefit entitlement exceeds $3,500 (or $5,000 for Plan Years beginning after
December 31, 1998), may elect a later date on which such Accrued Benefit shall
become payable if such Accrued Benefit exceeds, at the time of the distribution
or any prior distribution, $3,500 (or $5,000 for Plan Years beginning after
December 31, 1998). Such later date shall not be later than:
(i) In the case of an election by a Participant, the latest time
for payment under clause (iii) of subparagraph 8.1(a);
(ii) In the case of an election by a Beneficiary who is the
Participant's spouse, the later of:
(A) The end of the fifth (5th) calendar year following the calendar
year in which the Participant's death occurs, or
(B) The end of the calendar year in which the Participant would
have attained the age of seventy and one-half (70-1/2); and
(iii) In the case of an election by a Beneficiary who is not the
Participant's spouse, the end of the fifth (5th) calendar year following the
calendar year in which the Participant's death occurs.
Such election shall be in writing, executed and filed with the Administrator at
least thirty (30) days (or such shorter period as the Administrator may permit
on a uniform and non-discriminatory basis) before the date such Accrued Benefit
otherwise becomes payable, and it shall set forth and shall be conditioned upon
the payment of such Accrued Benefit in a form provided herein. Any such
election may be revoked or modified at any time.
8.1(d) The non-forfeitable Accrued Benefit of a Participant which is payable
to an "alternate payee" (as defined in Section 414(p) of the Code) who is the
Participant's spouse (including a former spouse) pursuant to a QDRO may be paid
in a Lump Sum Payment (as defined in paragraph 8.4), as soon as practicable
after the QDRO is delivered to the Administrator and determined to be a QDRO or
at such later time as may be provided in such QDRO, where the Participant has
neither attained the earliest retirement age under Section 414(p) of the Code or
separated from the service of the Employer.
- 36 -
<PAGE>
8.1(e) Notwithstanding the foregoing provisions of this paragraph, payment
may be delayed for a reasonable period in the event the recipient cannot be
located or is not competent to receive the benefit payment, there is a dispute
as to the proper recipient of such benefit payment, additional time is needed to
complete the Plan valuation adjustments and allocations, or additional time is
necessary to properly explain the recipient's options.
8.2 Form of Payment When Participant Is the Initial Recipient. The non-
---------------------------------------------------------
forfeitable Accrued Benefit of a Participant payable to him pursuant to
paragraph 8.1 shall be paid to him in the form of a Lump Sum Payment (as defined
in paragraph 8.4). Payments due after a Participant's death shall be made to
his Beneficiary.
8.3 Form of Payment When Beneficiary Is the Initial Recipient. In the
---------------------------------------------------------
event of a Participant's death before his Accrued Benefit is entirely paid to
him, the Participant's remaining non-forfeitable Accrued Benefit payable
pursuant to paragraph 8.1 shall be paid to his Beneficiary in the form of a Lump
Sum Payment (as defined in paragraph 8.4). Payments due after a Beneficiary's
death shall be made to the successor Beneficiary.
8.4 Payment Definitions and Rules.
-----------------------------
8.4(a) The term "Lump Sum Payment" generally means a single payment of the
entire or, as applicable, the designated portion of the entire, non-forfeitable
Accrued Benefit. A non-forfeitable Accrued Benefit of a Participant payable in
the form of a Lump Sum Payment shall be determined as of the Valuation Date (or
other time of valuation hereunder) immediately preceding the date of payment to
which shall be added any contributions or other adjustments allocated after such
Valuation Date (or other time of valuation hereunder) and from which shall be
subtracted any distributions or other adjustments since such Valuation Date (or
other time of valuation hereunder). In the event an Accrued Benefit is to be
paid in a Lump Sum Payment and the amount thereof has not been determined, the
Administrator is authorized to make one or more interim payments prior to the
time the amount of such Lump Sum Payment is finally determined.
8.4(b) All payments of a Participant's non-forfeitable Accrued Benefit held
in Fund divisions other than the Loan Fund or the Company Stock Fund shall be
made in cash.
8.4(c) All payments of a Participant's non-forfeitable Accrued Benefit held
in the Company Stock Fund shall be made by the transfer of either cash or whole
shares of Company Stock and cash in lieu of a fractional share, as follows:
(i) If the number of shares which would otherwise be distributed
is less than twenty-five (25) (as adjusted automatically from time to time
to reflect Company Stock dividends or splits or other capitalization changes
occurring after March 31, 1997), payment shall normally be made entirely in
cash.
(ii) If the number of shares to be distributed is twenty-five (25)
(as adjusted automatically from time to time to reflect Company Stock
dividends or splits or other capitalization changes occurring after March
31, 1997) or more, payment shall normally be made in whole shares and cash
in lieu of a fractional share.
(iii) Notwithstanding the normal form of payment, the recipient
shall be entitled to elect either method of payment. Such election shall be
filed with the Administrator at least thirty (30) days (or such shorter
period as the Administrator may permit on a uniform and non-discriminatory
basis) before the benefit payment date. Any election may be revoked and
another election made any number of times.
(iv) Any whole shares of Company Stock which are converted to cash
for payment purposes shall be disposed of at current fair market value at or
about the time of payment by sale to the Plan Sponsor or on the open market
or transfer to other Participants' accounts. Any whole or fractional shares
which are acquired with the portion of the account which normally would be
paid in cash shall be acquired at current fair market value at or about the
time of payment by purchase from the Plan Sponsor or on the open market or
transfer from other Participants' account. Notwithstanding the provisions
of paragraphs 4.6 and 4.7, the basis attributable to the Stock acquired with
the cash
- 37 -
<PAGE>
portion from a stockholder other than the Plan or from the Plan Sponsor
shall not be determined pursuant to paragraphs 4.6 and 4.7, but shall equal
its cost, if so directed by the Administrator.
8.4(d) All payments of a Participant's non-forfeitable Accrued Benefit held
in the Loan Fund shall be made by offset against the Participant's non-
forfeitable Accrued Benefit by distribution of the Participant's promissory
note(s) marked paid and satisfied.
8.4(e) To the extent the payment provisions of the Plan are inconsistent
with and violative of the requirements of Section 401(a)(9) of the Code, the
provisions of Section 401(a)(9) of the Code are hereby incorporated by reference
and shall control.
8.5 Plan to Plan Direct Rollover as a Distribution Option.
-----------------------------------------------------
8.5(a) Notwithstanding any contrary provision of the Plan, but subject to
any de minimis or other exceptions or limitations provided for under Section
401(a)(31) of the Code, any prospective recipient (whether a Participant, a
surviving spouse, a current or former spouse who is an alternate payee under a
QDRO or any other person eligible to make a rollover) of a distribution from the
Plan which constitutes an "eligible rollover distribution" (to the extent
otherwise includible in the recipient's gross income) may direct the Trustee to
pay the distribution directly to an "eligible retirement plan".
8.5(b) For purposes hereof, the following terms have the meanings assigned
to them in Section 401(a)(31) of the Code and, to the extent not inconsistent
therewith, shall have the following meanings:
(i) The term "eligible retirement plan" means a defined
contribution plan which is either an individual retirement account described
in Section 408(a) of the Code, an individual retirement annuity described in
Section 408(b) of the Code (other than an endowment contract), an annuity
plan described in Section 403(a) of the Code, or a qualified trust described
in Section 401(a) of the Code, that accepts the prospective recipient's
eligible rollover distribution; provided, however, that in the case of an
eligible rollover distribution payable to a Participant's surviving spouse,
an "eligible retirement plan" means only an individual retirement account or
individual retirement annuity.
(ii) The term "eligible rollover distribution" means any
distribution other than:
(A) A distribution which is one of a series of substantially equal
periodic payments (not less frequently than annually) made either for
the life (or life expectancy) of the recipient or the joint lives (or
joint life expectancies) of the recipient and his beneficiary who is
an individual or for a specified period of ten (10) or more years, or
(B) A distribution to the extent it is required under the minimum
distribution requirement of Section 401(a)(9) of the Code.
Effective January 1, 2000 pursuant to an administrative delay in
application of this sentence permitted by the Internal Revenue Service and
utilized by the Administrator, that portion of any hardship withdrawal
attributable to Pre-Tax Contributions (and any other contributions which the
Internal Revenue Service treats as subject to the rule of this sentence)
shall not constitute an eligible rollover distribution.
8.5(c) Any such direction shall be filed with the Administrator in such form
and at such time as the Administrator may require and shall adequately specify
the eligible retirement plan to which the payment shall be made.
8.5(d) The Trustee shall make payment as directed only if the proposed
transferee plan will accept the payment.
- 38 -
<PAGE>
8.5(e) Any such plan to plan transfer shall be considered a distribution
option under this Plan and shall be subject to all the usual distribution rules
of this Plan (including but not limited to the requirement of spousal consent,
where applicable, and an advance explanation of the option).
8.5(f) The Administrator is authorized in its discretion, applied on a
uniform and non-discriminatory basis, to apply any discretionary de minimis or
other discretionary exceptions or limitations provided for under Section
401(a)(31) of the Code in effecting or declining to effect plan to plan
transfers hereunder.
8.5(g) Within a reasonable time (generally not more than ninety (90) nor
less than thirty (30) days) before the benefit payment date of a prospective
recipient of an eligible rollover distribution from the Plan, the Administrator
shall provide the prospective recipient with a written explanation of the
rollover and tax rules required by Section 402(f) of the Code.
8.6 Notice, Election and Consent Procedures Regarding Accrued Benefit
-----------------------------------------------------------------
Payment.
- -------
8.6(a) Any election and any designation regarding, and any consent to,
payment given by a Participant or Beneficiary shall be in writing, shall clearly
indicate the election or designation being made or the consent being given, and
shall be filed with the Administrator and in accordance with the procedures
provided in the following subparagraphs to this paragraph.
8.6(b) Within a reasonable time (generally not more than ninety (90) nor
less than thirty (30) days, or any shorter period permitted under the Code)
before a Participant's non-forfeitable Accrued Benefit is to be paid to him, the
Administrator shall by mail or personal delivery provide the Participant with a
written explanation of:
(i) The terms and conditions of the applicable form of payment,
including the financial effects of the form of payment.
(ii) The Participant's right to delay receipt of his non-
forfeitable Accrued Benefit until such later date, if any, allowed under
paragraph 8.1, including the right to modify or revoke any election
thereunder.
8.6(c) Within a reasonable time before the non-forfeitable Accrued Benefit
of a Participant who died prior to commencement of payment of his Accrued
Benefit is to be paid, the Administrator shall by mail or personal delivery
provide the Participant's Beneficiary with a written explanation of:
(i) The terms and conditions of the applicable form of payment.
(ii) The Beneficiary's right to delay receipt of the Participant's
non-forfeitable Accrued Benefit until such later date, if any, allowed under
paragraph 8.1, including the right to modify or revoke any election
thereunder.
8.6(d) If a distribution is one to which Sections 401(a)(11) and 417 of the
Code do not apply (and it is intended that those sections do not apply to
distributions from this Plan), such distribution may commence to be made less
than thirty (30) days (or any shorter period permitted under the Code) after any
required notice pursuant to this paragraph or paragraph 8.5 is given so long as:
(i) The Administrator clearly informs the recipient that, where
applicable, the recipient has a right to a period of at least thirty (30)
days (or any shorter period permitted under the Code) after receiving the
notice to consider the decision of whether or not to elect or consent to a
distribution (and, if applicable, a particular distribution option), and
(ii) The recipient, after receiving the notice, affirmatively
elects a distribution.
- 39 -
<PAGE>
8.7 Benefit Determination and Payment Procedure.
-------------------------------------------
8.7(a) The Administrator shall make all determinations concerning
eligibility for benefits under the Plan, the time or terms of payment, and the
forms or manner of payment to the Participant or the Participant's Beneficiary,
in the event of the death of a Participant. The Administrator shall promptly
notify the Trustee of each such determination that benefit payments are due or
should cease to be made and provide to the Trustee all other information
necessary to allow the Trustee to carry out said determination, whereupon the
Trustee shall pay or cease to pay such benefits from the Fund in accordance with
the Administrator's determination.
8.7(b) In making the determinations described in subparagraph 8.7(a), the
Administrator shall take into account the terms of any QDRO received with
respect to the non-forfeitable Accrued Benefit of the Participant. The time and
form of payment with respect to the QDRO and the time and form of payment chosen
by the Participant or his Beneficiary or required by the Plan shall not be
altered by the terms of the QDRO (except as required under Section 414(p)(4) of
the Code or, if payment is made in the form of a Lump Sum Payment (as defined in
paragraph 8.4), as permitted under subparagraph 8.1(d)). The Administrator
shall make all determinations regarding benefit payments to be made pursuant to
a QDRO. Any benefit payment which may be subject to the terms of a domestic
relations order received by the Administrator shall be suspended during the
period the Administrator is considering whether the order is a QDRO. In the
event that benefits are in pay status at the time that a domestic relations
order is received, the Administrator shall promptly notify the Trustee of the
amount, if any, of the benefit payments that must be suspended for the period
required by the Administrator to determine the status of the order. Upon the
completion of the Administrator's review or other determination of the status of
the order, the Administrator shall promptly notify the Trustee of the time
benefit payments are to commence or resume, and of the identity of, and the
amount and form of benefits to be paid to the person or persons to whom payment
is to be made.
8.8 Claims Procedure.
----------------
8.8(a) A Participant or Beneficiary (the "claimant") shall have the right to
request any benefit under the Plan by filing a written claim for any such
benefit with the Administrator on a form provided by the Administrator for such
purpose. The Administrator shall give such claim due consideration and shall
either approve or deny it in whole or in part. Within ninety (90) days
following receipt of such claim by the Administrator, notice of any approval or
denial thereof, in whole or in part, shall be delivered to the claimant or his
duly authorized representative or such notice of denial shall be sent by mail to
the claimant or his duly authorized representative at the address shown on the
claim form or such individual's last known address. The aforesaid ninety (90)
day response period may be extended to one hundred eighty (180) days after
receipt of the claimant's claim if special circumstances exist and if written
notice of the extension to one hundred eighty (180) days indicating the special
circumstances involved and the date by which a decision is expected to be made
is furnished to the claimant within ninety (90) days after receipt of the
claimant's claim. Any notice of denial shall be written in a manner calculated
to be understood by the claimant and shall:
(i) Set forth a specific reason or reasons for the denial,
(ii) Make specific reference to the pertinent provisions of the
Plan on which any denial of benefits is based,
(iii) Describe any additional material or information necessary for
the claimant to perfect the claim and explain why such material or
information is necessary, and
(iv) Explain the claim review procedure of subparagraph 8.8(b).
If a notice of approval or denial is not provided to the claimant within the
applicable ninety (90) day or one hundred eighty (180) day period, the
claimant's claim shall be considered denied for purposes of the claim review
procedure of subparagraph 8.8(b).
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<PAGE>
8.8(b) A Participant or Beneficiary whose claim filed pursuant to
subparagraph 8.8(a) has been denied, in whole or in part, may, within sixty (60)
days following receipt of notice of such denial, or following the expiration of
the applicable period provided for in subparagraph 8.8(a) for notifying the
claimant of the decision on the claim if no notice of denial is provided, make
written application to the Administrator for a review of such claim, which
application shall be filed with the Administrator. For purposes of such review,
the claimant or his duly authorized representative may review Plan documents
pertinent to such claim and may submit to the Administrator written issues and
comments respecting such claim. The Administrator may schedule and hold a
hearing. The Administrator shall make a full and fair review of any denial of a
claim for benefits and issue its decision thereon promptly, but no later than
sixty (60) days after receipt by the Administrator of the claimant's request for
review, or one hundred twenty (120) days after such receipt if a hearing is to
be held or if other special circumstances exist and if written notice of the
extension to one hundred twenty (120) days is furnished to the claimant within
sixty (60) days after the receipt of the claimant's request for a review. Such
decision shall be in writing, shall be delivered or mailed by the Administrator
to the claimant or his duly authorized representative in the manner prescribed
in subparagraph 8.8(a) for notices of approval or denial of claims, and shall:
(i) Include specific reasons for the decision,
(ii) Be written in a manner calculated to be understood by the
claimant, and
(iii) Contain specific references to the pertinent Plan provisions
on which the decision is based.
The Administrator's decision made in good faith shall be final.
8.9 Payments to Minors and Incompetents. If a Participant or Beneficiary
-----------------------------------
entitled to receive any benefits hereunder is a minor or is adjudged to be
legally incapable of giving valid receipt and discharge for such benefits, or is
deemed so by the Administrator, benefits will be paid to such person as the
Administrator may designate for the benefit of such Participant or Beneficiary.
Such payments shall be considered a payment to such Participant or Beneficiary
and shall, to the extent made, be deemed a complete discharge of any liability
for such payments under the Plan.
8.10 Distribution of Benefit When Distributee Cannot Be Located. The
----------------------------------------------------------
Administrator shall make all reasonable attempts to determine the identity
and/or whereabouts of a Participant or Participant's Spouse or a Participant's
Beneficiary entitled to any other benefit under the Plan, including the mailing
by certified mail of a notice to the last known address shown on the Employer's,
the Administrator's or the Trustee's records. If the Administrator is unable to
locate such a person entitled to benefits hereunder, or if there has been no
claim made for such benefits, the Trustee shall continue to hold the benefit due
such person, subject to any applicable statute of escheats.
ARTICLE IX
Withdrawals and Loans
---------------------
9.1 In-Service Non-Hardship Withdrawals from After-Tax Optional Account
-------------------------------------------------------------------
and/or Rollover Account. A Participant who is employed by the Employer may make
- -----------------------
non-hardship withdrawals in whole or in part from his After-Tax Optional Account
and/or Rollover Account.
9.2 In-Service Non-Hardship Withdrawals from Unrestricted Matching
--------------------------------------------------------------
Account and/or Unrestricted Profit Sharing Account. A Participant who is
- --------------------------------------------------
employed by the Employer and who has attained the age of twenty-one (21) years
and is 100% vested in his Accrued Benefit may make non-hardship withdrawals in
whole or in part from his Unrestricted Matching Account and/or Unrestricted
Profit Sharing Account.
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<PAGE>
9.3 In-Service Non-Hardship Withdrawals from After-Tax Basic Account,
-----------------------------------------------------------------
Pre-Tax Account and/or Unrestricted QNEC Account. A Participant who is employed
- ------------------------------------------------
by the Employer and who has attained the age of fifty-nine and one-half (59-1/2)
years may make non-hardship withdrawals in whole or in part from his After-Tax
Basic Account, Pre-Tax Account and/or Unrestricted QNEC Account.
9.4 In-Service Hardship Withdrawals from After-Tax Basic Account, Pre-Tax
---------------------------------------------------------------------
Account, Unrestricted Matching Account and/or Unrestricted Profit Sharing
- -------------------------------------------------------------------------
Account.
- -------
9.4(a) A Participant who is employed by the Employer and who suffers a
Severe Hardship may, upon written request approved by the Administrator, make a
hardship withdrawal from his After-Tax Basic Account, Unrestricted Matching
Account (to the extent vested), Unrestricted Profit Sharing Account (to the
extent vested), and all or that portion of the balance of his Pre-Tax
Contributions then considered held in his Pre-Tax Account, which the
Administrator deems appropriate to relieve such hardship. Unless the
Administrator provides for a different ordering, Severe Hardship withdrawals
shall be made first from the Participant's After-Tax Basic Account, then from
his Pre-Tax Account, then from his Unrestricted Matching Account, and lastly
from his Unrestricted Profit Sharing Account.
9.4(b) "Severe Hardship" of a Participant for purposes of this paragraph
shall be determined by the Administrator upon review of each situation and in
accordance with the following objective standard and means an immediate and
heavy need for financial assistance in meeting obligations incurred or to be
incurred by the Participant, taking into account the Participant's other
reasonably available resources, as provided below. A Severe Hardship shall be
considered to exist only where the conditions of both of the following clauses
(i) and (ii) are satisfied:
(i) The immediate and heavy need requirement shall be considered
satisfied only where the need is on account of any of the following:
(A) Medical expenses (to the extent not reimbursable or compensable
by any plan, program, insurance or otherwise) described in Section
213(d) of the Code of the Participant, the Participant's spouse or any
of the Participant's dependents (as defined in Section 152 of the
Code).
(B) Acquisition (excluding mortgage payments) of a dwelling unit
which within a reasonable time is to be used (determined at the time
the withdrawal is made) as the principal residence of the Participant.
(C) Payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the Participant,
the Participant's spouse, the Participant's children or any of the
Participant's dependents (as defined in Section 152 of the Code).
(D) Prevention of eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's
principal residence.
The amount of the immediate and heavy financial need may include any amounts
necessary to pay any federal, state or local income taxes or penalties
reasonably anticipated to result from the Severe Hardship distribution.
(ii) The other reasonably available resources requirement shall be
considered satisfied only when all of the following occur:
(A) The distribution from the Plan does not exceed the amount of
the immediate and heavy need plus the projected income tax liability
on the amount to be withdrawn (taking into account the following
described currently available funds).
- 42 -
<PAGE>
(B) The Participant has obtained all currently available
distributions, other than Severe Hardship under this Plan and
comparable hardship distributions under other qualified plans, under
this Plan and all other qualified plans maintained by the Employer.
(C) The Participant has obtained all currently available non-
taxable loans under this Plan and all other qualified plans maintained
by the Employer.
(D) The Participant agrees to a suspension of his Elective
Deferrals (as defined in Appendix D to the Plan) to this Plan and all
his employee contributions (other than mandatory employee
contributions to a defined benefit plan and rollover contributions to
any plan) to all other qualified plans and non-qualified plans of
deferred compensation (other than health or welfare benefit plans)
maintained by the Employer, including, but not limited to stock
option, stock purchase and similar plans, for a period of one year
after receipt of the Severe Hardship distribution and all applicable
plans so provide.
(E) The Participant agrees that his Elective Deferrals (as defined
in Appendix D to the Plan) to this Plan and all other qualified plans
maintained by the Employer for the calendar year immediately following
the calendar year in which the Severe Hardship distribution is made
shall be limited to the excess of (I) the Elective Deferral Dollar
Limit (as defined in Appendix D to the Plan) for such next calendar
year over (II) the amount of such Participant's Elective Deferrals to
this Plan and such other qualified plans maintained by the Employer
for the calendar year in which the Severe Hardship distribution is
made.
The Participant contribution suspension and limitation requirements of
clauses (ii)(D) and (E) are hereby imposed on any Severe Hardship withdrawal
or similar hardship authorized in any other qualified plan maintained by the
Employer and shall be deemed agreed to by any Participant requesting a
Severe Hardship withdrawal or such other similar hardship withdrawal.
9.4(c) The one year Participant contribution suspension referred to in
clause (ii)(D) of subparagraph 9.3(b) shall be imposed for twelve (12) months
beginning on the first day of the payroll period next following the date of
withdrawal. For purposes hereof, separate periods of suspension under this
paragraph shall run concurrently.
9.4(d) A Participant who is an Eligible Employee may recommence his
contributions to the Plan after his applicable period of suspension has expired
on the first day of any calendar month thereafter by his delivering a new
payroll deposit election form to the Administrator no later than the fifteenth
(15th) day (or such shorter period as the Administrator on a uniform and non-
discriminatory basis may determine) of the month immediately preceding the
calendar month it is to become effective, designating the date, rate and type or
types of such recommencement of contributions.
9.4(e) For purposes hereof, unless otherwise provided in the applicable
asset transfer, plan merger or consolidation or adoption agreement, the
remaining period of any suspension from participation under any plan which is
merged into this Plan at the time of such merger shall be considered a period of
suspension under this paragraph during which Participants may not contribute to
the Plan.
9.5 Withdrawal Restrictions and Procedure.
-------------------------------------
9.5(a) A Participant shall not make more than two (2) non-hardship
withdrawals in any Plan Year. Withdrawals from more than one account made at
the same time shall only count as one withdrawal.
9.5(b) The amount of any withdrawal from any such account shall not be less
than $100, unless the Participant's account balance is less than $100 in which
case the then balance in the account may only be withdrawn or unless such
withdrawal would require a suspension from active participation in which case
the amount which would not cause a suspension may be withdrawn.
- 43 -
<PAGE>
9.5(c) All withdrawals shall be made only by filing a written withdrawal
request form with the Administrator in which the amount of withdrawal and the
account(s) and the Fund division(s) from which the withdrawal is to be made and,
if applicable, the Severe Hardship and such other information (including but not
limited to certifications regarding no other cash resources and/or no other
resources for purposes of determining the existence of a Severe Hardship)
pertaining thereto as the Administrator may deem appropriate are stated.
9.5(d) Notwithstanding any of the other provisions of this ARTICLE IX, the
Administrator may on a uniform and non-discriminatory basis at any time and from
time to time suspend or limit the withdrawal rights under this ARTICLE IX
(except to the extent prohibited by Section 411(d)(6) of the Code).
9.6 Payment of Withdrawals.
----------------------
9.6(a) All non-hardship withdrawals shall be made within a reasonable time
and at such time or times as are determined by the Administrator after the
Participant's non-hardship withdrawal request is delivered to the Administrator
or his hardship withdrawal request is approved by the Administrator, as the case
may be, and shall be made in cash.
9.6(b) The amount of any withdrawal shall be determined on the basis of the
value of the Participant's accounts from which the withdrawal is made as of the
most recent Valuation Date for which the valuation adjustments under paragraph
4.5 have been completed prior to the date of payment of the withdrawal,
decreased by any withdrawals or other distributions since such Valuation Date.
9.6(c) Unless otherwise determined by the Administrator from time to time on
a uniform and non-discriminatory basis applied prospectively or, to the extent
otherwise permitted by the Administrator, as specifically designated by the
Participant in his withdrawal request, each withdrawal by a Participant shall be
made in the following order, with availability being determined on the basis of
the circumstances (such as hardship, severe hardship, non-hardship, the age of
the Participant, the time contributions have been in the Plan, the length of the
Participant's active participation in the Plan as provided herein) surrounding
the withdrawal:
(i) First from his accounts in the following order:
(A) First his After-Tax Account, with withdrawals being made first
from his After-Tax Optional and then from his After-Tax Basic Account,
(B) Then his Rollover Account,
(C) Then his Pre-Tax Account,
(D) Then his Unrestricted QNEC Account, and
(E) Then his Unrestricted Matching Account (to the extent vested),
with withdrawals being made first from his Matching Non-forfeitable
Account and then from his Matching Active Account,
(F) Lastly his Unrestricted Profit Sharing Account (to the extent
vested), with withdrawals being made first from his Profit Sharing
Non-forfeitable Account and then from his Profit Sharing Active
Account.
Withdrawals are not available from a Participant's Company Stock QNEC
Account, Company Stock Matching Account or Company Stock Profit Sharing
Account.
(ii) Then with the withdrawals being made first from the Fund
division(s) in each account in the following:
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<PAGE>
(A) First the First Union Stable Portfolio Group Trust
(B) Then the Evergreen Short-Intermediate Bond Fund: Class Y,
(C) Then the Fidelity Puritan Fund,
(D) Then the First Union Enhanced Stock Market Fund,
(E) Then the Fidelity Advisor Growth Opportunities Fund: Class A,
(F) Lastly the Company Stock Fund.
9.6(d) Whenever withdrawals are permitted from the Company Stock Fund (if at
all), they shall be made in cash and not in the form of Company Stock.
9.6(e) All withdrawals shall be subject to the plan to plan rollover
transfer distribution option provided in paragraph 8.5.
9.7 No Withdrawal Restoration. No restoration of amounts withdrawn shall
-------------------------
be permitted.
9.8 Loans.
-----
9.8(a) Loans from the Fund may be made to Participants (such term for
purposes of this paragraph is intended to include deceased Participants'
Beneficiaries who are entitled to the Participant's non-forfeitable Accrued
Benefit for purposes of making loans from the Plan) who are employed by the
Employer or who otherwise are "parties in interest" (as defined in Section 3(14)
of the Act) on written application therefor delivered to the Administrator,
subject to the following rules:
(i) Loans must be adequately secured, which may include or consist
of use of a Participant's non-forfeitable Accrued Benefit as security,
provided however that:
(A) Not more than fifty percent (50%) of a Participant's non-
forfeitable Accrued Benefit may be considered adequate security for
such purpose, and
(B) Any pledge and assignment of a Participant's non-forfeitable
Accrued Benefit shall be ineffective and void for any period of time
during which the loan fails to comply with the provisions of Section
4975(d)(1) of the Code and Section 408(b)(1) of the Act.
(ii) Loans must be approved by the Administrator in accordance with a
uniform, non-discriminatory policy established, and which thereafter may be
modified or suspended from time to time, by the Administrator. The
Administrator's loan policy shall be considered a part of the Plan and shall
at a minimum contain:
(A) A procedure for applying for loans,
(B) The basis on which loans will be approved or denied,
(C) Limitations, if any, on the types and amounts of loans
available,
(D) The procedure for determining a reasonable interest rate,
- 45 -
<PAGE>
(E) The types of collateral which may secure a loan,
(F) The events constituting a default and the steps that will be
taken to preserve the Plan assets in the event of a default.
(iii) Loans must be available to all Participants on a reasonably
equivalent basis.
(iv) Loans must not be made available to Highly Compensated
Employees in an amount of and/or percentage of their non-forfeitable Accrued
Benefits or some combination thereof greater than that made available to
other Participants.
(v) Loans must not exceed with respect to any Participant (when
added to the outstanding balance of all loans to the Participant from the
Plan and all other qualified employer plans of the Employer and of each
Affiliate) the lesser of:
(A) $50,000, reduced by the excess of (I) the Participant's highest
aggregate outstanding balance in the preceding twelve (12) months
under this Plan and such other plans over (II) his aggregate
outstanding balance under this Plan and such other plans on the date
on which the loan in question is made,
(B) One-half of the sum of the Participant's non-forfeitable
Accrued Benefit under this Plan and non-forfeitable accrued benefits
(exclusive of his accumulated deductible employee contributions within
the meaning of Section 72(o)(5)(B) of the Code) under such other
plans, or
(C) With respect to loans from this Plan only, his vested Accrued
Benefit (exclusive of amounts held in his Company Stock Matching
Account, Company Stock Profit Sharing Account and Company Stock QNEC
Account) which is not held in the Loan Fund.
(vi) Loans must bear a reasonable rate of interest (which means a
commercially reasonable rate of interest), which may be fixed or variable
and which may vary between Participants based on the term of the loan, the
security provided and such other considerations deemed desirable by the
Administrator.
(vii) Notwithstanding the foregoing, unless the Secretary of Labor
or his delegate grants an administrative exemption from the prohibited
transaction rules with respect to such loan, no loan shall be made to any
Participant who is a shareholder-employee (as defined in Section 1379 of the
Code, as in effect on the day before the date of enactment of the Subchapter
S Revision Act of 1982) of the Employer or who is a member of the family (as
defined in Section 267(c)(4) of the Code) of such a shareholder-employee.
9.8(b) The loan policy of the Administrator shall include considerations
such as creditworthiness and may include financial need and any other
considerations deemed desirable by the Administrator.
9.8(c) All loans shall require repayment by substantially level amortization
with payments not less frequently than quarterly and shall otherwise be repaid
in the manner and within a specified period of time as determined by the
Administrator, but in no event to exceed ten (10) years for "home loans" or five
(5) years for all other loans. For purposes hereof a "home loan" is any loan
used to acquire any dwelling unit which within a reasonable time is to be used
(determined at the time the loan is made) as a principal residence of the
Participant.
9.8(d) The Employer shall cooperate with the Administrator and the Trustee
in enforcing prompt repayment of all such loans and installments thereon. The
entire balance of principal and interest then due on all such loans upon which a
Participant is then liable shall be deducted by offset from any distributions or
benefits paid to or with respect to such Participant from the Loan fund and
shall be applied to the payment of such balance.
- 46 -
<PAGE>
9.8(e) Every loan applicant shall receive a clear statement of the charges
involved in each loan transaction. This statement shall include the dollar
amount and annual interest rate of the finance charge.
9.8(f) Notwithstanding the foregoing, the Administrator may on a non-
discriminatory basis, among other things, set minimum loan amounts (not to
exceed $1,000), minimum repayment amounts, more restrictive loan limits, and/or
a maximum number of outstanding loans for any Participant at any one time, may
impose a loan processing and/or administrative charge, may restrict accounts
from which loans are made, may require repayment by payroll deduction, and may
suspend loan rights from time to time.
9.8(g) Upon the making of a loan to a Participant pursuant to this
paragraph, the Trustee shall transfer to a segregated account for the
Participant in the Loan Fund an amount equal to the principal amount of such
loan (unless otherwise determined by the Administrator from time to time on a
uniform and non-discriminatory basis applied prospectively and stated in the
Plan's loan policy):
(i) First from his accounts in the following order:
(A) First his After-Tax Account, with transfers being made first
from his After-Tax Optional and then from his After-Tax Basic Account,
(B) Then his Rollover Account,
(C) Then his Pre-Tax Account,
(D) Then his Unrestricted QNEC Account, and
(E) Then his Unrestricted Matching Account (to the extent vested),
with transfers being made first from his Matching Non-forfeitable
Account and then from his Matching Active Account,
(F) Lastly his Unrestricted Profit Sharing Account (to the extent
vested), with transfers being made first from his Profit Sharing Non-
forfeitable Account and then from his Profit Sharing Active Account,
and
Loans are not available from a Participant's Company Stock QNEC Account,
Company Stock Matching Account or Company Stock Profit Sharing Account.
(ii) Then with the transfers being made first from the Fund
division(s) other than the Company Stock Fund and the Loan Fund in each such
tier of accounts on a pro rata basis and then from the Company Stock Fund.
9.8(h) Notwithstanding any other provision of the Plan, if a loan repayment
obligation is suspended for any part of a Participant's service in the uniformed
services of the United States (as defined in chapter 43 of title 38, United
States Code), whether or not Qualified Military Service (as defined in paragraph
4.10), such suspension shall not be taken into account for purposes of Sections
72(p), 401(a) or 4975(d)(1) of the Code and, if the Administrator permits, for
purposes of the loan term and similar rules of the Plan.
9.8(i) In the event of a Participant's default where the default continues
after any applicable grace or catch-up period, if any, permitted by the
Administrator on a uniform and non-discriminatory basis, the Administrator shall
treat the loan as an offset against the Participant's non-forfeitable Accrued
Benefit by distribution of the Participant's promissory note(s) marked paid and
satisfied.
- 47 -
<PAGE>
9.9 Instructions to Trustee. The Administrator, upon determination
-----------------------
that a requested withdrawal or loan is permissible under the Plan, shall
immediately notify the Trustee, who shall pay from the Fund the amount of the
withdrawal or loan in accordance with the Administrator's instructions and, in
the case of a withdrawal, shall deduct the amount thereof from the Participants'
account in the Fund or transfer the amount to a segregated account in the Fund
as designated by the Administrator.
ARTICLE X
The Fund
--------
10.1 Trust Fund and Exclusive Benefit. The Trustee shall receive all
--------------------------------
contributions under and all assets transferred to the Plan and shall invest and
administer them as a trust fund (the "Fund") for the exclusive benefit of the
Participants and Beneficiaries hereunder in accordance with the Plan. Except as
otherwise expressly provided herein, no part of the corpus or income of the Fund
shall revert to or be used or enjoyed by the Employer or be used for, or
diverted to, purposes other than the exclusive benefit of the Participants or
their Beneficiaries and the defrayal of reasonable expenses of the Plan and
Fund. The rights of all persons hereunder are subject to the terms of the Plan.
10.2 Plan and Fund Expenses. Unless or to the extent not paid by the
----------------------
Employer without being advanced subject to reimbursement (which shall make such
payments as directed by the Plan Sponsor) or unless prohibited by the Act or the
Code, all expenses of the Plan and the Fund, including reasonable legal,
accounting, custodial, brokerage, consulting and other fees and expenses
incurred in the establishment, amendment, administration and termination of the
Plan or the Fund and/or the compensation of the Trustee and other fiduciaries of
the Plan to the extent provided under the Plan, and all taxes of any nature
whatsoever, including interest and penalties, assessed against or imposed upon
the Fund or the income thereof shall be paid out of the Fund and shall
constitute a charge upon the Fund. The Plan Sponsor may cause the Employer to
advance any or all such expenses and/or taxes on behalf of the Fund, subject to
the Employer's right of reimbursement from the Fund if so directed by the Plan
Sponsor and to the applicable prohibited transaction provisions of the Act and
the Code.
10.3 Reversions to the Employer.
--------------------------
10.3(a) If a contribution by the Employer is made under a mistake of fact,
upon written direction by the Plan Sponsor, the Trustee shall return to the
Employer an amount equal to such mistaken contribution, less any losses
attributable to such mistaken contribution, within one year after payment of
such contribution. If a contribution by the Employer is made conditioned upon
its deductibility for federal income tax purposes and there is a final
determination of the disallowance of a deduction under Section 404 of the Code
for such contribution or portion thereof, upon written direction by the Plan
Sponsor, the Trustee shall return to the Employer an amount equal to the amount
of such contribution or portion thereof so disallowed, less any losses
attributable to such contribution, within one year after such final
determination. Notwithstanding anything to the contrary in the foregoing, any
such return shall be limited to an amount which would not cause the balance of
any Participant's account to be reduced to less than the balance such
Participant's account would have been had such amount not been contributed.
10.3(b) If the Internal Revenue Service determines that the Plan does not
initially qualify under Section 401 of the Code with respect to any Employer
which has adopted the Plan provided it has submitted an application for a
determination within one year after its adoption of the Plan, the Trustee shall
return to such Employer (unless otherwise directed to be distributed to
Participants or, if deceased, their Beneficiaries) and to its Participants (or
if deceased, their Beneficiaries) within one year after the date of notice of
such disqualification, all assets attributable to contributions which the
Trustee has received from such Employer and its Participants, respectively, and
shall return to the predecessor funding agent or distribute to Participants or,
if deceased, their Beneficiaries, all assets attributable to funds of any
predecessor plan received by the Trustee, all as directed by the Plan Sponsor.
Upon such return, the Plan shall terminate with respect to such Employer.
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<PAGE>
10.3(c) After the termination of the Plan as a whole and after all fixed
and contingent liabilities of the Fund to Participants and their Beneficiaries
have been satisfied, any remaining assets of the Fund held pursuant to paragraph
4.5 shall be distributed to the Employer as the Plan Sponsor may direct.
10.4 No Interest Other Than Plan Benefit. Nothing contained herein
-----------------------------------
shall be deemed to give any Participant or Beneficiary any interest in any
specific part of the Fund or any interest other than his right to receive
benefits in accordance with the provisions of the Plan.
10.5 Payments from the Fund. The Trustee shall make all payments from
----------------------
the Fund which become due hereunder in accordance with the written instructions
or directions of the Administrator. In directing the Trustee to make any
payments or deliveries out of the Fund, the Administrator shall follow the
provisions of the Plan. The Trustee acting in accordance with such instructions
or directions shall be fully protected and indemnified by the Employer in
relying upon any such written instruction or direction which the Trustee
reasonably and in good faith believes to be proper.
10.6 Fund Divisions.
--------------
10.6(a) The Fund shall be held in divisions (sometimes referred to as
"divisions of the Fund", "Fund divisions" or "investments funds" herein) as
hereinafter provided, and each account under the Plan shall be subdivided to
reflect its interest in each Fund division.
10.6(b) The Fund divisions which shall be maintained in the Fund are as
follows:
(i) Company Stock Fund - The Company Stock Fund shall be
------------------
established effective March 31, 1997 and shall be a pooled investment fund
consisting of and invested primarily in Company Stock and such short-term
temporary investments and such cash balances as the Trustee deems
appropriate. It is generally expected that after accumulating a reasonable
reserve for day to day administration, Company Stock will represent
approximately at least 95% of the total assets of the Company Stock Fund,
and cash reserves and temporary investments represent the remaining assets.
(ii) Loan Fund - The Loan Fund shall consist of loans made to
---------
Participants pursuant to paragraph 9.8, which shall be considered directed
investments of each such Participant, of principal and interest payments
thereon.
(A) As provided in paragraph 9.8, an amount equal to the principal
amount of a loan to a Participant shall be segregated from such
Participant's account or accounts within the other Fund divisions.
(B) Payments of the principal of and payments of interest on a loan
to a Participant shall be transferred upon payment pro rata:
(I) To the Participant's unsegregated accounts in the Fund in
the reverse order from which funds were transferred from such
accounts to the Participant's segregated account in the Loan Fund
for purposes of making such loan, and
(II) To the Fund divisions determined on the basis of the
Participant's contribution investment direction then in effect
under paragraph 10.7.
(iii) Named Fund Divisions in Appendix E - The regulated investment
----------------------------------
companies, collective trust funds and/or mutual funds authorized for
investment as provided in Appendix E to the Plan, which appendix may be
modified from time to time by the Plan Sponsor.
10.7 Participant Investment Directions.
---------------------------------
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<PAGE>
10.7(a) Except as otherwise provided in the applicable plan asset transfer
or merger agreement, in the case of the direct transfer of assets to the Plan on
behalf of a Participant, such transferred assets (or the proceeds from the sale
thereof) which are allocated to his Directable Accounts shall initially be
invested in the Available Fund Divisions, in whole multiples of the Permitted
Direction Percentage (but not exceeding one hundred percent (100%) in the
aggregate), as directed by the Participant (or, if deceased, his Beneficiary)
for whom transferred in accordance with the direction filing requirements
therefor established by the Administrator.
10.7(b) Upon becoming a Participant without a contribution investment
direction in force, or upon a Participant's making a Rollover Contribution or
repayment pursuant to paragraph 6.6 without a contribution investment direction
in force, he may direct that such contribution or repayment and his allocable
share of future Directable Contributions be invested, in whole multiples of the
Permitted Direction Percentage (but not exceeding one hundred percent (100%) in
the aggregate), in the Available Investment Funds by filing a "contribution
investment direction" with the Administrator at such time.
10.7(c) In accordance with procedures established by the Administrator from
time to time:
(i) Contribution Investment Direction - A Participant may make a
---------------------------------
"contribution investment direction" by directing that whole multiples of the
Permitted Direction Percentage (but not exceeding one hundred percent (100%)
in the aggregate) of his allocable share of future Directable Contributions
be invested in the Available Fund Divisions. Any such contribution
investment direction shall be effected for contributions made after each
subsequent Contribution Investment Direction Change Date for which such
direction is timely delivered to the Administrator (or its designee); and/or
(ii) Account Balance Investment Direction - A Participant (or, if
------------------------------------
deceased, his Beneficiary) may make an "account balance investment
direction" by directing that whole multiples of the Permitted Direction
Percentage (but not exceeding one hundred percent (100%) in the aggregate)
of his Directable Accounts be invested in the Available Fund Divisions. Any
such account balance investment direction shall be effective as of and for
the Account Balance Investment Direction Change Date for which such
direction is timely delivered to the Administrator (or its designee).
10.7(d) If or to the extent a Participant (or if deceased, his Beneficiary)
has no investment direction in effect, his Directable Contributions and
Directable Accounts shall be invested in the Fund division designated as the
Default Fund in Appendix E to the Plan.
10.7(e) For purposes of this paragraph and subject to the provisions of
subparagraph 10.7(e):
(i) The term "Account Balance Investment Direction Change Date"
means each Valuation Date.
(ii) The term "Available Fund Divisions" means the Company Stock
Fund and the named investment funds listed in Appendix E.
(iii) The term "Directable Accounts" means all accounts, or parts of
accounts, of the Participant other than those parts held in the Company
Stock Matching Account, the Company Stock Profit Sharing Account, the
Company Stock QNEC Account, or the Loan Fund.
(iv) The term "Directable Contributions" means (A) all
contributions made by the Participant and (B) all contributions made by the
Employer (other than contributions by the Employer required to be invested
in the Company Stock Fund pursuant to subparagraph 3.2(c) - that is,
contributions allocated to the Company Stock Matching Account, the Company
Stock Profit Sharing Account, or the Company Stock QNEC Account,).
(v) The term "Contribution Investment Direction Change Date" means
each Valuation Date.
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<PAGE>
(vi) The term "Permitted Direction Percentage" means five percent
(5%) or any lesser percentage or any dollar amount permitted by the
Administrator from time to time.
10.7(f) The Plan is intended to constitute a plan described in Section
404(c) of the Act and Title 29 of the Code of Federal Regulations Section 2550-
404c-1 under which Participants may direct investments. It is intended that
fiduciaries of the Plan shall act accordingly and may thereby be relieved of
liability for investment losses which are the result of Participant and
Beneficiary investment directions regarding allocation of accounts and
contributions among the available divisions of the Fund to the maximum extent
permitted under Section 404(c) of the Act.
10.8 Investment Authority of the Administrator.
-----------------------------------------
10.8(a) The Administrator may on a uniform and non-discriminatory basis
require the entire Accrued Benefit (other than that held in the Company Stock
Matching Account) of one or more Participants and/or Beneficiaries be invested
in the Default Fund designated in Appendix E to the Plan in the event that the
person cannot be located or is not competent to make an investment direction or
that there is a dispute as to the proper recipient of the Participant's Accrued
Benefit.
10.8(b) The Administrator may on a uniform and non-discriminatory basis
from time to time may set or change the advance notice requirement for effecting
investment directions, may limit the number of investment direction changes made
in a Plan Year, may limit investment directions which be can made by telephone,
and generally may change any of the investment direction procedures.
10.8(c) The Administrator in its discretion may suspend from time to time
and at any time the maintenance and/or offering of any Fund division as a
Participant directed investment alternative hereunder, whereupon, and
notwithstanding anything to the contrary herein, no investment directions
pursuant hereto shall be permitted in such Fund division for the period of any
such suspension.
10.9 Provisions Relating to Insurer.
------------------------------
10.9(a) No Insurer shall be deemed a party to the Plan or responsible for
the validity thereof.
10.9(b) No Insurer shall be required to determine either:
(i) That a person for whom the Trustee applies for a Policy is, in
fact, eligible for participation or entitled to benefits under the Plan,
(ii) Any fact necessary for the proper issuance of any Policy or
Contract, or
(iii) The proper distributions or further application of any moneys
paid by it to the Trustee in accordance with the written direction of the
Trustee;
and with respect to each of the foregoing, the Insurer shall be fully
indemnified and protected in relying upon the advice and direction of the
Trustee.
10.9(c) Any notice, direction, application or other communication
whatsoever shall be accepted by the Insurer as duly authorized and executed if
signed by the Trustee. The Insurer shall be fully protected in assuming that
the Trustee is as shown in the latest notification received by it at its home
office.
ARTICLE XI
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<PAGE>
Fiduciaries
-----------
11.1 Named Fiduciaries and Duties and Responsibilities. Authority to
-------------------------------------------------
control and manage the operation and administration of the Plan shall be vested
in the following, who, together with their membership, if any, shall be the
Named Fiduciaries under the Plan with those powers, duties, and responsibilities
specifically allocated to them by the Plan:
11.1(a) Trustee - The Trustee in connection with its fiduciary obligations
-------
relating to the Plan and the Fund.
11.1(b) Plan Sponsor - The Plan Sponsor in connection with its fiduciary
------------
obligations and rights relating to the Plan and the Fund.
11.1(c) Plan Administrator - The Plan Administrator in connection with its
------------------
fiduciary obligations and rights relating to the Plan and the Fund.
11.1(d) Board - The Board in connection with its fiduciary obligations and
-----
rights relating to the Plan and the Fund.
11.2 Limitation of Duties and Responsibilities of Named Fiduciaries. The
--------------------------------------------------------------
duties and responsibilities, and any liability therefor, of the Named
Fiduciaries provided for in paragraph 11.1 shall be severally limited to the
duties and responsibilities specifically allocated to each such Named Fiduciary
in accordance with the terms of the Plan, and there shall be no joint duty,
responsibility, or liability among any such groups of Named Fiduciaries in the
control and management of the operation and administration of the Plan.
11.3 Service by Named Fiduciaries in More Than One Capacity. Any person
------------------------------------------------------
or group of persons may serve in more than one Named Fiduciary capacity with
respect to the Plan (including both service as Trustee and Plan Administrator).
11.4 Allocation or Delegation of Duties and Responsibilities by Named
----------------------------------------------------------------
Fiduciaries. By written agreement filed with the Plan Administrator and the
- -----------
Plan Sponsor, the duties and responsibilities of the Trustee with respect to the
management and control of the assets of the Fund may, with the written consent
of the Plan Sponsor, be allocated among the Trustees (if there are two or more
persons so serving) and any other duties and responsibilities of any Named
Fiduciary may be allocated among Named Fiduciaries or may, with the consent of
the Plan Sponsor, be delegated to persons other than Named Fiduciaries. The
delegation permitted under this paragraph includes the Trustee's right to select
a custodian (other than a Custodian for any separate trust established pursuant
to paragraph 12.8) to hold the assets of the Fund. Any written agreement shall
specifically set forth the duties and responsibilities so allocated or
delegated, shall contain reasonable provisions for termination, and shall be
executed by the parties thereto.
11.5 Investment Manager.
------------------
11.5(a) The Board may appoint one or more Investment Managers to manage all
or any portion of the Fund. The appointment of any such Investment Manager
shall be by written agreement, which shall specify the scope of the powers and
duties of such Investment Manager, shall contain reasonable provisions for the
termination of such appointment, may require or allow any Investment Manager to
perform or to select the person performing asset custodial services for all or
part of the Fund, and shall be executed by the parties thereto and acknowledged
by the Trustee. An Investment Manager appointed pursuant to any such agreement
shall acknowledge therein its status as a fiduciary with respect to the Plan.
11.5(b) In the event an Investment Manager is appointed for all or part of
the assets of the Fund, the Trustee shall follow the directions of the
Investment Manager in managing and controlling the assets of the Fund subject to
the direction and control of the Investment Manager. The Investment Manager
shall be governed by the powers and restrictions imposed on the Trustee in its
management and control of the Fund.
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<PAGE>
11.6 Assistance and Consultation. A Named Fiduciary, and any delegate
---------------------------
named pursuant to paragraph 11.4, may engage agents to assist in its duties and
may consult with counsel, who may be counsel for the Employer, with respect to
any matter affecting the Plan or its obligations and responsibilities hereunder,
or with respect to any action or proceeding affecting the Plan. All
compensation and expenses of such agents and counsel shall be paid or reimbursed
from the Fund, except to the extent prohibited by the Act or the Code and except
to the extent paid or reimbursed by the Employer.
11.7 Indemnification. The Employer shall indemnify and hold harmless
---------------
any individual who is a Named Fiduciary or a member of a Named Fiduciary under
the Plan and any other individual to whom duties of a Named Fiduciary are
delegated pursuant to paragraph 11.4, to the extent permitted by law, from and
against any liability, loss, cost or expense arising from their good faith
action or inaction in connection with their responsibilities under the Plan.
11.8 Funding Policy. The Board shall establish and communicate to the
--------------
Trustee a funding policy consistent with the current and long-term financial
needs of the Plan with respect to the ages of the Participants in the Plan and
other such relevant information; provided, however, that nothing in this
subparagraph shall be construed as granting to the Board any power or authority
with respect to the control and management of the Fund.
11.9 Standard of Conduct.
-------------------
11.9(a) The Named Fiduciaries and all other fiduciaries under the Plan
shall each discharge their duties with respect to the Plan and the Fund solely
in the interest of the Participants and Beneficiaries, in accordance with the
applicable provisions of the Act and the Code and:
(i) For the exclusive purpose of providing benefits to
Participants and Beneficiaries, and defraying reasonable expenses of
administering the Plan and the Fund to the extent permitted by the Plan and
any separate trust or custodial agreement;
(ii) With the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of
a like character and with like aims;
(iii) By diversifying investments of the Fund in accordance with the
requirements of the Act so as to minimize the risk of large losses, unless
under the circumstances it is clearly prudent not to do so; and
(iv) In accordance with the terms of the Plan and any other plan
documents insofar as they are consistent with the Act.
11.9(b) In the exercise of their authority under the Plan, the Named
Fiduciaries and all other fiduciaries under the Plan shall take cognizance of
and be inhibited by those limitations and prohibitions contained in Section 406
of the Act and the prohibited transaction provisions of Section 4975 of the
Code, for which no exemption is applicable.
ARTICLE XII
The Trust Fund
--------------
12.1 Trustee Powers and Duties. Subject to the following provisions of
-------------------------
this ARTICLE XII, the Trustee shall commingle and jointly invest, or where
specifically provided herein shall segregate and separately invest, the assets
of the Fund, without distinction between corpus and income.
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<PAGE>
12.1(a) The Trustee shall hold the Fund in trust, shall have the following
general powers granted in this paragraph, subject to the directions,
limitations, restrictions or prohibitions imposed hereunder, and, except as
otherwise specifically provided herein, shall have exclusive authority and
discretion in its management and control of the Fund.
(i) The Trustee shall invest and reinvest the Fund in such stocks,
stock options (whether or not covered), warrants and rights, puts, calls,
stock-index futures, bonds, securities, commodities, commodity futures and
options, loans to Participants if and subject to conditions expressly
authorized in the Plan, real estate mortgages, real estate investment trusts
or funds, real estate, partnership interests, mutual funds, closed-end
investment companies, regulated investment companies or trusts, common,
collective or group trust funds (except as otherwise limited hereunder) and
other investments, and in such proportion, as may be deemed suitable for the
purposes and the funding policy hereof.
(ii) Such investments shall not be restricted to property and
securities of the character authorized for investment by trustees under any
present or future laws, with the exception of the Act.
(iii) To the extent permitted by law, the Trustee is expressly
authorized to invest and reinvest the Fund and to execute any joinder or
similar agreement therefor on behalf of the Plan:
(A) In any general common trust fund qualifying under Section 584
of the Code and maintained by any person, including but not limited to
the Trustee or any affiliate of the Trustee in the same bank holding
system affiliated group, as defined in Section 1504 of the Code, as
the Trustee (if the Trustee and any such affiliate are banks or trust
companies supervised by a state or federal agency) and/or the
Investment Manager or any affiliate of the Investment Manager;
(B) In any other collective or group trust fund maintained by any
person, including but not limited to any such bank or trust company
and/or the Investment Manager or any affiliate of the Investment
Manager, and consisting solely of assets of qualified retirement
trusts and/or individual retirement accounts exempt from federal
income taxation under the Code, as the Trustee or, where applicable,
the Investment Manager in its discretion may determine (whether or not
the Trustee or, where applicable, the Investment Manager is such a
bank or trust company), provided such collective or group trust is so
qualified and exempt under the Code;
(C) In whole or in part in qualifying employer securities (subject
however to any applicable securities registration requirements),
qualifying employer real property, or both, as defined by Section
407(d)(4) and (5) of the Act;
(D) In Contracts or Policies (not containing or providing life
insurance) issued to provide or fund benefits under the Plan, and in
Policies of life insurance on the lives of Participants if the Plan
expressly provides for the purchase of such Policies and the
Administrator so directs, (whether or not the Insurer is the Plan
Sponsor or any affiliate of the Plan Sponsor, or the Investment
Manager or any affiliate of the Investment Manager, if an insurance
company);
(E) In whole or in part in deposits with any bank or similar
financial institution supervised by the United States or a State,
regardless of whether such bank or other institution is a Trustee or
other fiduciary hereunder, provided such deposits shall bear a
reasonable rate of interest, except that funds may be deposited in
non-interest bearing accounts to such extent and for such time as may
be reasonably required for the orderly administration of the Plan; or
(F) In any mutual fund, closed-end investment company, regulated
investment company or trust, or similar pooled investment medium,
whether on not maintained by or advised by the Trustee or any
affiliate of the Trustee or the Investment Manager or any affiliate of
the Investment Manager.
- 54 -
<PAGE>
(iv) If an investment is made in a common, collective or group
trust, the Trustee is expressly authorized to incorporate the terms thereof
as an investment medium under and as a part of the Plan, and the terms of
such trust shall govern the investment, disposition and distribution of the
assets of such trust.
12.1(b) Subject to the requirements imposed by law, and in furtherance and
not in limitation of the Trustee's investment authority, the Trustee shall have
all powers and authority necessary or advisable to carry out the provisions of
the Plan, and all inherent, implied and statutory powers now or subsequently
provided by law, including specifically the power to do any of the following:
(i) To deal with all or any part of the Fund, including, without
limitation, to invest, reinvest and change investment;
(ii) To acquire any property by purchase, subscription, lease or
other means;
(iii) To sell for cash or on credit, convey, lease for long or short
terms, or convert, redeem or exchange all or any part of the Fund;
(iv) To borrow money for the purpose of the Fund, and for any sum
so borrowed to issue its promissory note as Trustee and to secure the
repayment thereof by pledging all or any part of the Fund;
(v) To enforce by suit or otherwise, or to waive its rights on
behalf of the Fund, and to defend claims asserted against him or the Fund;
(vi) To compromise, adjust and settle any and all claims against or
in favor of it or the Fund;
(vii) To renew, extend or foreclose any mortgage or other security;
(viii) To bid in property on foreclosure;
(ix) To take deeds in lieu of foreclosure, with or without paying a
consideration therefor;
(x) To vote, or give proxies to vote, any stock or other security,
and to oppose, participate in and consent to the reorganization, merger,
consolidation or readjustment of the finances of any enterprise, to pay
assessments and expenses in connection therewith, and to deposit securities
under deposit agreements;
(xi) To hold Plan assets unregistered (including in bearer form),
or to register them in its own name, in street name or in the names of
nominees who are within the jurisdiction of the district courts of the
United States and are either banks or trust companies that are subject to
supervision by the United States or a state thereof, brokers or dealers
registered under the Securities Exchange Act of 1934, clearing agencies as
defined in Section 3(a)(23) of the Securities Exchange Act of 1934,
permissible nominees of any of the foregoing, or any other persons or
entities permitted to act as nominee for the Trustee under Section 403 of
the Act, provided the books and records of the Fund shall at all times
reflect that the Fund is the beneficial owner of such securities;
(xii) To make, execute, acknowledge and deliver any and all
instruments that it shall deem necessary or appropriate to carry out the
powers herein granted; and
(xiii) Generally to exercise any of the powers of an owner with
respect to all or any portion of the Fund.
Except as provided in the Act, no person dealing with the Trustee shall be bound
to see to the application of any money or property paid or delivered to the
Trustee or to inquire into the validity or propriety of any transaction.
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<PAGE>
12.1(c) The Trustee shall not have the power or duty to inquire into the
correctness of the amount tendered to it as required by the Plan nor to enforce
the payment of contributions thereunder by the Employer. The Trustee shall be
responsible only for such sums and assets that it actually receives as Trustee.
12.2 Accounts. The Trustee shall keep true and accurate accounts of all
--------
investments, receipts, and disbursements and other transactions hereunder, and
all accounts, books and records relating thereto shall be open to inspection and
audit at all reasonable times by any person or persons designated by the Plan
Sponsor. Within sixty (60) days after the removal or resignation of the Trustee
and at least quarterly (unless the Plan Sponsor requires less frequent reports),
the Trustee shall file with the Plan Sponsor a valuation of the assets of the
Trust, and an accounting of its transactions since the last previous such
accounting. In addition, the Plan Sponsor may require an accounting from the
Trustee at any other reasonable time. No employee and no person other than
those designated by the Plan Sponsor shall have the right to demand or be
entitled to any accounting by the Trustee except as otherwise provided by law.
12.3 Two or More Trustees. Except in the case of the appointment of a
--------------------
Separate Trustee pursuant to paragraph 12.8, in the event two or more persons
are at any time serving as Trustee hereunder, such Trustees shall jointly manage
and control the Fund; provided, however, that pursuant to paragraph 11.4 such
Trustees may enter into an agreement in writing with respect to the allocation
of specific responsibilities, obligations or duties among themselves. Any
written agreement entered into pursuant to this paragraph shall be attached to
and made a part of the Plan.
12.4 Management of Fund by Investment Manager. In the event an
----------------------------------------
Investment Manager is appointed for all or part of the assets of the Fund, the
Trustee shall follow the directions of the Investment Manager in managing and
controlling the assets of the Fund subject to the direction and control of the
Investment Manager. The Investment Manager shall be governed by the powers and
restrictions imposed on the Trustee in its management and control of the Fund.
12.5 Trustee Compensation and Expenses. Subject to applicable
---------------------------------
limitations and prohibitions under the Act, the Trustee shall be paid such
reasonable compensation and shall be reimbursed for its reasonable expenses as
shall from time to time be agreed upon by the Plan Sponsor and the Trustee.
12.6 Bond. Except as may be provided under Section 412 of the Act, the
----
Trustee shall not otherwise be required to give any bond or other security for
the faithful performance of its duties hereunder.
12.7 Trustee Resignation, Removal or Death and Appointment of Successor
------------------------------------------------------------------
or Additional Trustee.
- ---------------------
12.7(a) In the event the Trustee or Trustees serving hereunder have been
named Trustee by virtue of any office they may hold in connection with their
employment by the Plan Sponsor or any other Employer, upon leaving any such
office, such Trustee shall at once cease to be a Trustee and shall be discharged
from all further duties and responsibilities as Trustee. Upon acceptance in
writing of its status as Trustee hereunder by the successor in office of any
such Trustee, he shall become a Trustee hereunder.
12.7(b) The Trustee may resign at any time upon delivering to the Plan
Sponsor a written notice of such resignation to take effect not less than sixty
(60) days after the delivery thereof to the Plan Sponsor unless the Plan Sponsor
shall accept as adequate a shorter notice. The Trustee may be removed by the
Plan Sponsor by mailing notice by registered mail addressed to the Trustee at
his last known address, or by delivery of same to the Trustee to take effect not
less than sixty (60) days after mailing or delivery of such notification unless
notice of a shorter duration shall be accepted as adequate. The Administrator
shall be notified by the Plan Sponsor of any such resignation or removal.
12.7(c) In case of the resignation or removal of a Trustee, such Trustee
shall transfer, assign, convey and deliver to the successor or other Trustee the
trust estate as it may then be constituted and shall execute all documents
necessary for transferring the trust estate.
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<PAGE>
12.7(d) The Plan Sponsor shall forthwith appoint a successor Trustee in
case of resignation, removal or death of all Trustees appointed and then
serving. Any successor Trustee shall qualify as such by executing,
acknowledging, and delivering to the Plan Sponsor an instrument accepting such
appointment hereunder in such form as may be satisfactory to the Plan Sponsor,
which form shall become a part of this Trust document, and thereupon such
successor Trustee shall become vested with the rights, powers, discretion,
duties and obligation of its predecessor Trustee. The Administrator shall be
notified by the Plan Sponsor of any such successor Trustee.
12.7(e) In the event of the resignation, removal or death of a Trustee, the
surviving Trustee shall continue to be a Trustee hereunder.
12.7(f) The Plan Sponsor may at any time and from time to time appoint one
or more additional Trustees. The Administrator shall be notified by the Plan
Sponsor of any such additional Trustee.
12.7(g) The Trustee may, with the written consent of the Plan Sponsor, or
shall, at the written direction of the Plan Sponsor, or the Plan Sponsor may by
written direction, appoint a bank with trust powers or a trust company
(including any Trustee) as a Co-Trustee for the custody and/or investment of all
or a portion of the assets of the Fund and enter into a trust agreement with
such bank, and thereafter the Trustee shall deliver assets of the Fund to such
bank or trust company for such custody and/or investment in accordance with such
written consent or direction of the Plan Sponsor. Any such trust agreement
shall be attached to the Plan. For purposes hereof and except as otherwise
required by Section 405(b)(2) of the Act with respect to co-fiduciary
responsibility and liability:
(i) The duties and responsibilities with respect to the assets of
the Fund held by any Co-Trustee appointed pursuant to this subparagraph
shall be allocated solely to such Co-Trustee, and such Co-Trustee shall have
no duties or responsibilities with respect to the other assets of the Fund
by reason of its appointment pursuant to this subparagraph; and
(ii) Conversely, any Trustee which is not appointed as such Co-
Trustee for such assets of the Fund shall have no duties and
responsibilities with respect to the assets of the Fund held by such Co-
Trustee pursuant to this subparagraph.
Any appointment of a Co-Trustee pursuant to this subparagraph shall
automatically be considered an allocation of duties and responsibilities under
paragraph 11.4 without further action being required and it is intended to be an
allocation described in Section 405(b)(1) of the Act. The Administrator shall
be notified by the Plan Sponsor of any such appointment of a Co-Trustee pursuant
to this subparagraph.
12.8 Establishment of Separate Trusts.
--------------------------------
12.8(a) The Board may establish one or more separate trusts and appoint a
bank with trust powers, a trust company or any other person (including any
Trustee) as a Separate Trustee and if so provided a separate Custodian for the
custody and/or investment of all or a portion of the assets of the Fund and
enter into a separate trust agreement with such bank, trust company or other
person and the Trustee shall thereafter deliver assets of the Fund to such bank,
trust company or other person for such custody and/or investment in accordance
with such separate trust agreement and any written directions of the Board.
12.8(b) For purposes hereof:
(i) The duties and responsibilities of the Separate Trustee with
respect to the assets of the Fund held pursuant to the Plan shall be
allocated solely to such Separate Trustee, and such Separate Trustee shall
have no duties or responsibilities with respect to the other assets of the
Fund by reason of its appointment pursuant to this subparagraph; and
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<PAGE>
(ii) Conversely, any Trustee or Separate Trustee which is not
appointed as such Separate Trustee for such assets of the Fund shall have no
duties and responsibilities with respect to the assets of the Fund held by
such Separate Trustee pursuant to this subparagraph.
(iii) The provisions of subparagraphs 12.7(a) through (d) apply to
the appointment, resignation or removal of Separate Trustees and Custodians
as though references to Trustee were references to Separate Trustee and
Custodian, respectively.
12.8(c) Any appointment of a Separate Trustee pursuant to this subparagraph
is intended to be an establishment of a separate trust as described in Section
405(b)(3) of the Act. Upon the establishment of such a separate trust, any
Trustee currently serving shall automatically become a Separate Trustee in
accordance with the provisions of this paragraph.
12.8(d) Prior to March 31, 1997, there are no Separate Trustees, and First
Union National Bank of North Carolina is the sole Trustee. Effective as of
March 31, 1997, this Agreement shall be considered a separate trust agreement
for the purpose of establishing two separate trusts pursuant to this paragraph,
one separate trust to consist of all Fund divisions other than the Company Stock
Fund (for which no Custodian is appointed as of March 31, 1997) and the other
separate trust to consist of the Company Stock Fund (for which a Custodian is
appointed as of March 31, 1997 pursuant to a separate custodial agreement). As
of March 31, 1997, First Union National Bank of North Carolina is the Separate
Trustee for all Fund divisions other than the Company Stock Fund, Thomas M.
Mishoe, Jr. is the Separate Trustee for the Company Stock Fund, and First Union
National Bank of North Carolina is the Custodian for the Company Stock Fund.
12.8(e) The Administrator shall be notified by the Board of any appointment
of a Separate Trustee pursuant to this paragraph (other than the Separate
Trustees provided for in subparagraph 12.2(d)).
12.9 Automatic Successor Trustee by Corporate Transaction. If any
----------------------------------------------------
corporate Trustee at any time shall be merged, or consolidated with, or shall
sell or transfer substantially all of its assets and business to another
employer, domestic or foreign, or shall be in any manner reorganized or
reincorporated, then the resulting or acquiring employer shall be substituted
ipso facto for such corporate Trustee without the execution of any instrument
- ---- -----
and without any action upon the part of the Plan Sponsor, any Participant or
Beneficiary, or any other person having or claiming to have an interest in the
Fund.
ARTICLE XIII
Plan Administration
-------------------
13.1 Appointment of Plan Administrator. The Board may appoint one or
---------------------------------
more persons to serve as the Plan Administrator (the "Administrator") for the
purpose of carrying out the duties specifically imposed on the Administrator by
the Plan, the Act and the Code. In the event more than one person is appointed,
the persons shall form an administrative committee for the Plan. The person or
committeemen serving as Administrator shall serve for indefinite terms at the
pleasure of the Board, and may, by thirty (30) days prior written notice to the
Board, terminate such appointment. The Board shall inform the Trustee of any
such appointment or termination and the Trustee may assume that any person
appointed continues in office until notified of any change.
13.2 Plan Sponsor as Plan Administrator. In the event that no
----------------------------------
Administrator is appointed or in office pursuant to paragraph 13.1, the Plan
Sponsor shall be the Administrator.
13.3 Compensation and Expenses. Unless otherwise determined and paid by
-------------------------
the Employer (as directed by the Plan Sponsor), the person or committeemen
serving as the Administrator shall serve without compensation for service as
such. All expenses of the Administrator shall be paid as provided in paragraph
10.2, provided no compensation shall be paid the Administrator from the Fund to
the extent prohibited by the Act or the Code.
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13.4 Procedure if a Committee. If the Administrator is a committee, it
------------------------
shall appoint from its members a Chairman and a Secretary. The Secretary shall
keep records as may be necessary of the acts and resolutions of such committee
and be prepared to furnish reports thereof to the Trustee. Except as otherwise
provided, all instruments executed on behalf of such committee may be executed
by its Chairman or Secretary and the Trustee may assume that such committee, its
Chairman or Secretary are the persons who were last designated as such to the
Trustee in writing by the Plan Sponsor.
13.5 Action by Majority Vote if a Committee. If the Administrator is a
--------------------------------------
committee, its action in all matters, questions and decisions shall be
determined by a majority vote of its members qualified to act thereon. They may
meet informally or take any action without the necessity of meeting as a group.
13.6 Appointment of Successors. Upon the death, resignation or removal
-------------------------
of a person serving as, or on a committee which is, the Administrator, the Board
may, but need not, appoint a successor.
13.7 Additional Duties and Responsibilities. The Administrator shall
--------------------------------------
have the following duties and responsibilities in addition to those expressly
provided elsewhere in the Plan:
13.7(a) The Administrator shall be responsible for the fulfillment of all
relevant reporting and disclosure requirements set forth in the Act and the
Code, including but not limited to the preparation of necessary plan
descriptions, summary plan descriptions, annual reports, summary annual reports,
employee benefit statements, notice of forfeitability of benefits, notice of
special tax treatment (rollover, five-year or ten-year averaging and capital
gains) for distributions, and other statements or reports, the distribution
thereof to Participants and their Beneficiaries and the filing thereof with the
appropriate governmental officials and agencies.
13.7(b) The Administrator shall maintain and retain necessary records
respecting administration of the Plan and matters upon which disclosure is
required under the Act and the Code.
13.7(c) The Administrator shall make any elections for the Plan under the
Act or the Code.
13.7(d) The Administrator shall provide to Participants and Beneficiaries
such notices, including but not limited to the notice to interested parties, and
information as are required by the Plan, the Act and the Code.
13.7(e) The Administrator shall make all determinations regarding
eligibility for participation in and benefits under the Plan.
13.7(f) The Administrator shall have the right to settle claims against the
Plan and to make such equitable adjustments in a Participant's or Beneficiary's
rights or entitlements under the Plan as it deems appropriate in the event an
error or omission is discovered or claimed in the operation or administration of
the Plan.
13.8 Power and Authority.
-------------------
13.8(a) The Administrator is hereby vested with all the power and authority
necessary in order to carry out its duties and responsibilities in connection
with the administration of the Plan, including the power to interpret the
provisions of the Plan. For such purpose, the Administrator shall have the power
to adopt rules and regulations consistent with the terms of the Plan.
13.8(b) The Administrator shall exercise its power and authority in its
discretion. It is intended that a court review of the Administrator's exercise
of its power and authority with respect to matters relating to claims for
benefits by, and to eligibility for participation in and benefits of,
Participants and Beneficiaries shall be made only on an arbitrary and capricious
standard.
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13.9 Availability of Records. The Employer and the Trustee shall, at
-----------------------
the request of the Administrator, make available necessary records or other
information they possess which may be required by the Administrator in order to
carry out its duties hereunder.
13.10 No Action with Respect to Own Benefit. No Administrator who is a
-------------------------------------
Participant shall take any part as the Administrator in any discretionary action
in connection with his participation as an individual. Such action shall be
taken by the remaining Administrator, if any, or otherwise by the Plan Sponsor.
13.11 Limitation on Powers and Authority. The Administrator shall have
----------------------------------
no power in any way to modify, alter, add to or subtract from any provisions of
the Plan.
ARTICLE XIV
Amendment and Termination of Plan
---------------------------------
14.1 Amendment. The Plan may be amended in whole or in part at any time
---------
by action of the Board; provided, however, that:
(i) Except to the extent permitted or required by the Act or the
Code, neither the Accrued Benefit (nor any subsidy, early retirement
benefit, optional form of payment or any other benefit considered to be an
accrued benefit for purposes of Section 411(d)(6)(B) of the Code) of a
Participant, nor the percentage thereof which is non-forfeitable, at the
time of any such amendment shall be adversely affected thereby.
(ii) Except to the extent permitted or required by the Act or the
Code, no such amendment shall have the effect of revesting in the Employers
any part of the Fund prior to the termination of the Plan and the
satisfaction of all fixed and contingent liabilities thereunder with respect
to Participants and their Beneficiaries.
(iii) The duties and obligations of the Trustee hereunder shall not
be increased nor its compensation decreased without its written consent.
Any such amendment to the Plan shall be in writing and shall be adopted pursuant
to action by the Board (including pursuant to any standing authorization for any
officer, director or committee to adopt amendments) in accordance with its
applicable procedures, including where applicable by majority vote or consent in
writing.
14.2 Merger, Consolidation or Transfer of Assets.
-------------------------------------------
14.2(a) The merger or consolidation of or transfer of assets or liabilities
between this Plan and any other plan shall be permitted upon action by the Board
or as expressly provided elsewhere in the Plan so long as, immediately after
such merger, consolidation or transfer of assets or liabilities, each
Participant who is or may become eligible to receive an accrued benefit of any
type from this Plan (or whose Beneficiaries may be eligible to receive any such
benefit) would, if such surviving or transferee plan was then terminated, be
entitled to receive an accrued benefit at least equal to the accrued benefit to
which such Participant (and each such Beneficiary) would have been entitled had
this Plan terminated immediately prior to such merger, consolidation or transfer
of assets or liabilities.
14.2(b) With the consent of the Plan Sponsor, the Trustee may accept a
direct transfer of cash or other property to the Fund on behalf of a Participant
from a plan qualified under Section 401 or 403(a) of the Code.
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14.2(c) In the event property is received by the Trustee pursuant to this
paragraph, such property shall be valued at its fair market value on the date of
receipt by the Trustee in accordance with the method of valuation used for
purposes of paragraph 4.6 or as otherwise provided in the merger, consolidation
or asset transfer agreement.
14.2(d) Assets becoming part of the Fund by reason of any such merger,
consolidation or transfer of assets or liabilities shall be allocated to the
accounts in the Plan as provided in the merger, consolidation or asset transfer
agreement or as otherwise provided in the Plan.
14.3 Plan Permanence and Termination. The Employers have established
-------------------------------
the Plan with the intention and expectation that they will be able to make their
contributions indefinitely, but none of the Employers are or shall be under any
obligation or liability to any Participant or Employee to continue their
contributions or to maintain the Plan for any given length of time, and each may
in its sole and absolute discretion discontinue its contributions or otherwise
terminate its participation in the Plan at any time without any such liability
for such discontinuance or termination.
14.4 Lapse in Contributions. Failure by any Employer to make
----------------------
contributions to the Fund in any year or years, unless the same shall constitute
a complete discontinuance of contributions, or shall be coupled with any other
event causing a termination of its participation in the Plan, shall not
terminate the Plan or operate to vest the rights of any Participants or to
accelerate any payments or distributions to or for the benefit of any
Participants or their Beneficiaries.
14.5 Termination Events.
------------------
14.5(a) The Plan shall terminate in whole or in part as the case may be
upon the happening of any of the following events:
(i) With respect to any Employer, action by its Board terminating
the Plan as to it and specifying the date of such termination. Notice of
such termination shall be delivered to the Plan Sponsor, Trustee and the
Administrator.
(ii) With respect to any Employer, its adjudication as a bankrupt
or its general assignment to or for the benefit of its creditors or its
dissolution, unless within sixty (60) days after such event a successor
employer shall assume the terms and conditions hereof in writing.
(iii) With respect to any Employer, its complete discontinuance of
contributions.
(iv) Termination or partial termination of the Plan within the
meaning of Section 411(d)(3) of the Code, provided, however, that in the
case of a partial termination, paragraphs 14.5 through 14.8 shall only apply
to that part of the Plan which is partially terminated.
(v) With respect to any Employer other than the Plan Sponsor,
upon its ceasing to be an Affiliate with respect to the Plan Sponsor.
(vi) Action by the Board of the Plan Sponsor terminating the Plan
as a whole and specifying the date of such termination. Notice of such
termination shall be delivered to the Trustee, the Administrator and all
Employers.
14.5(b) For purposes of paragraphs 14.6 through 14.8 hereof, any action by
the Board terminating the Plan shall also specify whether the Plan is thereafter
to be operated as a "terminated plan" or a "frozen plan". Such terms are
defined as follows:
(i) A "terminated plan" is one that has been formally terminated,
has ceased crediting service for benefit accrual purposes and vesting, and
has been or is distributing Plan assets to Participants and Beneficiaries
entitled thereto
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<PAGE>
as soon as administratively possible. For purposes hereof, a Plan will be
considered a terminated plan when Plan assets are required to be distributed
pursuant to paragraph 14.8 hereof.
(ii) A "frozen plan" is one to which contributions to the Plan
have ceased but all Plan assets are not being distributed to Participants or
Beneficiaries entitled thereto as soon as administratively possible. For
purposes hereof, a Plan will be considered a frozen plan when Plan assets
are not required to be distributed pursuant to paragraph 14.8 hereof.
14.5(c) Termination of the Plan shall mean that:
(i) Contributions shall cease to be made to the Plan for periods
after the effective date of the termination, and
(ii) Unless otherwise determined by the Board or prohibited by the
Act or the Code, any withdrawal, investment direction, or other rights shall
cease in the case of a "terminated plan" or shall continue in the case of a
"frozen plan", and
(iii) In the case of a "frozen plan", benefit payments shall be
made as provided in ARTICLE VIII and withdrawals and loans shall be
permitted as provided in ARTICLE IX prior to its becoming a "terminated
plan".
14.6 Termination Allocations and Separate Accounts.
---------------------------------------------
14.6(a) Upon the effective date of the termination or partial termination
of the Plan within the meaning of Section 411(d)(3) of the Code, or upon the
effective date of the complete discontinuance of contributions to the Plan, the
accounts of each affected Participant shall be fully vested.
14.6(b) Upon the effective date of the termination of the Plan with respect
to any Employer, or upon the discontinuance of contributions by it, all or that
portion of each Participant's account which is attributable to such Employer's
(or its predecessor's) contributions shall be fully vested to the extent, if
any, as the Board or the Plan Sponsor shall provide. In addition:
(i) If so directed by the Plan Sponsor, and as of the effective
date of the termination of the Plan with respect to such Employer or the
complete discontinuance of contributions by it, or as of any subsequent
Valuation Date, the Trustee shall pay out of the Fund or provide for all
accrued expenses not otherwise paid, shall value the assets held by the
Fund, and shall adjust such accounts, both in the same manner as at the end
of the Plan Year.
(ii) If so directed by the Plan Sponsor, the Trustee shall then
hold as separate accounts the portions of each account which have been fully
vested under the provisions of this subparagraph.
14.6(c) Upon the effective date of the termination of the Plan as a whole
or the complete discontinuance of all contributions to the Plan, or if so
directed by the Plan Sponsor, the partial termination of the Plan, the Trustee
shall, subject to the Dollar/25% Limitation of paragraph 4.3, allocate the then
unallocated contributions and forfeitures to the accounts of Participants and
adjust such accounts in the same manner as at the end of the Plan Year and shall
thereafter hold such accounts of all Participants as separate accounts
hereunder. Thereafter, and after all fixed and contingent liabilities of the
Fund to Participants and their Beneficiaries have been satisfied, any remaining
assets of the Fund held in such account pursuant to paragraph 4.5 hereof shall
be distributed to the Employer in such manner and in such proportions as the
Plan Sponsor may determine.
14.6(d) To the extent a Participant's Matching and Profit Sharing Active
Accounts becomes fully vested pursuant to this paragraph, it shall be
transferred to his Matching and Profit Sharing Non-forfeitable Accounts.
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14.7 Holding of Separate Accounts.
----------------------------
14.7(a) Upon termination of the Plan with respect to any Employer caused
solely by a complete discontinuance of its contributions, by a partial
termination of the Plan and/or by action of its Board or the Board, the Trustee
shall continue to administer any separate accounts established in accordance
with paragraph 14.6 as a part of the Fund in accordance with the provisions of
the Plan for the sole benefit of the then Participants and Beneficiaries then
receiving benefits, and any future Beneficiaries entitled to receive benefits
hereunder with respect to such separate accounts.
14.7(b) In administering such separate accounts the Trustee shall have the
powers and duties imposed upon it under the Plan provided that under no
circumstances shall all or any portion of the separate accounts of any
Participant held under this paragraph, as from time to time adjusted to reflect
the profits, losses and expenses of the Fund, be subject to any forfeiture or
inure to the benefit of any person other than such Participant or his
Beneficiary.
14.8 Distribution of Separate Accounts after Termination.
---------------------------------------------------
Notwithstanding the other provisions of this ARTICLE XIV, but subject to the
applicable provisions of clause (i)(B) of subparagraph 8.1(a) in the event that
the Employer maintains another defined contribution plan other than an employee
stock ownership plan (as defined in Section 4975(e)(7) of the Code), the Trustee
shall forthwith distribute or pay the respective separate accounts in the Fund
to the Participants who are not Transferor Plan Participants or their
Beneficiaries entitled thereto, in cash or in assets valued as hereinbefore
provided, in a Lump Sum Payment and to Transferor Plan Participants and their
Beneficiaries entitled thereto either in the form of a Lump Sum Payment, in cash
or in assets valued as hereinbefore provided, or in the form of an annuity
contract or policy upon the happening of any of the following events which occur
on or after or result in the termination of the Plan:
(i) Delivery to the Trustee of a notice executed on behalf of the
Plan Sponsor by authority of the Board directing that such distribution or
payment be made.
(ii) Adjudication of the Plan Sponsor as a bankrupt or general
assignment by the Plan Sponsor to or for the benefit of creditors or
dissolution of the Plan Sponsor, unless, within sixty (60) days after such
event, either a successor or other employer shall assume the terms and
conditions hereof in writing, or the Trustee (or a successor Trustee
appointed within such sixty (60) day period) shall agree to continue to hold
and administer the Fund as provided herein and additionally, unless
otherwise agreed with or directed by the Plan Sponsor, to assume all the
powers and duties imposed upon the Named Fiduciaries under the Plan. In
assuming such powers and duties, the Trustee (or any successor Trustee)
shall be vested with all authority granted by the Plan without any
limitation imposed upon such authority by the Plan except the requirement
that its actions shall be governed by the other provisions of the Plan and
by the Act and the Code. If the Trustee (or any successor Trustee) shall so
agree to continue the trust, all expenses of the Plan and the Fund and
reasonable compensation to the Trustee (or any successor Trustee) and any
successor shall be paid from the Fund. In the event of the death,
resignation or removal of the Trustee (or any successor Trustee) who shall
have so agreed to continue the trust, a court of competent jurisdiction over
the Fund shall appoint a successor or the respective account balances in the
Fund shall forthwith be distributed as hereinabove provided at the direction
of such court.
14.9 Effect of Employer Merger, Consolidation or Liquidation.
-------------------------------------------------------
Notwithstanding the foregoing provisions of the ARTICLE XIV, the merger or
liquidation of any Employer into any other Employer or the consolidation of two
(2) or more of the Employers shall not cause the Plan to terminate with respect
to the merging, liquidating or consolidating Employers, provided that the Plan
has been adopted or is continued by and has not terminated with respect to the
surviving or continuing Employer.
ARTICLE XV
Matters Relating to Company Stock
---------------------------------
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<PAGE>
15.1 Voting Directions.
-----------------
15.1(a) Voting rights with respect to Company Stock (and any other
securities of the Employer) held in any Fund division and allocated to
Participants' accounts as of the applicable record date shall be passed through
to Participants (or if deceased, to their Beneficiaries). When so required to
be passed through, such rights which are not so exercised shall not be exercised
by the Trustee.
15.1(b) In addition to the required pass-through of voting rights under
subparagraph 15.1(a), when and then to the extent and in the manner directed by
the Board:
(i) Any voting rights with respect to Company Stock (or other
securities of the Employer) which are not required to be passed through may
be passed through to Participants (or if deceased, to their Beneficiaries),
(ii) Any decision by a holder of Company Stock (or such other
securities) to accept or reject a tender offer for Company Stock (or such
other securities) may be treated as voting rights with respect to Company
Stock (or such other securities) and passed through to Participants (or if
deceased, to their Beneficiaries), and/or
(iii) Voting rights with respect to unallocated Company Stock (and
such other securities) may be passed through to Participants (or if
deceased, to their Beneficiaries).
For purposes hereof, a "tender offer" is intended to include any acquisition
proposal which does not require voting rights with respect to Company Stock (or
such other securities) to be exercised.
15.1(c) Whenever voting rights of Company Stock (or any other securities of
the Employer) are passed through to Participants under subparagraph 15.1(a) or
(b), each Participant (or if deceased, his Beneficiary) shall have the right to
direct the manner in which such Company Stock (or other securities) is to be
voted pursuant to clause (i) hereof or to actually or by attorney vote such
Company Stock (or other securities) pursuant to clause (ii) hereof as determined
by the Administrator. Within a reasonable time before such voting rights are to
be exercised, the Administrator shall notify each Participant (or if deceased,
his Beneficiary) of the occasion for the exercise of such rights and shall cause
to be sent to each such Participant (or if deceased, his Beneficiary entitled to
benefits hereunder) all information that the Employer or tender offeror, as the
case may be, distributes to shareholders (or security holders) regarding the
exercise of such rights.
(i) Unless otherwise determined pursuant to clause (ii) of this
subparagraph, any direction made pursuant to this paragraph shall be made in
writing on a form provided by the Administrator, executed by the Participant
(or if deceased, his Beneficiary), and delivered to the Administrator by
5:00 p.m. of the second day preceding (or such other period as the
Administrator may establish) the date such voting rights are to be
exercised. The Administrator shall then forthwith deliver such direction to
the Trustee. To the extent permitted by law, the Trustee shall exercise
such rights as directed and, except in the case of voting rights or a tender
offer described in subparagraph 15.1(b) unless also directed by the
Administrator, shall not exercise such rights which are not so directed.
(ii) Notwithstanding the foregoing, the Administrator may
alternatively direct the Trustee to execute and give each Participant (or if
deceased, his Beneficiary) a power of attorney with respect to such Company
Stock (or other securities), and the Participant (or if deceased, his
Beneficiary) may then vote such Company Stock (or other securities) directly
or through his attorney. If the Administrator determines to pass through
voting rights pursuant to this clause (ii), such Company Stock (or other
securities) which is not voted by Participants (or if deceased, their
Beneficiaries) shall not be voted.
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15.1(d) To the extent that the voting rights of Company Stock (or other
securities of the Employer) or the decision to accept or reject a tender offer
for Company Stock (or other securities of the Employer) held in the Fund are not
passed through to Participants and are not prohibited from being voted under
subparagraph 15.1(a), either:
(i) The Administrator shall direct the Trustee in writing as to
the manner, if any, in which such voting rights shall be exercised and as to
the acceptance or rejection of such tender offer in whole or in part,
provided such direction is delivered to the Trustee prior to the time such
voting rights are to be exercised or such tender offer is to be accepted or
rejected, and the Trustee shall exercise such rights as directed, or
(ii) The Administrator's duly authorized representative may
exercise such rights in person or by proxy, or
(iii) The Administrator shall inform the Trustee that neither the
Administrator nor its authorized representative will exercise its rights
hereunder and that the Trustee should exercise such rights in its
discretion.
Such direction may include, but shall not be limited to, an instruction to vote
such Company Stock (or such other securities) or to accept or reject such tender
offer based on the manner in which such rights with respect to a majority (or
some other specified percentage or fraction) of shares of Company Stock (or
shares or interests in such other securities) with respect to which such voting
or tender acceptance or rejection rights are passed through to Participants are
exercised.
15.1(e) If the Trustee or Administrator is prevented by law from, or does
or may have a conflict of interest in, exercising any voting rights of Company
Stock (or other securities of the Employer) in accordance with the applicable
provisions of the Plan or making directions or other determinations pursuant to
this paragraph, or if the Plan Sponsor deems it appropriate for any reason, the
Plan Sponsor shall appoint a Co-Trustee (sometimes referred to as the "Voting
Co-Trustee") in lieu of the Trustee or Administrator for the purpose of
exercising such voting rights in accordance herewith or making directions or
other determinations pursuant to this paragraph and such appointment shall be
terminable at will by the Plan Sponsor.
15.2 Acquisitions and Dispositions of Company Stock.
----------------------------------------------
15.2(a) Purchases of Company Stock for the Company Stock Fund may be made
on the open market or from the Plan Sponsor (if the Plan Sponsor consents) as
determined by the Trustee from time to time or as directed by the Plan Sponsor.
15.2(b) The Named Fiduciaries under the Plan are hereby specifically
authorized, pursuant to and in accordance with Section 408(e) of the Act to
acquire from or sell to any "party in interest" as defined in Section 3(14) of
the Act any stock or securities of the Employer which constitutes "qualifying
employer securities" as defined in Section 407(d)(5) of the Act if such
acquisition or sale is for adequate consideration (or in the case of the
acquisition by the Plan, at a price not less favorable to the Plan than the fair
market value of such securities at the time of acquisition) and if no commission
is charged the Plan with respect thereto. The Board and the Plan Sponsor are
each authorized to determine on behalf of the Plan and the Fund what is adequate
consideration. Unless otherwise determined, the closing sale price per share of
Company Stock as reported in The Wall Street Journal or other authoritative
-----------------------
sources for the day on which a purchase or sale is to take place shall be
adequate consideration with respect to Company Stock if Company Stock is
considered readily tradable on an established market. If such price is not
supplied by The Wall Street Journal or other authoritative sources, then the
-----------------------
price per share will be determined pursuant to the valuation method or procedure
determined by the Board or the Plan Sponsor in good faith.
15.3 Sales Prohibited if Registration or Qualification Required. In no
----------------------------------------------------------
event shall any acquisition or sale of Company Stock pursuant to the Plan be
consummated if in the opinion of counsel for the Plan Sponsor such acquisition
or sale could result in the loss by the Employer or the Plan of its exemption
from applicable registration and/or qualification requirements of federal or
state securities laws. The foregoing sentence shall, however, be inapplicable
if and to the extent such acquisition or sale is required to preserve the
qualification of the Plan under Section 401 or, to the extent applicable, 409
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of the Code or to the extent such acquisition or sale is directed in writing by
the Administrator. In the event an acquisition or disposition of Company Stock
is made as provided in this paragraph under circumstances which require the
registration and/or qualification of the Company Stock under applicable federal
or state securities laws, then the Plan Sponsor, at the expense of the Employer,
shall take or cause to be taken any and all actions as may be necessary or
appropriate to effect such registration or qualification.
15.4 Limitation on Insiders' Interests in Company Stock.
--------------------------------------------------
Notwithstanding anything in the Plan to the contrary, but subject to any
applicable qualification requirements under Section 401 and, to the extent
applicable, 409 of the Code, the Board shall have authority to adopt and
implement administrative rules and regulations relating to the investment of the
assets held in the accounts of Participants who are insiders (within the meaning
of Section 16 of the Securities Exchange Act of 1934 (the "1934 Act") and the
rules thereunder), including, without limitation, such rules and regulations as
may the Administrator or Plan Sponsor deems necessary or appropriate in order
for insiders' participation in the Plan to satisfy the conditions of Rule 16b-3,
as amended (or any successor or similar rule), under the 1934 Act.
15.5 No Guarantee of Values. Neither the Employer nor the Named
----------------------
Fiduciaries guarantee that the fair market value of the Company Stock when it is
distributed will be equal to its purchase price or that the total amount
distributable under the Plan will be equal to or greater than the amount of
contributions and direct transfers allocated to any Participant. Each
Participant assumes all risk of any decrease in the market value of the Company
Stock and other assets allocated to his accounts in accordance with the
provisions of the Plan.
15.6 Legend Regarding Securities Laws Restriction on Sale or Transfer.
----------------------------------------------------------------
Each certificate for shares of Company Stock distributed from the Plan which is
subject to a restriction on sale or transfer by reason of any applicable federal
or state securities laws shall bear an appropriate legend giving notice of such
restrictions.
15.7 Confidentiality of Participant Directions regarding and Holdings of
-------------------------------------------------------------------
Company Stock.
- -------------
15.7(a) The Administrator shall maintain confidentially with respect to
Participant directions to invest or cease investment in the Company Stock Fund,
Participants' interests in the Company Stock Fund and Participant directions
regarding the exercise of voting, tender and similar rights for Company Stock as
is intended under Section 404(c) of the Act. The Administrator's procedures for
confidentiality shall include the collection of investment direction information
by the Administrator (or its delegate) and the collection of voting instructions
by the Plan Administrator (or its delegate), followed by delivery of voting
instructions to the Trustee. Information regarding investment directions and
voting instructions shall be retained by the Administrator, as required by the
Act and other applicable laws, but will not be disclosed to management of the
Plan Sponsor or any other Employer or Affiliate except to the extent required by
securities or other applicable laws which are not pre-empted by the Act.
15.7(b) The Plan fiduciary responsible for monitoring compliance with the
confidentiality procedures of this paragraph is the Director of Human Resources
of the Plan Sponsor.
15.7(c) The Plan fiduciary responsible for monitoring compliance with the
confidentiality procedures of this paragraph shall appoint an independent
fiduciary for the Plan to carry out certain activities with respect to Company
Stock for any matters (such as tender offers, exchange offers and contested
Board elections) for which he believes appropriate in order to ensure
confidentially.
ARTICLE XVI
Miscellaneous
-------------
16.1 Headings. The headings in the Plan have been inserted for
--------
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
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16.2 Gender and Number. In the construction of the Plan, the masculine
-----------------
shall include the feminine or neuter and the singular shall include the plural
and vice-versa in all cases where such meanings would be appropriate.
16.3 Governing Law. The Plan and the Fund created hereunder shall be
-------------
construed, enforced and administered in accordance with the laws of the
Commonwealth of Virginia, and any federal law pre-empting the same. Unless
federal law specifically addresses the issue, federal law shall not pre-empt
applicable state law preventing an individual or person claiming through him
from acquiring property or receiving benefits as a result of the death of a
decedent where such individual caused the death.
16.4 Employment Rights. Participation in the Plan shall not give any
-----------------
employee the right to be retained in the Employer's employ nor, upon dismissal
or upon his voluntary termination of employment, to have any right or interest
in the Fund other than as herein provided.
16.5 Conclusiveness of Employer Records. The records of the Employer
----------------------------------
with respect to age, service, employment history, compensation, absences,
illnesses and all other relevant matters shall be conclusive for purposes of the
administration of the Plan.
16.6 Right to Require Information and Reliance Thereon. The Employer,
-------------------------------------------------
Administrator and Trustee shall have the right to require any Participant,
Beneficiary or other person receiving benefit payments to provide it with such
information, in writing, and in such form as it may deem necessary to the
administration of the Plan and may rely thereon in carrying out its duties
hereunder. Any payment to or on behalf of a Participant or Beneficiary in
accordance with the provisions of the Plan in good faith reliance upon any such
written information provided by a Participant or any other person to whom such
payment is made shall be in full satisfaction of all claims by such Participant
and his Beneficiary; and any payment to or on behalf of a Beneficiary in
accordance with the provisions of the Plan in good faith reliance upon any such
written information provided by such Beneficiary or any other person to whom
such payment is made shall be in full satisfaction of all claims by such
Beneficiary.
16.7 Alienation and Assignment.
-------------------------
16.7(a) Except as otherwise permitted by the Act and the Code and as
expressly permitted by the Plan or the Administrator, no benefit hereunder shall
be subject in any manner to alienation, sale, anticipation, transfer,
assignment, pledge, encumbrance, garnishment, attachment, execution or levy of
any kind.
16.7(b) As provided in the Act and the Code, this prohibition shall not
apply to any QDRO entered on or after January 1, 1985, and the Administrator
shall have all rights granted thereunder in determining the existence of such an
order, in establishing and following procedures therefor and in complying with
any such order. The Administrator shall treat any domestic relations order
entered before January 1, 1985 as a QDRO entered on January 1, 1985 if the Plan
is paying benefits pursuant to such order on January 1, 1985 or if the
Administrator in its discretion deems such treatment warranted. On a uniform
and non-discriminatory basis, the Administrator may determine that any special
charge, fee or expense in reviewing the status of a domestic relations order and
in otherwise administering the Plan in connection therewith be charged directly
to the account of the Participant with respect to whom the order is issued.
16.7(c) As provided in the Act and the Code, this prohibition shall not
apply to any Participant loan which meets the requirements of subparagraph
9.8(a).
16.8 Notices and Elections.
---------------------
16.8(a) Except as provided in subparagraph 16.8(b), all notices required to
be given in writing and all elections, consents, applications and the like
required to be made in writing, under any provision of the Plan, shall be
invalid unless made
-67-
<PAGE>
on such forms as may be provided or approved by the Administrator and, in the
case of a notice, election, consent or application by a Participant or
Beneficiary, unless executed by the Participant or Beneficiary giving such
notice or making such election, consent or application.
16.8(b) Subject to limitations under applicable provisions of the Code or
the Act (such as the requirement that spousal consent be in writing), the
Administrator is authorized in its discretion to accept other means for receipt
of effective notices, elections, consent and/or application by Participants
and/or Beneficiaries, including but not limited to interactive voice systems, on
such basis and for such purposes as it determines from time to time.
16.9 Delegation of Authority. Whenever the Plan Sponsor or any
-----------------------
Employer is permitted or required to perform any act, such act may be performed
by its Chief Executive Officer, its President, its Vice President and Treasurer,
or its Board of Directors or by any person duly authorized by any of the
foregoing.
16.10 Service of Process. The Administrator, as well as the Trustee,
------------------
shall be the agent for service of process on the Plan.
16.11 Construction. This Plan is created for the exclusive benefit of
------------
Employees of the Employer and their Beneficiaries and shall be interpreted and
administered in a non-discriminatory manner consistent with its being an
employees' profit sharing plan and trust and a defined contribution plan as
defined in Sections 401(a) and 414(i), of the Code, respectively, with a cash or
deferred arrangement described in 401(k) of the Code.
ARTICLE XVII
Adoption of the Plan
--------------------
17.1 Restated Adoption and Failure to Obtain Qualification. If the
-----------------------------------------------------
Internal Revenue Service determines that this Restatement of the Plan does not
qualify initially under Section 401 of the Code, the Plan as restated herein
shall have no force and effect, unless the same shall be further amended in
order to so qualify.
17.2 Adoption by Additional Employers. Any employer which is an
--------------------------------
Affiliate and which, with the consent of the Board, desires to adopt the Plan,
may do so by executing the Plan or an adoption agreement in a form authorized
and approved by such employer's Board of Directors and the Board. In the event
that such Affiliate has established and has been maintaining a profit sharing or
money purchase pension plan for the benefit of its employees which qualifies
under Section 401 or 404(a)(2) of the Code, an adoption or other agreement may
provide, subject to the requirements of paragraph 14.2, that such plan is
amended and restated by the provisions of this Plan (such prior plan being
deemed a predecessor plan to this Plan) or that such plan is to be merged or
consolidated with this Plan; and, in such event, the assets of such plan shall
be paid over to the Trustee to be administered as a part of the Fund pursuant to
the provisions of this Plan.
-68-
<PAGE>
IN WITNESS WHEREOF, the Plan Sponsor, for itself and for each Employer,
pursuant to the resolution duly adopted by its Board of Directors, has caused
its name to be signed to this Plan and Trust Agreement by its duly authorized
officer with its corporate seal hereunto affixed and attested by its Secretary
or Assistant Secretary, and each Trustee and the Custodian have caused their
names to be signed to this Plan and Trust Agreement, as of the ______ day of
April, 1997.
ESKIMO PIE CORPORATION,
Plan Sponsor and participating Employer
By:________________________________(SEAL)
Its_______________________________
Attest:
___________________________________
Its_______________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Separate Trustee for all Fund divisions other
than the
Company Stock Fund and Custodian for the
Company Stock Fund
By:________________________________(SEAL)
Its_______________________________
Attest:
___________________________________
Its_______________________________
___________________________________(SEAL)
THOMAS M. MISHOE, JR.,
Separate Trustee for the Company Stock
Fund
-69-
<PAGE>
ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST
Appendix A
Determination of Hours of Service
---------------------------------
A-1.1 Introduction. Hours of Service shall be credited to Employees for
------------
purposes of the Plan as provided in this Appendix.
A-1.2 Paid Hours for the Performance of Duties. An Employee shall be
----------------------------------------
credited with one Hour of Service for each hour for which he is paid by the
Employer, or entitled to payment, for the performance of duties for the
Employer, including each hour for which credit has not theretofore been given
and for which back pay, irrespective of mitigation of damages, has either been
awarded or agreed to by the Employer. Such Hours of Service shall be credited
to the individual for the period in which the duties are actually performed.
A-1.3 Paid Hours Where No Performance of Duties Required. An Employee
--------------------------------------------------
shall also be credited with up to and including five hundred and one (501) Hours
of Service for any single continuous period during which no duties are performed
due to vacation, holiday, sickness, incapacity, disability, layoff, jury duty,
military duty or leave of absence and on account of which he is directly or
indirectly paid, or entitled to payment, by the Employer (other than under a
plan maintained solely for the purpose of complying with applicable workmen's
compensation or unemployment compensation or disability insurance laws or other
than solely as reimbursement for medical or medically related expenses incurred
by the individual), including hours for any such period for which credit has not
theretofore been given and for which back pay, irrespective of mitigation of
damages, has either been awarded or agreed to by the Employer, all determined as
provided below. Such Hours of Service shall be credited in accordance with the
following rules.
(i) The number of Hours of Service to be credited for a payment
calculated on the basis of units of time (such as hours, days, weeks or
months) shall be the number of regularly scheduled working hours included in
the unit of time on the basis of which the payment is calculated; provided,
however, that if an Employee has no regular working schedule, the number of
Hours of Service to be credited to the Employee shall be calculated, as
determined by the Administrator, on the basis of a forty (40) hour workweek,
an eight (8) hour workday, or on any reasonable basis which reflects the
average hours worked by the Employee, or by other Employees in the same job
classification, over a representative period of time, provided that the
basis so used is consistently applied. Such Hours of Service shall be
credited to the year or years in which the period during which no duties are
performed occurred.
(ii) The number of Hours of Service to be credited for a payment
which is not calculated on the basis of units of time shall be the number
determined by dividing the amount of the payment by the Employee's most
recent "hourly rate of compensation" before the period for which the payment
is made. An Employee's "hourly rate of compensation" is:
(A) In the case of an Employee whose compensation is
determined on the basis of an hourly rate, his hourly rate of
compensation;
(B) In the case of an Employee whose compensation is
determined on the basis of a fixed rate for specified periods of time
(other than hours), his rate of compensation for the specified period
of time divided by the number of hours regularly scheduled during such
specified period of time; provided, however, that the Employee has no
regular work schedule, the "hourly rate of compensation" of the
Employee shall be calculated, as determined by the Administrator, on
the basis of a forty (40) hour workweek, an eight (8) hour workday, or
on any reasonable basis which reflects the average hours worked by the
Employee, or by other Employees in the same job classification, over a
representative period of time, provided that the basis so used is
consistently applied; or
-A-1-
<PAGE>
(C) In the case of all other Employees, the lowest hourly rate
of compensation paid to Employees in the same job classification or,
if none have an hourly rate, the minimum wage as established from time
to time under Section 6(a)(1) of the Fair Labor Standards Act of 1938,
as amended.
Such Hours of Service shall be credited to the year in which the period
during which no duties are performed occurs, or, if more than one year is
involved, such Hours of Service shall be allocated between the first two
such years on any reasonable and consistently applied basis determined by
the Administrator.
(iii) Notwithstanding the provisions of clauses (i) and (ii) of this
paragraph, such Hours of Service shall not be credited in a number greater
than the number of hours regularly scheduled for performance of duties
during the period for which the payment is made; provided, however, that if
the Employee has no regular work schedule, the number of regularly scheduled
hours for the Employee for purposes of the provisions of this clause (iii)
shall be deemed to be, as determined by the Administrator, forty (40) hours
per workweek, eight (8) hours per workday, or such number as reflects the
average hours worked by the Employee, or by other Employees in the same job
classification, over a representative period of time, provided such number
used is consistently applied.
A-1.4 Periods Overlapping A Year. Notwithstanding the year to which Hours
--------------------------
of Service are required to be credited under the foregoing, in the case of Hours
of Service to be credited in connection with a period of no more than thirty-one
(31) days which overlaps two years, all such Hours of Service may be credited to
the first or second such year, if done consistently and as directed by the
Administrator.
A-1.5 Absences Due to Pregnancy, Childbirth, Adoption and Related Child
-----------------------------------------------------------------
Care. Solely for purposes of determining whether an Employee is credited with a
- ----
Year of Broken Service for purposes of determining his eligibility to
participate in the Plan or his vested interest in his Accrued Benefit, if the
Employee is absent from work with the Employer for any period beginning on or
after the first day of the first Plan Year commencing after December 31, 1984:
(i) By reason of the pregnancy of the Employee,
(ii) By reason of the birth of a child of the Employee,
(iii) By reason of the placement of a child with the Employee in
connection with the adoption of such child by the Employee, or
(iv) For purposes of caring for such child for a period beginning
immediately after such birth or placement,
then the Employee shall be credited with that number of Hours of Service which
would normally have been credited to the Employee during such absence but for
such absence or, if the Employee's otherwise credited Hours of Service cannot be
readily determined, with eight (8) Hours of Service per day of such absence,
except that the total number of Hours of Service so credited shall not exceed
that number needed to avoid incurring a Year of Broken Service. Such Hours of
Service shall be credited either for the applicable year in which the absence
from work begins, if the Employee would be prevented from receiving a Year of
Broken Service for such year solely because such periods of absence are treated
as Hours of Service as provided in this subparagraph, or in the immediately
following year, in any other case. Notwithstanding the foregoing, no credit for
Hours of Service shall be given under this subparagraph unless the Employee
furnishes to the Administrator such timely information as the Administrator may
reasonably require to establish that the absence from work is for one of the
foregoing reasons or purpose and the number of days for which there was such an
absence.
A-1.6 Absences for Leave under the Family and Medical Leave Act. Solely
---------------------------------------------------------
for purposes of determining whether an Employee is credited with a Year of
Broken Service (but only when Years of Broken Service are determined on the
-A-2-
<PAGE>
basis of Hours of Service) for purposes of determining his eligibility to
participate in the Plan or his vested interest in his Accrued Benefit, if the
Employee is absent from work with the Employer for any period after August 4,
1993 for family or medical leave required to be granted under the Family and
Medical Leave Act, then the Employee shall be credited with that number of Hours
of Service which would normally have been credited to the Employee during such
absence but for such absence or, if the Employee's otherwise credited Hours of
Service cannot be readily determined, with eight (8) Hours of Service per day of
such absence, except that the total number of Hours of Service so credited shall
not exceed that number needed to avoid incurring a Year of Broken Service. Such
Hours of Service shall be credited for the applicable year(s) in which the
absence from work occurs. Notwithstanding the foregoing, no credit for Hours of
Service shall be given under this subparagraph unless the Employee complies with
the leave procedures required under the Employer's leave policies and the Family
and Medical Leave Act.
A-1.7 Qualified Military Service. Effective December 12, 1994, service
--------------------------
shall be granted for periods of Qualified Military Service as provided in
paragraph 4.10 of the Plan. Unless otherwise required under Section 414(u) of
the Code or USERRA, the affected Employee shall be credited with that number of
Hours of Service which would normally have been credited to the Employee during
such absence but for such absence or, if the Employee's otherwise credited Hours
of Service cannot be readily determined, with eight (8) Hours of Service per day
of such absence. Such Hours of Service shall be credited for the applicable
year(s) in which the Qualified Military Service occurs. Notwithstanding the
foregoing, no credit for Hours of Service shall be given under this subparagraph
unless the Employee complies with the any notice and restoration right
procedures required, or permitted to be required and adopted by the Employer,
under Section 414(u) of the Code or USERRA.
A-1.8 No Duplication of Hours Credited or Conflict with Federal Law.
-------------------------------------------------------------
Nothing contained in this Appendix shall be construed to require or permit any
duplication in the crediting of Hours of Service or to alter, amend, modify,
invalidate, impair or supersede any law of the United States or any valid rule
or regulation issued under any such law so as to deny an Employee credit for an
Hour of Service where such credit is required by federal law other than the Act,
including but not limited to credit required to be given for periods of time in
which no duties are performed due to military duty or service in the United
States Armed Forces, provided that the Employee enters such service directly
from the employ of the Employer and returns to active employment with the
Employer within the period prescribed by applicable law. Hours of Service
before any year commencing after September 2, 1974 may be determined or
reasonably estimated with such records as are available to the Employer.
-A-3-
<PAGE>
ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST
Appendix B
Determination of Top Heavy Plan Status
--------------------------------------
B-1.1 Introduction. The Plan will be a Top Heavy Plan for any Plan Year
------------
beginning after December 31, 1983 if the sum of the present values of the
cumulative accrued benefits of Key Employees under the Plan, and the present
values of the cumulative accrued benefits of Key Employees under all plans
aggregated with it, exceeds sixty percent (60%) of the aggregate of the present
value of the cumulative Accrued Benefits under the Plan and accrued benefits
under such plan(s) at the applicable determination date. For purposes hereof,
aggregation, accrued benefits (including Accrued Benefits) taken into account,
the determination date and all other standards and criteria for determining top-
heaviness under this Plan and such other plan(s) shall be determined under
Section 416 of the Code. Subject to the foregoing, the determination of Top
Heavy Plan status shall be made each Plan Year in accordance with the rules and
definitions contained in this Appendix.
B-1.2 Determination Date. The determination date with respect to a plan
------------------
means the last day of its preceding plan year or, in the case of the first plan
year of a plan, the last day of such first plan year.
B-1.3 Value of Accrued Benefits.
-------------------------
B-1.3(a) The value of an accrued benefit at a determination date is the
value thereof at the most recent valuation date occurring within the twelve (12)
month period ending on the determination date, plus, in the case of a defined
contribution plan, an appropriate adjustment for contributions made or due
thereafter and on or before the determination date.
B-1.3(b) If the plan is a defined benefit plan, the present value of
accrued benefits thereunder shall be determined on the basis of the actuarial
assumptions stated in such plan for such purpose or, if none are stated, on the
basis of the applicable actuarial equivalent benefit payment factors of such
plan, in any case taking into account post-retirement mortality, interest, non-
proportional subsidies (the benefits of which are assumed to commence at the age
when the benefit is most valuable), pre-retirement mortality and future
increases in cost of living, but not taking into account proportional subsidies,
future withdrawals or salary increases, future increases in the maximum dollar
limitation of Section 415 of the Code, and benefits not relating to retirement.
B-1.3(c) If the plan is a defined contribution plan, the value of an
accrued benefit shall be determined as follows:
(i) An individual's account balance in a plan not subject to
Section 412 of the Code is the sum of his actual account balance on the
applicable valuation date and all contributions actually made after the
applicable valuation date but on or before the determination date; provided,
however, for such a plan's first plan year, the amount determined in the
preceding sentence shall be added to the amount of any contributions made
after the determination date that are allocated as of a date in that first
plan year.
(ii) An individual's account balance in a defined contribution
plan that is subject to Section 412 of the Code is the sum of his account
balance on the applicable valuation date, all contributions due as of the
determination date (that is, contributions that would be allocated as of a
date not later than the determination date, even though those amount are not
yet required to be contributed), and, for the plan year that contains the
determination date, all amounts actually contributed (or due to be
contributed) after the extended payment period in Section 412(c)(10) of the
Code.
B-1.3(d) The accrued benefit of a Non-Key Employee shall be determined (i)
under the method which is uniformly used for accrual purposes for all plans of
the Employer or (ii) if there is no method described in clause (i), as if such
benefit accrued not more rapidly than the slowest applicable accrual rate
permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
-B-1-
<PAGE>
B-1.4 Accrued Benefits Excluded from Determination. In determining the
--------------------------------------------
value of accrued benefits, there shall be excluded:
(i) Any rollover contribution or plan-to-plan transfer initiated
by the participant and made after December 31, 1983 so long as the rollover
contribution or transfer was not derived from a plan maintained by the
Employer,
(ii) Any accumulated deductible employee contributions,
(iii) The accrued benefit of any individual who was a Key Employee
for a prior plan year but who is no longer a Key Employee, and
(iv) For plan years beginning after December 31, 1984, the accrued
benefit of any individual who has not performed service for any Employer
maintaining the plan at any time during the five (5) plan year period ending
on the determination date.
B-1.5 Distributions and Transfers Taken into Account in Determination.
---------------------------------------------------------------
In determining the value of accrued benefits, there shall be included any
distributions made under the plan at any time during the five (5) plan year
period ending on the determination date:
(i) Including distributions from any terminated plan which if it
had not been terminated would have been required to be aggregated with this
Plan under clause (i) or (ii) of subparagraph 1.6(b) of this Appendix, but
(ii) Excluding:
(A) Distributions made on account of death, to the extent the
benefits do not exceed the present value of accrued benefits existing
immediately prior to death (in the case of a defined contribution
plan, a distribution made on account of death is the participant's
accrued account balance (including the cash value of life insurance
policies)), and
(B) Distributions and plan-to-plan transfers which are rolled
over into a plan maintained by the Employer or initiated by the
participant.
B-1.6 Aggregation of Plans.
--------------------
B-1.6(a) When aggregating plans, the value of accrued benefits shall be
calculated with reference to the determination dates of such aggregated plans
that fall within the same calendar year. When aggregating defined benefit plans
the same actuarial assumptions shall be used with respect to all such plans and,
if the stated assumptions of such plans are not the same, the plan sponsor(s) of
such plans shall select and agree on one plan's assumptions.
B-1.6(b) The plans to be aggregated with this Plan for purposes hereof for
a plan year are:
(i) Each other plan (whether or not terminated) intended to meet
the applicable requirements of Section 401(a)(10)(B) of the Code and
maintained by the Employer and each simplified employee pension plan
(whether or not terminated) maintained by the Employer in which a Key
Employee participates for the plan year containing the determination date
with respect to such plan year or for any of the preceding four (4) plan
years,
(ii) Each other qualified or simplified employee pension plan
(whether or not terminated) maintained by the Employer which, during the
applicable five (5) plan year period described in clause (i) of this
subparagraph, enables
-B-2-
<PAGE>
any such plan described in clause (i) of this subparagraph to meet the
requirements of Section 401(a)(4) or 410 of the Code, and
(iii) Solely in the discretion of the Plan Sponsor, any additional
qualified or simplified employee pension plan(s) (whether or not terminated)
maintained by the Employer if the plans described in clauses (i) and (ii) of
this subparagraph would continue to meet the requirements of Sections
401(a)(4) and 410 of the Code with such plan(s) being included in the
aggregation group.
-B-3-
<PAGE>
ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST
Appendix C
List of Participating Employers
(As of January 1, 1997)
-----------------------
<TABLE>
<CAPTION>
Type and Effective Date Effective Date
Place of of Commencement of Termination
Name of Employer Organization of Participation of Participation
- ---------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Eskimo Pie Corporation Virginia corporation April 6, 1992 ----
Eskimo, Inc. Virginia corporation February 1, 1997 ----
Sugar Creek Foods, Inc. Virginia corporation February 1, 1997 ----
</TABLE>
-C-1-
<PAGE>
ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST
Appendix D
Rules Pertaining to Limitations on After-Tax, Pre-Tax and Matching Contributions
- --------------------------------------------------------------------------------
D-1.1 Limitation on Pre-Tax Contributions.
-----------------------------------
D-1.1(a) The aggregate amount of a Participant's Pre-Tax Contributions made
to the Plan for a Plan Year shall not exceed the applicable limits thereon
specified in this paragraph and elsewhere in the Plan.
D-1.1(b) Notwithstanding anything in the Plan to the contrary, the
aggregate Pre-Tax Contributions and other Elective Deferrals made by a
Participant for any calendar year may not exceed the Elective Deferral Dollar
Limitation.
(i) In no event shall the aggregate Elective Deferrals made by
any Employee for any calendar year to this Plan and any other plan
maintained by the Employer exceed the Elective Deferral Dollar Limitation,
and the Administrator shall, whenever necessary to comply with this
limitation, cause such Employee's Elective Deferrals to this Plan to cease
being made for such calendar year and take such other action as it may deem
appropriate in connection therewith.
(ii) For purposes hereof:
(A) The term "Elective Deferral Dollar Limitation" means
$7,000, as adjusted by the Adjustment Factor and as otherwise adjusted
pursuant to Section 402(g) of the Code.
(B) The term "Elective Deferrals" means a Participant's Pre-
Tax Contributions to the Plan and his other elective or salary
reduction contributions to a cash or deferred arrangement, tax
sheltered annuity or simplified employee pension plan or "Section
501(c)(18)" trust to the extent not includable in or to the extent
deductible from the Participant's gross income for his taxable year of
contribution on account of or as described in Section 401(k), 403(b),
408(k) or 501(c)(18) of the Code and required to be taken into account
and aggregated for purposes of applying the limitations of Section
402(g) of the Code to the Plan.
(C) The term "Excess Elective Deferrals" means a
Participant's Elective Deferrals for a calendar year in excess of the
Elective Deferral Dollar Limitation for such calendar year.
(iii) The following procedure applies to the notice of the
existence of Excess Elective Deferrals and to the distribution of Excess
Elective Deferrals during the calendar year for which made:
(A) By written notice filed with the Administrator the
Participant may notify the Administrator of the existence of Excess
Elective Deferrals with respect to the Participant and may allocate
the amount of his Excess Elective Deferrals for such calendar year
among the plans to which contributed and notify the Administrator of
the portion, if any, allocated to the Plan. In addition, the Employer
may notify the Administrator of Excess Elective Deferrals made to the
Plan and other plans maintained by the Employer.
(B) The Administrator, in its discretion, may then
distribute the designated Excess Elective Deferrals (without income
thereon unless otherwise determined by the Administrator on a uniform
and non-discriminatory basis) in a "corrective distribution" during
the calendar year for which made so long as the distribution is made
after the Plan has received the Excess Elective Deferrals or, if
permitted under Section 402(g) of the Code, may direct that the Excess
Elective Deferrals be retained in the Plan permanently or for later
distribution pursuant to the Plan.
-D-1-
<PAGE>
(iv) The following procedure applies to the notice of the existence
of Excess Elective Deferrals and to the distribution of Excess Elective
Deferrals after the calendar year for which made:
(A) Not later than the January 31 following each calendar year
the Administrator shall inform each Participant of his aggregate Pre-
Tax Contributions for such calendar year.
(B) Not later than the March 1 following each calendar year, by
written notice filed with the Administrator the Participant may notify
the Administrator of the existence of Excess Elective Deferrals with
respect to the Participant and may allocate the amount of his Excess
Elective Deferrals for such calendar year among the plans to which
contributed and notify the Administrator of the portion, if any,
allocated to the Plan. In addition, the Employer may notify the
Administrator of Excess Elective Deferrals made to the Plan and other
plans maintained by the Employer.
(C) The Administrator may then, in its discretion, direct that
any Excess Elective Deferrals allocated to the Plan be distributed to
the Participant (together with income thereon as determined pursuant
to Section 402(g) of the Code) in a "corrective distribution" or, if
permitted under Section 402(g) of the Code, be retained in the Plan.
(v) For purposes hereof and except to the extent otherwise provided
under Section 401(k) or 402(g) of the Code:
(A) The amount of any Excess Elective Deferrals that may be
distributed with respect to any Participant for a calendar year shall
be reduced by any Excess Deferral Contributions (as defined in
paragraph 1.2 of this Appendix) previously distributed or
recharacterized with respect to the Participant for the Plan Year
beginning with or within the calendar year.
(B) Excess Elective Deferrals allocated to the Plan shall be
considered first to be Pre-Tax Optional Contributions for such Plan
Year and then to be the remainder of the Participant's Pre-Tax Basic
Contributions.
(vi) For purposes hereof and except to the extent otherwise provided
under Section 401(k) or 402(g) of the Code, the income allocated to any
Excess Elective Deferrals allocated to the Plan shall be determined by the
Administrator under the following rules and calculated under any reasonable
method selected by the Administrator so long as the method does not violate
the requirements of Section 401(a)(4) of the Code, is used consistently for
all Participants and for all corrective distributions under the Plan for a
calendar year, and is used by the Plan for allocating income to
Participants' accounts under the Plan:
(A) Unless another method is determined by the Administrator,
where the corrective distribution is made after the end of the
calendar year for which the Excess Elective Deferrals were made, the
amount of income to be distributed shall be determined by multiplying
(I) the income for the calendar year or other period in question
allocable to the account to which such Excess Elective Deferrals are
allocated by (II) a fraction, the numerator of which is the amount of
the Participant's Excess Elective Deferrals allocated to such account
for the calendar year or other period in question and entitled to a
share of the valuation adjustment therefor under paragraph 4.6 of the
Plan and the denominator of which is the balance in such account on
the last day of the calendar year or other period in question, reduced
by the earnings allocable thereto and increased by the losses
allocable thereto in the calendar year or other period in question.
-D-2-
<PAGE>
(B) Where the corrective distribution is made after the end of
the calendar year for which the Excess Elective Deferrals were made,
unless otherwise determined by the Administrator on a uniform and non-
discriminatory basis, no income shall be distributed for the period
between the end of the calendar year and the date of distribution.
(C) Where the corrective distribution is made during the
calendar year for which the Excess Elective Deferrals were made,
unless otherwise determined by the Administrator on a uniform and non-
discriminatory basis, no income shall be distributed.
(vii) For purposes of the Code, including Sections 401(a)(4),
401(k)(3), 404, 409, 411, 412 and 416 thereof, Excess Elective Deferrals are
treated as Employer contributions even if they are distributed. However,
Excess Elective Deferrals which are timely distributed to a Participant are
not treated as Annual Additions for purposes of Section 415 of the Code and
paragraphs 4.3 and 4.4 of the Plan. In addition, Excess Elective Deferrals
of Non-Highly Compensated Employees are not taken into account in
determining Deferral Percentages under paragraph 1.2 of this Appendix to the
extent they exceed the Elective Deferral Dollar Limitation based only on
Elective Deferrals made to this Plan and other plans maintained by the
Employer.
D-1.1(c) If a Participant's Pre-Tax Contributions are returned in a
corrective distribution made because of the existence of Elective Deferrals made
to plans not maintained by the Employer or any Affiliate, such contributions
shall nevertheless still be considered made for any benefit accrual requirements
contingent thereon, and any Matching Contributions attributable thereto shall be
also be distributed (to the extent vested) or forfeited (to the extent not
vested).
D-1.2 Limitation on and Distribution of Pre-Tax Contributions Made by
---------------------------------------------------------------
Highly Compensated Employees.
- ----------------------------
D-1.2(a) Except where the alternative method under Section 401(k)(12) of
the Code of meeting the nondiscrimination requirements of Section 401(k) of the
Code is satisfied with respect to the Plan for a Plan Year beginning on or after
January 1, 1999, the Pre-Tax Contributions otherwise permitted to be made
pursuant to the Plan shall be limited as hereafter provided so that the Average
Deferral Percentage for Eligible Participants who are Highly Compensated
Employees for a Plan Year (that is, the Tested Plan Year) does not exceed the
greater of (i) or (ii) as follows :
(i) The "regular limitation" percentage which is equal to one
hundred twenty-five percent (125%) of the Average Deferral Percentage for
the Eligible Participants who are Non-Highly Compensated Employees for the
Applicable Plan Year, or
(ii) The "alternative limitation" percentage which is equal to
the lesser of:
(A) Two hundred percent (200%) of the Average Deferral
Percentage for the Eligible Participants who are Non-Highly
Compensated Employees for the Applicable Plan Year, or
(B) Two (2) percentage points over the Average Deferral
Percentage for the Eligible Participants who are Non-Highly
Compensated Employees for the Applicable Plan Year.
Notwithstanding the foregoing, for Plan Years beginning on or after January 1,
1997, if the Tested Plan Year is the first Plan Year of the Plan, then the
Average Deferral Percentage for the Eligible Participants who are Non-Highly
Compensated Employees for the Applicable Plan Year shall be deemed to be three
percent (3%) unless the Plan Sponsor or the Administrator elects in accordance
with Section 401(k)(3)(E) of the Code, to use the actual Average Deferral
Percentage for the Eligible Participants who are Non-Highly Compensated
Employees for the first Plan Year.
D-1.2(b) For purposes hereof:
-D-3-
<PAGE>
(i) The term "Applicable Plan Year" means:
(A) For Plan Years beginning before January 1, 1997, the Tested
Plan Year.
(B) For Plan Years beginning on or after January 1, 1997, the Plan
Year immediately preceding the Tested Plan Year, unless the Plan Sponsor or
the Administrator elects in accordance with Section 401(k)(3)(A) of the
Code, to use the Tested Plan Year.
(ii) The term "Average Deferral Percentage" means the average (expressed
as a percentage) of the Deferral Percentages of the Eligible Participants in a
group.
(iii) The term "Deferral Contributions" means:
(A) Pre-Tax Contributions, and
(B) To the extent provided or elected pursuant to the special
operating rules of subparagraph 1.2(c) of this Appendix:
(I) Qualified non-elective contributions, including without
limitation QNEC Contributions, within the meaning of Section
401(m)(4)(C) of the Code (that is, any employer contributions (other
than matching contributions within the meaning of Section
401(m)(4)(A) of the Code) which the Employee may not elect to have
paid to him instead of being contributed to the plan, which are
subject to the restrictions on distributions contained in Section
401(k)(2)(B) of the Code (generally prohibiting distribution before
separation from service, death, or disability unless the Employee has
a hardship or has reached age fifty-nine and one-half (59-1/2) or
after plan termination), and which are immediately fully vested and
non-forfeitable),
(II) Qualified matching contributions within the meaning of
Section 401(k)(3)(C)(I) of the Code (that is, matching contributions
as defined in Section 401(m)(4)(A) of the Code, which are subject to
the restrictions on distributions contained in Section 401(k)(2)(B)
of the Code (generally prohibiting distribution before separation
from service, death, or disability unless the Employee has a hardship
or has reached the age fifty-nine and one-half (59-1/2) or after plan
termination) and which are immediately fully vested and non-
forfeitable), and/or
(III) Any other elective deferrals under a cash or deferred
arrangement described in Section 401(k) of the Code.
(C) Notwithstanding the foregoing, a Pre-Tax Contribution and any
other elective deferral shall not be considered a Deferral Contribution for
a Plan Year unless both:
(I) It is allocated as of a date within the Plan Year (which
generally means that it is not contingent upon the Employee's
participation in the plan or arrangement or performance of services
on any date subsequent to that date and that is actually paid to the
funding vehicle of the plan or arrangement no later than the end of
the 12-month period immediately following such Plan Year), and
(II) It either relates to compensation that either would have
been received by the Employee in such Plan Year but for his election
to contribute to the plan or arrangement or is attributable to
services performed by the Employee in the Plan Year, and but for the
Employee's election to contribute to the
-D-4-
<PAGE>
plan or arrangement, would have been received by the Employee within
two and one-half (2-1/2) months after the end of such Plan Year.
(iv) The term "Deferral Percentage" means the ratio (expressed as a
percentage and calculated to the nearest one-hundredth of one percent (.01%)) of
(A) the Pre-Tax Contributions under the Plan (and, where provided or elected in
accordance with the special operating rules of subparagraph 1.2(c) of this
Appendix, any other Deferral Contributions) made by or on behalf of an Eligible
Participant for the Plan Year to (B) the Eligible Participant's Eligible
Compensation for the Plan Year.
(v) The term "Eligible Compensation" means an Eligible Participant's
Statutory Compensation while he is an Eligible Participant determined without
regard to suspensions from participation.
(vi) The term "Eligible Participant" means any Employee who is authorized
under the terms of the Plan to make Pre-Tax Contributions for the Plan Year,
determined without regard to suspensions from participation for any reason other
than not being an Eligible Employee (or, where provided or elected in accordance
with the special operating rules of subparagraph 1.2(c) of this Appendix, who is
authorized under the terms of the applicable plan to make or receive an
allocation of Deferral Contributions for the Plan Year).
(vii) The term "Excess Deferral Contributions" means the amount of
Deferral Contributions for a Plan Year which must be eliminated in order for the
restrictions of subparagraph 1.2(a) of this Appendix to be satisfied for the
Plan Year.
(viii) The term "Tested Plan Year" means the Plan Year for which the
limitation is being applied to the contributions of Eligible Participants who
are Highly Compensated Employees.
D-1.2(c) The following special rules shall apply for purposes of this
paragraph:
(i) The following plans or portions of plans are mandatorily
disaggregated and must be tested separately under subparagraph 1.2(a) of this
Appendix and Section 401(k)(3) of the Code:
(A) Contributions under an employee stock ownership plan described
in Section 409 or 4975(e)(7) of the Code (an "ESOP") (or the portion of a
plan which is an ESOP) may not be aggregated with contributions under a
non-ESOP (or the portion of a plan which is not an ESOP) except as
permitted under Section 401(k), 409 or 4975 of the Code.
(B) Except where permitted to be aggregated for purposes of Section
410 of the Code, contributions by or for employees who are included in a
unit of employees covered by a collective bargaining agreement may not be
aggregated with contributions by or for employees who are included in a
unit of employees not covered by the same collective bargaining agreement.
(C) Except where permitted to be aggregated for purposes of Section
410 of the Code, contributions by or for employees assigned to qualified
separate lines of business within the meaning of Section 414(r) of the
Code, unless the plan in question qualifies for the employer-wide exception
to mandatory disaggregation for this purpose under Section 414(r) of the
Code.
(D) Contributions under plans that could but actually are not
aggregated for the plan year for purposes of satisfying the minimum coverage
requirements of Section 410(b) of the Code (other than the average benefits
percentage test).
-D-5-
<PAGE>
(E) Contributions under a plan maintained by more than one employer
as described in Section 413(c) of the Code shall be treated as if each such
employer maintained a separate plan.
(F) Except as provided in clause (ii) of this subparagraph,
contributions under plans which do not have the same plan year.
(ii) Subject to the limitations of clause (i) of this subparagraph, the
following plans or portions of plans are mandatorily aggregated and must be
tested as one plan under subparagraph 1.2(a) of this Appendix and Section
401(k)(3) of the Code:
(A) The Deferral Percentage for any Eligible Participant who is a
Highly Compensated Employee for the Plan Year and who is eligible to make
Pre-Tax Contributions or have other elective deferrals allocated to his
account under two or more cash or deferred arrangements described in
Section 401(k) of the Code that are maintained by the Employer shall be
determined as if all such Pre-Tax Contributions and elective deferrals were
made under a single plan. Such aggregation shall be effected on the basis
of plan years beginning in the same calendar year.
(B) In the event that this Plan satisfies the requirements of Section
401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii)) of the Code only
if aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of Section 401(a)(4) or 410(b) (other than Section
410(b)(2)(A)(ii)) of the Code only if aggregated with this Plan, then this
paragraph shall be applied by determining the Deferral Percentages of
Eligible Participants as if all such plans were a single plan.
(iii) Subject to the limitations of clause (i) of this subparagraph, two or
more cash or deferred arrangements may be permissively aggregated by the
Administrator for purposes of satisfying the requirements of Section 401(a)(4),
401(k) and 410(b) of the Code if such arrangements each have the same plan year.
(iv) At the option of the Administrator, each Eligible Participant's
Deferral Contributions for a Plan Year consisting of qualified non-elective
contributions and/or qualified matching contributions under any plan or
arrangement may be included in determining the Deferral Percentages for the Plan
Year provided, however, that:
(A) The non-elective contributions (both including and excluding the
qualified non-elective contributions which are treated as Deferral
Contributions) satisfy the requirements of Section 401(a)(4) of the Code.
(B) The matching contributions satisfy the requirements of Section
401(m) of the Code, provided that the qualified non-elective contributions
and qualified matching contributions treated as Deferral Contributions are
disregarded in making this determination.
(C) Except as provided in clauses (v)(A) and (B) of this
subparagraph, the qualified non-elective contributions and qualified
matching contributions treated as Deferral Contributions are not taken into
account in determining whether any other contributions or benefits satisfy
the requirements of Section 401(a)(4) of the Code or whether employee
contributions and matching contributions meet the requirements of Section
401(m) of the Code.
(D) The qualified non-elective contributions may not be treated as
Deferral Contributions if the effect is to increase the difference between
the Average Deferral Percentages for Highly Compensated Employees and for
Non-Highly Compensated Employees.
-D-6-
<PAGE>
(E) The qualified non-elective contributions and qualified
matching contributions satisfy the contingent benefit limitations of
Section 401(k)(4)(A) (which generally prohibit benefits other than
matching contributions from being contingent on making or not making
elective deferrals).
(F) The plan years of the plans or arrangements under which the
qualified non-elective contributions and qualified matching
contributions treated as Deferral Contributions are made is the same
as the Plan Year.
(v) The determination of Excess Deferral Contributions for a Plan
Year for purposes of this paragraph shall be made:
(A) After first determining the Excess Elective Deferrals under
subparagraph 1.1(b) of this Appendix for the Plan Year; provided that
the Excess Elective Deferrals of Non-Highly Compensated Employees
shall not be taken into account in determining the Deferral Percentage
of such Eligible Participants to the extent that such Excess Elective
Deferrals are made under this Plan or other cash or deferred
arrangement maintained by the Employer and that Excess Elective
Deferrals of Highly Compensated Employees shall be taken into account
in determining the Deferral Percentage of such Eligible Participants,
and
(B) Before determining the Excess Aggregate Contributions for
purposes of paragraph 1.3 of this Appendix and Section 401(m) of the
Code for the Plan Year.
(vi) The employee groups tested hereunder may be divided into
separate testing groups on such basis, if any, as the Administrator may
determine and as is permitted under Sections 410, 401(k) and 401(m) of the
Code, including, but not limited to, separate testing for excludible
employees (that is, where the plan's age and/or service requirements are
lower than the greatest minimum age and service conditions permissible
under Section 410(a) of the Code).
(vii) If the Plan Sponsor or the Administrator elects to apply
Section 410(b)(4)(B) of the Code in determining whether the Plan meets the
requirements of Section 410(b) of the Code for a Plan Year, the Plan may
exclude altogether the participation of Non-Highly Compensated Employees
(but not the participation of Highly Compensated Employees) who have not
met the minimum age and service requirements of Section 410(a)(1)(A) of the
Code in determining the satisfaction of requirements of subparagraph D-
1.2(a) and subparagraph D-1.4(a) of this Appendix.
(viii) The determination and treatment of the Deferral Contributions
and Deferral Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury or his
delegate.
D-1.2(d) If the Average Deferral Percentage for the Eligible
Participants who are Highly Compensated Employees for a Plan Year is more than
the amount permitted under the above restrictions, then:
(i) If the Administrator directs that Excess Deferral Contributions
shall be recharacterized, the Excess Deferral Contributions for the Highly
Compensated Employees for the Plan Year shall be reduced by
recharacterization as After-Tax Contributions as required by Section 401(k)
of the Code or by distributing such contributions (together with income
thereon) as provided below after the end of the Plan Year for which made
and, to the extent not inconsistent therewith. Notwithstanding the
foregoing, in no case shall the amount of Excess Deferral Contributions
recharacterized with respect to any Highly Compensated Employee exceed the
amount of his Pre-Tax Contributions and other elective deferrals. When
Excess Deferral Contributions cannot be recharacterized, they shall be
returned in a "corrective distribution" to the Highly Compensated Employee
at such time as the Administrator shall determine but in no event later than
twelve (12) months after the end of the Plan Year for which made, together
with income thereon (as
-D-7-
<PAGE>
determined pursuant to the provisions of clause (iv) of subparagraph 1.3(d)
of this Appendix substituting the phrase "Excess Deferral Contributions to
be returned" for "Excess Aggregate Contributions").
(ii) If the Administrator does not direct that Excess Deferral
Contributions shall be recharacterized, the Excess Deferral Contributions
for the Highly Compensated Employees for the Plan Year shall be reduced by
distributing them (together with income thereon) in a "corrective
distribution" to Highly Compensated Employees as required by Section 401(k)
of the Code (or, where so provided in another plan for Excess Deferral
Contributions made to that plan, by recharacterizing them as after-tax
employee contributions pursuant to that other plan) at such time as the
Administrator may determine after the end of the Plan Year for which made
but in no event later than twelve (12) months after the end of the Plan
Year for which made. To the extent not inconsistent with the requirements
of Section 401(k) of the Code, the reduction shall be effected in the
following manner:
(A) First, the excess amount shall be considered to consist
of the Participant's Pre-Tax Basic Contributions in excess of the
percentage of his Compensation with respect to which Matching
Contributions are made for such Plan Year to the extent thereof,
and
(B) Then, any remaining portion of the excess amount shall
be considered to consist of the remainder of the Participant's
Pre-Tax Contributions for such Plan Year to the extent thereof,
and
(C) Finally, any remaining portion of the excess amount
shall be considered to consist of the Participant's other
Deferral Contributions for such Plan Year.
Notwithstanding the time period described above for the return of Excess
Deferral Contributions, such amounts and any income thereon returned more
than two and one-half (2-1/2) months after the end of the Plan Year may be
subject to the ten percent (10%) excise tax imposed on the Employer by
Section 4979 of the Code.
(iii) Among such Participants, the reduction shall be effected by
reducing contributions in the order of the highest dollar amounts of
Deferral Contributions by or on behalf of each of the Highly Compensated
Employees, such that the applicable restrictions of subparagraph 1.2(a) of
this Appendix are satisfied; provided, however, that any required reduction
for any Eligible Participant will be reduced by his Excess Elective
Deferrals returned or recharacterized pursuant to subparagraph 1.1(b) of
this Appendix.
(iv) When two or more plans are involved, contributions shall be
reduced in the following order: First, those under money purchase pension
plans, then those under stock bonus plans, then those under profit sharing
plans, and lastly, those under all other plans; and reductions under plans
of the same type shall be on a pro rata basis.
(v) Whenever Excess Deferral Contributions are recharacterized
as After-Tax Contributions, the following rules shall apply with respect to
such recharacterization.
(A) Excess Deferral Contributions recharacterized are
includable in the Participant's income on the earliest date any
elective deferrals would have been received by the Participant but
for his election to contribute to the plan or arrangement.
(B) Such recharacterized Excess Deferral Contributions are
to be treated as After-Tax Contributions for purposes of Sections 72,
401(a), 401(m) and 6047 of the Code, but shall be considered elective
deferrals for all other purposes of the Code including but not
limited to Sections 401(k)(2), 404, 409, 411, 412, 415, 416 and 417
of the Code.
-D-8-
<PAGE>
(C) Such recharacterized Excess Deferral Contributions shall
remain allocated to the applicable account of the Participant, except
to the extent required to be distributed to the Participant.
(D) Such Excess Deferral Contributions shall be recharacterized no
later than two and one-half (2-1/2) months after the end of the Plan
Year in question. For this purpose, recharacterization is deemed to
occur on the date on which the last of those Highly Compensated
Employees with Excess Deferral Contributions to be recharacterized is
notified of the recharacterization in any manner prescribed by the
Secretary of the Treasury or his delegate.
(E) The payor or Administrator shall report such recharacterized
Excess Deferral Contributions as employee contributions to the
Internal Revenue Service and the affected Participant by timely
providing such forms as the Secretary of the Treasury or his delegate
shall designate to the Internal Revenue Service and to the affected
Participant, by timely taking such other actions as the Secretary of
the Treasury or his delegate shall require, and by the Administrator's
accounting for such amounts as employee contributions for purposes of
Sections 72 and 6047 of the Code.
(vi) For purposes hereof and except to the extent otherwise provided
under Section 401(k) of the Code, the income allocated to any Excess
Deferral Contributions allocated to the Plan shall be determined by the
Administrator under the following rules and calculated under any reasonable
method selected by the Administrator so long as the method does not violate
the requirements of Section 401(a)(4) of the Code, is used consistently for
all Participants and for all corrective distributions under the Plan for a
Plan Year, and is used by the Plan for allocating income to Participants'
accounts under the Plan:
(A) Unless another method is determined by the Administrator, the
amount of income to be distributed shall be determined by multiplying
(I) the income for the Plan Year or other period in question allocable
to the account to which such Excess Deferral Contributions are
allocated by (II) a fraction, the numerator of which is the amount of
the Participant's Excess Deferral Contributions allocated to such
account for the Plan Year or other period in question and entitled to
a share of the valuation adjustment therefor under paragraph 4.6 and
the denominator of which is the balance in such account on the last
day of the Plan Year or other period in question, reduced by the
earnings allocable thereto and increased by the losses allocable
thereto in the Plan Year or other period in question.
(B) Unless otherwise determined by the Administrator on a uniform
and non-discriminatory basis, no income shall be distributed for the
period between the end of the Plan Year and the date of distribution.
(vii) Any distribution of Excess Deferral Contributions (and income)
shall clearly be designated by the Administrator as such.
D-1.2(e) If a Participant's Pre-Tax Contributions are recharacterized as
After-Tax Contributions for purposes of paragraph 1.3 of this Appendix, such
contributions shall nevertheless still be considered made for any benefit
accrual requirements contingent thereon.
D-1.2(f) If a Participant's Pre-Tax Contributions are returned pursuant to
this paragraph, such contributions shall nevertheless still be considered made
for any benefit accrual requirements contingent thereon and any Matching
Contributions attributable thereto shall be also be distributed (to the extent
vested) or forfeited (to the extent not vested).
D-1.3 Limitation on and Distribution of After-Tax and Matching
--------------------------------------------------------
Contributions Made by or on behalf of Highly Compensated Employees.
- ------------------------------------------------------------------
-D-9-
<PAGE>
D-1.3(a) Except where the alternative method under Section 401(m)(11) of
the Code of meeting the nondiscrimination requirements of Section 401(m) of the
Code is satisfied with respect to the Plan for a Plan Year beginning on or after
January 1, 1999, the After-Tax Contributions made by Participants and the
Matching Contributions otherwise allocated to the account of a Participant under
the Plan shall be limited as hereafter provided so that the Average Contribution
Percentage for Eligible Participants who are Highly Compensated Employees for a
Plan Year (that is, the Tested Plan Year) does not exceed the greater of (i) or
(ii) as follows:
(i) The "regular limitation" percentage which is equal to one
hundred twenty-five percent (125%) of the Average Contribution Percentage
for the Eligible Participants who are Non-Highly Compensated Employees for
the Applicable Plan Year, or
(ii) The "alternative limitation" percentage which is equal to the
lesser of:
(A) Two hundred percent (200%) of the Average Contribution
Percentage for the Eligible Participants who are Non-Highly
Compensated Employees for the Applicable Plan Year, or
(B) Two (2) percentage points over the Average Contribution
Percentage for the Eligible Participants who are Non-Highly
Compensated Employees for the Applicable Plan Year.
Notwithstanding the foregoing, for Plan Years beginning on or after January 1,
1997, if the Tested Plan Year is the first Plan Year of the Plan, then the
Average Contribution Percentage for the Eligible Participants who are Non-Highly
Compensated Employees for the Applicable Plan Year shall be deemed to be three
percent (3%) unless the Plan Sponsor or the Administrator elects in accordance
with Section 401(m)(2)(E) of the Code, to use the actual Average Contribution
Percentage for the Eligible Participants who are Non-Highly Compensated
Employees for the first Plan Year.
D-1.3(b) For purposes hereof:
(i) The term "Aggregate Contributions" means:
(A) After-Tax Contributions and Matching Contributions,
(B) To the extent provided or elected pursuant to the special
operating rules of subparagraph 1.3(c) of this Appendix, any after-tax
employee contributions which are allocated to a separate account to
which attributable earnings or loss are allocated and consisting of
either:
(I) Employee contributions to the defined contribution
portion of a plan described in Section 414(k) of the Code.
(II) Employee contributions to a qualified cost-of-living
arrangement described in Section 415(2)(B) of the Code.
(III) Employee contributions applied to the purchase of
whole life insurance protection or survivor benefit protection
under a defined contribution plan.
(IV) Amounts attributable to Excess Deferral Contributions
as defined in paragraph 1.2 of this Appendix which are
recharacterized as after-tax employee contributions.
(V) Employee contributions to a contract described in
Section 403(b) of the Code.
-D-10-
<PAGE>
Notwithstanding the foregoing, after-tax employee contributions do not
include loan repayments, cash-out buy-backs, qualifying rollover
contributions, employee contributions which are transferred to a plan
or any other amounts which are excluded from such term under Section
401(m) of the Code,
(C) To the extent provided or elected pursuant to the special
operating rules of subparagraph 1.3(c) of this Appendix, any other
matching contributions within the meaning of Section 404(m)(4)(A) of
the Code (that is, employer contributions made on account of after-tax
employee contributions under any plan or elective deferrals under a
cash or deferred arrangement described in Section 401(k) of the Code),
and/or
(D) To the extent provided or elected pursuant to the special
operating rules of subparagraph 1.3(c) of this Appendix:
(I) Pre-Tax Contributions,
(II) Qualified non-elective contributions, including
without limitation QNEC Contributions, within the meaning of
Section 401(m)(4)(C) of the Code (that is, any employer
contributions (other than matching contributions) which the
Employee may not elect to have paid to him instead of being
contributed to the plan, which are subject to the restrictions on
distributions contained in Section 401(k)(2)(B) of the Code
(generally prohibiting distribution before separation from service,
death, or disability unless the Employee has a hardship or has
reached age fifty-nine and one-half (59-1/2) or after plan
termination), and which are immediately fully vested and non-
forfeitable), and/or
(III) Any other elective deferrals under a cash or deferred
arrangement described in Section 401(k) of the Code.
(E) Notwithstanding the foregoing, a contribution shall not be
considered an Aggregate Contribution for a Plan Year unless:
(I) In the case of an after-tax employee contribution it
is actually paid to the funding vehicle of the plan or an agent of
the plan who remits the contribution to the funding vehicle within
a reasonable time.
(II) In the case of a matching contribution, it is
allocated as of a date within the Plan Year, it is actually paid to
the funding vehicle of the plan no later than the end of the 12-
month period immediately following such plan year, and it is made
on behalf of the Employee's elective deferrals or employee
contributions for the plan year.
(ii) The term "Applicable Plan Year" means:
(A) For Plan Years beginning before January 1, 1997, the Tested
Plan Year.
(B) For Plan Years beginning on or after January 1, 1997, the Plan
Year immediately preceding the Tested Plan Year, unless the Plan
Sponsor or the Administrator elects in accordance with Section
401(m)(2)(A) of the Code, to use the Tested Plan Year.
(iii) The term "Average Contribution Percentage" means the average
(expressed as a percentage) of the Contribution Percentages of the Eligible
Participants in a group.
-D-11-
<PAGE>
(iv) The term "Contribution Percentage" means the ratio (expressed as
a percentage and calculated to the nearest one-hundredth of one percent (.01%))
of (A) the Matching Contributions under the Plan (and, where provided or elected
in accordance with the special operating rules of subparagraph 1.3(c) of this
Appendix, any other Aggregate Contributions) made by or on behalf of an Eligible
Participant for the Plan Year to (B) the Eligible Participant's Eligible
Compensation for the Plan Year.
(v) The term "Eligible Compensation" means an Eligible Participant's
Statutory Compensation while he is an Eligible Participant determined without
regard to suspensions from participation.
(vi) The term "Eligible Participant" means any Employee who is authorized
under the terms of the Plan to make After-Tax Contributions or Pre-Tax
Contributions for the Plan Year or receive an allocation of the Matching
Contribution for the Plan Year, determined without regard to suspensions from
participation for any reason other than not being an Eligible Employee (or,
where provided or elected in accordance with the special operating rules of
subparagraph 1.3(c) of this Appendix, who is authorized under the terms of the
applicable plan to make or receive an allocation of other Aggregate
Contributions for the Plan Year).
(vii) The term "Excess Aggregate Contributions" means the amount of
Aggregate Contributions for a Plan Year which must be eliminated in order for
the restrictions of subparagraph 1.3(a) of this Appendix to be satisfied for the
Plan Year.
(viii) The term "Tested Plan Year" means the Plan Year for which the
limitation is being applied to the contributions by or for Eligible Participants
who are Highly Compensated Employees.
D-1.3(c) The following special rules shall apply for purposes of this
paragraph:
(i) The following plans or portions of plans are mandatorily
disaggregated and must be tested separately under subparagraph 1.3(a) of this
Appendix and Section 401(m)(2) of the Code:
(A) Contributions under an employee stock ownership plan described
in Section 409 or 4975(e)(7) of the Code (an "ESOP") (or the portion of
a plan which is an ESOP) may not be aggregated with contributions under
a non-ESOP (or the portion of a plan which is not an ESOP) except as
permitted under Section 401(m), 409 or 4975 of the Code.
(B) Except where permitted to be aggregated for purposes of Section
410 of the Code, contributions by or for employees who are included in a
unit of employees covered by a collective bargaining agreement may not
be aggregated with contributions by or for employees who are included in
a unit of employees not covered by the same collective bargaining
agreement.
(C) Except where permitted to be aggregated for purposes of Section
410 of the Code, contributions by or for employees assigned to qualified
separate lines of business within the meaning of Section 414(r) of the
Code, unless the plan in question qualifies for the employer-wide
exception to mandatory disaggregation for this purpose under Section
414(r) of the Code.
(D) Contributions under plans that could but actually are not
aggregated for the plan year for purposes of satisfying the minimum
coverage requirements of Section 410(b) of the Code (other than the
average benefits percentage test).
(E) Contributions under a plan maintained by more than one employer
as described in Section 413(c) of the Code shall be treated as if each
such employer maintained a separate plan.
-D-12-
<PAGE>
(F) Except as provided in clause (ii) of this subparagraph,
contributions under plans which do not have the same plan year.
(ii) Subject to the limitations of clause (i) of this subparagraph, the
following plans or portions of plans are mandatorily aggregated and must be
tested as one plan under subparagraph 1.3(a) of this Appendix and Section
401(m)(2) of the Code:
(A) The Contribution Percentage for any Eligible Participant who is a
Highly Compensated Employee for the Plan Year and who is eligible to make
after-tax employee contributions, or to have matching contributions,
qualified non-elective contributions or elective deferrals allocated to his
account, under two or more plans described in Section 401(a) or cash or
deferred arrangements described in Section 401(k) of the Code that are
maintained by the Employer shall be determined as if all such after-tax
employee contributions, matching contributions, qualified non-elective
contributions and elective deferrals were made under a single plan. Such
aggregation shall be effected on the basis of plan years beginning in the
same calendar year.
(B) In the event that this Plan satisfies the requirements of Section
401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii)) of the Code only
if aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of Section 401(a)(4) or 410(b) (other than Section
410(b)(2)(A)(ii)) of the Code only if aggregated with this Plan, then this
paragraph shall be applied by determining the Contribution Percentages of
Eligible Participants as if all such plans were a single plan.
(iii) Subject to the limitations of clause (i) of this subparagraph, two
or more plans to which after-tax employee contributions or matching
contributions or both may be made may be permissively aggregated by the
Administrator for purposes of satisfying the requirements of Section 401(a)(4),
401(m) and 410(b) of the Code if such plans each have the same plan year.
(iv) At the option of the Administrator, each Eligible Participant's
Aggregate Contributions for a Plan Year consisting of qualified non-elective
contributions and elective deferrals under any plan or arrangement may be
treated as matching contributions and included in determining the Contribution
Percentages for the Plan Year provided, however, that:
(A) The non-elective contributions (both including and excluding the
qualified non-elective contributions which are treated as Aggregate
Contributions and in the latter case also excluding the qualified non-
elective contributions treated as elective deferrals under Section 401(k)
of the Code) satisfy the requirements of Section 401(a)(4) of the Code.
(B) The elective deferrals (both including and excluding elective
deferrals treated as Aggregate Contributions) satisfy the requirements of
Section 401(k) of the Code.
(C) Except as provided in clauses (v)(A) and (B) of this
subparagraph, the qualified non-elective contributions and elective
deferrals treated as Aggregate Contributions are not taken into account in
determining whether any other contributions or benefits satisfy the
requirements of Section 401(a)(4) of the Code or whether elective deferrals
meet the requirements of Section 401(k) of the Code.
(D) The qualified non-elective contributions may not be treated as
Aggregate Contributions if the effect is to increase the difference between
the Average Contribution Percentages for Highly Compensated Employees and
for Non-Highly Compensated Employees.
-D-13-
<PAGE>
(E) The plan years of the plans or arrangements under which the
qualified non-elective contributions and elective deferrals treated as
Aggregate Contributions are made is the same as the Plan Year.
(v) Contributions by or for employees who are included in a unit of
employees covered by a collective bargaining agreement shall automatically
be considered to pass the non-discrimination test of subparagraph 1.3(a) of
this Appendix and Section 401(m) of the Code and need not be tested
thereunder.
(vi) The determination of Excess Aggregate Contributions for a Plan
Year for purposes of this paragraph shall be made after:
(A) First determining the Excess Elective Deferrals under
subparagraph 1.1(b) of this Appendix for the Plan Year, and
(B) Then determining the Excess Deferral Contributions under
paragraph 1.2 of this Appendix for the Plan Year.
(vii) The employee groups tested hereunder may be divided into
separate testing groups on such basis, if any, as the Administrator may
determine and as is permitted under Sections 410, 401(k) and 401(m) of the
Code, including, but not limited to, separate testing for excludible
employees (that is, where the plan's age and/or service requirements are
lower than the greatest minimum age and service conditions permissible under
Section 410(a) of the Code).
(viii) If the Plan Sponsor or the Administrator elects to apply
Section 410(b)(4)(B) of the Code in determining whether the Plan meets the
requirements of Section 410(b) of the Code for a Plan Year, the Plan may
exclude altogether the participation of Non-Highly Compensated Employees
(but not the participation of Highly Compensated Employees) who have not met
the minimum age and service requirements of Section 410(a)(1)(A) of the Code
in determining the satisfaction of requirements of subparagraph D-1.3(a) and
subparagraph D-1.4(a) of this Appendix.
(ix) The determination and treatment of the Aggregate Contributions
and Contribution Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury or his
delegate.
D-1.3(d) If the Average Contribution Percentage for the Eligible
Participants who are Highly Compensated Employees for a Plan Year is more than
the amount permitted under the above restrictions, then:
(i) The Excess Aggregate Contributions for the Highly Compensated
Employees for the Plan Year shall be reduced by distributing them (to the
extent vested) to Highly Compensated Employees or by forfeiting them (to the
extent not vested), together with income thereon in either case, as required
by Section 401(m) of the Code at such time as the Administrator may
determine after the end of the Plan Year for which made but in no event
later than twelve (12) months after the end of the Plan Year for which made.
To the extent not inconsistent with the requirements of Section 401(m) of
the Code, the reduction shall be effected in the following manner:
(A) First, the excess amount shall be considered to consist of
the Participant's After-Tax Optional Contributions for such Plan Year
and similar contributions under other plans taken into account for
such Plan Year on a pro rata basis to the extent thereof, which
contributions shall be distributed to the Participant, and
(B) Then, any remaining portion of the excess amount shall be
considered to consist of the Participant's After-Tax Basic
Contributions, Matching Contributions, and other Aggregate
Contributions treated as matching contributions and similar
contributions under other plans taken into account for such Plan Year
on a pro rata basis to the extent thereof, which contributions shall
be distributed to the Participant (or forfeited, to the extent not
vested).
-D-14-
<PAGE>
Notwithstanding the time period described above for the return of Excess
Aggregate Contributions, such amounts and any income thereon returned more
than two and one-half (2-1/2) months after the end of the Plan Year may be
subject to the ten percent (10%) excise tax imposed on the Employer by
Section 4979 of the Code.
(ii) Among such Participants, the reduction shall be effected by
reducing contributions in the order of the highest dollar amounts of
Aggregate Contributions by or on behalf of each of the Highly Compensated
Employees, such that the applicable restrictions of subparagraph 1.3(a) of
this Appendix are satisfied.
(iii) When two or more plans are involved, contributions shall be
reduced in the following order: First, those under defined benefit plans
shall be reduced, then those under target benefit pension plans, then those
under money purchase pension plans, then those under stock bonus plans, then
those under profit sharing plans, and lastly, those under all other plans;
and reductions under plans of the same type shall be on a pro rata basis.
(iv) For purposes hereof and except to the extent otherwise
provided under Section 401(m) of the Code, the income allocated to any
Excess Aggregate Contributions allocated to the Plan shall be determined by
the Administrator under the following rules and calculated under any
reasonable method selected by the Administrator so long as the method does
not violate the requirements of Section 401(a)(4) of the Code, is used
consistently for all Participants and for all corrective distributions under
the Plan for a Plan Year, and is used by the Plan for allocating income to
Participants' accounts under the Plan:
(A) Unless another method is determined by the Administrator,
the amount of income to be distributed shall be determined by
multiplying (I) the income for the Plan Year or other period in
question allocable to the account to which such Excess Aggregate
Contributions are allocated by (II) a fraction, the numerator of
which is the amount of the Participant's Excess Aggregate
Contributions allocated to such account for the Plan Year or other
period in question and entitled to a share of the valuation
adjustment therefor under paragraph 4.6 of the Plan and the
denominator of which is the balance in such account on the last day
of the Plan Year or other period in question normally taken into
account in determining such valuation adjustment.
(B) Unless otherwise determined by the Administrator on a
uniform and non-discriminatory basis, no income shall be
distributed for the period between the end of the Plan Year and the
date of distribution.
(v) Any distribution of Excess Aggregate Contributions (and
income) shall clearly be designated by the Administrator as such.
D-1.4 Limitation on Multiple Use of Alternative Limitations in Paragraphs
-------------------------------------------------------------------
1.2 and 1.3 of this Appendix.
- ----------------------------
D-1.4(a) Multiple use of the alternative limitations under clause (ii) of
subparagraphs 1.2(a) and 1.3(a) of this Appendix is prohibited as provided in
section 401(m)(9)(A) of the Code and, to the extent not inconsistent therewith,
is considered to occur if both of the following occur for a Plan Year:
(i) One or more Highly Compensated Employees are Eligible
Participants for purposes of both paragraphs 1.2 and 1.3 of this Appendix,
and
(ii) The sum of the Average Deferral Percentages and the Average
Contribution Percentages of the Highly Compensated Employees who are
Eligible Participants exceeds the Multiple Use Limitation Percentage, and
(ii) Both:
-D-15-
<PAGE>
(A) The Average Deferral Percentage of the Highly Compensated
Employees who are Eligible Participants for the Tested Plan Year
exceeds one hundred twenty-five percent (125%) of the Average Deferral
Percentage of the Non-Highly Compensated Employees who are Eligible
Participants for the Applicable Plan Year, and
(B) The Average Contribution Percentage of the Highly Compensated
Employees who are Eligible Participants for the Tested Plan Year
exceeds one hundred twenty-five percent (125%) of the Average
Contribution Percentage of the Non-Highly Compensated Employees who
are Eligible Participants for the Applicable Plan Year.
Notwithstanding anything to the contrary herein, the prohibition on multiple
use of the alternative limitations under clause (ii) of subparagraphs 1.2
and 1.3 of this Appendix shall apply separately to contributions under an
employee stock ownership plan described in Section 409 or 4975(e)(7) of the
Code (an "ESOP") (or the portion of a plan which is an ESOP) and
contributions under a non-ESOP (or the portion of a plan which is not an
ESOP) except as permitted under Section 401(k), 401(m), 409 or 4975 of the
Code.
D-1.4(b) If the multiple use requirement of subparagraph 1.4(a) of this
Appendix is not satisfied for a Plan Year, then the Excess Multiple Use
Contributions shall be eliminated as provided in Sections 401(k) and 401(m) of
the Code and, to the extent not inconsistent therewith, as follows:
(i) The elimination shall be effected in the manner of reduction
described in paragraphs 1.2 and 1.3 of this Appendix, depending on whether
the contribution eliminated is a Deferral Contribution or an Aggregate
Contribution.
(ii) Such reduction shall be effected first for Aggregate
Contributions and then for Deferral Contributions.
(iii) Such reduction shall be effected for all Highly Compensated
Employees who are Eligible Participants for purposes of either paragraph 1.2
or 1.3 of this Appendix.
D-1.4(c) For purposes hereof:
(i) The term "Excess Multiple Use Contributions" means the amount
of Deferral Contributions and/or Aggregate Contributions for a Plan Year
which must be eliminated so that the Multiple Use Limitation Percentage will
not be exceeded for the Plan Year.
(ii) The term "Multiple Use Limitation Percentage" means a
percentage equal to the greater of:
(A) The sum of:
(I) One hundred twenty-five percent (125%) of the
greater of (a) the Average Deferral Percentage of the Non-
Highly Compensated Employees who are Eligible Participants or
(b) the Average Contribution Percentage of the Non-Highly
Compensated Employees who are Eligible Participants, and
(II) Two (2) plus the lesser of (a) the Average Deferral
Percentage referred to in clause (ii)(A)(I) of this
subparagraph or (b) the Average Contribution Percentage
referred to in clause (ii)(A)(I) of this subparagraph, provided
that the amount determined under this clause (ii)(A)(II)(b)
shall in no event exceed two hundred percent (200%) of such
lesser Average Deferral Percentage or Average Contribution
Percentage.
-D-16-
<PAGE>
(B) The sum of:
(I) One hundred twenty-five percent (125%) of the lesser of
(a) the Average Deferral Percentage of the Non-Highly Compensated
Employees who are Eligible Participants or (b) the Average
Contribution Percentage of the Non-Highly Compensated Employees who
are Eligible Participants, and
(II) Two (2) plus the greater of (a) the Average Deferral
Percentage referred to in clause (ii)(B)(I) of this subparagraph or
(b) the Average Contribution Percentage referred to in clause
(ii)(B)(I) of this subparagraph, provided that the amount
determined under this clause (ii)(B)(II)(b) shall in no event
exceed two hundred percent (200%) of such greater Average Deferral
Percentage or Average Contribution Percentage.
(iii) Notwithstanding the foregoing:
(A) The employee groups tested hereunder may be divided into
separate testing groups on such basis, if any, as the Administrator may
determine and as is permitted under Sections 410, 401(k) and 401(m) of
the Code, including, but not limited to, separate testing for excludible
employees (that is, where the plan's age and/or service requirements are
lower than the greatest minimum age and service conditions permissible
under Section 410(a) of the Code).
(B) The Multiple Use Limitation Percentage may otherwise be
appropriately adjusted by the Administrator as permitted in Sections
401(k) and (m) of the Code in accordance with regulations under
Sections 401(m)(9) of the Code.
D-1.5 Distribution of Transferred Contributions to Meet Requirements
--------------------------------------------------------------
Similar to Those of Paragraphs 1.2, 1.3 and 1.4 of this Appendix. In the event
- ----------------------------------------------------------------
that Deferral Contributions or Aggregate Contributions are transferred from
another plan to this Plan and corrective distributions are required under
Section 401(k), 401(m) or 402(g) of the Code with respect to the transferred
contributions (including income thereon), the Administrator is authorized to
distribute to the affected Participant or return to the transferor plan the
transferred Deferral Contributions and Aggregate Contributions (including income
thereon) as may be necessary or appropriate to effect the corrective
distribution.
-D-17-
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries of the Registrant Organized Under the Laws of
- ------------------------------ ---------------------------
Sugar Creek Foods, Inc.; Consolidated subsidiary Virginia
Eskimo Inc.; Consolidated subsidiary Virginia
All other subsidiaries individually and in the aggregate do not constitute a
"significant subsidiary" within the meaning of Rule 1-02(v) of Regulation S-X.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
We consent to the incorporation by reference in (a) the Registration Statement
(Form S-8 No. 33-58576) pertaining to the 1992 Incentive Stock Plan of Eskimo
Pie Corporation and (b) the Registration Statement (Form S-8 No. 333-24893)
pertaining to the Eskimo Pie Corporation 1996 Incentive Stock Plan, the Eskimo
Pie Corporation Savings Plan and the Eskimo Pie Corporation Employee Stock
Purchase Plan of our report dated March 2, 2000, with respect to the
consolidated financial statements of Eskimo Pie Corporation included in this
Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
March 21, 2000
<PAGE>
Exhibit 24
POWER OF ATTORNEY
I, Robert C. Sledd, do hereby constitute and appoint David B. Kewer and
Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting
singly is hereby authorized for me and in my name and on my behalf as a director
and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute
any and all instruments as such attorneys or attorney deems necessary or
advisable to enable the Company to comply with the Securities Exchange Act of
1934, and any rules, regulations, policies or requirements of the Securities and
Exchange Commission (the "Commission") in respect thereof, in connection with
the preparation and filing with the Commission of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and any and all
amendments to such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary or
appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do
or cause to be done by the virtue hereof.
WITNESS the execution hereof this 27th day of January, 2000.
/s/ Robert C. Sledd
--------------------------------
Robert C. Sledd
<PAGE>
POWER OF ATTORNEY
I, Judith B. McBee, do hereby constitute and appoint David B. Kewer and
Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting
singly is hereby authorized for me and in my name and on my behalf as a director
and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute
any and all instruments as such attorneys or attorney deems necessary or
advisable to enable the Company to comply with the Securities Exchange Act of
1934, and any rules, regulations, policies or requirements of the Securities and
Exchange Commission (the "Commission") in respect thereof, in connection with
the preparation and filing with the Commission of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and any and all
amendments to such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary or
appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do
or cause to be done by the virtue hereof.
WITNESS the execution hereof this 3rd day of February, 2000.
/s/ Judith B. McBee
------------------------------------
Judith B. McBee
<PAGE>
POWER OF ATTORNEY
I, F. Claiborne Johnston, Jr., do hereby constitute and appoint David B.
Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of
whom acting singly is hereby authorized for me and in my name and on my behalf
as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act
and to execute any and all instruments as such attorneys or attorney deems
necessary or advisable to enable the Company to comply with the Securities
Exchange Act of 1934, and any rules, regulations, policies or requirements of
the Securities and Exchange Commission (the "Commission") in respect thereof, in
connection with the preparation and filing with the Commission of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any
and all amendments to such Report, together with such other supplements,
statements, instruments and documents as such attorneys or attorney deem
necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do
or cause to be done by the virtue hereof.
WITNESS the execution hereof this 25th day of January, 2000.
/s/ F. Claiborne Johnston, Jr.
-------------------------------
F. Claiborne Johnston, Jr.
<PAGE>
POWER OF ATTORNEY
I, Wilson H. Flohr, Jr., do hereby constitute and appoint David B. Kewer
and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom
acting singly is hereby authorized for me and in my name and on my behalf as a
director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to
execute any and all instruments as such attorneys or attorney deems necessary or
advisable to enable the Company to comply with the Securities Exchange Act of
1934, and any rules, regulations, policies or requirements of the Securities and
Exchange Commission (the "Commission") in respect thereof, in connection with
the preparation and filing with the Commission of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and any and all
amendments to such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary or
appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do
or cause to be done by the virtue hereof.
WITNESS the execution hereof this 8th day of February, 2000.
/s/ Wilson H. Flohr, Jr.
-------------------------
Wilson H. Flohr, Jr.
<PAGE>
POWER OF ATTORNEY
I, Daniel J. Ludeman, do hereby constitute and appoint David B. Kewer and
Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting
singly is hereby authorized for me and in my name and on my behalf as a director
and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute
any and all instruments as such attorneys or attorney deems necessary or
advisable to enable the Company to comply with the Securities Exchange Act of
1934, and any rules, regulations, policies or requirements of the Securities and
Exchange Commission (the "Commission") in respect thereof, in connection with
the preparation and filing with the Commission of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and any and all
amendments to such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary or
appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do
or cause to be done by the virtue hereof.
WITNESS the execution hereof this 14th day of February, 2000.
/s/ Daniel J. Ludeman
-------------------------------------
Daniel J. Ludeman
<PAGE>
POWER OF ATTORNEY
I, Arnold H. Dreyfuss, do hereby constitute and appoint David B. Kewer
and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom
acting singly is hereby authorized for me and in my name and on my behalf as a
director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to
execute any and all instruments as such attorneys or attorney deems necessary or
advisable to enable the Company to comply with the Securities Exchange Act of
1934, and any rules, regulations, policies or requirements of the Securities and
Exchange Commission (the "Commission") in respect thereof, in connection with
the preparation and filing with the Commission of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, and any and all
amendments to such Report, together with such other supplements, statements,
instruments and documents as such attorneys or attorney deem necessary or
appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do
or cause to be done by the virtue hereof.
WITNESS the execution hereof this 25th day of January, 2000.
/s/ Arnold H. Dreyfuss
------------------------------------
Arnold H. Dreyfuss
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,751
<SECURITIES> 0
<RECEIVABLES> 6,057
<ALLOWANCES> 0
<INVENTORY> 4,032
<CURRENT-ASSETS> 12,397
<PP&E> 19,546
<DEPRECIATION> 12,968
<TOTAL-ASSETS> 36,486
<CURRENT-LIABILITIES> 8,468
<BONDS> 2,929
0
0
<COMMON> 3,464
<OTHER-SE> 19,332
<TOTAL-LIABILITY-AND-EQUITY> 36,486
<SALES> 66,452
<TOTAL-REVENUES> 66,452
<CGS> 38,657
<TOTAL-COSTS> 64,769
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 356
<INCOME-PRETAX> 1,327
<INCOME-TAX> 491
<INCOME-CONTINUING> 836
<DISCONTINUED> 0
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<NET-INCOME> 836
<EPS-BASIC> .24
<EPS-DILUTED> .24
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