FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal year ended January 29, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ...... to ......
Commission file number 0-14399
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Western Publishing Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 06-1104930
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
444 Madison Avenue, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-688-4500
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
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Common Stock, par value $ .01
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes /x/ or 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, is definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. /x/
The aggregate market value of the Registrant's voting stock held
by non-affiliates of the Registrant, computed by reference to the closing
sales price as quoted on NASDAQ on April 11, 1994, was approximately
$246,263,000.
As of April 11, 1994, 20,958,524 shares of the Registrant's $.01
par value common stock were outstanding.
Documents Incorporated by Reference
Definitive Proxy Statement for the annual meeting of stockholders
to be held on June 15, 1994 (the "Proxy Statement"), filed pursuant to
Section 14(a) of the Securities Exchange Act of 1934 on May 24, 1994
incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
BACKGROUND
Western Publishing Group, Inc., through its two operating
subsidiaries, Western Publishing Company, Inc., a Delaware corporation, and
Penn Corporation, a Delaware corporation, is engaged in two business
segments. The Consumer Products segment produces and markets a variety of
consumer products including children's story and picture books, coloring
and activity books, educational workbooks sold at retail, interactive story
books, craft products, children's pre-recorded music cassettes, book and
audio cassette sets, pre-recorded video cassettes, puzzles, games, activity
products incorporating electronic sounds, special interest books for
adults, decorated paper tableware, paper party accessories, gift wrap
products, invitations, stationery and gift items. The Commercial Products
segment provides the following printing and manufacturing services: (1)
graphic services and commercial printing, such as the printing of books,
catalogs, labels, tax forms, magazines and trading cards; (2) specialty
printing and game manufacturing, such as manufacturing, packaging and
distribution of games, instructional manuals for computer software
manufacturers and educational kits; (3) "Custom Publishing" services, such
as the creation, production, assembly and distribution for consumer product
and fast food companies of customized products for their marketing and
promotional programs; and (4) manufacturing and/or the imprinting of
customized writing instruments, vinyl products and wearables for the
advertising specialty market and for executive gifts.
Western Publishing Group, Inc.'s principal offices are located at
444 Madison Avenue, New York, New York 10022, and its telephone number is
(212) 688-4500.
Sale and Phase Out of Operations
On November 29, 1993, the Company announced that it had recently
been approached by several companies expressing a desire to discuss a
business combination. The Board of Directors of the Company authorized the
retention of two investment banking firms as its advisors to explore
alternatives to maximize shareholder value. Based on an analysis of
various alternatives, the Company adopted a plan designed to improve its
competitive position and reduce its cost structure through the sale or
phase out of certain operations, property divestitures and consolidations,
and a workforce reduction.
The plan includes the following major components:
o An agreement in principle to sell the game and puzzle operation
(including certain inventories) to Hasbro, Inc. (Hasbro) for
approximately $103,000,000. This transaction is subject to
customary conditions and is expected to be completed in the
second quarter of Fiscal 1995.
o The decision to exit the direct marketing continuity clubs and
school book club businesses. It is anticipated that this will be
completed by the end of Fiscal 1995.
o The closedown and sale of the Company's Fayetteville, North
Carolina manufacturing and distribution facility, which is
primarily dedicated to the game and puzzle operation but will not
be included in the sale to Hasbro.
o The decision to streamline the Company's publishing business so
as to focus on its core competencies. This will include a
reduction in the management, administrative and direct labor
workforces.
The Company intends to use the net cash proceeds arising from the
plan to repay outstanding debt under its Revolving Credit Agreement. It is
anticipated that the plan, which will begin to be implemented in the first
quarter of Fiscal 1995, will result in a net gain, inclusive of operating
losses of the game, puzzle, direct marketing and school book club
operations from January 30, 1994 through the expected disposition dates.
Accordingly, the anticipated gain will not be reflected in the consolidated
statement of operations until realized.
Provision for Write-Down of Division
On May 12, 1993, the Board of Directors of the Company directed
management to review the operations of the Advertising Specialty Division
of the Company's Penn Corporation subsidiary and evaluate various strategic
alternatives, including its disposition. Accordingly, the Company
established a provision, including operating losses through the expected
disposition date, to write-down the assets of the Division to net
realizable value.
On April 29, 1994, the Company entered into a letter of intent to
sell this Division for approximately $14,000,000. It is anticipated that
this transaction, which is expected to be completed in the second quarter
of Fiscal 1995, will result in a net gain. The net cash proceeds from the
sale of this division will be utilized to repay outstanding debt under the
Revolving Credit Agreement.
BUSINESS SEGMENT INFORMATION
For certain information with respect to revenues, operating
profits and identifiable assets attributable to Western Publishing Group,
Inc.'s Consumer Products and Commercial Products business segments, see
Note 14 of the Notes to Western Publishing Group, Inc.'s consolidated
financial statements, said Note being set forth on pages F-23 to F-25 herein.
CONSUMER PRODUCTS SEGMENT
Products
Western Publishing Company, Inc. is the largest creator,
publisher, manufacturer, printer and marketer of children's books in the
United States. Children's books include story and picture books for
children aged two through eight marketed as GOLDEN BOOKS(Registered) and LITTLE
GOLDEN BOOKS(Registered), Sound Story Books and musical story books for children
aged three and up marketed under the GOLDEN BOOKS(Registered) with sound,
GOLDEN SIGHT & SOUND(Registered), GOLDEN(Registered) SING ALONG, MY FIRST
GOLDEN SOUND STORY(Trademark), GOLDEN TALKING TALES(Trademark), GOLDEN SEEK N'
SOUND(Trademark), GOLDEN(Registered) SOUND STORY(Registered) and SOUND
STORY(Trademark) trademarks and activity books and products and educational
workbooks for children aged two through eight marketed under the
GOLDEN(Registered), MERRIGOLD(Registered), GOLDEN/STEP AHEAD(Registered) and
GOLDEN/BOOK 'N' TAPE(Registered) trademarks. Activity books and products
include coloring books, PAINT WITH WATER(Registered) books, STICKER
FUN(Registered) books, paper doll books, pop-up books, board books, shape books,
MAGIC SLATE(Registered), crayons and boxed activity products. Western
Publishing Company, Inc. also produces and markets pre-recorded video and audio
cassettes for children under its GOLDEN BOOK VIDEOS(Registered) and GOLDEN
MUSIC(Registered) trademarks and coin collecting products under its
WHITMAN(Registered) trademark. Western Publishing Company, Inc. also sells arts
and crafts products under its MERRIGOLD(Registered), GOLDEN(Registered), and
COLOR EXPRESS(Registered) trademarks, pre- recorded audio cassette tapes
packaged with books under its BOOK 'N' TAPE trademark and other products that
complement its lines of books, puzzles and games.
Western Publishing Company, Inc. believes that its
GOLDEN(Registered) and GOLDEN BOOK(Registered) brand names have strong consumer
awareness and recognition and a reputation among consumers for creativity,
quality, entertainment and educational value and customer satisfaction. Among
the best known GOLDEN BOOK(Registered) titles are "Richard Scarry's Best Word
Book Ever", "Pat the Bunny", "The Poky Little Puppy" and the "Golden Treasury of
Children's Literature." GOLDEN(Registered) and GOLDEN BOOK(Registered) products
are believed by Western Publishing Company, Inc., as a result of market
research, to be recognized by virtually all American mothers with children under
the age of ten.
Western Publishing Company, Inc. believes that it is the
nation's largest manufacturer and marketer of children's and adult
jigsaw puzzles and is one of the largest producers and marketers of
children's games, electronic sound games, card games, classic family
board games and adult board games. Western Publishing Company, Inc.'s
GUILD(Registered), FRAME TRAY(Registered) and other jigsaw puzzles
range in piece count from as few as 12 piece puzzles for pre-schoolers
to 1,500 piece puzzles for adults. Western Publishing Company, Inc.
markets classic games such as bingo, checkers, chess, backgammon,
dominoes and various boxed card games under the GOLDEN(Registered) and
WHITMAN(Registered) trademarks and children's games which incorporate
licensed characters. Board games include PICTIONARY(Registered),
PRETTY PRETTY PRINCESS(Trademark), BALDERDASH(Trademark),
OUTBURST(Registered), SONGBURST(Registered), GIRL TALK(Registered), and
HI-HO! CHERRY-O(Registered). As set forth in the section entitled "Sale
and Phase Out of Operations," the Company has agreed in principle to
sell its games and puzzles business to Hasbro, Inc.
Many of Western Publishing Company, Inc.'s products are
published or produced under license from authors, inventors and other
owners of intellectual properties. Other products often feature popular
characters licensed from other companies, including The Walt Disney
Company, Children's Television Workshop (Sesame Street(Registered)),
Mattel, Inc., The Lyons Group, Time Warner, Inc. (through Warner
Brothers, Inc. and D.C. Comics), MCA/Universal Merchandising, Inc., Saban
Entertainment, Inc., Paramount Pictures Corporation, and Twentieth Century Fox
Corporation.
Western Publishing Company, Inc.'s adult non-fiction book
line is designed to inform the family on subjects of special interest
and includes the GOLDEN GUIDES(Registered) line of books on subjects
such as science, birds and astronomy and WHITMAN(Registered) coin
collector products and other special interest adult books. Western
Publishing Company, Inc. however is not a major factor in the market
for adult books.
Penn Corporation believes that it is a recognized leader in
the design and production of quality decorated paper tableware, party
accessories, invitations, gift wrap products, stationery and giftware.
Under its BEACH(Registered) and CONTEMPO(Registered) trademarks, Penn
Corporation produces and markets to retailers an extensive line of
decorated paper tableware consisting of plates, cups, napkins, table
covers, guest towels, coasters and doilies in a variety of coordinated
designs, themes and colors. Penn Corporation works directly with
leading design studios such as Gloria Vanderbilt, Gear, Saloomey Design,
Laurette, Bob Van Allen, Joan Luntz, Mary Quant and J.G. Hook to offer
tableware patterns that it believes are representative of the most
current international design trends. Penn Corporation also produces
and/or markets an extensive line of children's party tableware, party
favors and accessories (such as horns, hats and blowouts), many of which
feature characters licensed from The Walt Disney Company, Western
Publishing Company, Inc., Children's Television Workshop (Sesame
Street(Registered)), Time Warner, Inc. and Marvel Entertainment Group, Inc.
Penn Corporation also produces under its
CONTEMPO(Registered) trademark a complete line of gift wrap products,
including gift wrap paper, ribbons, bows, gift enclosure cards, tissue
paper and tote bags. Penn Corporation's gift wrap products are produced
in a wide variety of colors and designs, including the designs of many
of the same leading fashion designers who design Penn Corporation's
tableware products. Penn Corporation's gift wrap paper also comes in a
variety of materials, including metallic and high gloss paper.
Under the RENNER DAVIS(Registered) by CONTEMPO(Trademark)
trademark, Penn Corporation produces and markets hand-crafted stationery
and giftware. RENNER DAVIS(Registered) stationery items include
correspondence cards, invitations, writing papers and envelopes. Penn
Corporation's writing papers are crafted by hand from fine quality
watermarked papers with a high cotton fiber content. All sheets and
notes are individually hand-edged and all envelopes are either lined or
hand-bordered. The RENNER DAVIS(Registered) by CONTEMPO(Trademark)
giftware line includes hand-crafted keepsake boxes, imaginative gift
books featuring Walt Disney Company characters, desk accessories and
decorative kitchen accessories, such as address books, memo holders, picture
frames and pencil holders, which are constructed from quality materials
coordinated for color, finish, texture, pattern and style.
Licensing
Licensing agreements are important factors in the differentiation
of Western Publishing Group, Inc.'s products from those of its competitors.
In the year ended January 29, 1994 ("Fiscal 1994"), approximately 66% of
Western Publishing Group, Inc.'s Consumer Products segment's sales were
generated by books, games, activity products, paper party goods and party
favors featuring popular juvenile characters and properties licensed by
Western Publishing Company, Inc. and Penn Corporation from authors,
illustrators, inventors and other companies. Most of Western Publishing
Group, Inc.'s character licenses have terms of one to three years. Despite
the relatively short period of each license, Western Publishing Group, Inc.
has longstanding relationships with many of its licensors. Licenses from
authors and inventors are generally longer in duration, often for the term
of the copyright.
Approximately 44% of the Consumer Products segment's sales in
Fiscal 1994 were attributable to juvenile products incorporating characters
and properties licensed from its five largest licensors: The Walt Disney
Company, Children's Television Workshop (Sesame Street(Registered)),
The Lyons Group, Mattel, Inc., and Time Warner, Inc. (through Warner Brothers,
Inc. and D.C. Comics, Inc.).
Royalty rates paid by Western Publishing Company, Inc. generally
range from 6% to 10% of the invoiced price of the merchandise featuring the
licensed characters and properties. Many license agreements require
advance royalty payments and minimum royalty guarantees, contain editorial
standards that govern Western Publishing Company, Inc.'s use of the
characters and properties and can be cancelled for failure to meet these
standards or certain other contractual obligations. In recent years, none
of Western Publishing Company, Inc.'s licenses has been cancelled by the
licensor for failure to meet these standards or obligations.
Western Publishing Company, Inc. selects the characters and
properties to be licensed primarily on such factors as adaptability to
its markets, compatibility with its product lines, the identity of the
licensor and other licensees of the character, the amount of licensor
advertising and marketing support for the character, the timing of any
scheduled promotion of the character and the terms offered by the
licensor. Western Publishing Company, Inc. believes that the large
breadth of its product categories and its vast distribution network, as
well as the breadth and effectiveness of its sales and in-store retail
merchandising forces, gives it an advantage over its competitors in
obtaining licensing rights. However, competition to obtain licenses is
intense, and Western Publishing Company, Inc. sometimes does not obtain
a license that it seeks, or only obtains a non-exclusive license, and
other times does not obtain a license for all of its desired product
categories. In Fiscal 1994, Western Publishing Company, Inc. entered
into many new licensing agreements, including Thomas The Tank Engine
with Quality Family Entertainment, Sonic The Hedgehog with Sega, Muppet
Workshop with Henson Associates, Ghost Writer with Children's Television
Workshop and Mighty Morphin Power Rangers(Trademark) with Saban
Entertainment, Inc. In addition, licenses were obtained and product lines
were produced in conjunction with Disney's release of the movie,
Aladdin(Registered), The Nightmare Before Christmas(Registered), Snow
White(Registered) and the re-release of Pinocchio(Registered).
Further, a licensing agreement was entered into with The Walt Disney
Company for The Lion King, Disney's spring theatrical release. A
licensing agreement was also entered into with MCA/Universal
Merchandising, Inc. and Amblin Entertainment, Inc. for products related
to their upcoming theatrical release of The Flintstone Movie and with
20th Century Fox Film Corporation for their upcoming "Page Master "
theatrical release.
Upon obtaining a license, Western Publishing Company, Inc.
develops story books and other products featuring the licensed character
or property to incorporate into its GOLDEN(Registered) and GOLDEN BOOK
(Registered) lines and associated products. To develop those products, Western
Publishing Company, Inc. utilizes its internal creative staff of over 100
editors, artists and game and puzzle designers and an extensive network of
authors, artists and inventors who work on a regular, but free-lance basis, with
Western Publishing Company, Inc.
Penn Corporation's Beach/Contempo Division produces a line
of children's party tableware and accessories featuring characters
licensed from, among others, The Walt Disney Company, Western
Publishing Company, Inc., Children's Television Workshop (Sesame
Street(Registered)), Time Warner, Inc. and Marvel Entertainment Group,
Inc. Royalty rates paid by Penn Corporation range from 5% to 10% of the
invoiced price of the product on which the licensed characters appear.
New Product Lines
Western Publishing Group, Inc., through market research
activities, has intensified its efforts to identify opportunities for
either the development or acquisition of new product lines that
consumers will recognize as offering value at a popular price and has
allocated substantial resources to its new product acquisition and
development efforts. In calendar 1991, it introduced SECRET
DIARY(Trademark), a game of sharing secrets for girls, SESAME STREET
ALL-STAR BAND(Trademark), a fun-filled electronic music activity
product, movie poster puzzles and unreleased pre-recorded videos acquired from
Media Home Entertainment, Inc. Also in 1991, Western Publishing Company, Inc.
entered into a joint venture with Hersch and Company to manufacture, market,
promote, sell and distribute SONGBURST(Registered), a board game based upon
musical lyrics. In calendar 1992, it introduced SQUIGGLY WORMS(Trademark), a
juvenile skill and action game, a relaunched HI-HO! CHERRY-O(Registered), a
child's first counting game, SOUND SAFARI(Trademark), an electronic sound
adventure game for children. New SOUND STORY(Registered) products in 1992
included LITTLE GOLDEN BOOKS(Registered) SOUND STORY Books, GOLDEN
SING-A-LONG(Trademark) Books and BIG BIRDS TALKING BINGO(Trademark). In
calendar 1993, it introduced SONGBURST COUNTRY AND WESTERN EDITION(Trademark),
POPPIN POPCORN(Registered),
a juvenile action game, BARBIE(Trademark) DRESS UP GAME, a dress your
doll with fashion accessories game for children. It also reintroduced
HUSKER DU(Registered), the match the pictures memory game and BOOBY
TRAP, the suspenseful spring action game. New SOUND STORY(Registered)
products in 1993 included GOLDEN SING ALONG(Trademark), MY FIRST GOLDEN
SOUND STORY(Trademark) and GOLDEN TALKING TALES(Trademark) books as
well as GOLDEN SEEK N' SOUND(Trademark) games.
In calendar 1991, Penn Corporation's Beach/Contempo Division
expanded on the success of The Victoria collection, which once again was
its number one selling ensemble, as well as introducing Sesame
Street(Registered) licensed products under its Contempo brand and sold
to the gift and party store markets. In addition, new size gift bags,
metallic tableware and die cut invitations, announcements and note pads
were successfully introduced. In calendar 1992, it introduced The
Pretty Florals collection of decorated paper tableware which represented
the top selling designs for the year. In addition, the Garden Variety
and Hot 'n Spicy collections were introduced. In calendar 1993, it
introduced the first shape and die cut paper plates and the first all
over spring designs for napkins and table covers. It also introduced
The Disney Gift Book program of social expression books in 8 innovative
formats.
The Company, since acquiring Sight & Sound, Inc. in July
1990, has expanded its SOUND STORY(Registered) product line to over 85
titles, including the DELUXE SOUND STORY(Registered) with 10 sounds,
the CLASSIC SOUND STORY(Registered) with 7 sounds, LITTLE GOLDEN
BOOK(Registered) SOUND STORY(Registered) with 4 sounds, GOLDEN SEEK N'
SOUND(Trademark) with 10 sounds and GOLDEN SING ALONG(Trademark) with
8 songs and 5 sounds. It should be pointed out that the Company sources
sound pad components abroad and as a result, scheduling is an important
pre-requisite to producing and distributing particular licensed product
in a timely fashion. The Company experienced scheduling problems in
Fiscal 1994 and, as a result, virtually none of its new sound emitting
product introductions were shipped in time for the Fiscal 1994 selling season.
In July 1991, Western Publishing Company, Inc. acquired the
rights to a library of never before released children's pre-recorded video
programs from Media Home Entertainment, Inc. This series includes such
well known children's favorites as titles featuring the character Madeline,
Baby Songs(Trademark) and others. Western believes that this acquired group
of products has provided new product introductions since acquisition as well
as a number of backlist titles. To effectively handle these new products,
as well as existing video and audio products, Western Publishing Company,
Inc. established separate and distinct groups of sales, creative and
marketing personnel called the Golden Entertainment Group.
In February 1992, Western Publishing Company, Inc.
announced that, as a result of a series of agreements with Games Gang,
Ltd., it had obtained the exclusive right to sell Pictionary(Registered)
and Balderdash(Registered) and a group of other popular board games in the
United States and other specified territories.
Marketing and Distribution
Western Publishing Company, Inc.'s marketing strategy for its
consumer products is to create consumer demand through advertising,
promotion and attractive point-of-purchase presentations in order to sell
a high volume of popularly priced products, through mass merchandising
chains such as Wal-Mart Stores, Inc., K-Mart Corp., Caldor, Inc. and
Target Stores Incorporated, a division of Dayton Hudson Corporation;
national book chains such as B. Dalton Book Seller and Walden Book Co.,
Inc.; toy stores such as Toys "R" Us, Inc. and Kay-Bee Toy & Hobby Shops,
Inc.; supermarkets such as Winn Dixie Stores, Inc., HE Butt Grocery Co.
Inc. and Smith's Food and Drug Centers, Inc.; drug chains such as Walgreens
Co., Revco D.S., Inc., Long's Drug Stores Corporation and Eckerd Corporation;
warehouse clubs such as The Price/Costco and Sam's Clubs (Wal-Mart Stores,
Inc.); deep discount drug stores such as Drug Emporium, Inc., Marc Glassman,
Inc. (Marc's) and Phar-Mor, Inc.; trade bookstores; independent toy stores and
other retail outlets.
A majority of Western Publishing Company, Inc.'s consumer
products sales are made directly to retailers through its 164 employee
direct sales force, which it believes is larger than any of its
competitors. This sales force is divided into four groups. The GOLDEN
Press Group, with approximately 111 salespersons, handles all book
products. The GOLDEN Games Group, consisting of approximately 35
salespersons, is responsible for all games and puzzle sales. The GOLDEN
Entertainment Group, consisting of 6 salespersons (established in 1991), is
responsible for the sale of video and audio products. In Fiscal 1993,
Western established a fourth sales force of approximately 12 salespersons
dedicated to calling upon independent and emerging chain trade bookstores
and designed to support the sales of Western's rapidly increasing list of
higher priced, trade books sold under The Artists and Writer's Guild
(Registered) and GOLD KEY(Registered) imprints.
Western Publishing Company, Inc. also sells through wholesalers,
distributors, sales representatives and food brokers. Western Publishing
Company, Inc. generally provides retailers with permanent wood racks,
spinners, plan-o-gramming and its computerized space management planning
service, all of which it believes provides it with a competitive advantage
in obtaining favorable shelf space for its products. To promote sales,
Western Publishing Company, Inc. uses print media, television, cooperative
advertising programs, point-of-sale displays and a variety of consumer
promotions.
Western Publishing Company, Inc. also markets selected
products directly to the consumer through its Direct Marketing group.
The Company intends to dispose of its Direct Marketing business as set
forth in the section on "Sale and Phase Out of Operations" on page 3.
Presently, its most common method of sale is through continuity club
plans. This sales method features an introductory offer delivered
directly to the consumer, followed by regular shipments until the
program is completed or the consumer chooses to terminate the program.
These programs are offered through traditional direct response media,
which include direct mail, magazine and television advertising. The
product offerings are divided into children's and adult programs.
Current children's programs include the popular Sesame
Street(Registered) Book Club and The Berenstain Bears(Registered) Cub
Club, a juvenile program based on the popular Berenstain Bears and Girl
Talk Fun Club, a continuity book club for preteen girls. The adult
programs feature craft programs such as programs involving knitting,
crocheting and sewing. Western's school book club, the Golden(Registered)
Book Club, first introduced in 1990, made progress in expanding its name
recognition, sales and market penetration.
Beach Products markets its products to retailers through a
combination of independent sales representatives and its own sales
force. Beach Products provides retailers with display units and racks
for its party goods and gift wrap products and conducts various sales
incentive programs for its representatives and retailers. Beach
Products also markets its decorated paper tableware directly to food
service organizations and other institutional customers under the
CUSTOMPRINTS(Registered) trademark. These items are imprinted with
names, logos or messages for business and promotional use. In the mass
market and chain store channels, Beach Products utilizes Western
Publishing Group, Inc.'s in-store retail merchandising force.
International Sales
Western Publishing Group, Inc.'s international sales in Fiscal
1994 were approximately 6% of net sales, the majority of which were derived
through a Canadian subsidiary of Western Publishing Company, Inc., Western
Publishing (Canada) Inc., and a sales, distribution and licensing division
of Western Publishing Company, Inc. in the United Kingdom. The Canadian
subsidiary serves the Canadian market and distributes Western Publishing
Company, Inc.'s books, puzzles and game products, as well as distributing
toy and hobby products for other manufacturers. The operation located in
London, England serves the United Kingdom and other European markets. The
Company has been expanding its international sales to its distributor in
Australia as well as to customers in Spanish speaking countries including
Mexico and South America. In addition, the Company has been exporting
sound pads for its SOUND STORY(Registered) books to many countries throughout
Europe and the Far East.
In-Store Merchandising
In Fiscal 1994, Western Publishing Group, Inc. made significant
investments in the further development and expansion of its in-store retail
merchandising service unit. This merchandising unit operates independently
of any of Western's business units or sales groups and is responsible for
providing in-store merchandising services in support of all Western
Publishing Group, Inc.'s product lines, i.e. Golden Press, Golden Games,
Golden Entertainment and Beach Products. This unit is focused on mass
market, discount, toy and chain drug classes of trade and supports
Western's expansion into other retail channels. By setting plan-o-grams,
moving merchandise out of stock rooms, building displays, managing racks
and product presentation and performing store level ordering services,
product take away has increased and additional retail space has been
captured. Sales increases have been experienced in major retail chains
where Western's merchandising services have been initiated. The Company
believes it is providing vital services to the retailer which will enhance
the long-term relationship between Western and the retailer. The
merchandising group currently consists of the equivalent of over 800
permanent part-time employees.
Retail Businesses
o Category Management
Under Western Publishing Company, Inc.'s Total Category
Management program, the retailer never touches the product, but rather
provides strategic direction and parameters to Western who, in turn,
manages all the operational and supply chain management tasks.
In Fiscal 1994, Western further enhanced its innovative "shop-
within-a-store" Books 'R' Us(Trademark) concept at Toys 'R' Us. It designed,
serviced, supplied, warehoused and distributed the best juvenile books from
Western and more than 40 other publishers. The program was expanded to
approximately 190 stores. Western returned the day to day actual operation of
these "shop-within-a-store" locations over to Toys 'R' Us as of February 1,
1994. Toys 'R' Us intends to open approximately 125 additional Books 'R' Us
locations in calendar 1994. All will feature a full array of Golden Books.
Western has created similar merchandising innovations designed
to enhance the retail environment for its product category. Just For
Kids(Trademark) is a new children's book, audio and video "store-within-
a-store" at Wal-Mart, Inc. Approximately 100 Just For Kids(Trademark),
Wal-Mart stores are scheduled to be opened in 1994.
Western's Storyland(Trademark) "store-within-an-aisle" program
is a scaled down version of the same concept. It features a greatly expanded
books department at mass market retailers, with a bookstore atmosphere including
special racks, signage and full face presentation of children's books. The
Storyland program is managed and serviced by Western. Wal-Mart, Caldor's, Fred
Meyers and several other national chains are installing the program with
approximately 130 stores currently in place. The number of chains and stores
adapting the Storyland program is growing and Western has plans to open 550
additional locations in calendar 1994. In each case where a Storyland program
has been installed, sales of children's books and of Western's books in
particular, have increased markedly.
o Company Stores
After opening its first Golden Book(Registered) Showcase store in
Schaumburg, IL. in November 1992, Western Publishing Company opened its second
Golden Book(Registered) Showcase store in the CityWalk Center in Burbank, CA in
June 1993. The Company opened its third store in Rockefeller Center in New York
City in April 1994. Each of the stores features only Western Publishing Group,
Inc. consumer products. Each store is located in a different environment. For
example, the Schaumburg, IL store is located in the Woodfield Mall, an upscale
suburban mall. The CityWalk store is located just outside of the Universal City
tour in Burbank, CA. The New York City store is located in a midtown,
high-trafficked urban area. All three Golden Book(Registered) Showcase
stores permit the Company to support and expand its Golden brand
recognition as well as test product and survey customers in different
environments.
Competition
Although Western Publishing Company, Inc. has one of the largest
shares of the market for children's story books and activity books, there
are other major competitors in the industry, such as Random House, Inc.,
Simon and Schuster, Inc. and G.P. Putnam & Sons, a division of The Putnam
Berkley Publishing Group, as well as many other publishers. There also are
numerous competitors in the markets for puzzles, games and adult books
marketed by Western Publishing Company, Inc. Competition is intense and is
based primarily on price, quality, distribution, advertising and licenses.
In addition, Western Publishing Company, Inc. competes for a share of
consumer spending on juvenile entertainment and educational products
against companies that market a broad range of other products for children.
Western Publishing Company, Inc. believes that its specialized
manufacturing equipment for many of its products results in lower
production costs and its integrated production facilities provide it with
greater flexibility in the timing and volume of its production of
inventory. Its large market share in most of the product lines in which it
competes gives it greater economies of scale in producing, marketing,
selling and distributing those products.
Penn Corporation has many major competitors in the paper
tableware, gift wrap and stationery industries, such as Hallmark Cards,
Inc., American Greetings, Inc., James River Company, Unique Industries, Inc.,
Amscan, Inc. and many other companies.
Trademarks
Western Publishing Company, Inc. has numerous registered
trademarks in the United States and other countries, including for
various uses the names LITTLE GOLDEN BOOKS(Registered), GOLDEN
BOOKS(Registered), GOLDEN PRESS(Registered), GOLDEN SIGHT &
SOUND(Registered), GOLDEN(Registered) SOUND STORY(Trademark),
MERRIGOLD(Registered) and WHITMAN(Registered). Western Publishing
Company, Inc. believes that the GOLDEN(Registered) and GOLDEN Book
(Registered)trademarks are material to the conduct of its business. Western
Publishing Company, Inc. also has registered the trademark MAGIC SLATE
(Registered) for its well-known children's activity product and WHITMAN
(Registered) for its line of products for coin collecting enthusiasts. Western
Publishing Company, Inc. has certain patents, some of which are material to the
conduct of its business. Penn Corporation has several registered trademarks
in the United States, including BEACH(Registered), CONTEMPO(Registered) and
RENNER DAVIS(Registered).
Inventory; Returns; Backlog
Both Western Publishing Company, Inc. and Penn Corporation have
their own production capabilities and do not rely to any material extent on
suppliers for their finished product inventory needs, except for a limited
number of products that they do not self-manufacture. Western Publishing
Company, Inc. continues to maintain a high level of finished goods
inventory to improve customer service (see Management's Discussion &
Analysis on page 20 for a discussion of inventory). When Company approval is
secured in advance, a customer may return saleable merchandise. Both
companies provide payment terms standard in their respective industries,
which, in the case of Western Publishing Company, Inc., includes extended
dating programs. Backlog is not meaningful to either company's business.
Regulation
Some of Western Publishing Company, Inc.'s products must comply
with the child safety laws which, in general, prohibit the use of materials
that might be hazardous to children. Western Publishing Company, Inc.
maintains its own materials testing laboratory to assure the quality and
safety of its products. Western Publishing Company, Inc. has experienced
no difficulty and incurred no material costs in complying with these laws.
Certain of Penn Corporation's tableware products are subject to regulations
of the Food and Drug Administration and the Company has experienced no
difficulty and incurred no material costs in complying with these regulations.
COMMERCIAL PRODUCTS SEGMENT
Western Publishing Company, Inc., through its Diversified
Products Division, provides printing and publishing services to others.
Western Publishing Company, Inc. groups these activities into five
principal categories: graphic services and commercial printing; specialty
printing and game manufacturing; custom publishing services; literature and
software distribution services; and educational kit manufacturing. Western
Publishing Company, Inc. has been shifting its business emphasis from
commercial printing to the other activities of its Diversified Products
Division, which are less price sensitive and which can utilize its creative
resources and specialized production equipment.
Graphic Services and Commercial Printing
A substantial portion of Western Publishing Company's graphic
services and commercial printing business is concentrated in the printing of
books, industrial manuals, catalogs, labels and promotional materials. Western
Publishing Company, Inc. also engages in commodity printing (such as tax
instruction booklets and tax forms), which business usually is obtained on a
competitive bid basis and is generally produced when Western has open production
capacity available. Customers include Random House, Inc., Bantam Doubleday Dell
Inc., the American Bible Society, the International Bible Society, the U.S.
government, Houghton Miflin Company, Musical Heritage Society, Inc., etc.
Specialty Printing and Game Manufacturing
Specialty printing services include printing, packaging and
distributing for others printed products such as games, puzzles, playing
cards, trading picture cards and posters. Customers include Classic Games,
Inc. (a subsidiary of The Score Board, Inc.), Regina Press (a division of
Malhave & Co.), Publishers and Importers, Inc. and TH-Q, Inc.
Custom Publishing
Custom publishing includes the creation, design, production,
assembly and distribution for major consumer products and fast food
companies of customized products for their marketing and promotional
programs. Recent Custom Publishing customers include Wendy's
International, Inc., Pizza Hut Inc., Continental Baking Company, Motts
Division (Cadbury Beverages Inc.) and Continental Airlines, Inc. Custom
publishing utilizes the complete creative capabilities of Western
Publishing Company, Inc., as well as its marketing, art, editorial, rights
and royalty and product engineering groups.
Educational Kit Manufacturing
Educational kit manufacturing includes the printing, sorting and
collating of as many as 200 different components for one kit. Western
Publishing Company, Inc. has produced educational kits for the nation's
foremost educational publishers, including World Book, Inc., Scott Foresman
& Company, Inc. and Macmillan/McGraw-Hill.
Literature Distribution and Software Publishing
The literature distribution and software manual printing segment
includes the printing of manuals, providing telemarketing services and
physical distribution for software publishing companies. Recent customers
for whom Western Publishing Company, Inc. has provided these services have
included IBM, Sun Microsystems, Inc., Xerox Corporation and Aldus Corporation.
Marketing and Competition
Western Publishing Company, Inc.'s Diversified Products services
are sold by approximately 38 employee sales representatives located in ten
field sales offices throughout the United States. Western Publishing
Company, Inc. utilizes its consumer products resources and relationships to
assist in the marketing of its Diversified Products services. Competition,
which is based upon price, quality and delivery, is intense, particularly
in the graphics and commercial printing businesses. Western Publishing
Company, Inc. competes in this area with hundreds of companies, the largest
of which is R.R. Donnelly & Sons Company.
GENERAL INFORMATION
Seasonality
Western Publishing Group, Inc. experiences seasonality,
particularly in the Consumer Products segment, with highest revenues in the
third fiscal quarter. Western Publishing Company, Inc. generally uses
certain of its production facilities that are not being fully utilized for
its consumer products for its graphics and commercial printing activities,
thereby somewhat reducing the seasonality of Western Publishing Company,
Inc.'s overall business. However, overall sales have migrated to the
second half of the fiscal year and, in Fiscal 1994, approximately 61% of
revenues were generated in this time period.
Raw Materials
Both Western Publishing Company, Inc. and Penn Corporation use a
wide variety of paper, plastic, inks and other raw materials in the
manufacture of their products. Neither Western Publishing Company, Inc.
nor Penn Corporation is dependent on any one supplier for any raw material,
and neither has experienced any material difficulty in obtaining raw
materials or subcontracted products.
Employees
Western Publishing Group, Inc. employs in the aggregate
approximately 4,200 full-time employees and 799 part time employees.
Approximately 1,100 employees are represented by labor unions. In Fiscal
1994, Western Publishing Company, Inc. negotiated new three-year contracts
with the International Automobile workers on terms it considers
satisfactory. Western Publishing Company, Inc. and Penn Corporation,
believe that their relations with their employees are generally good.
ITEM 2. PROPERTIES
Western Publishing Company, Inc.'s facilities are designed
principally for the manufacture of products of its Consumer Products and
Diversified Products Divisions. Western Publishing Company, Inc. devotes
substantial resources to maintain its facilities in good operating
condition and, where appropriate, to improve facilities so that they are
cost-efficient and competitive in the principal markets in which it
competes. Western Publishing Company, Inc. has substantial sheetfed and
web press manufacturing capacity in its Cambridge, Maryland and Racine,
Wisconsin plants, and substantial game and puzzle manufacturing and
printing capacity in its Fayetteville, North Carolina plant. Capacity
utilization in these facilities, based on operating three shifts a day,
five days a week, averaged approximately 81% in Fiscal 1994.
Penn Corporation's manufacturing facilities are designed solely
for the manufacture of its products. These facilities are maintained in
good operating condition and, where necessary, upgraded in line with
business needs. Penn Corporation employs certain sophisticated machinery
in its manufacturing facilities including sophisticated napkin, table
cover, paper plate and cup making machinery, including color presses, a
narrow web press, plate formers, table cover embosser/folders and Senning
wrap-over machines at its BEACH/CONTEMPO Division; and paper cutting,
scoring, box erecting and envelope making machinery at its RENNER
DAVIS(Registered) Division.
Certain information as to the significant properties used by
Western Publishing Company, Inc. and Penn Corporation in the conduct of
their businesses is set forth in the following table:
Location Square Feet Type of Use
- - -------- ----------- -----------
Racine, 1,556,000 Corporate, creative and marketing
Wisconsin offices; printing and facilities;
warehousing
Fayetteville, 1,036,000 Game and puzzle production and
North Carolina assembly; warehousing and distribution
Coffeyville, 672,000 Warehousing and distribution
Kansas
Kalamazoo, 458,000 Corporate offices; manufacturing;
Michigan warehousing and distribution
Cambridge, 200,000 Printing; warehousing
Maryland
Cambridge, 148,000 Canadian corporate offices; sales
Ontario, Canada offices; warehousing and distribution
Crawfordsville, 403,000 Distribution and Warehousing
Indiana
Little Rock, 135,000 Warehousing
Arkansas
Fenton, 74,000 Manufacturing; warehousing and
Missouri distribution
W. Springfield, 41,000 Manufacturing; warehousing
Massachusetts
New York, 35,000 Publishing offices; sales offices
New York
New York, 17,000 Showroom
New York
New York, 2,213 Retail Store
New York
All of these properties are owned by either Western Publishing
Company, Inc. or Penn Corporation, except for three leases covering 438,000
square feet of the Wisconsin properties (leases expire July 31, 1994,
January 31, 1995, and August 31, 1995 with Western Publishing Company,
Inc. having options to renew with respect to these leases); one lease in
Little Rock, Arkansas expiring May 31, 1994, which will not be renewed;
two leases covering 90,000 square feet in Cambridge, Maryland, the first of
which expires on September 30, 1995 and the second of which is on a month
to month basis; two leases covering 283,000 square feet in Fayetteville,
North Carolina, the first of which expired on March 31, 1994 but was
renewed on a month to month basis and the second of which expires on June
30, 1994; one lease covering 60,000 square feet in Coffeyville, Kansas
which expired April 30, 1994, and will not be renewed; one lease covering
the Massachusetts property (lease expires May 31, 1995 with Penn
Corporation having an option to renew); one lease covering the Creve Coeur,
Missouri property (lease expires May 31, 1995 with Penn Corporation having
an option to renew); and three leases covering the New York properties
(leases expire March 31, 2003, April 30, 2003 and March 31, 2003; two of
which are with a subsidiaries of Western Publishing Company, Inc.). All of
these properties, except for West Springfield, Massachusetts and Canada are
employed in both the Consumer Products and Commercial Business Segments;
the West Springfield, Massachusetts, the Little Rock, Arkansas and the
Canada properties are used solely in the Consumer Products business
segment. In addition to the properties described above, Western Publishing
Company, Inc. and Penn Corporation own or rent various other properties
that are used for administration, sales offices and warehousing.
Western Publishing Group, Inc. believes that, in general, its
plants and equipment are well maintained and in good operating condition
and adequate for its present needs. Western Publishing Group, Inc.
regularly upgrades and modernizes its facilities and equipment. Capital
additions were $37,359,000 in Fiscal 1994.
ITEM 3. LEGAL PROCEEDINGS
Western Publishing Group, Inc. and its subsidiaries are parties
to certain legal proceedings which are incidental to their ordinary
business and none of which involve amounts in controversy which are
material to Western Publishing Group, Inc. or its subsidiaries.
Two subsidiaries of Western Publishing Group, Inc., Western
Publishing Company, Inc. ("Western") and Penn Corporation ("Penn"), face
potential environmental liabilities under the Comprehensive Environmental
Response, Compensation and Liability Act (commonly know as "CERCLA" or
"SuperFund") and other federal and state laws as a result of past off-site
waste disposal practices. The United States Environmental Protection
Agency ("EPA"), and in some cases state regulatory agencies, have informed
Western that it is a potentially responsible party ("PRP") at six disposal
sites and that Penn is a PRP at one such site. In each instance, the
affected subsidiary of Western Publishing Group, Inc. is one of a number of
PRPs that have been identified by EPA or the relevant state agency. In
addition, Western maintains insurance coverage for certain of its
liabilities and has asserted claims against its insurers.
At three of these sites, the volume of waste disposed of by
Western is relatively small compared to other PRPs. As such, Western
either has been, or is likely to be, determined to be a "de minimis" party.
In addition, during the first quarter of 1994, Western was identified as a
PRP at a fourth site. To date in its investigation, Western has not
discovered any information demonstrating that it shipped any material to
this site.
At a fifth site, Western's liability is limited to approximately
4% of the total costs at the site, which are estimated to be in the range
of $22,000,000. Western has reached a settlement with certain of its
insurance carriers with respect to this site pursuant to which these
insurers have reimbursed Western for a portion of Western's liability and
defense costs.
At a sixth site, the Hertel Landfill in Plattekill, New York,
Western is one of six PRPs that have been identified by EPA. In September
1991, EPA approved a remedial action for the site that had a present value
cost of approximately $8 million. In September 1992, EPA issued a
unilateral administrative order to the six PRPs. This order requires the
implementation of the remedial design and remedial action for the site.
Believing that it had sufficient cause not to comply, Western did not
comply with the order. One of the other PRPs is complying with the order.
Western anticipates that this PRP will seek a monetary contribution from
Western in the future. In addition, although Western has certain defenses
available to it, EPA could seek penalties of up to $25,000 per day and/or
its costs plus treble damages from Western resulting from Western's
decision not to comply with the administrative order.
Western and the performing PRP are actively engaged in an effort
to identify other PRPs at the Hertel Landfill site, with the goal of
seeking contribution from them for the remedial design and remedial action
activities. The parties have not allocated responsibility at this site on
a percentage basis, and liability for response costs under CERCLA can be
joint and several. Western and certain of Western's insurers have entered
into a Confidential Partial Interim Settlement Agreement pursuant to which
they have agreed, inter alia, subject to certain conditions, to stay
litigation brought by Western for a period of two years. Upon expiration
of the stay, it is anticipated that the parties would resume litigation
concerning the insurers' duty to defend and indemnify Western.
A division of Penn has been identified as a PRP at the West KL
Avenue Landfill site in Kalamazoo, Michigan. In September 1990, EPA
approved a remedial action for this site that EPA estimated would cost
$16.2 million. The PRP identified as the largest contributor to the site
is conducting the cleanup, and has entered into settlements with
approximately 225 other PRPs. This PRP filed a private cost recovery
action against Penn and approximately 40 other PRPs in 1992 in the U.S.
District Court for the Western District of Michigan. The percentage of
waste at the site attributed to Penn is approximately 1% or less of the
total volume of waste shipped to the site, but Penn has not been able to
reach a settlement with the plaintiff PRP. The litigation is currently in
discovery.
Western and Penn are actively pursuing resolution of the
aforementioned matters. Western Publishing Group, Inc. does not believe
that any of these liabilities will be material to its business, financial
condition or results of operations. Where known, provision has been made
for any uninsured portion of any liabilities Western or Penn may have.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION(S)
- - ---- --- -----------
Glenn R. Albrecht 57 Senior Vice President-Logistics and
Distribution of Western Publishing Company, Inc.
Bruce A. Bernberg 50 Senior Vice President, Finance and
Administration of Western Publishing
Company, Inc.
Richard A. Bernstein 47 Director, Chairman and Chief Executive
Officer of Western Publishing Group, Inc.;
Chairman of Western Publishing Company, Inc.;
Chairman, President and Chief Executive
Officer of Penn Corporation
James A. Cohen 48 Senior Vice President-Legal Affairs and
Secretary of Western Publishing Group, Inc.;
Vice President-Legal Affairs and Secretary of
Western Publishing Company, Inc. and
Penn Corporation.
Frank P. DiPrima 56 Director, President and Chief Operating Officer
of Western Publishing Group, Inc.
Ira A. Gomberg 50 Vice President-Business Development and Corporate
Communications of Western Publishing Group, Inc.;
Vice President of Penn Corporation
Dale Gordon 45 Vice President and General Counsel of Western
Publishing Group, Inc., Western Publishing
Company, Inc. and Penn Corporation
Steven M. Grossman 33 Vice President-Financial Planning of Western
Publishing Group, Inc.
George P. Oess 58 President of Western Publishing Company, Inc.
Lily Lai Ray 34 Vice President -- Worldwide Sourcing of Western
Publishing Group, Inc.
Ilan Reich 39 Vice President-Special Projects of Western
Publishing Group, Inc.
Stuart Turner 49 Executive Vice President, Treasurer and Chief
Financial Officer of Western Publishing
Group, Inc.; Executive Vice President and
Treasurer of Western Publishing Company,
Inc.; Executive Vice President, Treasurer and
Chief Financial Officer of Penn Corporation
Laurence Usdin 51 Vice President and Corporate Controller of
Western Publishing Group, Inc.
Hal B. Weiss 37 Vice President and Assistant Treasurer of Western
Publishing Group, Inc.
Mr. Albrecht has been Senior Vice President-Logistics and
Distribution of Western Publishing Company, Inc. since March 24, 1994. Prior to
that Mr. Albrecht had been Senior Vice President-Manufacturing and Distribution
from May 24, 1991 to March 23, 1994. From August 1986 to May 1991, Mr. Albrecht
had been Vice President of Manufacturing. Mr. Albrecht joined Western Publishing
Company, Inc. in a manufacturing management capacity in 1973. Prior to being
appointed Vice President, Mr. Albrecht held a succession of manufacturing
management positions. Mr. Albrecht is a board member of the Racine United Way,
a director of Printing Industries of Wisconsin and a director of the Racine Area
Manufacturers Association.
Mr. Bernberg has been Senior Vice President-Finance and
Administration of Western Publishing Company, Inc. since May 1987. Mr.
Bernberg joined Western Publishing Company, Inc. as Vice President, Finance
in 1982 and was elected Treasurer and Chief Financial Officer in 1984. Mr.
Bernberg is a director of St. Mary's Medical Center and St. Lukes Hospital
in Racine, Wisconsin. He is also a director of MEI, Inc.
Mr. Bernstein has been Chairman and Chief Executive Officer of
Western Publishing Group, Inc. and Chairman of Western Publishing Company,
Inc. since February 1984. From 1984 to August 1989, Mr. Bernstein was also
President of Western Publishing Group, Inc. In November 1986, Mr.
Bernstein became Chairman, President and Chief Executive Officer of Penn
Corporation. He is President of P&E Properties, Inc., a private commercial
real estate ownership/management company, and has been for more than five
years. Mr. Bernstein is the sole shareholder of P&E Properties, Inc. He
is a member of the Regional Advisory Board of Chemical Bank, a member of
the Board of Trustees of New York University, a member of the Board of
Overseers of the New York University Stern School of Business, a Director
and Vice President of the Police Athletic League, Inc., a member of the
Board of Trustees of the Hospital for Joint Diseases/Orthopaedic Institute,
a member of the Board of Directors of The Big Apple Circus, Inc., a member
of the Investment Advisory Board of the New York State Employees Retirement
System, a member of The New York State Legislative Commission on
Expenditure Review and a member of The Economic Club of New York.
Mr. Cohen has been Senior Vice President-Legal Affairs and
Secretary of Western Publishing Group, Inc. since December 1991 and a
senior executive of P&E Properties, Inc. since February 1984. From
February 1984 until December 1991 he was Vice President, General Counsel
and Secretary of Western Publishing Group, Inc. He became Vice President-
Legal Affairs and Secretary of Western Publishing Company, Inc. in March
1987. In November 1986, Mr. Cohen became Secretary of Penn Corporation and
in April 1987, Vice President and General Counsel of that corporation.
From March 1982 to February 1984 Mr. Cohen held various senior positions
with the United States Department of Housing and Urban Development,
including Regional Counsel. From 1976 to 1982 Mr. Cohen was the Deputy
Regional Counsel of the United States Department of Energy.
Mr. DiPrima is President and Chief Operating Officer of Western
Publishing Group, Inc., serving in that capacity since May 1990. From June
1987 to May 1990, Mr. DiPrima served as Executive Vice President and Chief
Operating Officer of Thompson Medical Company, Inc., a corporation that
owns and markets a variety of advertised non-prescription drugs and at the
time of Mr. DiPrima's employment also owned and marketed
SLIM-FAST(Registered) products. Between June 1984 and June 1987, Mr.
DiPrima was Executive Vice President and Chief Operating Officer of
Jeffrey Martin, Inc., a national marketer of health and beauty aids.
Previously, Mr. DiPrima served for four years at Merck & Co., Inc., nine
years at Schering-Plough Corporation, and five years at Playboy
Enterprises, Inc., in various capacities in legal and financial affairs
and in general management. Mr. DiPrima is a former member of the Board
of Directors of the Nonprescription Drug Manufacturers Association. He
is admitted to practice law in the states of New York, New Jersey,
Illinois and Tennessee and in the District of Columbia.
Mr. Gomberg has been Vice President-Business Development and
Corporate Communications of Western Publishing Group, Inc. since February
1986. In April 1987, Mr. Gomberg became a Vice President of Penn
Corporation. In addition, he is a Vice President and Assistant Secretary
of Western Publishing Company, Inc. Since February 1986, he has also been
a senior executive of P&E Properties, Inc. From 1976 through January 1986,
Mr. Gomberg was employed by Sony Corporation of America, a manufacturer and
distributor of consumer electronic products, first as General Counsel and
after November 1983 as Vice President-Government Affairs.
Mr. Gordon joined Western Publishing Company, Inc. in August 1993
as Vice President and General Counsel. He became Vice President and
General Counsel of Western Publishing Group, Inc. and Penn Corporation in
January, 1994. From 1980 through July 1993 he was with Playboy
Enterprises, Inc. in various legal/management positions, most recently as
Vice President, Secretary and Associate General Counsel.
Mr. Grossman joined Western Publishing Group, Inc. in July 1992
as Vice President-Financial Planning. From August 1983 to July 1992 Mr.
Grossman was with the public accounting firm of Deloitte & Touche. He is
a Certified Public Accountant licensed in the State of New York.
Mr. Oess was elected President of Western Publishing Company,
Inc. on April 7, 1992. He had been Executive Vice President-Consumer
Products from May 1991 through April 7, 1992. Mr. Oess joined Western
Publishing Company, Inc. in a sales management capacity in 1968 and since
then has held a succession of management responsibilities. He was
appointed Vice President-Commercial Products of Western Publishing Company,
Inc. in 1976 and Senior Vice President-Business Development in 1989.
Ms. Ray joined Western Publishing, Group, Inc. in February 1993
as Vice President -- Worldwide Sourcing. From 1991 to January 1993 she
served as an independent consultant for Mattel KK (Japan) working on
projects related to shipping and planning. From 1989 to 1991 she served
as Senior Group Manager of Planning and Development at Mattel as well as
General Manager of their Arco Toys Division in Thailand.
Mr. Reich has been Vice President-Special Projects of Western
Publishing Group, Inc. since October 1992. Since December, 1987 he has
also been an employee of P&E Properties, Inc.
Mr. Turner has been the Executive Vice President, Treasurer and
Chief Financial Officer of Western Publishing Group, Inc. and Executive
Vice President of Western Publishing Company, Inc. since February 1984. In
November 1986, Mr. Turner became the Executive Vice President, Treasurer
and Chief Financial Officer of Penn Corporation. Since May 1981, Mr.
Turner has been a senior executive of P&E Properties, Inc. From 1969 to
May 1981 he was a partner of Turner, Imowitz and Company, a firm of
certified public accountants.
Mr. Usdin has been Vice President, Corporate Controller of
Western Publishing Group, Inc. since August 1990. Mr. Usdin joined Western
Publishing Group, Inc. in 1989 as Corporate Controller. From 1988 to 1989,
Mr. Usdin was Vice President-Finance of New American Shoe Company, Inc. and
from 1982 to 1988 he was Vice President-Finance and Corporate Controller of
Ziff Communications Company. From 1973 to 1982 he was associated with Mego
International, Inc. in several financial positions, including Senior Vice
President-Finance. Mr. Usdin is a Certified Public Accountant. He serves
on the Advisory Board to Pace University's Masters of Science in Publishing
program.
Mr. Weiss has been Vice President and Assistant Treasurer of
Western Publishing Group, Inc. since August 1990. From April 1986 until
July 1990, Mr. Weiss was Controller and Assistant Treasurer of Western
Publishing Group, Inc. and from November 1986 until July 1989 he was
Controller of Penn Corporation. In addition, Mr. Weiss has been Controller
of P&E Properties, Inc. since 1985. Mr. Weiss is a Certified Public
Accountant. Prior to joining Western Publishing Group, Inc. in 1985, Mr.
Weiss practiced public accounting.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
STOCKHOLDERS' INFORMATION
COMMON STOCK PRICES
Western Publishing Group, Inc. completed an
initial public offering of its Common Stock
on April 22, 1986. The Common Stock is
traded over-the-counter and is quoted on
the NASDAQ National Market System (symbol
WPGI). The following table sets forth the
range of prices (which represent actual
transaction) by quarter as provided by the
National Association of Securities Dealers, Inc.
Fiscal Year Ended January 29, 1994
High Low
First Quarter 18 1/2 13 1/4
Second Quarter 17 3/8 13 3/8
Third Quarter 16 3/4 13 3/8
Fourth Quarter 20 1/4 12 1/4
Fiscal Year Ended January 30, 1993
High Low
First Quarter 19 1/8 16 1/4
Second Quarter 18 5/8 15
Third Quarter 22 3/4 15 5/8
Fourth Quarter 22 1/2 16
DIVIDEND POLICY
Since its organization in 1984, Western
Publishing Group, Inc. has not paid any
cash dividends on its Common Stock.
Management does not anticipate the payment
of cash dividends on Common Stock in the
foreseeable future (see Note 6 to the
Company's Consolidated Financial
Statements).
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
(In Thousands Except For Per Share Data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Net sales $613,464 $649,089 $552,360 $491,089 $507,785
Royalties and other income 3,211 3,062 2,141 2,486 3,865
-------- -------- -------- -------- --------
Total revenues 616,675 652,151 554,501 493,575 511,650
-------- -------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 432,192 425,274 365,913 324,082 320,718
Selling, general and administrative 203,353 188,161 160,059 148,293 147,709
Provision for write-down of division 28,180
-------- -------- -------- -------- --------
Total costs and expenses 663,725 613,435 525,972 472,375 468,427
-------- -------- -------- -------- --------
(LOSS) INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (47,050) 38,716 28,529 21,200 43,223
INTEREST EXPENSE 16,270 10,358 6,255 7,533 8,230
-------- -------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (63,320) 28,358 22,274 13,667 34,993
(BENEFIT) PROVISION FOR INCOME TAXES (22,295) 10,860 8,580 5,650 12,045
-------- -------- -------- -------- --------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (41,025) 17,498 13,694 8,017 22,948
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (14,800)
-------- -------- -------- -------- --------
NET (LOSS) INCOME $(55,825) $ 17,498 $ 13,694 $ 8,017 $ 22,948
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
(LOSS) INCOME PER COMMON SHARE:
Before cumulative effect of change
in accounting principle $ (1.99) $ .80 $ .62 $ .34 $ 1.05
Cumulative effect of change in
accounting principle (.71)
-------- -------- -------- -------- --------
NET (LOSS) INCOME $ (2.70) $ .80 $ .62 $ .34 $ 1.05
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
BALANCE SHEET DATA (AT PERIOD END):
Working capital $332,979 $283,101 $106,556 $ 95,474 $ 95,466
Total assets 505,116 508,585 390,965 331,740 311,906
Long-term debt 229,812 179,797 3,902
Convertible preferred stock 9,985 9,985 9,985 9,985 9,985
Common stockholders' equity 158,673 215,246 199,393 186,857 182,245
</TABLE>
The selected financial data should be read in conjunction with the
audited consolidated financial statements and notes thereto included
elsewhere herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FISCAL YEAR ENDED JANUARY 29, 1994 (FISCAL 1994)
COMPARED TO FISCAL YEAR ENDED JANUARY 30, 1993 (FISCAL 1993)
Revenues for the year ended January 29, 1994 decreased $35.5
million (5.4%) to $616.7 million as compared to $652.2 million for
the year ended January 30, 1993. On May 12, 1993, the Board of
Directors of the Company directed management to review the
operations of the Advertising Specialty Division of the Company's
Penn Corporation subsidiary and evaluate various strategic
alternatives, including its disposition. Therefore, subsequent to
the Company's first quarter ended May 1, 1993, the results of
operations do not include the results of this Division. Excluding
revenues of the Advertising Specialty Division for both periods,
revenues decreased 1.2% or $7.6 million as compared to the prior
year. Consumer Products Segment revenues decreased $7.4 million
(1.4%) for the year ended January 29, 1994. The decrease was
primarily due to decreases in domestic consumer product sales and
the negative effect of foreign currency rates with respect to the
Company's international sales during the year. The decline in
domestic consumer product sales was primarily the result of out-of-
stock conditions of fast moving titles and late availability of new
product introductions, partially offset by increased sales from
category management programs. Commercial product segment revenues,
other than revenues of the Advertising Specialty Division, is
comprised of printing services which decreased $.3 million (.4%)
for the year ended January 29, 1994. The decline for the year was
due to a decrease in sales of graphic products, offset by increases
in the sale of kits and custom publishing.
Price increases in the Consumer Products Segment were approximately
5%. Sales of printing services are the result of individual
agreements entered into with customers as to price and services
performed. Accordingly, the effects on inflation cannot be
determined on the sales of printing services.
The loss before the provision for write-down of Division, interest
expense, income taxes and the cumulative effect of a change in
accounting principle for the year ended January 29, 1994 was $18.9
million as compared to income of $38.7 million for the year ended
January 30, 1993. This decrease of $57.6 million was the result of
a $42.4 million decrease in gross profit and a $15.2 million
increase in selling, general and administrative expenses. In
addition, the Company recorded a $28.2 million provision to write-
down the carrying value of the assets of the Advertising Specialty
Division to their estimated net realizable value.
Gross profit for the year ended January 29, 1994 was $184.5
million, compared to $226.9 million for the year ended January 30,
1993, a decrease of 18.7%. As a percentage of revenues, the gross
profit margin decreased to 29.9% for fiscal 1994 as compared to
34.8% for fiscal 1993. In the Consumer Products Segment, gross
profit decreased $33.8 million (16.1%) to $176.1 million for the
year ended January 29, 1994 as compared to the year ended January
30, 1993. As a percentage of revenues, the consumer gross profit
margin decreased to 32.7% for fiscal 1994 as compared to 38.5% for
fiscal 1993. A substantial portion of the decrease in gross profit
margin was due to lower production in response to higher average
inventories, resulting in negative manufacturing variances.
Additionally, the decrease in gross profit was attributable to an
unfavorable change in product mix, increased inventory
obsolescence, increased freight costs associated with category
management programs and increased storage costs incurred in
conjunction with higher average inventories. In the Commercial
Products Segment, the gross profit margin of printing services
decreased to 11.3% from 11.9% of revenues for the year, as compared
to the prior year. The decrease was primarily due to the change in
sales mix to lower margin services, partially offset by a reduction
in unfavorable manufacturing variances.
Selling, general and administrative expenses for the year ended
January 29, 1994 increased $15.2 million (8.1%) to $203.4 million
as compared to $188.2 million for the year ended January 30, 1993.
Consumer Products Segment increases were primarily attributable to
increased costs for the expansion of the in-store retail
merchandising force and category management programs of $11.4
million, increased creative costs and increased general and
administrative expenses, including the annual costs of
postretirement benefits, other than pension costs, offset by a
decrease in consumer advertising.
Interest expense for the year increased $5.9 million to $16.3
million as compared to $10.4 million in fiscal 1993. The increase
was due to higher average debt outstanding and higher interest
rates. Total average outstanding debt increased to $248.7 million
in fiscal 1994 from $168.4 million in fiscal 1993 (see Financial
Condition, Liquidity and Capital Resources), while average interest
rates increased to 6.6% for fiscal 1994 as compared to 6.1% for
fiscal 1993. The increase in average interest rates resulted
primarily from the issuance of $150 million, 10 year maturity,
7.65% Senior Notes in September, 1992.
The effective income tax benefit rate was 35.2% in fiscal 1994, as
compared to an income tax rate of 38.3% in fiscal 1993. The change
in effective tax rate is primarily the result of the inability to
utilize loss carrybacks against state taxes, resulting in a lower
state income tax benefit in fiscal 1994. This was offset by the 1%
increase in the federal statutory rate.
The loss for the year ended January 29, 1994, before the provision
to write-down of Division and the cumulative effect of a change in
accounting principle (postretirement benefits other than pensions)
was $21.7 million or $1.07 per share, compared to income of $17.5
million or $.80 per share for the year ended January 30, 1993.
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions", using
the immediate recognition method. As a result, the Company
recorded a pre-tax non-cash charge of $24.3 million ($14.8 million,
net of income taxes) or $.71 per share as a cumulative effect of a
change in accounting principle in the statement of operations. The
Company's provision for write-down of Division was $28.2 million
($19.3 million, net of income taxes) or $.92 per share. Therefore,
the net loss for the year was $55.8 million or $2.70 per share.
The seasonality of the Company's business, which leads to a greater
percentage of sales and profits in the third quarter of the fiscal
year, continued in fiscal 1994.
With respect to fiscal 1995, the Company's operating results for
the first quarter will experience a downturn as compared with the
prior year due to the continuing difficult retail environment
caused by unusually severe weather conditions in much of the
country, distractions resulting from the contemplated sale of the
Company, overhead reduction measures announced during the first
quarter and the pending sales of certain of the Company's operating
divisions and product lines.
FISCAL YEAR ENDED JANUARY 30, 1993 (FISCAL 1993)
COMPARED TO FISCAL YEAR ENDED FEBRUARY 1, 1992 (FISCAL 1992)
Western Publishing Group, Inc.'s revenues increased $97.7 million
(17.6%) to $652.2 million in fiscal 1993, as compared to $554.5
million in fiscal 1992. Consumer Products Segment revenues
increased $105.7 million (24.0%). This increase was due, in large
part, to growth in sales of storybooks (includes Sound
Storybooks(Registered)), puzzles, activity books, games, paper tableware
and party goods. Commercial Products Segment revenues decreased $7.6
million (6.7%) due to a sales decrease of $9.3 million (11.6%) in
printing services partially offset by a sales increase of $1.7 million
(5.0%) in sales of Advertising Specialty products over the comparable
period in the prior year.
Price increases in the Consumer Products Segment were approximately
4%. Sales of printing services are the result of individual
agreements entered into with customers as to price and services
performed. Accordingly, the effects of inflation cannot be
determined on the sales of printing services.
Income before interest expense and income taxes increased $10.2
million (35.7%) to $38.7 million in fiscal 1993, as compared to
$28.5 million in fiscal 1992. As a percentage of total revenues,
this was an increase to 5.9% of revenues in fiscal 1993 as compared
to 5.1% in fiscal 1992. This increase was the result of a $38.3
million increase in gross profit, offset by a $28.1 increase in
selling, general and administrative expenses.
Gross profit increased $38.3 million (20.3%) to $226.9 million for
the year ended January 30, 1993, as compared to $188.6 million for
the year ended February 1, 1992. As a percentage of revenues, the
gross profit margin increased to 34.8% for the year ended January
30, 1993, from 34.0% for the year ended February 1, 1992. The
increase in gross profit margin for the year is due to a change in
product mix to higher gross profit margin consumer products and a
decrease in sales of lower margin commercial products. In the
Consumer Products Segment, gross profit increased $39.5 million
(23.2%) to $209.9 million in fiscal 1993 as compared to $170.3
million in fiscal 1992. The increase in gross profit was
attributable to increased sales. As a percentage of revenues, the
gross profit margin was approximately the same at 38.5% in fiscal
1993 as compared to 38.7% in fiscal 1992. Notwithstanding a
decrease in sales in the Commercial Products Segment, the gross
profit margin increased to 14.9% in fiscal 1993 from 14.1% in
fiscal 1992. The increase was primarily in printing services which
experienced a change in sales mix to higher margin products.
Selling, general and administrative expenses for the year ended
January 30, 1993, increased $28.1 million (17.6%) to $188.2 million
as compared to $160.1 million for the year ended February 1, 1992.
This increase was primarily in the Consumer Products Segment and
was attributable to increases in sales promotion, selling expense
(primarily costs for the in-store retail merchandising force) and
advertising.
Interest expense increased $4.1 million (65.6%) to $10.4 million in
fiscal 1993 as compared with $6.3 million in fiscal 1992. The
increase was due to higher average debt outstanding, partially
offset by lower interest rates. Total outstanding debt, due to the
planned increase in consumer products finished goods inventory,
increased to an average of $168.4 million in fiscal 1993 from $92.5
million in fiscal 1992, (see Financial Condition, Liquidity and
Capital Resources), while average interest rates were 6.1% and
6.6%, respectively.
The effective tax rate decreased to 38.3% in fiscal 1993, from
38.5% in fiscal 1992. The slight decrease was primarily due to the
favorable effect of foreign tax credits.
Net income increased $3.8 million (27.8%) to $17.5 million as
compared to $13.7 million in 1992. Income per common share
increased 29.0% to $.80 per share in fiscal 1993, from $.62 per
share in fiscal 1992. The trend toward seasonality, leading to
greater sales and profits in the third fiscal quarter continued in
fiscal 1993.
EFFECTS OF INFLATION
During fiscal 1990, the Company experienced significant increases
in its costs for certain raw materials, particularly paper, which
is the Company's primary raw material. A portion of the
inflationary effects were recouped through price increases. In
fiscal 1991, additional productive capacity in the paper industry
caused a decline in paper costs. In fiscal 1993 and fiscal 1994,
paper prices remained stable. Management does not anticipate that
there will be any significant increase in the cost of raw materials
in fiscal 1995.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Operations for the year ended January 29, 1994, excluding non-cash
charges for depreciation, amortization, provision for losses on
accounts receivable, the adoption of FASB No. 106, the provision
for the write-down of a division and changes in working capital,
provided cash of approximately $17.5 million. The profit for the
year ended January 30, 1993, excluding depreciation, amortization,
provision for losses on accounts receivable and changes in working
capital, provided cash of approximately $36.7 million. During the
years ended January 29, 1994 and January 30, 1993, other changes in
assets and liabilities, resulting from operating activities,
amounted to $32.0 million and $107.5 million, respectively,
resulting in net cash used in operating activities of $14.5 million
and $70.8 million, respectively.
Acquisitions of property, plant and equipment, were $37.4 million
during the year ended January 29, 1994 as compared to $23.7 million
during the year ended January 30, 1993. In fiscal 1994, the
Company acquired and retrofitted a 403,000 square foot distribution
center in Crawfordsville, Indiana. The distribution center is
expected to cost approximately $10 million, of which $9.0 million
was expended through January 29, 1994. The Company is currently
reconsidering its previously announced plans to undertake a
facility expansion of its paper tableware and party goods
operations in Kalamazoo, Michigan in conjunction with the Company's
plan to improve its competitive position and reduce its overall
operating cost structure. As yet, no material commitments for this
facility expansion have been made.
Cash provided by financing activities during the year ended January
29, 1994, was primarily from borrowings under the Company's
Revolving Credit Agreement, while the issuance of the 7.65% Senior
Notes provided the cash from financing activities during the year
ended January 30, 1993.
Working capital increased to $333.0 million from $283.1 million at
January 30, 1993. This increase includes $17.0 million of games,
puzzles, direct marketing continuity and school book club non-
current assets which were reclassified to net assets held for sale.
Accounts receivable at January 29, 1994, decreased $7.1 million (a
4.9% decrease), as compared to the prior year, which is consistent
with the decrease in revenues. Inventories, including $30.6
million which was reclassified to net assets held for sale,
decreased $56.5 million, as compared to January 30, 1993. This is
the result of the Company's inventory management program which was
designed and implemented in fiscal 1994 to reduce overall inventory
levels. Additionally, the income tax effect of the fiscal 1994
operating results increased refundable and current deferred income
taxes $22.3 million. The balance of loans outstanding under the
Revolving Credit Agreement at January 29, 1994 as compared to
January 30, 1993, increased by $50.0 million to a total of $80.0
million. The increase in the loan balance was primarily utilized
to fund operating losses and capital expenditures, offset by
reductions in accounts receivable and inventories.
The Company's Revolving Credit Agreement, dated November 12, 1992,
initially provided for a line of credit totaling $200 million. The
facility provides for the seasonal working capital requirements of
the Company. In October, 1993, the Revolving Credit Agreement was
amended to provide credit availability of $140 million from
December 28, 1993 until the third quarter of fiscal 1995.
Subsequently, an agreement was entered into to further amend the
Revolving Credit Agreement to provide for borrowings up to $125
million through July 31, 1994 and $140 million thereafter; in each
case, including letters of credit of $10 million. Concurrent with
the completion of the sale of the game and puzzle operation (the
"Sale"), the Revolving Credit Agreement facility will be $90
million, including letters of credit of $10 million. Additionally,
the provision that borrowings not exceed $115 million during any
thirty day period in the first quarter of each fiscal year will be
$15 million after the Sale. The Revolving Credit Agreement expires
May 31, 1995.
The Company's management believes that the credit facilities
available under the Revolving Credit Agreement are sufficient to
meet the Company's seasonal borrowing needs.
RECENT EVENTS
As discussed in Note 2 to the Consolidated Financial Statements,
the Company adopted a plan which is aimed at focusing management's
attention on its core competencies, and therefore grow the
Company's publishing, paper party goods, stationery and printing
businesses. The plan is designed to improve the Company's
competitive position and reduce its operating cost structure
through the sale or closedown of certain operations, property
divestitures and consolidations, and a reduction in the management,
administrative and direct labor workforces. It is anticipated that
the plan will be substantially completed by the fourth quarter of
fiscal 1995. This plan was adopted after extensive consultation
with the Company's investment bankers upon completion of discussions with
parties which had expressed an interest in a business combination with the
Company, as the best means available to maximize value to shareholders. The
Company is no longer engaged in discussions regarding a business combination.
As part of the plan, the Company has entered into an agreement in
principle to sell its game and puzzle operation to Hasbro, Inc. for
approximately $103 million (including the sale of certain
inventories). This transaction is subject to customary conditions
and is expected to be completed in the second quarter of fiscal
1995. In conjunction therewith, the Company intends to close its
Fayetteville manufacturing and distribution facility, where
manufacturing is primarily dedicated to games and puzzles.
Additionally, the Company will exit the direct marketing continuity
and school book club businesses.
The sale of the game and puzzle operation, along with the
implementation of the balance of the plan is expected to have a favorable
effect on the Company's financial position, results of operations,
and future capital requirements. As a result of the plan, the
Company will dispose of operations with fiscal 1994 aggregate sales
of approximately $125,000,000 and pre-tax operating losses of
approximately $20,000,000. Furthermore, the Company estimates that
the disposition of those operations will reduce the Company's
average working capital needs by approximately $60,000,000. The
Company will use the net cash proceeds from the sale of the game
and puzzle operation to repay outstanding indebtedness under its
Revolving Credit Agreement facility, which was $100 million on
April 30, 1994.
Annual operating cost savings associated with the plan, exclusive
of the impact of the sale of the game, puzzle, direct marketing and
school book club operations will begin to be realized in the second
quarter of fiscal 1995. The Company will continue to evaluate
opportunities for additional cost savings through fiscal 1995,
including possible additional facility consolidations and further
headcount reductions.
In addition to the plan's adoption, the Company entered into a
letter of intent to sell the Advertising Specialty Division of the
Company's Penn Corporation subsidiary for approximately $14
million. The transaction, which is subject customary conditions,
is expected to be completed in the second quarter of fiscal 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedules on Page F-1.
CONSOLIDATED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In Thousands Except For Per Share Data)
<S> <C> <C> <C> <C>
1994
Net sales $ 110,325 $ 130,988 $ 200,573 $ 171,578
Gross profit 33,765 40,785 63,999 42,723
(Loss) income before cumulative effect
of change in accounting principle (1) (30,312) (3,966) 2,426 (9,173)
Net (loss) income (1) (45,112) (3,966) 2,426 (9,173)
(Loss) income per common share:
Before cumulative effect of change in
accounting principle $ (1.45) $ (.20) $ .11 $ (.45)
Net (loss) income (2.16) (.20) .11 (.45)
Weighted average number of common
shares 20,950 20,957 20,959 20,959
1993
Net sales $ 120,997 $ 123,840 $ 227,176 $ 177,076
Gross profit 41,300 42,964 83,484 56,067
Net income 2,133 1,376 12,936 1,053
Net income per common share $ .09 $ .06 $ .61 $ .04
Weighted average number of common
shares 20,869 20,880 20,912 20,935
</TABLE>
(1) Includes provision for write-down of Division of $28,180, before
income taxes of $8,900 ($6,400 of which was recognized in the first
quarter and $2,500 in the fourth quarter). The impact on net loss per
share for the year was $.92.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for with respect to directors is
incorporated by reference to the information under "Business Experience
of Nominees for Election as Directors" at pages 3 through 5 of the Proxy
Statement.
The information called for with respect to executive officers
appears in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information called for is incorporated by reference to the
information under "Executive Compensation" at page 10 and 11 of the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for is incorporated by reference to the
information under "Stock Ownership of Principal Stockholders" and "Stock
Ownership of Directors ard Officers at pages 2 and 5 of the Proxy
Statement, respectively.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for is incorporated by reference to the
information under "Certain Transactions" at page 12 of the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) See Index to Consolidated Financial Statements and
Schedules on Page F-1.
EXHIBITS
3.1 Restated Certificate of Incorporation of the Registrant dated March 11,
1986 (incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement No 33-4127 on Form S-1 (the "Registration
Statement")).
3.2 Certificate of Correction of the Certificate of Incorporation of the
Registrant dated January 13, 1987 (incorporated by reference to Exhibit
3.2 to the Registrant's Annual Report on Form 10-K for fiscal year 1988
(the "1988 Form 10-K")).
3.3 Amendment to Certificate of Incorporation of Registrant as approved by
a majority of the stockholders at the Annual Meeting of Stockholders
held May 14, 1987 (incorporated by reference to Exhibit 3.3 to the 1988
Form 10-K).
3.4 Amendment to Certificate of Incorporation of Registrant as approved by
a majority of the stockholders at the Annual Meeting of Stockholders
held May 17, 1990 (incorporated by reference to Exhibit 3.4 to the 1991
Form 10-K).
3.5 By-laws of the Registrant (incorporated by reference to Exhibit 3.4 to
the 1988 Form 10-K).
4.1 Form of certificate for shares of the Registrant's Common Stock
(incorporated by reference to Exhibit 4.4 to the Registration
Statement).
10.27 Lease dated January 15, 1985, between PG Investments and Western
Publishing Company, Inc. with amendment dated January 22, 1986
(incorporated by reference to Exhibit 10.9 to the Registration
Statement).
10.28 Amendment dated December 29, 1986, between PG Investments and
Western Publishing Company, Inc. to the lease dated January 15,
1985, as amended (incorporated by reference to Exhibit 10.9 to the
1988 Form 10-K).
10.29 Amendment dated January 18, 1988, between PG Investments and
Western Publishing Company, Inc. to the Lease dated January 15,
1985, as amended (incorporated by reference to Exhibit 10.10 to the
1988 Form 10-K).
10.30 Amendment dated August 25, 1988, between PG Investments and Western
Publishing Company, Inc. to the Lease dated January 15, 1985, as
amended (incorporated by reference to Exhibit 10.16 to the 1989
Form 10-K).
10.31 Amendment dated December 21, 1989, between PG Investments and
Western Publishing Company, Inc. to the Lease dated January 15,
1985, as amended (incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the fiscal year 1990
(the "1990 Form 10-K")).
10.32 Lease commencing July 24, 1988, between Jeno Partnership and
Western Publishing Company, Inc. (incorporated by reference to
Exhibit 10.17 to the 1989 Form 10-K).
10.33 Lease dated February 1, 1989, between Golden Press, Inc. and 850
Third Ave. LP (incorporated by reference to Exhibit 10.33 to the
Registrant's Annual Report on Form 10-K for the fiscal year 1990
(the "1990 Form 10-K")).
10.33a First Amendment Agreement dated as of February 3, 1993 (to lease
dated February 1, 1989) between 850 Third Avenue Limited
Partnership and Golden Press, Inc., as modified by Letter Agreement
dated February 3, 1993 (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year 1990).
10.34 Lease dated November 9, 1992, between 200 Fifth Avenue Associates
and Western Publishing Company, Inc.
10.35 Warehouse Lease Agreement -- Indenture dated as of April 15, 1987,
between Cambridge Terminal Warehouse and Western Publishing
Company, Inc. (incorporated by reference to Exhibit 10.21 to the
1988 Form 10-K).
10.36 Lease Amendment dated March 17, 1989, between Cambridge Terminal
Warehouse and Western Publishing Company, Inc. to the Warehouse
Lease Agreement -- Indenture dated as of April 15, 1987
(incorporated by reference to Exhibit 10.36 to the Registrant's
Annual Report on Form 10-K for the fiscal year 1990 (the "1990 Form
10-K")).
10.37 Lease dated May 1, 1987, between West Springfield Industrial
Center, Inc. and Penn Corporation (incorporated by reference to
Exhibit 10.23 to the 1988 Form 10-K).
10.39 Indenture to Lease dated March 24, 1988, between The Equitable Life
Assurance Society of the United States and Penn Corporation
(incorporated by reference to Exhibit 10.29 to the 1989 Form 10-K).
10.40 Golden Comprehensive Security Program, as amended and restated,
effective January 1, 1993
10.53 Golden Retirement Savings Program, as amended and restated,
effective as of January 1, 1993.
10.63 Penn Corporation Comprehensive Security Program, effective January
1, 1987 (incorporated by reference to Appendix A to the
Registrant's Registration Statement 33-18430 on Form S-8 (the "Penn
Comprehensive Registration Statement")).
10.64 First Amendment of Penn Corporation Comprehensive Security Program,
effective November 2, 1987 (incorporated by reference to Appendix
A to the Penn Comprehensive Registration Statement).
10.65 Second Amendment of Penn Corporation Comprehensive Security
Program, effective January 1, 1987 (incorporated by reference to
Exhibit 10.36 to the 1988 Form 10-K).
10.66 Third Amendment of Penn Corporation Comprehensive Security Program,
effective November 2, 1987 (incorporated by reference to Exhibit
10.37 to the 1988 Form 10-K).
10.67 Fourth Amendment of Penn Corporation Comprehensive Security
Program, effective January 1, 1988 (incorporated by reference to
Exhibit 10.48 to the 1989 Form 10-K).
10.68 Fifth Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1988 (incorporated by reference to Exhibit
10.49 to the 1989 Form 10-K).
10.69 Sixth Amendment of Penn Corporation Comprehensive Security Program,
effective January 1, 1988 (incorporated by reference to Exhibit
10.50 to the 1989 Form 10-K).
10.70 Seventh Amendment of Penn Corporation Comprehensive Security
Program, effective January 1, 1987, 1988 or 1989 as applicable
(incorporated by reference to Exhibit 10.52 to the 1990 Form 10-K).
10.71 Eighth Amendment of Penn Corporation Comprehensive Security
Program, effective October 18, 1989 (incorporated by reference to
Exhibit 10.67 to the Registrant's Annual Report on Form 10-K for
the fiscal year 1990 (the "1990 Form 10-K")).
10.71a Ninth Amendment of Penn Corporation Comprehensive Security Program,
effective July 1, 1991 (incorporated by reference to Exhibit 10.67
to the Registrant's Annual Report on Form 10-K for the fiscal year
1990 (the "1990 Form 10-K")).
10.71b Tenth Amendment of Penn Corporation Comprehensive Security Program
effective April 1, 1993 (incorporated by reference to Exhibit 10.67
to the Registrant's Annual Report on Form 10-K for the fiscal year
1990 (the "1990 Form 10-K")).
10.72 Beach Products (Division of Penn Corporation) Retirement Savings
Program, effective May 2, 1989 (incorporated by reference to
Exhibit 10.72 to the Registrant's Annual Report on Form 10-K for
the fiscal year 1992 (the "1992 Form 10-K")).
10.73 First Amendment of Beach Products (Division of Penn Corporation)
Retirement Savings Program, effective October 1, 1990 (incorporated
by reference to Exhibit 10.73 to the Registrant's Annual Report on
Form 10-K for the fiscal year 1992 (the "1992 Form 10-K")).
10.74 Second Amendment of Beach Products (division of Penn Corporation)
Retirement Savings Program, effective October 17, 1991
(incorporated by reference to Exhibit 10.74 to the Registrant's
Annual Report on Form 10-K for the fiscal year 1993 (the "1993 Form
10-K")).
10.74a Third Amendment of Beach Products (division of Penn Corporation)
Retirement Savings Program, effective July 1, 1991 (incorporated by
reference to Exhibit 10.73 to the Registrant's Annual Report on
Form 10-K for the fiscal year 1993 (the "1993 Form 10-K")).
10.74b Fourth Amendment of Beach Products (division of Penn Corporation)
Retirement Savings Program, effective April 1, 1993 (incorporated
by reference to Exhibit 10.73 to the Registrant's Annual Report on
Form 10-K for the fiscal year 1993 (the "1993 Form 10-K")).
10.75 Master Trust Agreement between the Registrant, Western Publishing
Company, Inc., Penn Corporation and Bankers Trust Company,
effective November 19, 1987 (incorporated by reference to Exhibit
10.38 to the 1988 Form 10-K).
10.76 Form of Agreement between the Registrant, Penn Corporation and
certain employees of Penn Corporation relating to the award of
shares of common stock of the Registrant, as adopted by the Board
of Directors of the Registrant on May 1, 1987 (incorporated by
reference to Exhibit 10.39 to the 1988 Form 10-K).
10.77 Amended and Restated 1986 Employee Stock Option Plan of the
Registrant (incorporated by reference to Exhibit 10.40 to the 1988
Form 10-K).
10.78 Amendment dated April 11, 1989 to the Amended and Restated 1986
Employee Stock Option Plan of the Registrant (incorporated by
reference to Exhibit 10.56 to the 1990 Form 10-K).
10.79 Employment Agreement dated the 24th day of April, 1990 between
Western Publishing Group, Inc. and Frank P. DiPrima (incorporated
by reference to Exhibit 10.72 to the Registrant's Annual Report on
Form 10-K for the fiscal year 1991 (the "1991 Form 10-K")).
10.80 Western Publishing Company, Inc.'s Executive Medical Reimbursement
Plan dated January 1, 1991 (incorporated by reference to Exhibit
10.73 to the Registrant's Annual Report on Form 10-K for the fiscal
year 1991 (the "1991 Form 10-K")).
10.88 Credit Agreement dated as of November 12, 1992, providing up to
$200 million, among the Registrant, Western Publishing Group, Inc.
and a group of commercial banks (incorporated by reference to
Exhibit 10.88 to the Form 10-Q for the quarter ended October 31, 1992).
10.89 Amendment No. 1 dated as of July 31, 1993, to the Credit Agreement
dated as of November 12, 1992
10.90 Amendment No. 2 dated as of October 30, 1993, to the Credit
Agreement dated as of November 12, 1992.
10.91 Guarantee Agreement dated as of December 13, 1993, to the Credit
Agreement dated as of November 12, 1992.
10.92 Amendment No. 3 dated as of May 13, 1994 to the Credit
Agreement dated as of November 12, 1992.
21.1 List of Subsidiaries.
23.1 Consent dated May 13, 1994 of Deloitte & Touche, Independent Auditors.
99.1 Financial Statements for the Golden Comprehensive Security Program.
99.2 Financial Statements for the Golden Retirement Savings Program.
99.3 Financial Statements for the Penn Corporation Comprehensive Security
Program.
99.4 Undertaking incorporated by reference into Part II of certain
registration statements on Form S-8 of the Registrant.
b) Reports on Form 8-K. None.
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.
Dated: May 16, 1994
Western Publishing Group, Inc.
By: /s/ Richard A. Bernstein
--------------------------
Richard A. Bernstein,
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been executed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
- - --------- ----- ----
/s/ Richard A. Bernstein Chairman, Chief Executive May 16, 1994
- - ------------------------------ Officer and Director
Richard A. Bernstein (Principal Executive Officer)
/s/ Stuart Turner Executive Vice President, May 16, 1994
- - ------------------------------ Treasurer and Chief Financial
Stuart Turner Officer (Principal Financial
and Accounting Officer)
/s/ Frank P. DiPrima President, Chief Operating May 16, 1994
- - ------------------------------ Officer and Director
Frank P. DiPrima
/s/ Allan S. Gordon Director May 16, 1994
- - ------------------------------
Allan S. Gordon
/s/ Robert A. Bernhard Director May 16, 1994
- - ------------------------------
Robert A. Bernhard
/s/ Samuel B. Fortenbaugh, III Director May 16, 1994
- - ------------------------------
Samuel B. Fortenbaugh, III
/s/ Michael A. Pietrangelo Director May 16, 1994
- - ------------------------------
Michael A. Pietrangelo
/s/ Jenny Morgenthau Director May 16, 1994
- - ------------------------------
Jenny Morgenthau
WESTERN PUBLISHING GROUP, INC AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements PAGE
- - -------------------- ----
Independent Auditors' Report F-2
Consolidated Balance Sheets as of January 29, 1994
and January 30, 1993. F-3
Consolidated Statements of Operations for the
Years ended January 29, 1994, January 30, 1993 F-4
and February 1, 1992.
Consolidated Statements of Common Stockholders' Equity
for the Years Ended January 29, 1994, January 30, 1993
and February 1, 1992. F-5
Consolidated Statements of Cash Flows for the Years Ended
January 29, 1994, January 30, 1993 and February 1, 1992. F-6
Notes to Consolidated Financial Statements. F-7
Schedules
VIII -- Valuation and Qualifying Accounts S-1
IX -- Short-Term Borrowings S-2
X -- Supplementary Income Statement Information S-3
Schedules which are not included have been omitted because either
they are not required or are not applicable or because the required
information has been included elsewhere in the consolidated financial
statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Western Publishing Group, Inc.:
We have audited the accompanying consolidated balance sheets of Western
Publishing Group, Inc. and subsidiaries as of January 29, 1994 and
January 30, 1993, and the related consolidated statements of
operations, common stockholders' equity and cash flows for each of the
three years in the period ended January 29, 1994. Our audits also
included the financial statement schedules listed in the Index at Item
14. These financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is
to express an opinion on the financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the companies at
January 29, 1994 and January 30, 1993, and the results of their
operations and their cash flows for each of the three years in the
period ended January 29, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 13 to the consolidated financial statements, in
fiscal 1994 the companies changed their method of accounting for
postretirement benefits other than pensions to conform with Statement
of Financial Accounting Standards No. 106.
DELOITTE & TOUCHE
Milwaukee, Wisconsin
May 13, 1994
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1994 AND JANUARY 30, 1993
(In Thousands Except for Share and Per Share Data)
<TABLE>
<CAPTION>
ASSETS 1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,513 $ 10,441
Accounts receivable 137,921 145,006
Inventories 121,178 177,630
Prepublication and prepaid advertising costs 7,720 17,600
Royalty advances 2,970 4,020
Refundable income taxes 12,830
Deferred income taxes 20,823 11,362
Net assets held for sale 88,523
Other current assets 10,361 9,707
-------- --------
Total current assets 411,839 375,766
-------- --------
OTHER ASSETS:
Deferred income taxes 1,439
Other noncurrent assets 11,008 16,353
-------- --------
Total other assets 12,447 16,353
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Cost:
Land 1,013 1,556
Buildings and improvements 21,472 22,344
Machinery and equipment 76,874 86,446
Machinery and equipment in process of installation 9,242 3,908
-------- --------
108,601 114,254
Less accumulated depreciation 41,351 40,597
-------- --------
Total property, plant and equipment 67,250 73,657
IDENTIFIED INTANGIBLES AND COST IN EXCESS
OF NET ASSETS ACQUIRED (GOODWILL), less accumulated
amortization of $17,066 and $35,088 13,580 42,809
-------- --------
TOTAL $505,116 $508,585
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 40,532 $ 44,469
Accrued compensation and fringe benefits 10,644 12,760
Income taxes 342 4,879
Other current liabilities 27,342 30,557
-------- --------
Total current liabilities 78,860 92,665
-------- --------
NONCURRENT LIABILITIES AND CREDITS:
Long-term debt 229,812 179,797
Accumulated postretirement benefit obligation 25,949
Deferred income taxes 9,440
Other 1,837 1,452
-------- --------
Total noncurrent liabilities and credits 257,598 190,689
-------- --------
CONVERTIBLE PREFERRED STOCK - Series A, 20,000
shares authorized, no par value, 19,970 shares issued
and outstanding; at mandatory redemption amount 9,985 9,985
-------- --------
COMMON STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, 30,000,000 shares
authorized, 21,167,324 and 21,148,424 shares issued 212 211
Additional paid-in capital 80,213 79,914
Retained earnings 82,714 139,387
Cumulative translation adjustments (1,644) (1,444)
-------- --------
161,495 218,068
Less cost of Common Stock in treasury - 208,800 shares 2,822 2,822
-------- --------
Total common stockholders' equity 158,673 215,246
-------- --------
TOTAL $505,116 $508,585
-------- --------
-------- --------
</TABLE>
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED JANUARY 29, 1994
(In Thousands Except for Per Share Data)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
REVENUES:
Net sales $613,464 $649,089 $552,360
Royalties and other income 3,211 3,062 2,141
-------- -------- --------
Total revenues 616,675 652,151 554,501
-------- -------- --------
COSTS AND EXPENSES:
Cost of sales 432,192 425,274 365,913
Selling, general and administrative 203,353 188,161 160,059
Provision for write-down of division 28,180
-------- -------- --------
Total costs and expenses 663,725 613,435 525,972
-------- -------- --------
(LOSS) INCOME BEFORE INTEREST EXPENSE,
INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (47,050) 38,716 28,529
INTEREST EXPENSE 16,270 10,358 6,255
-------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (63,320) 28,358 22,274
(BENEFIT) PROVISION FOR INCOME TAXES (22,295) 10,860 8,580
-------- -------- --------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (41,025) 17,498 13,694
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (14,800)
-------- -------- --------
NET (LOSS) INCOME $(55,825) $ 17,498 $ 13,694
-------- -------- --------
-------- -------- --------
(LOSS) INCOME PER COMMON SHARE:
Before cumulative effect of change in
accounting principle $ (1.99) $ .80 $ .62
Cumulative effect of change in accounting
principle (.71)
-------- -------- --------
Net (loss) income $ (2.70) $ .80 $ .62
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
THREE YEARS ENDED JANUARY 29, 1994
(In Thousands Except for Share and Per Share Data)
<TABLE>
<CAPTION>
Common Stock Additional Cumulative Treasury Stock
------------------ Paid-In Retained Translation ---------------
Shares Amount Capital Earnings Adjustments Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, FEBRUARY 3, 1991 21,070,924 $211 $78,669 $109,891 $ 908 208,800 $2,822
Net income 13,694
Dividends on Preferred
Stock - $42.50 per share (848)
Exercise of stock options,
including related income
tax benefits 4,500 60
Translation adjustments (370)
---------- ---- ------- -------- ------- ------- ------
BALANCES, FEBRUARY 1, 1992 21,075,424 211 78,729 122,737 538 208,800 2,822
Net income 17,498
Dividends on Preferred
Stock - $42.50 per share (848)
Exercise of stock options,
including related income
tax benefits 73,000 1,185
Translation adjustments (1,982)
---------- ---- ------- -------- ------- ------- ------
BALANCES, JANUARY 30, 1993 21,148,424 211 79,914 139,387 (1,444) 208,800 2,822
Net loss (55,825)
Dividends on Preferred
Stock - $42.50 per share (848)
Excercise of stock options,
including related income
tax benefits 18,900 1 299
Translation adjustments (200)
---------- ---- ------- -------- ------- ------- ------
BALANCES, JANUARY 29, 1994 21,167,324 $212 $80,213 $ 82,714 $(1,644) 208,800 $2,822
---------- ---- ------- -------- ------- ------- ------
---------- ---- ------- -------- ------- ------- ------
</TABLE>
See notes to consolidated financial statements.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JANUARY 29, 1994
(In Thousands)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(55,825) $ 17,498 $ 13,694
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation 12,108 8,506 8,128
Amortization of intangibles arising from
acquisition 4,888 4,798 5,210
Provision for losses on accounts receivable 5,662 5,855 5,061
Provision for write-down of division 26,405
Cumulative effect of change in accounting
principle (before income tax benefit) 24,300
(Gains) losses on sale of equipment (26) 109 61
Other 1,330 720 80
Changes in assets and liabilities:
Accounts receivable (9,222) (29,669) (29,146)
Inventories 17,959 (62,088) (25,531)
Prepublication and prepaid advertising costs 1,431 (3,482) (2,918)
Royalty advances (202) 535 (1,510)
Refundable income taxes (12,830)
Other current assets (2,280) (4,041) (1,060)
Accounts payable (1,087) (6,301) 25,265
Accrued compensation and fringe benefits (1,021) (625) 1,828
Income taxes (4,466) (3,599) 438
Other current liabilities (1,242) 772 4,345
Deferred income taxes (20,340) 210 (670)
-------- -------- --------
Net cash (used in) provided by
operating activities (14,458) (70,802) 3,275
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment (37,359) (23,704) (11,860)
Proceeds from sale of equipment 119 281 226
Acquisition of rights to market games (1,125)
Acquisition of video rights (2,500)
Investment in joint venture (1,600) (1,500)
Return of investment in joint venture 1,900
-------- -------- --------
Net cash used in investing activities (35,340) (26,148) (15,634)
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED JANUARY 29, 1994
(In Thousands)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of Common Stock (exercise
of options) $ 300 $ 1,049 $ 60
Proceeds from borrowings under Credit Agreement 50,000 30,000
Proceeds from issuance of senior notes 149,792
Costs in connection with issuance of senior notes (1,440)
(Decrease) increase in notes payable under
bridge credit agreement (79,000) 14,500
Dividends paid on Preferred Stock (848) (848) (848)
Other (562) (870) (59)
-------- -------- --------
Net cash provided by financing activities 48,890 98,683 13,653
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH (20) (66) (9)
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (928) 1,667 1,285
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 10,441 8,774 7,489
-------- -------- --------
CASH AND CASH EQUIVALENTS, END
OF YEAR $ 9,513 $ 10,441 $ 8,774
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 16,016 $ 6,590 $ 6,122
Income taxes 6,124 13,556 9,418
</TABLE>
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED JANUARY 29, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of Western Publishing Group, Inc., and its
wholly-owned subsidiaries (the "Company"). Certain reclassifications
have been made in the prior year financial statements to conform with
the current year presentation.
All significant intercompany transactions and balances are eliminated in
consolidation.
Fiscal Year - The fiscal year of the Company ends on the Saturday
nearest January 31. Accordingly, fiscal 1994, 1993, and 1992 each
contained 52 weeks.
Cash and Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with maturities of three months or less to be
cash equivalents. The carrying amounts of short-term financial
instruments approximate fair value.
Inventories - Inventories are valued at the lower of cost or market.
Cost is determined by the last-in, first-out (LIFO) method for
substantially all domestic inventories. Inventories of Western
Publishing Company, Inc.'s international operations are valued using the
first-in, first-out (FIFO) method. At January 29, 1994 and January 30,
1993, approximately 93% and 95% of total inventories were valued under
the LIFO method.
Prepublication and Prepaid Advertising Costs - Prepublication costs
(comprised principally of externally developed art, manuscript and
editorial costs and internally or externally developed plate costs) and
advertising and premium costs associated with the Company's direct
marketing operation are deferred. Such costs are amortized from the
date of initial product sale, generally over a period of one year. At
January 29, 1994, the direct marketing advertising and premium costs
were included as a component of Net Assets Held for Sale.
Properties and Depreciation - Property, plant and equipment are stated
at cost and depreciated on the straight-line method over the following
estimated useful lives for financial statement purposes:
Buildings and improvements 10-40 years
Machinery and equipment 3-10 years
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Expenditures which significantly increase value or extend useful lives
are capitalized, while maintenance and repairs are expensed as
incurred. The cost and related accumulated depreciation of assets
replaced, retired or disposed of are eliminated from the property
accounts, and any gain or loss is reflected in operations.
Costs related to the development of information systems that are
expected to benefit future periods are capitalized and amortized over
the estimated useful lives of the systems.
Identified Intangibles - Identified intangibles arising from the
acquisition of Penn Corporation in fiscal 1987 are being amortized
generally by accelerated methods over periods of from 10 to 26 years.
Cost in Excess of Net Assets Acquired - The cost in excess of net assets
acquired (goodwill) arising from the acquisition of Penn Corporation is
being amortized on the straight-line method over a 40-year period.
Foreign Currency Translation - Foreign currency assets and liabilities
are translated into United States dollars at end of period rates of
exchange, and income and expense accounts are translated at the weighted
average rates of exchange for the period. Resulting translation
adjustments are included as a separate component of common
stockholders' equity.
2. SALE AND PHASE OUT OF OPERATIONS; PROVISION FOR WRITE-DOWN OF DIVISION;
NET ASSETS HELD FOR SALE
Sale and Phase Out of Operations
On November 29, 1993, the Company announced that it had recently been
approached by several companies expressing a desire to discuss a
business combination. The Board of Directors of the Company authorized
the retention of two investment banking firms as its advisors to explore
alternatives to maximize shareholder value. Based on an analysis of
various alternatives, the Company adopted a plan designed to improve its
competitive position and reduce its cost structure through the sale or
phase out of certain operations, property divestitures and
consolidations, and a workforce reduction.
The plan includes the following major components:
o An agreement in principle to sell the game and puzzle operation
(including certain inventories) to Hasbro, Inc. (Hasbro) for
approximately $103,000,000. This transaction is subject to customary
conditions and is expected to be completed in the second quarter of
fiscal 1995.
o The decision to exit the direct marketing continuity clubs and school
book club businesses. It is anticipated that this will be completed by
the end of fiscal 1995.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
o The closedown and sale of the Company's Fayetteville, North Carolina
manufacturing and distribution facility, which is primarily dedicated
to the game and puzzle operation but will not be included in the sale
to Hasbro.
o The decision to streamline the Company's publishing business so as to
focus on its core competencies. This will include a reduction in the
management, administrative and direct labor workforces.
The Company will use the net cash proceeds arising from the plan to
repay outstanding debt under its Revolving Credit Agreement (see Note
6). It is anticipated that the plan, which will begin to be
implemented in the first quarter of fiscal 1995, will result in a net
gain, inclusive of operating losses of the game, puzzle, direct
marketing and school book club operations from January 30, 1994 through
the expected disposition dates. Accordingly, the anticipated gain
will not be reflected in the consolidated statement of operations until
realized.
The net assets of the game, puzzle, direct marketing and school book
club operations and the Fayetteville facility are included as a
component of Net Assets Held for Sale at January 29, 1994. For fiscal
1994, 1993 and 1992 the game, puzzle, direct marketing and school book
club operations had revenues of approximately $125,000,000,
$142,000,000, and $123,000,000, respectively.
Provision for Write-Down of Division
On May 12, 1993, the Board of Directors of the Company directed
management to review the operations of the Advertising Specialty
Division of the Company's Penn Corporation subsidiary and evaluate
various strategic alternatives, including its disposition. Accordingly,
the Company established a provision, including operating losses through
the expected disposition date, to write-down the assets of the Division
to net realizable value.
On April 29, 1994, the Company entered into a letter of intent to sell
this Division for approximately $14,000,000, subject to customary
conditions. It is anticipated that this transaction, which is expected
to be completed in the second quarter of fiscal 1995, will result in a
net gain. The net cash proceeds from the sale of this Division will be
utilized to repay outstanding debt under the Revolving Credit Agreement
(see Note 6).
Revenues and losses before interest expense and income taxes of the
Division, included in the accompanying statements of operations,
exclusive of the provision for write-down, are as follows (subsequent
to May 1, 1993, the statements of operations do not include the results
of the Division):
1994 1993 1992
(In Thousands)
Revenues $7,202 $35,037 $33,367
------ ------- -------
------ ------- -------
Loss before interest expense and income taxes,
exclusive of the provision for write-down $2,083 $ 4,635 $ 6,638
------ ------- -------
------ ------- -------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net Assets Held for Sale
As of January 29, 1994, net assets held for sale consisted of the following:
(In thousands)
Current assets $ 60,020
Property, plant and equipment, net 32,655
Other assets (primarily identified intangibles and goodwill), net 27,933
--------
120,608
Less:
Current liabilities (5,680)
Provision for write-down, net of Division
operations subsequent to May 1, 1993 (26,405)
--------
Net assets held for sale $ 88,523
--------
--------
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
1994 1993
(In thousands)
Accounts receivable $154,090 $160,178
Allowance for doubtful accounts (4,491) (6,929)
Allowance for returns (11,678) (8,243)
-------- --------
$137,921 $145,006
-------- --------
-------- --------
4. INVENTORIES
Inventories consisted of the following:
1994 1993
(In thousands)
Raw materials $ 14,913 $ 25,205
Work-in-process 28,783 36,050
Finished goods 77,482 116,375
-------- --------
$121,178 $177,630
-------- --------
-------- --------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At January 29, 1994 and January 30, 1993, the replacement cost of
inventories valued using the LIFO method exceeded the net carrying
amount of such inventories by $8,840,000 and $6,930,000, respectively.
5. IDENTIFIED INTANGIBLES AND GOODWILL
Identified intangibles and goodwill, all of which result from the
acquisition of Penn Corporation in fiscal 1987, net of amortization,
included in the accompanying consolidated balance sheets, were as
follows (see Note 2):
1994 1993
(In thousands)
Goodwill $ 6,114 $16,229
Identified intangibles:
Customer lists 6,730 8,707
Other 736 2,854
Distributor network 15,019
------- -------
$13,580 $42,809
------- -------
------- -------
In connection with the provision for write-down of the Advertising
Specialty Division, the portion of identified intangibles and goodwill
related to this Division ($24,341,000, net of amortization at January
29, 1994) has been included as a component of Net Assets Held for Sale
(see Note 2).
6. LONG-TERM DEBT
Long-term debt consisted of the following:
1994 1993
(In thousands)
Notes payable to banks $ 80,000 $ 30,000
7.65% Senior Notes ($150,000,000 face amount)
due in 2002 149,812 149,797
-------- --------
$229,812 $179,797
-------- --------
-------- --------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company maintains a Revolving Credit Agreement dated November 12,
1992, with a group of commercial banks, which expires on May 31, 1995.
Under the terms of an agreement to amend the Revolving Credit
Agreement, the Company may borrow up to $125,000,000 through July 31,
1994 and $140,000,000 thereafter; in each case, including letters of
credit of $10,000,000. Concurrent with the completion of the sale of
the game and puzzle operation (the "Sale") (see Note 2), the Revolving
Credit Agreement facility will be $90,000,000, including letters of
credit of $10,000,000. Additionally, the provision that borrowings not
exceed $115,000,000 during any thirty day period in the first quarter
of each fiscal year will be $15,000,000 after the Sale. Further
reductions in the facility will occur based upon the net cash proceeds
from other asset sales, including the sale of the Advertising Specialty
Division of the Company's Penn Corporation subsidiary (see Note 2).
Borrowings will bear interest at one percent above the Base Rate. A
commitment fee of 1/2% is payable quarterly on the unused portion of
the facility. On January 29, 1994, notes totalling $80,000,000 at a
weighted average interest rate of 4.16% were outstanding.
On September 17, 1992, the Company completed an offering of $150,000,000
of 7.65% Senior Notes due September 15, 2002. Interest is payable
semiannually on March 15 and September 15. There is no obligation to
redeem, purchase or repay the Senior Notes prior to maturity.
The Revolving Credit Agreement and the Indenture covering the Senior
Notes contain certain provisions limiting additional indebtedness,
guarantees, liens, the payment of cash dividends on Common Stock and
tangible net worth requirements. Additionally, the Revolving Credit
Agreement contains certain ratio requirements and limitations on
investments. At January 29, 1994, there were no retained earnings
available to pay dividends on Common Stock.
Under the Company's Revolving Credit Agreement, the commitment may be
utilized for letters of credit for the Company or any of its
subsidiaries. At January 29, 1994, the Company's subsidiaries had
letters of credit outstanding for inventory purchase commitments of
approximately $3,600,000 under the line.
Notes payable to banks at January 29, 1994 and January 30, 1993 under
the Company's Revolving Credit Agreement approximate fair value, as the
short-term interest rates on the then outstanding balances were reset
in December 1993 and 1992, respectively. Western Publishing Group,
Inc.'s 7.65% Senior Notes had a fair value of approximately
$142,000,000 at January 29, 1994 based on market interest rates. At
January 30, 1993, the fair value of the Senior Notes approximated
carrying value.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
1994 1993
(In thousands)
Royalties payable $ 4,757 $ 6,445
Advertising and promotion 8,507 7,894
Other 14,078 16,218
------- -------
$27,342 $30,557
------- -------
------- -------
8. PREFERRED STOCK
The Company has 100,000 authorized preferred shares, no par value,
including 20,000 shares of Convertible Preferred Stock, Series A. The
Convertible Preferred Stock has a dividend rate of 8.5% per annum. The
conversion price is $24 per share. The stock is redeemable at the
option of the Company at any time for $500 a share plus all dividends
(whether or not earned or declared) accrued and unpaid to the date
fixed for redemption. Western Publishing Group, Inc. is obligated to
redeem the stock no later than March 31, 1996. There is no significant
difference between the carrying amount and approximate fair value of
the Convertible Preferred Stock.
9. EMPLOYEE STOCK OPTIONS
In March 1986, the Company adopted a stock option plan, which as
amended, provides for the granting of options to purchase up to
2,100,000 shares of Common Stock through 1996 to employees of the
Company and its subsidiaries. Options granted through February 3, 1990
become exercisable two years after the date of grant (50%) and three
years after the date of grant (50%). Generally, options granted
subsequent to February 3, 1990, except as noted below, become
exercisable in their entirety five years after the date of grant.
The following table includes options to purchase 300,000 shares of
Common Stock granted in 1991 to the Company's President. In accordance
with his employment agreement, these options vest over a seven year
period, expire in 2001 and are priced as follows: 60,000 each at
$11.75, $10.00 and $15.00 and 120,000 at $12.50 per share.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Additionally, the President of Western Publishing Company, Inc. has
options to purchase 90,000 shares of Common Stock; of which 20,000 were
granted in fiscal 1993 and 70,000 were granted in fiscal 1994 pursuant
to his employment agreement. Such options vested immediately upon
issuance and expire in 2002 and 2003, respectively.
The following data is presented in connection with the stock option plan:
<TABLE>
<CAPTION>
Shares
----------------------------------------------
Outstanding
Reserved Options Available
-------- ----------- ---------
<S> <C> <C> <C>
Balances, February 3, 1991 -
$10.00 to $20.00 835,450 790,050 45,400
Increase in authorization 600,000 600,000
Granted - $10.00 to $15.00 222,000 (222,000)
Cancelled - $10.00 to $20.00 (63,200) 63,200
Exercised - $10.00 to $14.50 (4,500) (4,500)
--------- --------- --------
Balances, February 1, 1992 -
$10.00 to $20.00 1,430,950 944,350 486,600
Granted - $15.50 to $17.25 207,000 (207,000)
Cancelled - $10.00 to $20.00 (39,700) 39,700
Exercised - $10.00 to $16.75 (73,000) (73,000)
--------- --------- --------
Balances, January 30, 1993 -
$10.00 to $20.00 1,357,950 1,038,650 319,300
Increase in authorization 600,000 600,000
Granted - $12.50 70,000 (70,000)
Cancelled -$10.00 to $20.00 (91,000) 91,000
Exercised - $11.75 to $16.75 (18,900) (18,900)
--------- --------- --------
Balances, January 29, 1994 -
$10.00 to $20.00 1,939,050 998,750 940,300
--------- --------- --------
--------- --------- --------
Options exercisable at January 29, 1994:
$20.00 36,000
16.75 60,550
15.50 20,000
15.00 20,000
14.50 27,000
12.50 70,000
12.00 27,200
11.75 59,000
10.00 40,000
---------
359,750
---------
---------
</TABLE>
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Options outstanding at January 29, 1994 expire as follows:
Expiration Exercise Number of
Date Price Options
April 21, 1996 $20.00 36,000
April 21, 1997 12.00 27,200
April 22, 1998 14.50 27,000
March 1, 1999 16.75 60,550
February 2, 2001 11.75 179,500
February 2, 2001 10.00 60,000
February 2, 2001 15.00 60,000
February 2, 2001 12.50 120,000
September 16, 2001 10.00 130,000
January 3, 2002 15.00 30,000
June 30, 2002 15.50 186,000
October 26, 2002 17.25 12,500
November 30, 2003 12.50 70,000
-------
998,750
-------
-------
In addition to the shares reserved for the exercise of stock options,
the Company has reserved 416,042 shares of Common Stock for the
conversion of its Preferred Stock (see Note 8).
10. LEASE COMMITMENTS
The Company leases certain facilities, machinery and vehicles under
various noncancelable operating lease agreements over periods of one to
10 years. Future minimum lease payments required under such leases in
effect at January 29, 1994, were as follows (by fiscal year):
(In thousands)
1995 $ 5,638
1996 4,452
1997 3,959
1998 3,112
1999 2,712
2000 through 2007 7,917
-------
$27,790
-------
-------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Total rental expense charged to operations was $8,330,000, $7,732,000
and $5,695,000 for the years ended January 29, 1994, January 30, 1993
and February 1, 1992, respectively.
11. ROYALTIES AND OTHER INCOME
Royalties and other income consisted of the following:
1994 1993 1992
(In thousands)
Royalties $2,043 $1,771 $1,004
Interest income 807 836 1,019
Other 361 455 118
------ ------ ------
$3,211 $3,062 $2,141
------ ------ ------
------ ------ ------
12. INCOME TAXES
Income tax expense (benefit) (calculated in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes")
consisted of the following:
1994 1993 1992
(In thousands)
Currently (refundable) payable:
Federal $(11,185) $ 7,700 $6,320
State (240) 2,240 2,030
Foreign (30) 710 900
-------- ------- ------
(11,455) 10,650 9,250
Deferred: -------- ------- ------
Federal (9,520) 230 (390)
State (1,300) 80 (250)
Foreign (20) (100) (30)
-------- ------- ------
(10,840) 210 (670)
-------- ------- ------
$(22,295) $10,860 $8,580
-------- ------- ------
-------- ------- ------
Income (loss) before income tax expense of Western Publishing Company,
Inc.'s Canadian subsidiary was $(82,000), $1,122,000 and $1,963,000 for
the years ended January 29, 1994, January 30, 1993 and February 1,
1992, respectively.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the statutory United States Federal income tax rate
to the Company's effective income tax rate follows:
1994 1993 1992
Statutory rate 35.0% 34.0% 34.0%
State income taxes, net of Federal benefit 1.6 5.5 5.3
Effect of foreign taxes (1.7)
Effect of capital loss on write-down of division (1.8)
Other - net .4 .5 (.8)
---- ---- ----
35.2% 38.3% 38.5%
---- ---- ----
---- ---- ----
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The income tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at
January 29, 1994 and January 30, 1993 were as follows:
January 29, 1994
-----------------------------
Assets Liabilities Total
(In thousands)
Allowances for doubtful accounts and
returns not currently deductible $ 5,222 $ 5,222
Inventories:
Excess of book basis over tax
basis due to purchase accounting $ (6,121) (6,121)
Other 8,580 8,580
Advertising costs (1,259) (1,259)
Accrued expenses not currently deductible 5,800 5,800
Provision for write-down of division 8,197 8,197
Other - net 404 404
------- -------- -------
Current 28,203 (7,380) 20,823
------- -------- -------
Property, plant and equipment:
Excess of tax basis over
acquisition accounting basis 3,934 3,934
Excess of tax over book depreciation (8,294) (8,294)
Identified intangibles (4,486) (4,486)
Deferred gain on sale of plant (693) (693)
Deductible pension contributions
in excess of pension expense (1,760) (1,760)
Postretirement benefits 10,379 10,379
State NOL carryforwards 1,185 1,185
Other - net 1,174 1,174
------- -------- -------
Noncurrent 16,672 (15,233) 1,439
------- -------- -------
Total $44,875 $(22,613) $22,262
------- -------- -------
------- -------- -------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
January 30, 1993
-------------------------------
Assets Liabilities Total
(In thousands)
Allowances for doubtful accounts and
returns not currently deductible $ 5,043 $ 5,043
Inventories:
Excess of book basis over tax
basis due to purchase accounting $ (5,969) (5,969)
Other 9,632 9,632
Advertising costs (1,956) (1,956)
Accrued expenses not currently deductible 4,402 4,402
Other - net 210 210
------- --------- -------
Current 19,287 (7,925) 11,362
------- --------- -------
Property, plant and equipment:
Excess of tax basis over
acquisition accounting basis 4,055 4,055
Excess of tax over book depreciation (6,949) (6,949)
Identified intangibles (5,104) (5,104)
Deferred gain on sale of plant (809) (809)
Deductible pension contributions
in excess of pension expense (1,703) (1,703)
Other - net 1,070 1,070
------- --------- -------
Noncurrent 5,125 (14,565) (9,440)
------- --------- -------
Total $24,412 $(22,490) $ 1,922
------- --------- -------
------- --------- -------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. PENSION, POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Pension Benefits
Western Publishing Company, Inc. and its Canadian subsidiary have
noncontributory defined benefit retirement plans covering substantially
all domestic hourly and Canadian salaried and hourly employees. The
benefits are generally based on a unit amount at the date of termination
multiplied by the participant's credited service. The Companies'
funding policy is to contribute amounts within the limits which can be
deducted for income tax purposes.
The following tables set forth the plans' funded status and amounts
recognized in the consolidated financial statements at January 29, 1994
and January 30, 1993, and for each of the three years ended January 29,
1994:
1994 1993
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including
vested benefits of $14,177,000 and $13,480,000 $14,458 $13,682
------- -------
------- -------
Projected benefit obligations for service rendered $15,026 $14,248
Plan assets at fair value (primarily U.S. government
securities, corporate bonds and equity mutual funds) 17,314 18,199
------- -------
Projected benefit obligations less than plan assets 2,288 3,951
Unrecognized net loss (gain) 10 (233)
Unrecognized prior service cost 2,516 1,261
Unamortized portion of unrecognized net (asset)
at January 31, 1987 (414) (613)
------- -------
Prepaid pension costs recognized in
accompanying balance sheets $ 4,400 $ 4,366
------- -------
------- -------
1994 1993 1992
(In thousands)
Net pension expense (income), included the
following components:
Service cost - benefits earned during the period $ 573 $ 530 $ 445
Interest cost on projected benefit obligations 1,104 1,078 1,017
Actual return on plan assets (1,836) (1,814) (3,428)
Net amortization and deferral 211 33 2,012
------- ------- -------
Net pension expense (income) for the year $ 52 $ (173) $ 46
------- ------- -------
------- ------- -------
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.5% in 1994 and
1993. The expected long-term rate of return on assets was 10.0%.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pension expense charged to operations for these plans and for other
multi-employer plans in which certain union employees of the Company's
subsidiaries participate was $598,000, $314,000 and $565,000 for the
years ended January 29, 1994, January 30, 1993 and February 1, 1992,
respectively.
Subsidiaries of the Company also maintain defined contribution
contributory retirement plans for substantially all domestic employee
groups. Under the plans, the companies make contributions based on
employee compensation and in certain cases based on specified levels of
voluntary employee contributions. Western Publishing Company, Inc.'s
Canadian subsidiary also maintains a profit sharing plan for certain
salaried employees. Expense for these plans was $4,157,000, $3,819,000
and $3,484,000 for the years ended January 29, 1994, January 30, 1993
and February 1, 1992, respectively.
Postretirement Benefits
Western Publishing Company, Inc. provides certain health care and life
insurance benefits for substantially all of its retired employees.
Effective January 31, 1993, the Company adopted Statement of Financial
Accounting Standards (FASB) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." FASB No. 106 requires
the Company to accrue the estimated cost of retiree benefit payments
during the years the employee provides services. The Company previously
expensed the cost of these benefits, which are principally health care,
as claims were incurred. FASB No. 106 allows recognition of the
cumulative effect of the liability in the year of adoption or the
amortization of the obligation over a period of up to twenty years. The
Company elected to recognize the cumulative effect of this obligation
on the immediate recognition basis. As of January 31, 1993, the
Company recognized the accumulated liability for such benefits
(transition obligation). The cumulative effect of this change in
accounting principle reduced net earnings by $24,300,000 ($14,800,000,
net of income taxes).
For the year ended January 29, 1994, the incremental effect of adopting
FASB No. 106 was to increase the loss before cumulative effect of
change in accounting principle by approximately $990,000 ($.05 per
share).
The Company's postretirement health care plans are not currently funded.
The status of the plans is as follows:
The accrued postretirement benefits (actuarial present value of
accumulated postretirement benefit obligation) at January 1, 1994
consisted of:
(In thousands)
Retirees currently receiving benefits $12,549
Current employees eligible to receive benefits 6,600
Current employees not yet eligible to receive benefits 8,500
Unrecognized net loss from past experience (1,700)
-------
$25,949
-------
-------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The net postretirement benefit cost for the year ended January 29, 1994
consisted of the following components:
(In thousands)
Service cost - benefits earned during the year $ 700
Interest cost on accumulated postretirement benefit obligation 1,900
Recognition of transition obligation 24,300
-------
$26,900
-------
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation as of January 1, 1994 was
8% for 1994 decreasing linearly to 5% in 2010; and remaining level
thereafter.
If the health care cost trend rate were increased one percentage point
in each year, the accumulated postretirement benefit obligation as of
January 1, 1994 and the net postretirement cost would have increased by
approximately 15% and 19%, respectively. The weighted average discount
rate used in determining the accumulated postretirement benefit
obligation was 7.5%.
Prior to Fiscal 1994, the Company recognized postretirement health care
and life insurance benefits as an expense as claims were paid. On that
basis, the costs of such benefits were $926,000 and $1,175,000 for the
years ended January 30, 1993 and February 1, 1992, respectively.
Postemployment Benefits
During November 1992, the FASB issued Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits"
(FASB No. 112), which requires the cost of such benefits be accrued
over the employee service period. The Company has reviewed its policies
and practices to determine the applicability of FASB No. 112 and
believes the adoption of FASB No. 112 in Fiscal 1995 will not have a
material effect on its financial statements.
14. INDUSTRY SEGMENT INFORMATION
The Company has two industry segments, Consumer Products and Commercial
Products.
The Company is engaged in the creation, publication, printing and
marketing of story and picture books, interactive electronic books,
coloring books, activity books, books and games that feature special
effects and prerecorded audio and video products for juveniles, as well
as puzzles, games and special interest books for the entire family (see
Note 2). The Company is also engaged in the manufacture and sale of
decorated paper tableware, party goods, stationery and gift products.
The Company's foreign operations within the Consumer Products Segment
consist of a marketing subsidiary in Canada and a marketing branch in
the United Kingdom.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's Commercial Products Segment provides printing and creative
publishing services and is engaged in the manufacture of advertising
specialties including imprinted writing instruments, wearables and
simulated leather items, such as wallets, folders and other promotional
business products (see Note 2).
Operating profit represents income before income taxes, interest expense
and general corporate income and expense. Identifiable assets are
those assets used specifically in the operations of each industry
segment or which are allocated when used jointly. Corporate assets are
principally comprised of cash and cash equivalents, deferred income
taxes, prepaid pension costs and certain other assets. Domestic sales
to foreign markets were less than 10% of total consolidated sales for
the years ended January 29, 1994, January 30, 1993 and February 1, 1992.
Information by industry segment is set forth below:
1994 1993 1992
(In thousands)
Net sales:
Consumer Products $535,603 $543,154 $438,706
Commercial Products 77,861 105,935 113,654
-------- -------- --------
$613,464 $649,089 $552,360
-------- -------- --------
-------- -------- --------
Operating profit (loss):
Consumer Products $ 192 $ 53,625 $ 45,161
Commercial Products (2,558) (3,609) (3,694)
-------- -------- --------
(2,366) 50,016 41,467
Other income 1,168 1,291 1,137
General corporate expense (17,672) (12,591) (14,075)
Provision for write-down of division (28,180)
Interest expense (16,270) (10,358) (6,255)
-------- -------- --------
(Loss) income before income taxes and
cumulative effect of change in accounting
principle $(63,320) $ 28,358 $ 22,274
-------- -------- --------
-------- -------- --------
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Consumer Commercial
Products Products Corporate Total
(In thousands)
Identifiable assets:
1994 $401,817 $38,731 $64,568 $505,116
1993 396,277 74,197 38,111 508,585
1992 281,745 72,729 36,491 390,965
Depreciation and amortization:
1994 11,155 5,153 688 16,996
1993 7,851 5,059 394 13,304
1992 7,022 5,813 503 13,338
Capital expenditures:
1994 33,524 2,443 1,392 37,359
1993 19,374 3,446 884 23,704
1992 6,978 4,241 641 11,860
Other Information
During Fiscal 1994, sales to the Company's two largest customers, Toys R
Us, Inc., and Wal-Mart Stores, Inc., amounted to approximately 12% and
10% of consolidated net sales, respectively.
15. NET (LOSS) INCOME PER COMMON SHARE
Net (loss) income per common share was computed as follows:
1994 1993 1992
(In thousands except for
per share data)
Net (loss) income $(55,825) $17,498 $13,694
Preferred dividend requirements (848) (848) (848)
-------- ------- -------
(Loss) income applicable to Common Stock $(56,673) $16,650 $12,846
-------- ------- -------
-------- ------- -------
Weighted average common shares
outstanding 20,956 20,899 20,864
-------- ------- -------
-------- ------- -------
Net (loss) income per common share $ (2.70) $ .80 $ .62
-------- ------- -------
-------- ------- -------
* * * * * *
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED JANUARY 29, 1994 (IN THOUSANDS)
<TABLE>
<CAPTION>
Allowance Allowance
for Doubtful for
Accounts Returns Total
<S> <C> <C> <C>
BALANCES, FEBRUARY 3, 1991 $ 8,986 $ 7,931 $ 16,917
Additions charged to costs and expenses 5,061 22,631 27,692
Deductions - amounts written off (5,830) (21,641) (27,471)
Foreign currency conversion (30) (4) (34)
------- -------- --------
BALANCES, FEBRUARY 1, 1992 8,187 8,917 17,104
Additions charged to costs and expenses 5,855 27,509 33,364
Deductions - amounts written off (7,041) (28,131) (35,172)
Foreign currency conversion (72) (52) (124)
------- -------- --------
BALANCES, JANUARY 30, 1993 6,929 8,243 15,172
Additions charged to costs and expenses 5,577 40,951 46,528
Deductions - amounts written off (5,686) (40,268) (45,954)
Other changes - net (2,318) 2,767 449
Foreign currency conversion (11) (15) (26)
------- -------- --------
BALANCES, JANUARY 29, 1994 $ 4,491 $ 11,678 $ 16,169
------- -------- --------
------- -------- --------
</TABLE>
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
THREE YEARS ENDED JANUARY 29, 1994 (IN THOUSANDS)
Category of Aggregate
Short-Term Borrowings 1994 1993 1992
Notes payable to banks:
Balance at end of period $ -0- $ -0- $ 79,000
Weighted average interest rate - - 5.4%
Maximum amount outstanding during the
period -0- $198,000 $128,400
Average amount outstanding during the
period (a) $ -0- $ 94,895 $ 92,482
Weighted average interest rate during the
period (b) - 5.0% 6.6%
(a) Average amount outstanding during the period computed by dividing the
total of daily outstanding principal balances by number of days in the
fiscal year.
(b) Weighted average interest rate for the fiscal year computed by dividing
the actual short-term interest expense by the average short-term
borrowings outstanding.
WESTERN PUBLISHING GROUP, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED JANUARY 29, 1994 (IN THOUSANDS)
1994 1993 1992
Maintenance and repairs $ 9,257 $10,099 $ 9,484
Royalties 40,826 41,988 36,671
Advertising costs 31,035 35,114 28,397
Depreciation 11,442 8,506 8,128
Amortization of intangible assets 2,861 4,798 5,210
Amounts for taxes, other than payroll and income taxes, are not presented as
such amounts are less than 1% of net sales.
GOLDEN COMPREHENSIVE SECURITY PROGRAM
(As Amended and Restated Effective January 1, 1993)
McDermott, Will & Emery
Chicago, Illinois
C E R T I F I C A T E
I, James A. Cohen, Secretary of WESTERN PUBLISHING
COMPANY, INC., hereby certify that the attached is a full,
true and complete copy of the GOLDEN COMPREHENSIVE SECURITY
PROGRAM, as in effect on the date hereof.
Dated this 28 day of December, 1993.
/s/ James A. Cohen
--------------------------------
Secretary as Aforesaid
(Corporate Seal)
TABLE OF CONTENTS
PAGE
----
SECTION 1 1
Introduction 1
Purpose 1
Effective Date, Plan Year 1
Employers 2
Plan Administration 2
Trustee, Trust Agreement, Trust Fund 2
Examination of Plan Documents 2
Notices 3
Gender and Number 3
Supplements 3
SECTION 2 4
Eligibility and Participation 4
Eligibility 4
Continuity of Employment 5
Leave of Absence 8
Reemployed Former Participant 9
Leased Employees 9
SECTION 3 11
Employer Contributions 11
Annual Employer Contribution 11
Income Deferral Contributions 11
Compensation and Adjusted Compensation 12
Matching Employer Contributions 13
Employer Contributions Made From Profits 14
Limitations on Income Deferrals 14
Highly Compensated Participants 20
Verification of Employer Contributions 22
No Interest in Employers 22
SECTION 4 24
Participant Contributions 24
Amount of Participant Contributions 24
Deduction or Payment of Participant
Contributions 24
Variation, Discontinuance, Resumption and With-
drawal of Participant Contributions 24
SECTION 5 26
Period of Participation 26
Termination Date 26
Restricted Participation 27
SECTION 6 29
Accounting 29
Separate Accounts 29
Accounting Dates 30
Employer Contributions Considered Made on Last
Day of Plan Year 30
Adjustment of Participants' Accounts 30
Allocation of Employer Contributions and For 32
Statement of Accounts 32
Contribution Limitations 33
Investment Funds 35
SECTION 7 39
Payment of Account Balances 39
Retirement or Death 39
Resignation or Dismissal 39
Forfeitures 41
Manner of Distribution 42
Commencement of Distributions 46
Designation of Beneficiary 47
Missing Participants or Beneficiaries 48
Facility of Payment 49
Latest Date for Distribution 53
Direct Transfer of Eligible Rollover
Distributions 53
Withdrawal of Income Deferral Contributions 54
SECTION 8 56
Prior Plan Accounts 56
Transfer of Prior Plan Balances 56
Prior Plan Accounts 56
Withdrawals from Prior Plan Accounts 57
Other Transferred Amounts and Rollovers 57
SECTION 9 59
The Committee 59
Membership 59
Committee's General Powers, Rights and Duties 59
Manner of Action 60
Interested Committee Member 61
Resignation or Removal of Committee Members 61
Committee Expenses 62
Information Required by Committee 62
Uniform Rules 62
Review of Benefit Determinations 63
Committee's Decision Final 63
SECTION 10 64
General Provisions 64
Additional Employers 64
Action by Employers 64
Waiver of Notice 64
Controlling Law 64
Employment Rights 64
Litigation by Participants 65
Interests Not Transferable 65
Absence of Guaranty 66
Evidence 66
SECTION 11 67
Amendment and Termination 67
Amendment 67
Termination 67
Reorganizations 68
Vesting and Distribution on Termination 68
Notice of Amendment or Termination 69
Plan Merger, Consolidation, Etc 69
SECTION 12 70
Top-Heavy Rules 70
Purpose and Effect 70
Top-Heavy Plan 70
Key Employee 71
Aggregated Plans 72
Maximum Earnings 72
No Duplication of Benefits 73
Adjustment of Combined Benefit Limitations 73
SUPPLEMENT A
Golden Comprehensive Security Program A-1
SUPPLEMENT B
Golden Comprehensive Security Program B-1
GOLDEN COMPREHENSIVE
SECURITY PROGRAM
SECTION 1
Introduction
1.1. Purpose. GOLDEN COMPREHENSIVE SECURITY PROGRAM
(the "plan") is maintained by WESTERN PUBLISHING COMPANY, INC.
(the "company") and, effective April 23, 1986, by WESTERN PUB-
LISHING GROUP, INC., the company's parent ("parent") for eligi-
ble employees of the company and the parent and the eligible
employees of any other United States subsidiary of the company
or the parent which adopts the plan, with the consent of the
company. The purpose of the plan is to replace the Western
Pension Plan for Salaried Employees and other plans previously
maintained for eligible employees and to provide for the accu-
mulation of funds from both employer and participant contribu-
tions in order to provide retirement income to participants
when they retire from the employ of the employers, thereby
providing for their future financial security. The plan is
designed as a qualified pension and profit sharing plan under
the provisions of Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code").
1.2. Effective Date, Plan Year. The original
effective date of the plan was November 1, 1984. The plan, as
set forth below, constitutes an amendment and restatement of
the plan effective January 1, 1993 (the "effective date"). A
"plan year" means each calendar year.
1.3. Employers. The company, the parent and any
United States subsidiary of the company or the parent which
adopts the plan and trust with the consent of the company are
sometimes referred to hereinafter collectively as the "employ-
ers" and individually as an "employer."
1.4. Plan Administration. The plan will be admin-
istered by a pension security committee (the "committee")
appointed by the company, as described in Section 9. Partici-
pants will be notified of the identity of the committee members
and of any change in the membership of such committee.
1.5. Trustee, Trust Agreement, Trust Fund. Funds
contributed by the employers or participants under the plan
will be held and invested in a trust fund, until distributed,
by a trustee (the "trustee") appointed by the company. The
trustee will act under a trust agreement between the employers
and the trustee. Participants will be notified of the identity
of the trustee, and of any change in trustee.
1.6. Examination of Plan Documents. Copies of the
plan and trust agreement, and any amendments thereto, will be
made available at the principal office of each employer where
they may be examined by any participant or beneficiary entitled
to receive benefits under the plan. The provisions of and
benefits under the plan are subject to the terms and provisions
of the trust agreement.
1.7. Notices. Any notice or document required to be
given to or filed with the committee shall be considered as
given or filed if delivered or mailed by registered mail, post-
age prepaid, addressed as follows:
Benefit Plans Administration Committee
Western Publishing Company, Inc.
444 Madison Avenue
New York, New York 10022
1.8. Gender and Number. Words in the masculine gen-
der shall include the feminine and neuter genders and, where
the context admits, the plural shall include the singular, and
the singular shall include the plural.
1.9. Supplements. The company and any other employ-
er (with the consent of the company) may establish supplements
to this plan with respect to any group or class of employees of
an employer to which the plan has been extended. Each such
supplement will be a part of the plan as it applies to the
employees affected thereby. To the extent that the provisions
of any supplement are inconsistent with the other features of
the plan, the provisions of the supplement shall control.
SECTION 2
Eligibility and Participation
2.1. Eligibility. Subject to the conditions and
limitations of the plan, each employee of an employer who was
an active participant in the plan immediately prior to the
effective date will continue to participate in the plan in
accordance with the provisions of this plan. Each other
employee of an employer will become a participant in the plan
on January 1, 1993, or on the first January 1, April 1, July 1
or October 1 (the "quarterly entry date") coincident with or
next following the date he meets all of the following
requirements:
(a) He is either:
(i) A salaried employee (that is, an employee
whose basic compensation for services
rendered to an employer is paid to him in
fixed amounts at stated intervals without
regard to the number of hours worked, even
though he may receive additional
compensation in the form of bonuses,
overtime pay or commissions); or
(ii) A member of a group or class of employees
of an employer to whom the plan has been
extended by the Board of Directors of the
employer; and
(b) He does not belong to a collective bargaining
unit of employees represented by a collective
bargaining representative, except to the extent
that an agreement between the employer and such
representative extends the plan to such unit of
employees; and
(c) He has completed six months of continuous
employment (as defined in subsection 2.2).
Each employee will be notified of the date as of which he
becomes a participant in the plan and will be furnished with a
summary plan description in accordance with governmental rules
and regulations. An employee who would be eligible to
participate in the plan on the applicable quarterly entry date
except for the requirements of subparagraph 2.1(a) or (b) will
become a participant on the date he satisfies the conditions
for participation under such subparagraphs but will not be
eligible to make income deferral contributions (as defined in
subsection 3.2) or voluntary participant contributions until
the quarterly entry date coincident with or next following the
date he becomes a participant.
2.2. Continuity of Employment. In determining an
employee's or participant's continuity of employment, the fol-
lowing rules shall apply:
(a) An employee's or participant's continuous
employment will be computed in terms of
full and fractional years of continuous
employment, with fractional years computed
in completed days of employment, commencing
on the date an employee is first employed
by an employer (i.e., the date he first
completes an hour of service) or, if he has
incurred a one-year break in employment (as
defined in subparagraph (g) below), the
date of his reemployment (i.e., the date he
first completes an hour of service upon
reemployment).
(b) A leave of absence (as defined in subsec-
tion 2.3) will not interrupt continuity of
employment for purposes of the plan.
(c) A period of concurrent employment with two
or more employers will be considered as
employment with one employer during that
period.
(d) The termination of any employee's employ-
ment with one employer will not interrupt
the continuity of his employment or par-
ticipation if, concurrently with or imme-
diately after such termination, he is
employed by one or more other employers.
(e) If a former employee of the employers is
reemployed by an employer before he has
incurred a one-year break in employment (as
defined in subparagraph (g) below), his
employment with the employers will not be
deemed to have terminated.
(f) A period of employment with a controlled
group member (as defined below) which is
not an employer will be considered a period
of employment with an employer for purposes
of determining years and days of continuous
employment. A "controlled group member"
means any corporation or other trade or
business which is under common control with
an employer within the meaning of Sections
414(b), 414(c) and 414(m) of the Code.
(g) In determining an employee's or partici-
pant's continuous employment for an
employee or participant who incurs a
one-year break in employment and is reem-
ployed by an employer or controlled group
member, continuous employment (both before
and after such one-year break in employ-
ment) will be taken into account for plan
purposes upon his reemployment, except as
follows:
If a former employee of the employers
who is not vested with respect to any
portion of his employer contribution
account balance, income deferral
contribution account balance, or
matched employer contribution account
balance is reemployed by an employer
or controlled group member after he
has incurred five consecutive one-year
breaks in employment and if such
consecutive one-year breaks in
employment equal or exceed his years
of continuous employment, his period
of continuous employment with the
employers or controlled group members
prior to such five consecutive
one-year breaks in employment shall be
disregarded for purposes of
determining the vested portion of his
employer contribution account or
matched employer contribution account
upon his reemployment. In no event
shall a period of continuous employ-
ment after an employee has incurred
five consecutive one-year breaks in
employment be taken into account in
determining the vested portion of his
employer contribution account or
matched employer contribution account
attributable to employment prior to
such five consecutive one-year breaks
in employment.
A "one-year break in employment" will be deemed
to have occurred for each 12-month period
commencing on the date of an employee's
termination of employment, and on each
anniversary thereof, during which such employee
is not employed by an employer or controlled
group member. In the case of a maternity or
paternity absence (as defined below), the
12-month period beginning on the first day of
such absence and the first anniversary thereof
shall not constitute one-year breaks in service.
A "maternity or paternity absence" means an
employee's absence from work because of the
pregnancy of the employee or birth of a child of
the employee, the placement of a child with the
employee in connection with the adoption of
such, or for purposes of caring for the child
immediately following such birth or placement.
(h) In determining the continuous employment of
an employee who had previously been
employed by Sight & Sound, Inc., and who
was transferred to employment with an
employer after such acquisition, such
continuous employment will commence on the
date such employee was first employed by
Sight & Sound, Inc.
An "hour of service" means each hour for which an employee is
directly or indirectly paid, or entitled to payment, by an
employer for the performance of duties, determined in
accordance with Department of Labor Reg. Sec. 2530.200b-2. A
"year of continuous employment" means 365 days of continuous
employment under this subsection.
2.3. Leave of Absence. A leave of absence will not
interrupt continuity of employment or participation in the
plan. A "leave of absence" for plan purposes means a leave of
absence required by law or granted by an employer on account of
service in military or governmental branches described in any
applicable statute granting reemployment rights to employees
who entered such branches, or any other military or governmen-
tal branch designated by the employers, and also means any
other absence from active employment with an employer under
conditions which are not treated by it as a termination of
employment including, but not limited to, vacations, holidays,
maternity, illness, incapacity or jury duty. Leaves of absence
will be governed by rules uniformly applied to all employees
similarly situated. If an employee or participant does not
return to work with an employer or controlled group member on
or before termination of a leave of absence, he will be con-
sidered to have resigned on the date his last leave ended
unless his employment actually terminated prior to the expira-
tion of such leave.
2.4. Reemployed Former Participant. If a former
participant in the plan who has completed the requirements of
subparagraph 2.1(c) is reemployed by an employer after
incurring a one-year break in employment, he will again become
a participant in the plan on the date he meets the requirements
of subparagraphs 2.1(a) and (b) and will be eligible to make
income deferral contributions under subsection 3.2 or voluntary
participant contributions under subsection 4.1 on the quarterly
entry date coincident with or next following the date he
becomes a participant.
2.5. Leased Employees. A leased employee (as
defined below) shall not be eligible to participate in the
plan. A leased employee means any person who is not an
employee of an employer but who has provided services to an
employer of the type which have historically (within the
business field of the employers) been provided by employees on
a substantially full-time basis for a period of at least one
year pursuant to an agreement between an employer and a leasing
organization. The period during which a leased employee
performs services for an employer shall be taken into account
for purposes of subsection 2.2 of the plan unless (i) such
leased employee is a participant in a money purchase pension
plan maintained by the leasing organization which provides a
nonintegrated employer contribution rate of at least ten
percent (10%) of compensation, immediate participation for all
employees and full and immediate vesting and (ii) leased
employees do not constitute more than twenty percent (20%) of
the employer's nonhighly compensated work force.
SECTION 3
Employer Contributions
3.1. Annual Employer Contribution. Subject to the
limitations of the plan, each employer will contribute to the
plan for each plan year an amount equal to three percent (3%)
of the adjusted compensation (as defined in subsection 3.3) of
participants entitled to share in the contribution for that
year. The amount of the employer's contribution for a plan
year, as described above, will be reduced, however, by any
forfeitures to be credited under subsection 7.3 for that plan
year; and the employer's contribution, as so reduced, will be
the actual amount paid to the trustee as a contribution for
that year under this subsection. An employer's contribution
for any plan year under this subsection shall be paid to the
trustee not later than the earlier of (i) the latest date for
making such contribution under the provisions of Section
412(c)(10) of the Code or (ii) the time required for the filing
of the employer's federal income tax return for the fiscal year
in which such plan year ends, including extensions thereof.
3.2. Income Deferral Contributions. Subject to the
limitations of the plan, by writing filed with the committee, a
participant, if he so desires, may defer payment of a
percentage (in increments of one percent (1%)) of his
compensation ("income deferral contributions"), not exceeding
sixteen percent (16%) thereof, by electing to have such
percentage withheld from his compensation and contributed to
the plan on his behalf by his employer. For plan years
beginning on or after January 1, 1993, no participant may elect
to make income deferral contributions for any calendar year in
excess of $8,994 (or such greater amount as determined pursuant
to Section 402(g)(5) of the Code). The amounts withheld from a
participant's compensation pursuant to the participant's
election shall be contributed to the plan by the participant's
employer and credited to his income deferral contribution
account as soon as practicable after being withheld but, in any
event, not later than 30 days following the end of the pay
period for which such contributions are made. A participant
may elect to change the rate of his deferrals, or suspend or
resume such deferrals, within the limits stated above, by
filing a new election with the committee. Each election under
this subsection shall be made at such time, in such manner and
in accordance with such rules as the committee shall determine
and shall be effective for compensation paid on the first
payment date (i.e., a date on which regular salary payments are
made to employees of the employer) coincident with or next
following the quarterly entry date or such other date specified
by the committee for which such election is effective.
3.3. Compensation and Adjusted Compensation. A par-
ticipant's "compensation" for any plan year means the sum total
of the adjusted compensation (as defined below) paid to him
during that plan year for services rendered to the employers as
an employee and the amount of any income deferral contributions
made for such year under subsection 3.2. A participant's
"adjusted compensation" for any plan year means the total cash
compensation, including commissions, bonuses and overtime pay,
but excluding any payments from the Western Incentive Compen-
sation Program, paid during the period such participant is an
active participant in the plan. In no event shall compensation
in excess of $200,000 (or such greater amount as permitted in
regulations issued by the Secretary of the Treasury) be
included in a participant's compensation for any plan year.
3.4. Matching Employer Contributions. Subject to
the limitations of the plan and in addition to the annual
employer contributions made under subsection 3.1 and the income
deferral contributions made under subsection 3.2, each employer
will contribute for a participant an amount equal to sixty per-
cent (60%) of the first six percent (6%) of income deferral
contributions (but not exceeding $8,994 or such greater amount
as determined pursuant to Section 402(g)(5) of the Code for
plan years beginning on or after January 1, 1993) made on
behalf of the participant under subsection 3.2, reduced by any
forfeitures to be credited to such participant's matched em-
ployer contribution account for such period as provided under
subsection 7.3. Such contributions shall be paid to the
trustee and credited to the participant's matched employer con-
tribution account as soon as practicable after the end of the
pay period for which such contribution is made but, in any
event, not later than 60 days after the end of such period.
3.5. Employer Contributions Made From Profits. Each
employer's contributions for or during a plan year under
subsection 3.4 shall be made from net income (i.e., its net
profits before federal and state taxes on income) for that plan
year, or its accumulated profits (i.e., its net profits after
federal and state taxes on income which have been accumulated
and retained in the business), or both, as determined under
generally accepted accounting principles and practices. Each
employer's contributions are conditioned on their deductibility
under Section 404 of the Code and, unless an employer specifies
otherwise, shall not exceed an amount equal to the maximum
amount deductible on account thereof by the employer for its
fiscal year for purposes of federal taxes on income.
3.6. Limitations on Income Deferrals. In no event
shall the actual deferral percentage (as defined below) of the
highly compensated participants (as defined in subsection 3.8)
for any plan year exceed the greater of:
(a) the actual deferral percentage of all other
participants for such plan year multiplied
by 1.25; or
(b) the actual deferral percentage of all other
participants for such plan year multiplied
by 2.00; provided that the actual deferral
percentage of the highly compensated par-
ticipants does not exceed that of all other
participants by more than two percentage
points.
The "actual deferral percentage" of a group of participants for
a plan year means the average of the ratios (determined sepa-
rately for each participant in such group) of A to B where A
equals the income deferral contributions credited to each such
participant's income deferral contribution account for each
plan year and B equals the participant's "compensation" for
such plan year. For purposes of this subsection, the term
"compensation" shall mean compensation as defined in Section
414(s) of the Code, including income deferral contributions.
The committee shall determine from time to time based on the
income deferral elections then on file with the committee
whether the foregoing limitations will be satisfied and, to the
extent necessary to insure compliance with such limitation,
shall reduce, on an individual-by-individual basis, for each
highly compensated participant who is exceeding such deferral
percentage the applicable percentage of income deferral con-
tributions to be withheld for such highly compensated partici-
pant beginning with the highly compensated participant with the
highest deferral percentage first and then reducing the appli-
cable percentage for each subsequent highly compensated par-
ticipant until such excess contributions are eliminated. In
addition, if at any time a portion of the income deferrals
withheld from a highly compensated participant's compensation
cannot be credited to his income deferral contribution account
because the limitations described above would be applicable,
such amounts will not be considered contributions under sub-
section 3.2 and the amount of such excess contributions (and
any income allocable to such contributions) will be distributed
to such highly compensated participant no later than two and
one-half (2-1/2) months after the close of the plan year for
which such excess contribution was made. For purposes of
determining the amount of any income for a plan year
attributable to any excess contributions by a highly
compensated participant (as defined in subsection 3.8) to be
returned to such participant, the following formula will be
used:
(i) first, the value of his income
deferral contribution account as of
the beginning of the plan year and as
of the last day of the plan year shall
be determined;
(ii) next, the gain or loss on such income
deferral contribution account shall be
determined after first reducing the
difference between the balance of the
account as at the end of the year and
the balance as at the beginning of the
year by income deferral contributions
made for such year; and
(iii) finally, the amount calculated under
paragraph (ii) shall be multiplied by
a fraction the numerator of which is
the excess income deferral
contributions made by the participant
for such year and the denominator of
which is such participant's income
deferral contribution account as of
the last day of such year, reduced by
the amount of any gain for such year
and increased by the amount of any
loss for such year. The amount
calculated under this paragraph shall
be the amount of income to be returned
to the participant for such year.
The actual deferral percentage of a highly compensated
participant to whom the family attribution rules described in
subsection 3.8 apply shall be the greater of:
(i) the actual deferral ratio obtained by
aggregating the income deferral
contributions and compensation of only
those family members who are highly
compensated participants; or
(ii) the actual deferral ratio obtained by
aggregating the income deferral
contributions and compensation of all
family members who are participants.
For purposes of this subsection, certain former employees (as
determined under Section 414(q)(9) of the Code) shall be
treated as employees for purposes of determining highly
compensated participants.
3.7 Limitations on Matching Employer Contributions
and Participant Contributions. In no event shall the contri-
bution percentage (as defined below) of the highly compensated
participants (as defined below) for any plan year exceed the
greater of:
(a) the contribution percentage of all
other participants for such plan year
multiplied by 1.25; or
(b) the contribution percentage of all
other participants for such plan year
multiplied by 2.00; provided that the
contribution percentage of the highly
compensated participants does not ex-
ceed that of all other participants by
more than 2 percentage points.
The "contribution percentage" of a group of participants for a
plan year means the average of the ratios (determined
separately for each participant in such group) of A to B where
A equals the sum of the matching employer contributions under
subsection 3.4 and the participant contributions under
subsection 4.1, if any, credited, to such participant's
accounts for such plan year and B equals the participant's
compensation (as defined in subsection 3.6) for such plan year.
The committee shall determine from time to time based on such
participant's matching employer contributions and participant
contributions whether the foregoing limitations will be
satisfied and, to the extent necessary to insure compliance
with such limitation, shall reduce, on an individual-
by-individual basis, for each highly compensated participant
who is exceeding such contribution percentage, the applicable
percentage of participant contributions, if any, to be withheld
for such highly compensated participant, beginning with the
highly compensated participant with the highest contribution
percentage first and then reducing the applicable percentage
for each subsequent highly compensated participant until such
contribution percentage satisfies the foregoing test. If,
after reducing such participant contributions, such
contribution percentage still exceeds such limitation, the
matching employer contributions to be contributed for such
highly compensated participants shall be reduced, beginning
with the highly compensated participant with the highest
matching employer contributions first and then reducing the
applicable percentage for each subsequent highly compensated
participant until such contribution percentage satisfies the
foregoing test. If, because of the foregoing limitations, a
portion of the matching employer contributions made on behalf
of a highly compensated participant may not be credited to his
account for a plan year, such portion (and the income allocable
to such amount) will be forfeited and returned to the employer
making such contribution not later than two and one-half months
after the end of that plan year. The determination of any ex-
cess aggregate matching contributions under this subparagraph
shall be made after determining any excess income deferral con-
tributions under subsection 3.6. Income on such excess
participant contributions and, if applicable, matching employer
contributions shall be calculated in the same manner as
provided in subparagraphs (i) - (iii) of subsection 3.6 except
that such calculations shall be made using the participant's
participant contribution account balance and the participant's
contributions and excess participant contributions made for
such plan year and then, if necessary, such participant's
matched employer contribution account balance and the
employer's matching employer contributions and excess matching
employer contributions made for such plan year. In the event
that both the actual deferral percentage and the contribution
percentage do not satisfy the requirements of subparagraphs
3.6(a) and 3.7(a) above, the following additional limitation
shall apply to participant contributions and then to employer
matching contributions of highly compensated participants under
the plan. After the appropriate tests under subparagraph
3.6(a) or (b) above and subparagraph 3.7(a) or (b) have been
made and any excess income deferral contributions and
participant contributions have been returned to the participant
and any excess employer matching contributions are forfeited,
the "Aggregate Limit" test will be applied. The "Aggregate
Limit" will be the sum of: (1) 125 percent of the greater of
the actual deferral percentage or the contribution percentage
for participants who are not highly compensated participants
and (2) the lesser of (a) the actual deferral percentage or the
contribution percentage, whichever is smaller, for participants
who are not highly compensated participants plus two (2)
percentage points or (b) the actual deferral percentage or
contribution percentage, whichever is smaller, for participants
who are not highly compensated participants multiplied by 2.0.
If the sum of the actual deferral percentage and the
contribution percentage for the highly compensated participants
exceeds the Aggregate Limit, participant contributions and then
employer matching contributions will be further reduced until
the Aggregate Limit test is satisfied.
3.8. Highly Compensated Participants. For purposes
of subsections 3.6 and 3.7 of the plan, a "highly compensated
participant" means any participant who, during the current or
immediately preceding plan year:
(a) was a 5 percent (5%) owner of an employer
or controlled group member;
(b) received annual compensation from an em-
ployer and/or controlled group member of
more than $75,000;
(c) received annual compensation from an em-
ployer and/or controlled group member of
more than $50,000 and was in the top-paid
twenty percent (20%) of the employees; or
(d) was an officer of an employer and/or con-
trolled group member receiving annual
compensation greater than fifty percent
(50%) of the limitation in effect under
Section 415(b)(1)(A) of the Internal
Revenue Code; provided, that for purposes
of this subparagraph (d), no more than 50
employees of the employer (or if lesser,
the greater of 3 employees or 10 percent of
the employees) shall be treated as
officers.
A participant not described in (b), (c) or (d) above for the
immediately preceding year will not be considered a highly com-
pensated participant for the current plan year under (b), (c)
or (d) unless such participant is included within the group of
the 100 highest paid employees of the employer and controlled
group members for such current year. If any participant is a
family member of a highly compensated participant who is either
a 5 percent owner or one of the ten most highly compensated
participants with respect to any plan year, that participant
shall not be treated as a separate participant for purposes of
this subsection and such individual's compensation will be
treated as if paid to such highly compensated participant; pro-
vided that, a "family member" of a highly compensated partici-
pant means such participant's spouse, lineal ascendants or
descendants and the spouses of such lineal ascendants or de-
scendants. For purposes of this subsection, "compensation"
shall be defined as provided in subsection 3.6 of the plan.
The compensation thresholds in (b), (c) and (d) above will be
adjusted in accordance with Section 414(q)(1) of the Code.
3.9. Verification of Employer Contributions. A cer-
tificate of an independent certified public accountant selected
by the employer shall be conclusive on all persons as to the
amount of an employer's contributions under the plan for any
plan year.
3.10. No Interest in Employers. The employers shall
have no right, title or interest in the trust fund, nor will
any part of the trust fund at any time revert or be repaid to
an employer, unless:
(a) the Internal Revenue Service determines
that the plan does not meet the require-
ments of Section 401(a) of the Internal
Revenue Code of 1986, in which event con-
tributions made to the plan by such em-
ployer conditioned upon such qualification
shall be returned to the employer within
one year after the date notice of such
determination is issued to the employer; or
(b) a contribution is made by such employer by
mistake of fact and such contribution is
returned to the employer within one year
after payment to the trustee; or
(c) a contribution is disallowed as an expense
for federal income tax purposes and such
contribution (to the extent disallowed) is
returned to the employer within one year
after the disallowance of the deduction.
The amount of any contribution that may be returned to an
employer pursuant to subparagraph (b) or (c) above shall be
reduced by any portion thereof previously distributed from the
trust fund and by any losses of the trust fund allocable
thereto and in no event may the return of such contribution
cause any participant's account balances to be less than the
amount of such balances had the contribution not been made
under the plan.
SECTION 4
Participant Contributions
4.1. Amount of Participant Contributions. In lieu
of any income deferral contributions made by a participant
under subsection 3.2 and subject to any limitations contained
in the plan, a participant, if he so desires, may elect to make
voluntary contributions under the plan for any plan year in an
amount of not less than one percent (1%) nor more than sixteen
percent (16%) of his adjusted compensation (as defined in
subsection 3.3) for that year. Each such election by a
participant under this subsection shall be made at such time,
in such manner and in accordance with such rules as the
committee shall determine.
4.2. Deduction or Payment of Participant
Contributions. A participant's contributions may be made by
regular payroll deductions (in multiples of one percent) or in
any other way approved by the committee. Participant
contributions deducted by an employer will be paid to the
trustee as soon as practicable after the date the contributions
are made.
4.3. Variation, Discontinuance, Resumption and With-
drawal of Participant Contributions. A participant may elect
to change his contribution rate (but not retroactively) within
the limits specified above, to discontinue making contributions
or to resume making such contributions. As of the first day of
any plan year quarter, a participant may withdraw all or any
portion of the then net credit balance in his participant con-
tribution account. Each election by a participant under this
subsection 4.3 shall be made at such time and in such manner as
the committee shall determine, and shall be effective only in
accordance with such rules as may be established from time to
time by the committee.
SECTION 5
Period of Participation
5.1. Termination Date. A participant's "termination
date" will be the date on which his employment with all of the
employers is terminated because of the first to occur of the
following:
(a) Normal or Late Retirement. The date of the
participant's retirement on or after
attaining age 65 years (his "normal
retirement age"). A participant's right to
all account balances shall be nonfor-
feitable on and after his normal retirement
age.
(b) Early Retirement. The date of the partic-
ipant's retirement on or after attaining
age 55 years but before attaining age 65
years.
(c) Disability Retirement. The date the par-
ticipant is retired from the employ of all
of the employers at any age because of
disability (physical or mental), as deter-
mined by a qualified physician selected by
the committee. A participant will be con-
sidered disabled for purposes of this sub-
paragraph if, on account of a disability,
he is no longer capable of performing the
duties assigned to him by his employer.
(d) Death. The date of the participant's
death.
(e) Resignation or Dismissal. The date the
participant resigns or is dismissed from
the employ of all of the employers before
he attains age 55 years and for a reason
other than disability retirement.
If a participant is transferred from employment with an
employer to employment with a controlled group member, his
termination date will not be considered to have occurred until
his employment with all employers and controlled group members
has terminated but his participation in the plan will be
restricted as provided in subsection 5.2.
5.2. Restricted Participation. If (i) payment of
all of a participant's account balances is not made prior to
the accounting date next following his termination date, or
(ii) a participant transfers to a controlled group member which
is not an employer, or (iii) a participant transfers to a group
or class of employees who are not eligible to participate in
the plan pursuant to the requirements of subparagraph 2.1(a) or
(b), the participant or his beneficiary will be treated as a
participant for all purposes of the plan, except as follows:
(a) The participant may not make income
deferral contributions and will not share
in employer contributions and forfeitures
(as defined in subsection 7.3) under Sec-
tion 3 after his termination date, or dur-
ing any period described in (i), (ii) or
(iii) above, except as provided in subsec-
tion 6.5.
(b) The participant may not make contributions
under Section 4 after his termination date
or during any period described in (i),
(ii), or (iii) above.
(c) The beneficiary of a deceased participant
cannot designate a beneficiary under
subsection 7.6.
If such participant subsequently again satisfies the
requirements for participation in the plan, he will become an
active participant in the plan on the date he satisfies the
requirements of subparagraph 2.1 (a), (b) and (c) and will be
eligible to make income deferral contributions under
subsection 3.2 effective with the first payment date (i.e., a
date on which regular salary payments are made to employees of
the employer) coincident with or next following the date that
he satisfies the requirements of subsection 2.4.
SECTION 6
Accounting
6.1. Separate Accounts. The committee will maintain
the following accounts in the name of each participant:
(a) Employer Contribution Account. This
account will reflect his share of employer
contributions under subsection 3.1 and
certain forfeitures arising under the plan,
and the income, losses, appreciation and
depreciation attributable thereto.
(b) Income Deferral Contribution Account. If a
participant elects to make income deferral
contributions under subsection 3.2 of the
plan, this account will reflect such
contributions and the income, losses,
appreciation and depreciation attributable
thereto.
(c) Matched Employer Contribution Account. If
a participant has elected to make income
deferral contributions under the plan, this
account will reflect the matching employer
contributions made under subsection 3.4 of
the plan and certain forfeitures arising
under the plan, and the income, losses,
appreciation and depreciation attributable
thereto.
(d) Participant Contribution Account. If a
participant has elected to make voluntary
participant contributions under subsection
4.1 of the plan, this account will reflect
such participant contributions and the
income, losses, appreciation and deprecia-
tion attributable thereto.
(e) Prior Plan Account. If a participant has
amounts attributable to his participation
in any prior plan transferred to this plan
as provided in Section 8, this account will
reflect such amounts and the income,
losses, appreciation and depreciation
attributable thereto.
The committee also may maintain such other accounts (including
accounts reflecting amounts invested in any particular invest-
ment fund) in the names of participants or otherwise as it con-
siders advisable. Unless the context indicates otherwise,
references in the plan to a participant's "accounts" means all
accounts maintained in his name under the plan.
6.2. Accounting Dates. A "regular accounting date"
is the last day of each month. A "special accounting date" is
any date designated as such by the committee and a special
accounting date occurring under subsection 11.4. The term
"accounting date" includes both a regular accounting date and a
special accounting date.
6.3. Employer Contributions Considered Made on Last
Day of Plan Year. For purposes of this Section 6, each employ-
er's contributions for any plan year under subsection 3.1 will
be considered to have been made on the last day of that year,
regardless of when paid to the trustee.
6.4. Adjustment of Participants' Accounts. As of
each accounting date, the committee shall:
(a) First, charge to the proper accounts all
payments, distributions or withdrawals made
since the last preceding accounting date
that have not been charged previously;
(b) Next, adjust the credit balances in the
accounts of all participants upward or
downward, pro rata, according to the credit
balances so that the total of the credit
balances will equal the then adjusted net
worth (as defined below) of the trust fund
or any separate investment fund (as defined
below) established for such accounts;
(c) Next, subject to the provisions of subsec-
tion 6.7, credit any income deferral con-
tributions that are to be credited as of
that date in accordance with subsection
3.2;
(d) Next, credit matching employer contri-
butions and forfeitures, if any, that are
to be credited as of that date in accor-
dance with subsection 3.4;
(e) Next, allocate and credit employer contri-
butions and forfeitures, if any, that are
to be allocated and credited as of that
date in accordance with subsection 6.5; and
(f) Finally, credit any participant contribu-
tions that are to be credited as of that
date in accordance with subsection 4.2.
The "trust fund" as at any date will consist of all property of
every kind then held by the trustee. The "adjusted net worth"
of the trust fund as at any date means the then net worth of
the trust fund as determined by the trustee, less an amount
equal to the sum of employer and participant contributions not
yet credited to the accounts of participants. The committee
may establish one or more investment funds for the investment
of employer and participant contributions under the plan and
may adjust participant accounts in accordance with the
accounting provisions established under any such investment
funds. The investment funds established by the committee are
described in subsection 6.8. The term "investment fund"
includes any trust account, group annuity contract, separate
account or other investment vehicle established under a
contract with a licensed insurance company or under a trust
agreement with a trustee.
6.5. Allocation of Employer Contributions and For-
feitures. Subject to subsection 6.7, as of each regular
accounting date occurring on the last day of a plan year, each
employer's total contribution under subsection 3.1 of the plan
for the plan year ending on that date, plus forfeitures (used
to reduce an employer's contribution as provided in subsection
3.1), if any, that are to be allocated on that date in accor-
dance with subsection 7.3, will be allocated and credited to
the employer contribution accounts of participants who were
employed by such employer during that plan year (excluding par-
ticipants who resigned or were dismissed from the employ of all
of the employers during that year under subparagraph 5.1(e)),
pro rata, according to the adjusted compensation paid to them,
respectively, by such employer during that year.
6.6. Statement of Accounts. Each participant will
be furnished with a statement reflecting the condition of his
accounts in the trust fund as of the last day of each plan year
or more frequently, if so provided by the committee. No par-
ticipant, except one authorized by the committee, shall have
the right to inspect the records reflecting the accounts of any
other participant.
6.7. Contribution Limitations. Notwithstanding any
provisions in the plan to the contrary, the following limita-
tions shall apply to each participant in the plan:
(a) If such participant is not an active par-
ticipant in any other defined contribution
or defined benefit plan (as defined in
Section 415(k) of the Internal Revenue Code
of 1986) maintained by an employer or a
controlled group member which is not an
employer, the maximum "annual additions"
(as defined below) to such participant's
accounts for any plan year shall not exceed
the lesser of $30,000 (or, if greater, 1/4
of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code for the
calendar year which begins with or within
that plan year) or 25 percent of the
participant's compensation for the plan
year. A participant's "annual additions"
shall mean the sum of (i) employer
contributions to be allocated and credited
to his employer contribution account or
matched employer contribution account for
the year, (ii) any forfeitures to be
allocated and credited to his employer
contribution account for the year, (iii)
any income deferral contributions credited
to his income deferral contribution account
for the year and (iv) participant
contributions credited to his participant
contribution account for such year. For
purposes of this subparagraph, annual
additions shall include excess aggregate
contributions (as defined in Section
401(m)(6)(B) of the Code) and excess income
deferrals (as described in Section 402(g)
of the Code), regardless of whether such
amounts are distributed or forfeited. For
purposes of this subsection, "compensation"
means compensation as defined for purposes
of Section 415 of the Internal Revenue
Code.
(b) If such participant is an active partici-
pant in any other defined contribution plan
maintained by an employer or a controlled
group member which is not an employer, the
maximum "annual additions" provided in
subparagraph (a) above shall apply to this
plan and all such other defined
contribution plans as if all such plans
were one plan.
(c) If such participant is an active partici-
pant in any other defined benefit plan
maintained by an employer or a controlled
group member which is not an employer, the
limitation provided in subparagraph (a) or
(b) above, whichever is applicable, shall
apply, and, in addition, the following
additional limitation shall be applicable.
If such participant's "defined contribution
fraction" (as described below) when added
to his "defined benefit fraction",
determined under such other defined benefit
plan as of the end of each plan year,
exceeds 1.0 as calculated under Section
415(e) of the Code, the annual additions
under this plan, the annual additions under
such other defined contribution plan, or
the annual benefit expected to be paid
under the defined benefit plan shall be
adjusted, in the sole discretion of the
plan administrators under the plans, so
that the defined contribution fraction when
added to the defined benefit fraction will
not exceed 1.0. A participant's defined
contribution fraction as of the end of any
plan year shall consist of a numerator
which is the sum of the annual additions to
such participant's accounts for all years,
computed under subparagraph (a) or (b)
above, whichever is applicable, and the
denominator of which is the sum of the
adjusted limitations for each year of such
participant's service with the employers or
controlled group members. For purposes of
this subparagraph the "adjusted limitation"
for a year shall mean the lesser of: (i)
$30,000 (or, if greater, 1/4 of the dollar
limitation in effect under Section
415(b)(1)(A) of the Code for the calendar
year which begins with or within that plan
year) multiplied by 125 percent and, (ii)
25 percent of such participant's
compensation for such year multiplied by
140 percent.
If, as a result of the limitations provided above, any partici-
pant contributions cannot be credited to a participant's par-
ticipant contribution account, the committee, after consulting
with the participant, may in its sole discretion:
(a) Reduce any future participant contributions
to be made by the participant for such plan
year.
(b) Return to the participant any participant
contributions which, because of the limi-
tations contained in this subsection, can-
not be credited to his participant contri-
bution account for the year, without
interest or earnings.
Any employer contributions which cannot be credited to a par-
ticipant's accounts because of the foregoing limitations will
be used to reduce employer contributions for the next plan year
(and succeeding plan years in order of time).
6.8. Investment Funds. Each participant may elect,
subject to the following provisions, to have a portion or all
of his income deferral contributions, matching employer contri-
butions and participant contributions (but not employer con-
tributions made under subsection 3.1 or his employer contribu-
tion account) invested in one or more investment funds
established by the committee. As at January 1, 1993, the
following investment funds have been established:
(a) Conservative Equity Fund. This fund will
be primarily invested in equity securities
that are deemed to have 'defensive' char-
acteristics, the investment objective being
a favorable rate of return paralleling the
pattern of the general stock market, but
the variability of its results expected to
be lower than those of the general stock
market.
(b) Aggressive Equity Fund. This fund will be
primarily invested in equity securities
that are deemed to have 'aggressive'
characteristics, the investment objective
being a favorable rate of return parallel-
ing the pattern of the general stock
market, but the variability of its results
expected to be greater than those of the
general stock market.
(c) Interest Accumulation Investment Fund.
This fund will be invested with an
insurance company under a group annuity
contract or in an eligible pooled fund or
funds consisting of such guaranteed
investment contracts, or in a money market
fund or funds, the investment objective
being the preservation of principal and a
favorable rate of interest on such
principal.
(d) Parent Company Stock Fund. This fund will
be invested solely in the shares of common
stock issued by Western Publishing Group,
Inc., the parent of the company.
An election by a participant will be subject to the following
requirements:
(a) Each election made in accordance with this
subsection must be in writing and filed
with the committee at such time as the
committee determines.
(b) Each election shall be effective on the
first day of any plan year quarter (after
all adjustments as of the next preceding
accounting date have been made) for which a
new election is effective. If no election
is in effect with respect to a participant,
such participant's income deferral
contributions, matching employer
contributions and participant contributions
will be invested in the Interest
Accumulation Investment Fund.
(c) Any election made in accordance with this
subsection to have amounts invested in one
or more investment funds shall be in
increments of 10 percent of such partici-
pant's contributions or account balances.
(d) Effective as of the dates specified in
subparagraph (b) above, a participant may
elect to have a portion or all of the
amounts credited to his income deferral
contribution account, matching employer
contribution account, participant contri-
bution account or prior plan account (after
all adjustments as of the next preceding
accounting date have been made) transferred
from one investment fund to another
investment fund. Each such election shall
be subject to the provisions of
subparagraphs (a) and (c) above and no
election to transfer from the Interest
Accumulation Investment Fund to another
investment fund shall be effective unless
such transfer is permitted under the
Interest Accumulation Investment Fund,
without penalty.
(e) With respect to each participant who has an
interest in the Parent Company Stock Fund
(as defined in subparagraph 6.8(d) above),
the trustee shall provide a copy of the
notice and proxy statement for each meeting
of the holders of common stock issued by
Western Publishing Group, Inc., together
with an appropriate form for the
participant's use in instructing the
trustee with respect to the voting of the
shares of such stock that, at the record
date for the determination of the
shareholders entitled to such notice, and
to vote at, such meeting, are allocable to
such participant under the Parent Company
Stock Fund as of such date. If a
participant furnishes timely instructions
to the trustee, the trustee (in person or
by proxy) shall vote the shares (including
fractional shares) of the common stock of
Western Publishing Group, Inc. allocable to
such participant in the Parent Company
Stock Fund in accordance with the
directions of the participant. Shares of
such stock allocable to participants in the
Parent Company Stock Fund for which timely
voting instructions are not received by the
trustee shall be voted by the trustee as
directed by the committee.
(f) Notwithstanding the foregoing, any
elections by a participant who is an
officer or director of Western Publishing
Group, Inc. with respect to contributions
to or withdrawals from, and elections to
transfer amounts between the Parent Company
Stock Fund and any other fund, may be
limited in accordance with any regulations
issued by the Securities and Exchange
Commission under Section 16 of the
Securities Exchange Act of 1934.
SECTION 7
Payment of Account Balances
7.1. Retirement or Death. If a participant's
employment with all of the employers and controlled group mem-
bers is terminated because of retirement under subparagraph
5.1(a), (b) or (c), or if a participant dies while in the
employ of an employer, any income deferral contributions or
participant contributions made by him previously but not cred-
ited to his appropriate account will be returned to him or, in
the event of his death, to his beneficiary. The balances in
all of his accounts as at the accounting date coincident with
or next following his termination date (after all adjustments
required under the plan as of that date have been made) shall
be nonforfeitable and shall be distributable to him or, in the
event of his death, to his beneficiary, under subsection 7.4.
7.2. Resignation or Dismissal. If a participant who
immediately prior to November 1, 1984 was an active participant
in the Western Pension Plan for Salaried Employees and who
became a participant in this plan on November 1, 1984 resigns
or is dismissed from the employ of all of the employers before
retirement under subparagraph 5.1(a), (b) or (c), any income
deferral contributions or participant contributions made by him
previously but not credited to his appropriate account will be
returned to him and the balances in all of his accounts as at
the accounting date coincident with or next following his
termination date (after all adjustments required under the plan
as of that date have been made) shall be nonforfeitable and
shall be distributable to him under subsection 7.4. In the
case of any other participant who resigns or is dismissed under
subparagraph 5.1(a), (b) or (c), any income deferral contribu-
tions or participant contributions made by him previously but
not credited to his appropriate account will be returned to him
and the balances in his income deferral contribution account,
participant contribution account and prior plan account, if
any, as at the accounting date coincident with or next follow-
ing his termination date (after all adjustments required under
the plan as of that date have been made) shall be nonforfeit-
able and shall be distributable to him under subsection 7.4
along with the vested balances in his employer contribution
account and matched employer contribution account as at the
accounting date coincident with or next following his termina-
tion date (after all adjustments required under the plan as of
that date have been made) determined in accordance with the
following schedule:
Vested Percentage of
Years of continuous employer contribution
employment under and matched employer
subsection 2.2 contribution accounts
------------------- ---------------------
Less than 1 0
1 25%
2 50%
3 75%
4 or more 100%
7.3. Forfeitures. The amount by which a partici-
pant's employer contribution account and matched employer con-
tribution account are reduced under subsection 7.2 shall be
treated as a 'forfeiture' on the earlier of the date of
distribution of such participant's account balances or the date
such participant incurs five consecutive one-year breaks in
employment. Prior to that date, such accounts will continue to
be adjusted pursuant to the provisions of subparagraph 6.4(b).
Forfeitures attributable to a participant's employer
contribution account will be used to reduce the employer's
contribution otherwise required under subsection 3.1 and shall
be allocated and credited to the employer contribution accounts
of other participants in accordance with subsection 6.5.
Forfeitures attributable to a participant's matched employer
contribution account will be used to reduce the employer's
contribution otherwise required under subsection 3.4 and shall
be credited to the matched employer contribution accounts of
other participants in accordance with that subsection. If a
participant is reemployed by an employer or controlled group
member before he incurs five consecutive one-year breaks in
employment, any forfeitures attributable to such participant
shall be recredited to such participant's appropriate
account(s) on the accounting date coincident with or next
following the date of such participant's reemployment if the
participant repays the total amount of any previous
distribution attributable to his employer contribution account
and matched employer contribution account within five years of
his date of reemployment. Such participant's accounts shall be
recredited from current unallocated forfeitures or, to the
extent there are insufficient unallocated forfeitures for this
purpose, from supplemental employer contributions necessary to
restore such amount. The actual amount restored to such
participant's accounts shall be the amount of such forfeitures,
without investment adjustments.
7.4. Manner of Distribution. After each partici-
pant's termination date, and subject to the conditions set
forth below and in subsections 7.5 and 7.11, distribution of
the net credit balance in the participant's accounts will be
made to or for the benefit of the participant or, in the case
of his death, to or for the benefit of his beneficiary, by one
or both of the following methods:
(a) By purchase of an annuity subject to the
following requirements:
(i) Except as otherwise provided in
subparagraph (v) below, if such
participant has a spouse to whom he is
legally married as of the date payment
of his account balances is to commence
as a result of his termination of
employment for a reason other than
death, the participant's account bal-
ances shall be applied to purchase an
annuity for him and such annuity shall
provide for payment of an annuity for
the life of the participant with a
survivor annuity payable for the life
of his spouse which is one-half of the
annuity payable during the joint lives
of the participant and his spouse.
(ii) Except as otherwise provided in
subparagraph (v) below, if such
participant has a spouse to whom he is
legally married as of the date of his
death, an annuity providing payments
for the life of the spouse shall be
purchased for the spouse with at least
50 percent of the participant's
account balances unless such amount is
less than $3,500, in which case, such
amount shall be distributed to the
spouse in a lump sum. Such spouse may
elect in writing to have any amounts
payable to the spouse paid in a lump
sum.
(iii) The portion of a participant's account
balances, if any, which is not paid to
the participant's spouse under
subparagraph (ii) shall be paid to
such participant's designated
beneficiary under one or more of the
methods described in subparagraph (v)
below; provided such distributions
commence within one year of the
participant's death.
(iv) The premium paid to the insurance
company for a contract will be charged
to the participant's accounts when
paid. The committee may direct the
trustee to cause the contract to be
assigned or delivered to the person or
persons then entitled to payments
under it but, prior to assignment or
delivery of the contract, it shall be
rendered nontransferable and
noncommutable.
(v) In the event a participant does not
have a spouse as of the date payment
of his account balances is to commence
to him or upon his death, or such
participant elects, with the written
consent of his spouse (which consent
acknowledges the effect of such
election and is witnessed by a plan
representative or notary public), not
to receive distribution in the form of
an annuity described in (i) or (ii)
above, the committee, after consulting
with the participant, will direct the
trustee to distribute such
participant's benefits to him or, in
the event of his death, to or for the
benefit of his designated beneficiary,
by any one or more of the following
methods:
(1) an annuity for life, with or
without a refund feature;
(2) an annuity for life and a period
certain, which period certain may
not exceed the joint life
expectancy of the participant and
his designated beneficiary;
(3) an annuity for the joint life
expectancy of the participant and
his designated beneficiary;
(4) with the written consent of the
participant and, where
applicable, his spouse, a lump
sum under subparagraph (b) below.
If such participant's designated beneficiary is
not the participant's spouse and is more than 10
years younger than the participant, an annuity
shall be paid over a period not exceeding the
joint life expectancy of the participant and a
designated beneficiary 10 years younger than the
participant.
(vi) Within a reasonable period of time
prior to the earliest date on which a
married participant could receive
payment of benefits under the plan,
the committee will furnish him with a
written explanation of the terms and
conditions of the form of payment
specified in subparagraph (a)(i)
above, and the financial effect of
making an election not to receive
payment in such form. An election not
to receive payment in the form
specified in subparagraph (a)(i) shall
be in writing and signed by the
participant and consented to by his
spouse and may be made or revoked by
the participant at any time during the
90-day period prior to commencement of
his benefits. Within the three plan
year period beginning (i) on the first
day of the plan year in which a
participant attains age 32 or (ii) if
such employee becomes a participant in
the plan after attaining age 32, with
the plan year in which such employee
becomes a participant, the committee
will furnish him with a written
explanation of the terms and
conditions of the form of payment
specified in subparagraph (a)(ii)
above and the financial effect of
making an election not to receive pay-
ment in such form. An election not to
receive payment in the form specified
in subparagraph (a)(ii) may be made by
a participant at any time on or after
the first day of the plan year in
which he attains age 35 years. Such
election shall be in writing and
consented to by his spouse and may be
made or revoked by the participant at
any time prior to his death.
(b) Subject to the provisions of subparagraph
(a), by payment in a lump sum.
Subject to the requirements of subparagraph (a) above, the
participant may elect the method of distributing his benefits
to him and may direct how his benefits are to be paid to his
beneficiary. The committee shall select the method of
distributing the participant's benefits to his beneficiary if
the participant has not filed a direction with the committee.
The trustee may make distributions in cash or property, or
partly in each, provided property is distributed at its fair
market value as of the date of distribution as determined by
the trustee. All distributions under the plan shall comply
with the requirements of Section 401(a)(9) of the Code and the
regulations thereunder.
7.5. Commencement of Distributions. Except as pro-
vided in the following sentence, payment of a participant's
benefits will be made within a reasonable time after his termi-
nation date, but not later than 60 days after (a) the end of
the plan year in which his termination date occurs, or (b) such
later date on which the amount of the payment can be
ascertained by the committee. However, if a participant's
termination date occurs before he attains age 65 and if the
aggregate nonforfeitable balance in his accounts at his
termination date or at the time of any prior distribution
exceeds $3,500, then payment of such benefits shall be deferred
to his attainment of age 65 (or, if elected by the participant,
age 70-1/2) unless the participant (or, in the event of his
death, his surviving spouse) consents in writing to an
immediate distribution. A (i) participant or (ii) former
participant who previously made an election to defer
commencement of his benefits whose nonforfeitable balance in
his accounts as at his termination date (after any required
adjustments) was less than $3,500 will automatically receive
his distribution in a lump sum. A participant who previously
made an election to defer commencement of his benefits may
elect, not more frequently than once each plan year and in an
amount not less than $1,000 in each such plan year, to receive
a distribution from his account(s) in a lump sum payment.
7.6. Designation of Beneficiary. Each participant
from time to time, by signing a form furnished by the
committee, may designate any person or persons (who may be
designated concurrently, contingently or successively) to whom
his benefits are to be paid if he dies before he receives all
of his benefits. A beneficiary designation form will be
effective only when the form is filed with the committee while
the participant is alive and will cancel all beneficiary
designation forms previously filed with the committee. If a
deceased participant failed to designate a beneficiary as
provided above, or if the designated beneficiary dies before
the participant or before complete payment of the participant's
benefits, the committee, in its discretion, may direct the
trustee to pay the participant's benefits as follows:
(a) To or for the benefit of any one or more of
his relatives by blood, adoption or
marriage and in such proportions as the
committee determines; or
(b) To the legal representative or representa-
tives of the estate of the last to die of
the participant and his designated
beneficiary.
The term "designated beneficiary" as used in the plan means the
person or persons (including a trustee or other legal represen-
tative acting in a fiduciary capacity) designated by a partici-
pant as his beneficiary in the last effective beneficiary
designation form filed with the committee under this subsection
and to whom a deceased participant's benefits are payable under
the plan. The term "beneficiary" as used in the plan means the
natural or legal person or persons to whom a deceased partici-
pant's benefits are payable under this subsection.
7.7. Missing Participants or Beneficiaries. Each
participant and each designated beneficiary must file with the
committee from time to time in writing his post office address
and each change of post office address. Any communication,
statement or notice addressed to a participant or beneficiary
at his last post office address filed with the committee, or if
no address is filed with the committee then, in the case of a
participant, at his last post office address as shown on the
employer's records, will be binding on the participant and his
beneficiary for all purposes of the plan. Neither the employ-
ers nor the committee will be required to search for or locate
a participant or beneficiary. If the committee notifies a par-
ticipant or beneficiary that he is entitled to a payment and
also notifies him of the provisions of this subsection, and the
participant or beneficiary fails to claim his benefits or make
his whereabouts known to the committee within three years after
the notification, the benefits of the participant or benefi-
ciary will be disposed of, to the extent permitted by appli-
cable law, as follows:
(a) If the whereabouts of the participant then
is unknown to the committee but the where-
abouts of the participant's designated
beneficiary then is known to the committee,
payment will be made to the designated
beneficiary;
(b) If the whereabouts of the participant and
the participant's designated beneficiary
then is unknown to the committee but the
whereabouts of one or more relatives by
blood, adoption or marriage of the partic-
ipant is known to the committee, the com-
mittee may direct the trustee to pay the
participant's benefits to one or more of
such relatives and in such proportions as
the committee decides; or
(c) If the whereabouts of such relatives and
the participant's designated beneficiary
then is unknown to the committee, the
benefits of such participant or beneficiary
will be disposed of in an equitable manner
permitted by law under rules adopted by the
committee.
7.8. Facility of Payment. When a person entitled to
benefits under the plan is under legal disability, or in the
committee's opinion, is in any way incapacitated so as to be
unable to manage his financial affairs, the committee may
direct the trustee to pay the benefits to such person's legal
representative, or to a relative or friend of such person for
such person's benefits, or the committee may direct the appli-
cation of such benefits for the benefit of such person. Any
payment made in accordance with the preceding sentence shall be
a full and complete discharge of any liability for such payment
under the plan.
7.9 Loans to Participants. While it is the primary
purpose of the plan to accumulate funds for participants when
they retire, it is recognized that under some circumstances it
is in the best interests of participants to permit loans to be
made to them while they continue in the active service of the
employers. Accordingly, the committee, pursuant to such rules
as it may from time to time establish, and upon written
application by a participant supported by such evidence as the
committee may request, may direct the trustee to make a loan to
a participant subject to the following:
(a) Subject to the provisions of this sub-
section, each participant may borrow from
his accounts (other than his employer
contribution account and matched employer
contribution account) for general purposes
or for residential purposes by filing a
written application wit the committee
requesting such loan. The minimum amount
which can be borrowed for any loan will be
$1,000. All loans shall be made on a pro
rata basis from a participant's income
deferral contribution account, participant
contribution account and prior plan account
and no more than two loans may be
outstanding at any time.
(b) The principal amount of any loan made to a
participant, when added to the outstanding
balance of all other loans made to the
participant from all qualified plans
maintained by the employers, shall not
exceed the least of: (i) $50,000, reduced
by the excess (if any) of the highest
outstanding balance during the one-year
period ending immediately preceding the
date of the loan, over the outstanding
balance of all such loans from all such
plans on the date of such loan; (ii) 50
percent of the participant's vested account
balances under the plan; and (iii) the sum
of a participant's income deferral
contribution account, participant con-
tribution account and prior plan account
(excluding any amounts in such account
attributable to the Western IRA Plan).
(c) Each loan must be evidenced by a written
note in a form approved by the committee,
shall require substantially level
amortization payments (with payments at
least quarterly), shall be repaid by regu-
lar payroll deduction and shall be secured
by the participant's account balances.
Each loan shall bear interest at the rate
established by the committee and be
commensurate with rates charged by com-
mercial lenders on similar loans. Any loan
to a married participant must be consented
to in writing by the participant's spouse.
Such spousal consent shall be obtained no
earlier than the beginning of the ninety-
day period ending on the date of the loan,
must acknowledge the effect of the loan and
must be witnessed by a plan representative
or notary public. Such consent shall be
binding with respect to the consenting
spouse or any subsequent spouse with
respect to that loan unless such loan is
renegotiated, extended, reserved or
otherwise revised.
(d) Each loan shall specify a repayment period
which shall not be less than 12 months nor
more than 60 months for general purposes
and not less than 120 months nor more than
240 months for residential loans used to
acquire, construct, reconstruct or
substantially rehabilitate 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. No repayment period shall
extend beyond a participant's normal
retirement date. Amounts repaid by the
participant will be recredited to the
participant's accounts in the same ratio as
the loan is made from such accounts.
(e) If, on a participant's termination date
(other than a termination date described in
paragraph 5.1(c)), any loan or portion of a
loan made to him under the plan, together
with the accrued interest thereon, remains
unpaid, the entire amount of the unpaid
loan and accrued interest shall be due and
payable by the participant; provided that,
if such amount is not repaid by the end of
the calendar month beginning after his ter-
mination date, an amount equal to the
outstanding balance of the loan, together
with the accrued interest thereon, shall be
charged to the participant's accounts after
all other adjustments required under the
plan, but before any distribution pursuant
to subsection 7.4. A participant who has a
termination date under subparagraph 5.1(c)
need not repay the entire amount of the
loan by the end of the calendar month
beginning after his termination date, but
if payments are in default at the end of
any calendar month, such loan shall be
charged against the participant's accounts
as provided in the preceding sentence.
(f) In determining the adjusted net worth of
the trust fund as of each accounting date,
the committee shall disregard any
promissory notes held by the trustee
evidencing loans made to participants,
together with any interest and principal
payments on such loans received by the
trustee since the preceding accounting
date. For purposes of adjusting partic-
ipants' accounts under subsection 6.3, the
committee shall exclude from the credit
balance of a participant's accounts the
unpaid amount of any loan made to him
(disregarding any principal payments made
since the last preceding accounting date).
Interest paid by a participant on a loan
made to him under this subsection 7.9 shall
be credited to the accounts of the
participant as of the accounting date which
ends the accounting period during which
such interest payment was made, after all
adjustments required under the plan as of
the date have been made.
(g) Notwithstanding any provision to the
contrary, the participant's ability to
withdraw amounts from his participant
contribution account under subsection 4.3
and from his prior plan account under
subsection 8.3 shall be restricted to the
extent that the outstanding principal and
interest due on a loan equals or exceeds
50% of his vested account balances.
7.10. Latest Date for Distribution. Notwithstanding
any provision of the plan to the contrary, payment of benefits
to a participant shall be made (or commence) no later than the
April 1 of the calendar year following the calendar year in
which the participant has attained age 70-1/2.
7.11. Direct Transfer of Eligible Rollover
Distributions. Effective January 1, 1993, if payment of
benefits to a participant, a participant's surviving spouse, or
the spouse or former spouse of the participant who is an
alternate payee under a qualified domestic relations order (as
defined in Section 414(p) of the Code) constitutes an 'eligible
rollover distribution' under Section 402(c)(4) of the Code,
then the participant or the participant's spouse (or former
spouse) may elect to have such distribution paid directly to an
eligible retirement plan described in Section 402(c)(8)(B) of
the Code (except that in the case of an eligible rollover
distribution to a participant's surviving spouse on the death
of a participant, the definition of an eligible retirement plan
is limited to an individual retirement account or individual
retirement annuity). Each election by a participant under this
subsection shall be made at such time and in such manner as the
committee shall determine and shall be effective only in
accordance with such rules as shall be established from time to
time by the committee. Any election by a participant under
this subsection will be subject to the requirements of
subparagraph 7.4(a)(v) of the plan.
7.12 Withdrawal of Income Deferral Contributions.
With the consent of the committee, a participant may elect to
withdraw any income deferral contributions made by such par-
ticipant because of a "hardship" (as defined below) causing an
immediate and heavy financial need on the participant. For
purposes of this subsection a hardship shall include:
(a) Medical expenses incurred (or not yet
incurred but necessary to obtain such
medical care) by the participant, the
participant's spouse or the participant's
dependents (as defined in Section 152 of
the Internal Revenue Code) which are not
reimbursed by insurance or otherwise;
(b) Purchase of a principal residence for the
participant, excluding mortgage payments;
(c) Payment of tuition and related educational
fees for the next twelve months of post-
secondary education for the participant or
the participant's spouse, children or
dependents;
(d) The need to prevent the eviction of the
participant from his principal residence or
foreclosure under the mortgage on the
participant's principal residence;
(e) Casualty losses or catastrophes such as
flooding, hurricanes or tornadoes; or
(f) Any other hardship which in the opinion of
the committee creates an immediate and
heavy financial need on the participant.
A withdrawal will be considered necessary to satisfy an immedi-
ate and heavy financial need only if the participant represents
in writing to the committee that the need cannot reasonably be
relieved (i) through reimbursement or compensation by insurance
or otherwise, (ii) by liquidation of the employee's assets and
the assets of the employee's spouse and minor children that are
reasonably available to the employee, (iii) from other
available distributions and loans under this plan or any other
qualified retirement plan maintained by the employers or by
borrowing from commercial sources on reasonable commercial
terms in amounts sufficient to satisfy the need; or (iv) the
cessation of income deferral contributions or voluntary
contributions to the plan. Each such election shall be in
writing, shall be filed with the committee at such time and in
such manner as the committee shall determine and shall be
effective in accordance with such rules as the committee may
establish from time to time. Any withdrawal by a married
participant must be consented to in writing by the
participant's spouse, must acknowledge the effect of the
withdrawal and must be witnessed by a plan representative or
notary public.
SECTION 8
Prior Plan Accounts
8.1. Transfer of Prior Plan Balances. Each partici-
pant in the plan who prior to November 1, 1984 was covered by
the Western Publishing Company Employees' Savings and Security
Plan ("savings and security plan") and/or Western Profit Shar-
ing Trust Plan has had his account balance(s) under such
plan(s) transferred in a lump sum to this plan. In addition,
each participant previously covered by the Western Pension Plan
for Salaried Employees who was not eligible to receive an
annuity under such plan had the option of having the present
value of his accrued benefit determined under such plan
transferred to this plan in a lump sum. The balances
attributable to each such participant's participation in such
plans (a "prior plan") will be subject to the provisions of
this Section.
8.2. Prior Plan Accounts. All such amounts which
are transferred to this plan from a prior plan will be held in
a separate prior plan account established for the participant
which will be fully vested and nonforfeitable at all times.
Such prior plan account will be adjusted from time to time in
accordance with the provisions of Section 6 and, except as
otherwise provided in subsection 8.3, will be distributed in
accordance with the provisions of Section 7. Appropriate sub-
accounts will be maintained reflecting each participant's
interest in a prior plan.
8.3. Withdrawals from Prior Plan Accounts. No with-
drawals of any portion of a participant's prior plan account
will be permitted prior to distribution in accordance with Sec-
tion 7 of the plan unless such amounts are attributable to such
participant's participation in the Savings and Security plan or
unless such amounts are attributable to "rollover" amounts as
described in subsection 8.4.
8.4. Other Transferred Amounts and Rollovers. Sub-
ject to such rules and requirements as the committee may estab-
lish, a participant may direct the trustee to receive a "roll-
over" amount either in the form of a direct rollover (as
defined in Section 401(a)(31) of the Code) or an indirect
rollover as defined in Section 402(c)(5) or Section 408(d)(3)
of the Code attributable to such participant's participation in
any other qualified pension or profit sharing plan under
Section 401(a) of the Code. Any such rollover amount shall be
credited to a prior plan account and will be subject to the
provisions of subsection 8.2. At the direction of a
participant and with the consent of the committee, the trustee,
under this plan, may receive assets held for a participant
under any other plan pursuant to a trust-to-trust transfer
between such qualified pension or profit sharing plan and this
plan. Any such transferred amounts will be credited to a prior
plan account and shall be subject to the provisions of subsec-
tion 8.2.
SECTION 9
The Committee
9.1. Membership. A committee consisting of three or
more persons (who may but need not be employees of the employ-
ers) shall be appointed by the company. The Secretary of the
company shall certify to the trustee from time to time the
appointment to (and termination of) office of each member of
the committee and the person who is selected as secretary of
the committee.
9.2. Committee's General Powers, Rights and Duties.
Except as otherwise specifically provided and in addition to
the powers, rights and duties specifically given to the com-
mittee elsewhere in the plan and the trust agreement, the com-
mittee shall have the following powers, rights and duties:
(a) To select a secretary, if it believes it
advisable, who may but need not be a
committee member.
(b) To determine all questions arising under
the plan, including the power to determine
the rights or eligibility of employees or
participants and any other persons to
benefits under the plan, and the amount of
their benefits under the plan, and to
remedy ambiguities, inconsistencies or
omissions.
(c) To adopt such rules of procedures and
regulations as in its opinion may be
necessary for the proper and efficient
administration of the plan and as are con-
sistent with the plan and trust agreement.
(d) To enforce the plan in accordance with the
terms of the plan and the trust agreement
and the rules and regulations adopted by
the committee.
(e) To direct the trustee as respects payments
or distributions from the trust fund in
accordance with the provisions of the plan.
(f) To furnish the employers with such infor-
mation as may be required by them for tax
or other purposes in connection with the
plan.
(g) To employ agents, attorneys, accountants or
other persons (who also may be employed by
the employers) and to allocate or delegate
to them such powers, rights and duties as
the committee may consider necessary or
advisable to properly carry out admini-
stration of the plan, provided that such
allocation or delegation and the acceptance
thereof by such agents, attorneys,
accountants or other persons, shall be in
writing.
9.3. Manner of Action. During a period in which two
or more committee members are acting, the following provisions
apply where the context admits:
(a) A committee member by writing may delegate
any or all of his rights, powers, duties
and discretions to any other member, with
the consent of the latter.
(b) The committee members may act by meeting or
by writing signed without meeting, and may
sign any document by signing one document
or concurrent documents.
(c) An action or a decision of a majority of
the members of the committee as to a matter
shall be as effective as if taken or made
by all members of the committee.
(d) If, because of the number qualified to act,
there is an even division of opinion among
the committee members as to a matter, a
disinterested party selected by the
committee shall decide the matter and his
decision shall control.
(e) Except as otherwise provided by law, no
member of the committee shall be liable or
responsible for an act or omission of the
other committee members in which the former
has not concurred.
(f) The certificate of the secretary of the
committee or of a majority of the committee
members that the committee has taken or
authorized any action shall be conclusive
in favor of any person relying on the
certificate.
9.4. Interested Committee Member. If a member of
the committee is also a participant in the plan, he may not
decide or determine any matter or question concerning distribu-
tions of any kind to be made to him or the nature or mode of
settlement of his benefits unless such decision or determina-
tion could be made by him under the plan if he were not serving
on the committee.
9.5. Resignation or Removal of Committee Members. A
member of the committee may be removed by the company at any
time by 10 days' prior written notice to him and the other mem-
bers of the committee. A member of the committee may resign at
any time by giving 10 days' prior written notice to the company
and the other members of the committee. The company may fill
any vacancy in the membership of the committee; provided, how-
ever, that if a vacancy reduces the membership of the committee
to less than three, such vacancy shall be filled as soon as
practicable. The company shall give prompt written notice
thereof to the other members of the committee. Until any such
vacancy is filled, the remaining members may exercise all of
the powers, rights and duties conferred on the committee.
9.6. Committee Expenses. All costs, charges and
expenses reasonably incurred by the committee will be paid by
the employers in such proportions as the company may direct.
No compensation will be paid to a committee member as such.
9.7. Information Required by Committee. Each person
entitled to benefits under the plan shall furnish the committee
with such documents, evidence, data or information as the com-
mittee considers necessary or desirable for the purpose of
administering the plan. The employers shall furnish the
committee with such data and information as the committee may
deem necessary or desirable in order to administer the plan.
The records of the employers as to an employee's or partici-
pant's period of employment, termination of employment and the
reason therefor, leave of absence, reemployment, compensation
and adjusted compensation will be conclusive on all persons
unless determined to the committee's satisfaction to be
incorrect.
9.8. Uniform Rules. The committee shall administer
the plan on a reasonable and nondiscriminatory basis and shall
apply uniform rules to all persons similarly situated.
9.9. Review of Benefit Determinations. The com-
mittee will provide notice in writing to any participant or
beneficiary whose claim for benefits under the plan is denied
and the committee shall afford such participant or beneficiary
a full and fair review of its decision if so requested.
9.10. Committee's Decision Final. Subject to appli-
cable law, any interpretation of the provisions of the plan and
any decisions on any matter within the discretion of the com-
mittee made in good faith shall be binding on all persons. A
misstatement or other mistake of fact shall be corrected when
it becomes known and the committee shall make such adjustment
on account thereof as it considers equitable and practicable.
SECTION 10
General Provisions
10.1. Additional Employers. Any United States sub-
sidiary of the company may adopt the plan and become a party to
the trust agreement by:
(a) Filing with the company, the committee and
the trustee a written instrument to that
effect; and
(b) Filing with the committee and the trustee a
certified copy of a resolution of the
company's Board of Directors consenting to
such action.
10.2. Action by Employers. Any action required or
permitted to be taken by an employer under the plan shall be by
resolution of its Board of Directors, by resolution of a duly
authorized committee of its Board of Directors, or by a person
or persons authorized by resolution of its Board of Directors
or such committee.
10.3. Waiver of Notice. Any notice required under
the plan may be waived by the person entitled to such notice.
10.4. Controlling Law. Except to the extent super-
seded by laws of the United States, the laws of Wisconsin shall
be controlling in all matters relating to the plan.
10.5. Employment Rights. The plan does not con-
stitute a contract of employment, and participation in the plan
will not give any employee the right to be retained in the
employ of an employer, nor any right or claim to any benefit
under the plan, unless such right or claim has specifically
accrued under the terms of the plan.
10.6. Litigation by Participants. If a legal action
begun against the trustee, an employer or the committee or any
member thereof by or on behalf of any person results adversely
to that person, or if a legal action arises because of con-
flicting claims to a participant's or other person's benefits,
the cost to the trustee, the employers or the committee or any
member thereof of defending the action will be charged to the
extent permitted by law to the sums, if any, which were
involved in the action or were payable to the person concerned.
10.7. Interests Not Transferable. The interests of
persons entitled to benefits under the plan are not subject to
their debts or other obligations and, except as may be required
by the tax withholding provisions of the Internal Revenue Code
or any state's income tax act or pursuant to any qualified
domestic relations order as defined in Section 414(p) of the
Code, may not be voluntarily or involuntarily sold,
transferred, alienated, assigned or encumbered, except as
otherwise provided in Section 401(a)(13) of the Code.
Notwithstanding any other provisions of the plan, the committee
may direct the trustee to distribute benefits to an alternate
payee on the earliest date specified in a qualified domestic
relations order, without regard to whether such distribution is
made or commences prior to the participant's earliest
retirement age (as defined in Section 414(p)(4)(B) of the Code)
or the earliest date that the participant could commence
receiving benefits under the plan.
10.8. Absence of Guaranty. Neither the committee
nor the employers in any way guarantee the trust fund from loss
or depreciation. The liability of the trustee or the committee
to make any payment under the plan will be limited to the
assets held by the trustee which are available for that
purpose.
10.9. Evidence. Evidence required of anyone under
the plan may be by certificate, affidavit, document or other
information which the person acting on it considers pertinent
and reliable, and signed, made or presented by the proper party
or parties.
SECTION 11
Amendment and Termination
11.1. Amendment. While the employers expect and
intend to continue the plan, the company reserves the right to
amend the plan from time to time, except as follows:
(a) The duties and liabilities of the committee
cannot be changed substantially without its
consent;
(b) No amendment shall reduce the accrued
benefit (as defined in Section 411(d)(6) of
the Code) the participant would be entitled
to receive if he had resigned from the
employ of all the employers on the date of
the amendment; and
(c) Except as provided in subsection 3.8, under
no condition shall an amendment result in
the return or repayment to any employer of
any part of the trust fund or the income
from it or result in the distribution of
the trust fund for the benefit of anyone
other than persons entitled to benefits
under the plan.
11.2. Termination. The plan will terminate as to
all employers (i) on any date specified by the company if
thirty days' advance written notice of the termination is given
to the committee, the trustee and the other employers or (ii)
on the date that contributions by all employers are completely
discontinued under the plan. A partial termination of the plan
may occur as to an individual employer or as to a group or
class of employees on any date so specified by the company or
as required by law.
11.3. Reorganizations. No plan termination will
occur solely as a result of the judicially declared bankruptcy
or insolvency of an employer, or the dissolution, merger, con-
solidation or reorganization of an employer, or the sale by
that employer of all or substantially all of its assets, or the
termination or complete discontinuance of contributions by any
one employer. However, arrangements may be made with the con-
sent of the company whereby the plan will be continued by any
successor to that employer or any purchaser of all or sub-
stantially all of its assets, in which case the successor or
purchaser will be substituted for that employer under the plan
and the trust agreement; provided that, if an employer is
merged, dissolved, or in any other way organized into, or con-
solidated with, any other employer, the plan as applied to the
former employer will automatically continue in effect without a
termination thereof.
11.4. Vesting and Distribution on Termination. On
termination or partial termination of the plan, the date of
termination will be a "special accounting date" and, after all
adjustments then required have been made, each affected par-
ticipant's benefits will be nonforfeitable. If, on termination
of the plan, the participant remains an employee of an
employer, the amount of his benefits shall be retained in the
trust fund until his termination of employment with all of the
employers and then shall be paid to him in accordance with the
provisions of subsection 7.4. In the event that the
participant's employment with all of the employers is
terminated coincident with the termination of the plan, his
benefits shall be paid to him in a lump sum, subject to the
provisions of subsection 7.4.
11.5. Notice of Amendment or Termination. Partici-
pants will be notified of an amendment or termination of the
plan within a reasonable time.
11.6. Plan Merger, Consolidation, Etc. In the case
of any merger or consolidation of this plan with, or the trans-
fer of assets or liabilities of this plan to, any other plan,
each participant's benefits if such plan terminated immediately
after such merger, consolidation or transfer shall be equal to
or greater than the benefits he would have been entitled to
receive if this plan had terminated immediately before the
merger, consolidation or transfer.
SECTION 12
Top-Heavy Rules
12.1. Purpose and Effect. The purpose of this Sec-
tion is to comply with the requirements of Section 416 of the
Code. Except for subsection 12.6, the provisions of this
Section shall be effective for each plan year beginning with
the plan year ending December 31, 1985 in which the plan is a
"top-heavy plan" within the meaning of Section 416(g) of the
Code.
12.2. Top-Heavy Plan. In general, the plan will be
top-heavy plan for any plan year if, as of the last day of the
preceding plan year (the "determination date"), the sum of the
amounts in (a), (b) and (c) below for key employees (defined
below and in Section 416(i)(1) of the Code) exceeds 60 percent
of the sum of such amounts for all employees who are covered by
a defined contribution plan or defined benefit plan which is
aggregated in accordance with subsection 12.4 below:
(a) The aggregate account balances of partici-
pants under this plan.
(b) The aggregate account balances or partici-
pants under any other defined contribution
plan included in subsection 12.4.
(c) The present value of cumulative accrued
benefits of participants calculated under
any defined benefit plan included in sub-
section 12.4.
In determining the account balances of participants under this
plan (i) such participant's account balances shall be increased
by the aggregate distributions, if any, made with respect to
the participant during the 5-year period ending on the determi-
nation date, (ii) the account balances of a participant who was
previously a key employee, but who is no longer a key employee,
shall be disregarded, (iii) the accounts of a beneficiary of a
participant shall be considered accounts of the participant and
(iv) the account balances of a participant who has not
performed any services for an employer during the 5-year period
ending on the determination date shall be disregarded.
12.3. Key Employee. In general, a "key employee" is
an employee who, at any time during the plan year ending on the
determination date or during any of the four preceding plan
years, is:
(a) an officer of employer or a controlled
group member whose compensation (as defined
in subparagraph 6.7(a)) exceeds fifty
percent (50%) of the dollar limitation
specified in Section 415(b)(1)(A) of the
Code for a plan year (including only the
greater of three or ten percent of the
total employees of the employer and
controlled group members but not exceeding
50);
(b) one of the ten employees owning the largest
interests in an employer and all other
controlled group members whose compensation
(as defined in subparagraph 6.7(a)) exceeds
the dollar limitation specified in
subparagraph 6.7(a);
(c) a 5 percent owner of an employer or
controlled group member; or
(d) a 1 percent owner of an employer or con-
trolled group member receiving annual
compensation from the employer and all
other controlled group members of more than
$150,000.
A "key employee" for purposes of any other plan included in
subsection 12.4 means a key employee as determined in accor-
dance with such plan.
12.4. Aggregated Plans. Each other defined contri-
bution plan and defined benefit plan maintained by an employer
or controlled group member which covers a "key employee" as a
participant or which is maintained by such employer or con-
trolled group member in order for a plan covering a key
employee to be qualified shall be aggregated in determining
whether this plan is top-heavy. In addition, any other defined
contribution or defined benefit plan of an employer or con-
trolled group member may be included if all such plans which
are included when aggregated will not discriminate in favor of
officers, shareholders or highly compensated employees.
12.5. Maximum Earnings. For any plan year in which
the plan is a top-heavy plan, a participant's adjusted compen-
sation in excess of $200,000 (or such greater amount as may be
determined by the Commissioner of Internal Revenue for that
plan year) shall be disregarded for purposes of subsections 3.4
and 6.5 of the plan.
12.6. No Duplication of Benefits. If a participant
is covered by another plan maintained by an employer or con-
trolled group member, appropriate modification may be made in
the plan in accordance with regulations issued by the Internal
Revenue Service to prevent inappropriate duplication of minimum
contributions or benefits under Section 416 of the Code.
12.7. Adjustment of Combined Benefit Limitations.
For any plan year in which the plan is a top-heavy plan, the
determination of the defined contribution plan fraction and
defined benefit plan fraction under subsection 6.7 of the plan
shall be adjusted in accordance with the provisions of Section
416(h) of the Code.
SUPPLEMENT A
TO
GOLDEN COMPREHENSIVE SECURITY PLAN
A-1. Purpose. The purpose of this Supplement A is
to provide for the administration of accounts transferred to
this plan effective as of March 31, 1987 from the Western
Publishing Company Inc. Employees' IRA Plan (the "IRA plan").
A-2. Effective Date. The effective date of this
Supplement is March 31, 1987 (the "transfer date").
A-3. Eligibility. Any employee who was a par-
ticipant in this plan and in the IRA plan immediately prior to
the transfer date and whose account balance in the IRA plan is
transferred to this plan shall be eligible to participate in
this Supplement and shall be known as a "Supplement A partici-
pant."
A-4. Supplement A Participants' Accounts.
(a) The committee shall maintain, for each
Supplement A participant, an account
reflecting the amount transferred to
this Supplement on his behalf from the
IRA plan and the income, losses,
appreciation and depreciation
attributable thereto, (an "IRA
account"). Each IRA account shall be
invested in the same guaranteed
interest fund ("Interest Fund II") in
which it was invested immediately
prior to the transfer date.
(b) The committee shall adjust the IRA
accounts of Supplement A participants
in accordance with the provisions of
Section 6 of the plan. Any cash
amounts received by the trustee with
respect to Interest Fund II (and
credited to a Supplement A
participant's IRA account under the
provisions of this subsection) will be
reinvested, to the extent possible, in
the same Fund, unless such cash
amounts are to be held pending
distribution to or on account of the
participant.
(c) A Supplement A participant's IRA
account will be fully vested in the
Supplement A participant at all times.
(d) A Supplement A participant's IRA
account will not be considered an
account for purposes of subsection 7.9
of this plan.
A-5. Withdrawal of Supplement A Contributions. A
Supplement A participant may elect to withdraw all or part of
his IRA account no more than once per calendar month, subject
to the following conditions and limitations:
(a) The amount available for any such dis-
tribution from the Interest Fund II
will be based on the value of the
Supplement A participant's IRA account
in the Fund as determined as of the
end of the month next preceding the
date the distribution is to be made.
(b) The amount withdrawn from a
Supplement A participant's IRA account
shall be paid in cash. If a
participant elects to withdraw less
than $250 from his IRA participant's
account, the entire balance in his IRA
account, will be distributed to him in
cash.
(c) Each election under this subsection
shall be filed with the committee at
such time and in such manner as
specified by the committee.
A-6. Distribution. A Supplement A participant shall
be entitled to receive the balance in his IRA account after his
termination date, in the manner described in Section 7 of the
plan.
A-7. Use of Terms. Notwithstanding Section 8 of the
plan, all terms and provisions of the plan shall apply to this
Supplement A, except that where the terms and provisions of the
plan and this Supplement conflict, the terms and provisions of
this Supplement shall control.
SUPPLEMENT B
TO
GOLDEN COMPREHENSIVE SECURITY PROGRAM
B-1. Purpose. The purpose of this Supplement B is
to provide for the administration of accounts transferred to
this plan effective March 15, 1993, as a result of the merger
of the Sight & Sound, Inc. 401(k) Profit Sharing Plan ("S&S
plan") and the requirements of Section 401(k)(10) of the Code.
B-2. Effective Date. The effective date of this
Supplement is March 15, 1993 (the "transfer date").
B-3. S&S Plan Participants. Each former participant
in the S&S plan who has become a participant in this plan shall
participate in this Supplement and shall be known as a
"Supplement B participant."
B-4. Supplement B Participants' Accounts.
(a) The committee shall maintain for each
Supplement B participant a fully
vested nonforfeitable account
reflecting the amount transferred to
this Supplement on his behalf on the
transfer date from the S&S plan
attributable to his Participant's
Elective Account under the S&S plan
and any other account under the S&S
plan that he elects to transfer to
this plan.
(b) Each Supplement B participant shall
have the same investment choices with
respect to the Participant's Elective
Account (and any other account which
is transferred from the S&S plan) as
he would have with respect to his
Income Deferral Contribution Account
under the plan and, except as
otherwise provided herein, such
balances shall be distributed in the
same manner as other benefits under
the plan.
(c) To the extent a Supplement B
participant (or beneficiary of a
Supplement B participant) chooses an
optional form of payment with respect
to transferred amounts which was
permitted under the S&S plan but not
permitted under this plan, such S&S
participant may elect to have his
benefits distributed in such form.
(d) On and after the transfer date, a
Supplement B participant's transferred
Elective Account will be treated the
same as an Income Deferral
Contribution Account under the plan
and will be subject to the same
limitations applicable to such Income
Deferral Contribution Account under
the plan.
B-5. Use of Terms. Notwithstanding Section 8 of the
plan, all terms and provisions of the plan shall apply to this
Supplement B, except that where the terms and provisions of the
plan and this Supplement conflict, the terms and provisions of
this Supplement shall control.
GOLDEN RETIREMENT SAVINGS PROGRAM
(As Amended and Restated Effective as of January 1, 1993)
McDermott, Will & Emery
Chicago, Illinois
C E R T I F I C A T E
I, James A. Cohen, Secretary of WESTERN
PUBLISHING COMPANY, INC., hereby certify that the attached
is a full, true and complete copy of the GOLDEN RETIREMENT
SAVINGS PROGRAM, as in effect on the date hereof.
Dated this 28 day of December, 1993.
James A. Cohen
--------------------------------
Secretary as Aforesaid
(Corporate Seal)
TABLE OF CONTENTS
PAGE
----
SECTION 1 1
INTRODUCTION 1
Purpose 1
Effective Date and Plan Year 1
Employers 1
Plan Administration 2
Trustee, Trust Agreement, and Trust Fund 2
Examination of Plan Documents 2
Notices 2
Gender and Number 3
Supplements 3
SECTION 2 4
ELIGIBILITY AND PARTICIPATION 4
Eligibility 4
Continuity of Employment 5
Leave of Absence 7
Reemployed Former Participant 8
Leased Employees 8
SECTION 3 10
EMPLOYER CONTRIBUTIONS 10
Income Deferral Contributions 10
Compensation and Adjusted Compensation 11
Matching Employer Contributions 11
Limitations on Income Deferrals 12
Limitations on Matching Employer Contributions
and Participant Contributions 15
Highly Compensated Participants 18
Verification of Employer Contributions 20
No Interest in Employers 20
SECTION 4 22
PARTICIPANT CONTRIBUTIONS 22
Amount of Participant Contributions 22
Deduction or Payment of Participant Contribu-
tions 22
Variation, Discontinuance, Resumption, and
Withdrawal of Participant Contributions 22
SECTION 5 24
PERIOD OF PARTICIPATION 24
Termination Date 24
Restricted Participation 25
SECTION 6 27
ACCOUNTING 27
Separate Accounts 27
Accounting Dates 28
Adjustment of Participants' Accounts 28
Statement of Account 29
Contribution Limitations 30
Investment Funds 32
SECTION 7 35
PAYMENT OF ACCOUNT BALANCES 35
Retirement or Death 35
Resignation or Dismissal 35
Forfeitures 36
Manner of Distribution 38
Commencement of Distributions 42
Designation of Beneficiary 43
Missing Participants or Beneficiaries 44
Facility of Payment 45
Latest Date for Distribution 45
Loans to Participants 46
Direct Transfer of Eligible Rollover
Distributions 49
Withdrawal of Income Deferral Contributions 50
SECTION 8 53
PRIOR PLAN ACCOUNT 53
Transfer of Prior Plan Balance 53
Prior Plan Accounts 53
Withdrawals from Prior Plan Accounts 53
Other Transferred Amounts and Rollovers 54
SECTION 9 55
THE COMMITTEE 55
Membership 55
Committee's General Powers, Rights, and Duties 55
Manner of Action 56
Interested Committee Member 57
Resignation or Removal of Committee Members 57
Committee Expenses 58
Information Required by Committee 58
Uniform Rules 58
Review of Benefit Determinations 59
Committee's Decision Final 59
SECTION 10 60
GENERAL PROVISIONS 60
Additional Employers 60
Action by Employers 60
Waiver of Notice 60
Controlling Law 60
Employment Rights 60
Litigation by Participants 61
Interests Not Transferable 61
Absence of Guaranty 62
Evidence 62
SECTION 11 63
AMENDMENT AND TERMINATION 63
Amendment 63
Termination 63
Reorganizations 64
Vesting and Distribution on Termination 64
Notice of Amendment or Termination 65
Plan Merger, Consolidation, Etc 65
SECTION 12 66
TOP-HEAVY RULES 66
Purpose and Effect 66
Top-Heavy Plan 66
Key Employee 67
Aggregated Plans 68
Minimum Contribution 68
Maximum Earnings 69
No Duplication of Benefits 69
Adjustment of Combined Benefit Limitations 69
SUPPLEMENT A A-1
GOLDEN RETIREMENT
SAVINGS PROGRAM
SECTION 1
INTRODUCTION
1.1. Purpose. GOLDEN RETIREMENT SAVINGS PROGRAM
(the "plan") is maintained by WESTERN PUBLISHING COMPANY, INC.
(the "company") for eligible employees of the company and the
eligible employees of any other United States subsidiary of the
company which adopts the plan, with the consent of the company.
The purpose of the plan is to provide for the accumulation of
funds from both employer and participant contributions in order
to provide retirement income to participants when they retire
from the employ of the employers, thereby providing for their
future financial security. The plan is designed as a qualified
profit sharing plan under the provisions of Sections 401(a) and
401(k) of the Internal Revenue Code of 1986, as amended (the
"Code").
1.2. Effective Date and Plan Year. The original
effective date of the plan was July 1, 1987. The "effective
date" of the plan as set forth herein is January 1, 1993. A
"plan year" means each calendar year.
1.3. Employers. The company and any United States
subsidiary of the company which adopts the plan and trust with
the consent of the company are sometimes referred to herein-
after collectively as the "employers" and individually as an
"employer."
1.4. Plan Administration. The plan will be admin-
istered by a pension security committee (the "committee") ap-
pointed by the company, as described in Section 9. Partici-
pants will be notified of the identity of the committee members
and of any change in the membership of such committee.
1.5. Trustee, Trust Agreement, and Trust Fund.
Funds contributed by the employers or participants under the
plan will be held and invested in a trust fund, until distrib-
uted, by a trustee (the "trustee") appointed by the company.
The trustee will act under a trust agreement between the em-
ployers and the trustee. Participants will be notified of the
identity of the trustee and of any change in trustee.
1.6. Examination of Plan Documents. Copies of the
plan and trust agreement, and any amendments thereto, will be
made available at the principal office of each employer where
they may be examined by any participant or beneficiary entitled
to receive benefits under the plan. The provisions of and
benefits under the plan are subject to the terms and provisions
of the trust agreement.
1.7. Notices. Any notice or document required to be
given to or filed with the committee shall be considered as
given or filed if delivered or mailed by registered mail, post-
age prepaid, addressed as follows:
Benefit Plans Administration Committee
Western Publishing Company, Inc.
444 Madison Avenue
New York, New York 10022
1.8. Gender and Number. Words in the masculine gen-
der shall include the feminine and neuter genders and, where
the context admits, the plural shall include the singular, and
the singular shall include the plural.
1.9. Supplements. The company and any other employ-
er (with the consent of the company) may establish supplements
to this plan with respect to any group or class of employees of
an employer to which the plan has been extended. Each such
supplement will be a part of the plan as it applies to the
employees affected thereby. To the extent that the provisions
of any supplement are inconsistent with the other features of
the plan, the provisions of the supplement shall control.
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1. Eligibility. Subject to the conditions and
limitations of the plan, each employee of an employer who was
an active participant in the plan immediately prior to the
effective date will continue to participate in the plan in
accordance with the provisions of this plan. Each other
employee of an employer will become a participant in the plan
on January 1, 1993, or on the first January 1, April 1, July 1,
or October 1 thereafter (the "quarterly entry date") coincident
with or next following the date he meets all of the following
requirements:
(a) He is a member of a group of employees to
which the plan has been and continues to be
extended by his employer, either unilater-
ally or through collective bargaining, as
described in Supplement A.
(b) He has completed six months of continuous
employment (as defined in subsection 2.2).
Each employee will be notified of the date as of which he be-
comes a participant in the plan and will be furnished with a
summary plan description in accordance with governmental rules
and regulations. An employee who would be eligible to partici-
pate in the plan on the applicable quarterly entry date except
for the requirements of subparagraph 2.1(a) or (b) will become
a participant on the date he satisfies the conditions for par-
ticipation under such subparagraphs but will not be eligible to
make income deferral contributions (as defined in subsection
3.2) or voluntary participant contributions until the quarterly
entry date coincident with or next following the date he
becomes a participant.
2.2. Continuity of Employment. In determining an
employee's or participant's continuity of employment, the fol-
lowing rules shall apply:
(a) An employee's or participant's continuous
employment will be computed in terms of
full and fractional years of continuous
employment, with fractional years computed
in completed days of employment, commencing
on the date an employee is first employed
by an employer (i.e, the date he first
completes an hour of service) or, if he has
incurred a one-year break in employment [as
defined in subparagraph (g) below], the
date of his reemployment (i.e., the date he
first completes an hour of service upon
reemployment).
(b) A leave of absence (as defined in subsec-
tion 2.3) will not interrupt continuity of
employment for purposes of the plan.
(c) A period of concurrent employment with two
or more employers will be considered as
employment with one employer during that
period, and an employee's employment with
any predecessor to an employer will be
considered as employment with that
employer.
(d) The termination of any employee's employ-
ment with one employer will not interrupt
the continuity of his employment or par-
ticipation if, concurrently with or imme-
diately after such termination, he is em-
ployed by one or more other employers.
(e) If a former employee of the employers is
reemployed by an employer before he has
incurred a one-year break in employment [as
defined in subparagraph (g) below], his
employment with the employers will not be
deemed to have terminated.
(f) A period of employment with a controlled
group member (as defined below) which is
not an employer will be considered a period
of employment with an employer for purposes
of determining years and days of continuous
employment. A "controlled group member"
means any corporation or other trade or
business which is under common control with
an employer within the meaning of Sections
414(b), 414(c) and 414(m) of the Code.
(g) In determining an employee's or partici-
pant's continuous employment for an employ-
ee or participant who incurs a one-year
break in employment and is reemployed by an
employer or controlled group member, con-
tinuous employment (both before and after
such one-year break in employment) will be
taken into account for plan purposes upon
his reemployment, except as follows:
If a former employee of the employers
who is not vested with respect to any
portion of his income deferral
contribution account or matched
employer contribution account balance
is reemployed by an employer or
controlled group member after he has
incurred five consecutive one-year
breaks in employment and if such
consecutive one-year breaks in
employment equal or exceed his years
of continuous employment, his period
of continuous employment with the
employers or controlled group members
prior to such five consecutive one-
year breaks in employment shall be
disregarded for all purposes of the
plan upon his reemployment, and such
employee shall be treated as a new
employee for all purposes of the plan.
In no event shall a period of
continuous employment after an
employee has incurred five consecutive
one-year breaks in employment be taken
into account in determining the vested
portion of his matched employer
contribution account balance
attributable to employment prior to
such five consecutive one-year breaks
in employment.
A "one-year break in employment" will be
deemed to have occurred for each 12-month
period commencing on the date of an
employee's termination of employment, and
on each anniversary thereof, during which
such employee is not employed by an
employer or controlled group member. In
the case of a maternity or paternity
absence (as defined below), an employee's
termination of employment will not be
deemed to have occurred until the first
anniversary of the date of such absence. A
"maternity or paternity absence" means an
employee's absence from work because of the
pregnancy of the employee or birth of a
child of the employee, the placement of a
child with the employee in connection with
the adoption of such child by the employee,
or for purposes of caring for the child
immediately following such birth or place-
ment.
An "hour of service" means each hour for which an employee is
directly or indirectly paid, or entitled to payment, by an
employer for the performance of duties, determined in
accordance with Department of Labor Reg. Sec. 2530.200b-2. A
"year of continuous employment" means 365 days of continuous
employment under this subsection.
2.3. Leave of Absence. A leave of absence will not
interrupt continuity of employment or participation in the
plan. A "leave of absence" for plan purposes means a leave of
absence required by law or granted by an employer on account of
service in military or governmental branches described in any
applicable statute granting reemployment rights to employees
who entered such branches, or any other military or
governmental branch designated by the employers, and also means
any other absence from active employment with an employer under
conditions which are not treated by it as a termination of
employment including, but not limited to, vacations, holidays,
maternity, illness, incapacity or jury duty. Leaves of absence
will be governed by rules uniformly applied to all employees
similarly situated. If an employee or participant does not
return to work with an employer or controlled group member on
or before termination of a leave of absence, he will be
considered to have resigned on the date his last leave ended
unless his employment actually terminated prior to the
expiration of such leave.
2.4. Reemployed Former Participant. If a former
participant in the plan who has completed one year of contin-
uous employment is reemployed by an employer after incurring a
one-year break in employment, he will again become a partici-
pant in the plan on the date he meets the requirements of sub-
paragraphs 2.1(a) and (b) and will be eligible to make income
deferral contributions under subsection 3.1 or voluntary par-
ticipant contributions under subsection 4.1 on the quarterly
entry date coincident with or next following the date he be-
comes a participant.
2.5. Leased Employees. A leased employee (as de-
fined below) shall not be eligible to participate in the plan.
A leased employee means any person who is not an employee of an
employer but who has provided services to an employer of the
type which have historically (within the business field of the
employers) been provided by employees on a substantially full-
time basis for a period of at least one year pursuant to an
agreement between an employer and a leasing organization. The
period during which a leased employee performs services for an
employer shall be taken into account for purposes of subsection
2.2 of the plan unless (i) such leased employee is a partici-
pant in a money purchase pension plan maintained by the leasing
organization which provides a nonintegrated employer contribu-
tion rate of at least ten percent (10%) of compensation,
immediate participation for all employees and full and
immediate vesting and (ii) leased employees do not constitute
more than twenty percent (20%) of the employer's nonhighly
compensated work force.
SECTION 3
EMPLOYER CONTRIBUTIONS
3.1. Income Deferral Contributions. Subject to the
limitations of the plan, by writing filed with the committee, a
participant, if he so desires, may defer payment of a percent-
age [in increments of one percent (1%)] of his compensation
("income deferral contributions"), not exceeding sixteen per-
cent (16%) thereof, by electing to have such percentage with-
held from his compensation and contributed to the plan on his
behalf by his employer. For plan years beginning on or after
January 1, 1993, no participant may elect to make income defer-
ral contributions for any calendar year in excess of $8,994 [or
such greater amount as determined pursuant to Section 402(g)(5)
of the Code]. The amounts withheld from a participant's com-
pensation pursuant to the participant's election shall be con-
tributed to the plan by the participant's employer and credited
to his income deferral contribution account as soon as practi-
cable after being withheld but, in any event, not later than 30
days following the end of the pay period for which such contri-
butions are made. A participant may elect to change the rate
of his deferrals, or suspend or resume such deferrals, within
the limits stated above, by filing a new election with the com-
mittee. Each election under this subsection shall be made at
such time, in such manner, and in accordance with such rules as
the committee shall determine, and shall be effective for
compensation paid on the first payment date (i.e., a date on
which regular salary payments are made to employees of the
employer) coincident with or next following the quarterly entry
date or such other date specified by the committee for which
such election is effective.
3.2. Compensation and Adjusted Compensation. A par-
ticipant's "compensation" for any plan year means the sum total
of the adjusted compensation (as defined below) paid to him
during that plan year for services rendered to the employers as
an employee and the amount of any income deferral contributions
made for such year under subsection 3.1. A participant's "ad-
justed compensation" for any plan year means the total cash
compensation, including overtime, base pay, overtime premium,
and shift premium, vacation and holiday compensation, but ex-
cluding any payments representing cash reimbursements for ex-
penses incurred by the participant and any compensation paid to
him in a form other than cash, paid during the period such par-
ticipant is an active participant in the plan. In no event
shall compensation in excess of $200,000 (or such greater
amount as permitted in regulations issued by the Secretary of
the Treasury) be included in a participant's compensation for
any plan year.
3.3. Matching Employer Contributions. Subject to
the limitations of the plan and the income deferral contribu-
tions made under subsection 3.1, each employer will contribute
for a participant an amount equal to fifty percent (50%) of the
first six percent (6%) of income deferral contributions [but
not exceeding $8,994 or such greater amount as determined pur-
suant to Section 402(g)(5) of the Code for plan years beginning
on or after January 1, 1993] made on behalf of the participant
under subsection 3.1, reduced by any forfeitures to be credited
to such participant's matched employer contribution account for
such period as provided under subsection 7.3. Such contri-
butions shall be paid to the trustee and credited to the par-
ticipant's matched employer contribution account as soon as
practicable after the end of the pay period for which such con-
tribution is made but, in any event, not later than 60 days
after the end of such period.
3.4. Limitations on Income Deferrals. In no event
shall the actual deferral percentage (as defined below) of the
highly compensated participants (as defined in subsection 3.6)
for any plan year exceed the greater of:
(a) the actual deferral percentage of all other
participants for such plan year multiplied
by 1.25; or
(b) the actual deferral percentage of all other
participants for such plan year multiplied
by 2.00; provided that the actual deferral
percentage of the highly compensated par-
ticipants does not exceed that of all other
participants by more than two percentage
points.
The "actual deferral percentage" of a group of participants for
a plan year means the average of the ratios (determined sepa-
rately for each participant in such group) of A to B where A
equals the income deferral contributions credited to each such
participant's income deferral contribution account for each
plan year and B equals the participant's "compensation" for
such plan year. For purposes of this subsection, the term
"compensation" shall mean compensation as defined in Section
414(s) of the Code, including income deferral contributions.
The committee shall determine from time to time based on the
income deferral elections then on file with the committee
whether the foregoing limitations will be satisfied and, to the
extent necessary to ensure compliance with such limitation,
shall reduce, on an individual-by-individual basis, for each
highly compensated participant who is exceeding such deferral
percentage the applicable percentage of income deferral
contributions to be withheld for such highly compensated
participant beginning with the highly compensated participant
with the highest deferral percentage first and then reducing
the applicable percentage for such subsequent highly
compensated participant until such excess contributions are
eliminated. In addition, if at any time a portion of the
income deferrals withheld from a highly compensated
participant's compensation cannot be credited to his income
deferral contribution account because the limitations described
above would be applicable, such amounts will be not be
considered contributions under subsection 3.1 and the amount of
such excess contributions (and any income allocable to such
contributions) will be distributed to such highly compensated
participant no later than two and one-half (2-1/2) months after
the close of the plan year for which such excess contribution
was made. For purposes of determining the amount of any income
for a plan year attributable to any excess contributions by a
highly compensated participant (as defined in subsection 3.6)
to be returned to such participant, the following formula will
be used:
(i) first, the value of his income deferral
contribution account as of the beginning
of the plan year and as of the last day
of the plan year shall be determined;
(ii) next, the gain or loss on such income
deferral contribution account shall be
determined after first reducing the dif-
ference between the balance of the ac-
count as at the end of the year and the
balance as at the beginning of the year
by income deferral contributions made for
such year; and
(iii) finally, the amount calculated under
paragraph (ii) shall be multiplied by a
fraction the numerator of which is the
excess income deferral contributions made
by the participant for such year and the
denominator of which is such
participant's income deferral
contribution account as of the last day
of such year reduced by the amount of any
gain for such year and increased by the
amount of any loss for such year. The
amount calculated under this paragraph
shall be the amount of income to be
returned to the participant for such
year.
The actual deferral percentage of a highly compensated partic-
ipant to whom the family attribution rules described in subsec-
tion 3.6 apply shall be the greater of:
(i) the actual deferral ratio obtained by
aggregating the income deferral contribu-
tions and compensation of only those
family members who are highly compensated
participants; or
(ii) the actual deferral ratio obtained by
aggregating the income deferral contribu-
tions and compensation of all family
members who are participants.
For purposes of this subsection, certain former employees (as
determined under Section 414(q)(9) of the Code) shall be
treated as employees for purposes of determining highly
compensated participants.
3.5. Limitations on Matching Employer Contributions
and Participant Contributions. In no event shall the contribu-
tion percentage (as defined below) of the highly compensated
participants (as defined in subsection 3.6) for any plan year
exceed the greater of:
(a) the contribution percentage of all other
participants for such plan year multiplied
by 1.25; or
(b) the contribution percentage of all other
participants for such plan year multiplied
by 2.00; provided that the contribution
percentage of the highly compensated par-
ticipants does not exceed that of all other
participants by more than two (2) percent-
age points.
The "contribution percentage" of a group of participants for a
plan year means the average of the ratios (determined separate-
ly for each participant in such group) of A to B where A equals
the sum of the matching employer contributions under subsection
3.3 and the participant contributions under subsection 4.1, if
any, credited to such participant's accounts for such plan year
and B equals the participant's compensation (as defined in sub-
section 3.4) for such plan year. The committee shall determine
from time to time based on such participant's matching employer
contributions and participant contributions whether the fore-
going limitations will be satisfied and, to the extent neces-
sary to ensure compliance with such limitation, shall reduce,
on an individual-by-individual basis, for each highly compen-
sated participant who is exceeding such contribution percent-
age, the applicable percentage of participant contributions, if
any, to be withheld for such highly compensated participant,
beginning with the highly compensated participant with the
highest contribution percentage first and then reducing the
applicable percentage for each subsequent highly compensated
participant until such contribution percentage satisfies the
foregoing test. If, after reducing such participant contribu-
tions, such contribution percentage still exceeds such limita-
tion, the matching employer contributions to be contributed for
such highly compensated participants shall be reduced, begin-
ning with the highly compensated participant with the highest
matching employer contributions first and then reducing the
applicable percentage for each subsequent highly compensated
participant until such contribution percentage satisfies the
foregoing test. If, because of the foregoing limitations, a
portion of the matching employer contributions made on behalf
of a highly compensated participant may not be credited to his
account for a plan year, such portion (and the income allocable
to such amount) will be forfeited and returned to the employer
making such contribution not later than two and one-half months
after the end of that plan year. The determination of any
excess aggregate matching contributions under this subparagraph
shall be made after determining any excess income deferral con-
tributions under subsection 3.4. Income on such excess partic-
ipant contributions and, if applicable, matching employer con-
tributions shall be calculated in the same manner as provided
in subparagraphs (i) - (iii) of subsection 3.4 except that such
calculations shall be made using the participant's participant
contribution account balance and the participant's contribu-
tions and excess participant contributions made for such plan
year and then, if necessary, such participant's matched employ-
er contribution account balance and the employer's matching
employer contributions and excess matching employer contribu-
tions made for such plan year. In the event that both the
actual deferral percentage and the contribution percentage do
not satisfy the requirements of subparagraphs 3.4(a) and 3.5(a)
above, the following additional limitation shall apply to
participant contributions and then to employer matching
contributions of highly compensated participants under the
plan. After the appropriate tests under subparagraphs 3.4(a)
or (b) above and subparagraphs 3.5(a) or (b) have been made and
any excess income deferral contributions and participant
contributions have been returned to the participant and any
excess employer matching contributions are forfeited, the
'Aggregate Limit' test will be applied. The 'Aggregate Limit'
will be the sum of: (1) 125 percent of the greater of the
actual deferral percentage or the contribution percentage for
participants who are not highly compensated participants and
(2) the lesser of (a) the actual deferral percentage or the
contribution percentage. whichever is smaller, for participants
who are not highly compensated participants plus two (2)
percentage points or (b) the actual deferral percentage or
contribution percentage, whichever is smaller, for participants
who are not highly compensated participants multiplied by 2.0.
If the sum of the actual deferral percentage and the
contribution percentage for the highly compensated participants
exceeds the Aggregate Limit, participant contributions and then
employer matching contributions will be further reduced until
the Aggregate Limit test is satisfied.
3.6. Highly Compensated Participants. For purposes
of subsections 3.4 and 3.5 of the plan, a "highly compensated
participant" means any participant who, during the current or
immediately preceding plan year:
(a) was a five percent (5%) owner of an employ-
er or controlled group member;
(b) received annual compensation from an em-
ployer and/or controlled group member of
more than $75,000;
(c) received annual compensation from an em-
ployer and/or controlled group member of
more than $50,000 and was in the top paid
twenty percent (20%) of the employees; or
(d) was an officer of an employer and/or con-
trolled group member receiving annual com-
pensation greater than fifty percent (50%)
of the limitation in effect under Section
415(b)(1)(A) of the Internal Revenue Code;
provided, that for purposes of this
subparagraph (d), no more than 50 employees
of the employer [or if lesser, the greater
of 3 employees or ten percent (10%) of the
employees] shall be treated as officers.
A participant not described in (b), (c), or (d) above for the
immediately preceding year will not be considered a highly com-
pensated participant for the current plan year under (b), (c),
or (d) unless such participant is included within the group of
the 100 highest paid employees of the employer and controlled
group members for such current year. For purposes of this
subsection, "compensation" shall be defined as provided in
subsection 3.4 of the plan. If any participant is a family
member of a highly compensated participant who is either a
5 percent owner or one of the ten most highly compensated
participants with respect to any plan year, that participant
shall not be treated as a separate participant for purposes of
this subsection and such individual's compensation will be
treated as if paid to such highly compensated participant;
provided that, a "family member" of a highly compensated
participant means such participant's spouse, lineal ascendants
or descendants and the spouses of such lineal ascendants or
descendants. The compensation thresholds in (b), (c) and (d)
above will be adjusted in accordance with Section 414(q)(1) of
the Code.
3.7. Verification of Employer Contributions. A cer-
tificate of an independent certified public accountant selected
by the employer shall be conclusive on all persons as to the
amount of an employer's contributions under the plan for any
plan year.
3.8. No Interest in Employers. The employers shall
have no right, title, or interest in the trust fund, nor will
any part of the trust fund at any time revert or be repaid to
an employer, unless:
(a) the Internal Revenue Service determines
that the plan does not meet the require-
ments of Section 401(a) of the Internal
Revenue Code of 1986, in which event con-
tributions made to the plan by such employ-
er conditioned upon such qualification
shall be returned to the employer within
one year after the date notice of such
determination is issued to the employer; or
(b) a contribution is made by such employer by
mistake of fact and such contribution is
returned to the employer within one year
after payment to the trustee; or
(c) a contribution is disallowed as an expense
for federal income tax purposes and such
contribution (to the extent disallowed) is
returned to the employer within one year
after the disallowance of the deduction.
The amount of any contribution that may be returned to an em-
ployer pursuant to subparagraph (b) or (c) above shall be re-
duced by any portion thereof previously distributed from the
trust fund and by any losses of the trust fund allocable there-
to and in no event may the return of such contribution cause
any participant's account balances to be less than the amount
of such balances had the contribution not been made under the
plan.
SECTION 4
PARTICIPANT CONTRIBUTIONS
4.1. Amount of Participant Contributions. In lieu
of any income deferral contributions made by a participant
under subsection 3.1 and subject to any limitations contained
in the plan, a participant, if he so desires, may elect to make
voluntary contributions under the plan for any plan year in an
amount of not less than one percent (1%) nor more than sixteen
percent (16%) of his adjusted compensation (as defined in sub-
section 3.2) for that year. Each such election by a partici-
pant under this subsection shall be made at such time, in such
manner and in accordance with such rules as the committee shall
determine.
4.2. Deduction or Payment of Participant Contribu-
tions. A participant's contribution may be made by regular
payroll deductions [in multiples of one percent (1%)] or in any
other way approved by the committee. Participant contributions
deducted by an employer will be paid to the trustee as soon as
practicable after the date the contributions are made.
4.3. Variation, Discontinuance, Resumption, and
Withdrawal of Participant Contributions. A participant may
elect to change his contribution rate (but not retroactively)
within the limits specified above, to discontinue making con-
tributions or to resume making such contributions. As of the
first day of any plan year quarter, a participant may withdraw
all or any portion of the then net credit balance in his par-
ticipant contribution account. Each election by a participant
under this subsection 4.3 shall be made at such time and in
such manner as the committee shall determine, and shall be
effective only in accordance with such rules as may be estab-
lished from time to time by the committee.
SECTION 5
PERIOD OF PARTICIPATION
5.1. Termination Date. A participant's "termination
date" will be the date on which his employment with all of the
employers is terminated because of the first to occur of the
following:
(a) Normal or Late Retirement. The date of the
participant's retirement on or after at-
taining age 65 years (his "normal retire-
ment age"). A participant's right to all
account balances shall be nonforfeitable on
and after his normal retirement age.
(b) Early Retirement. The date of the partic-
ipant's retirement on or after attaining
age 60 years but before attaining age 65
years.
(c) Disability Retirement. The date the par-
ticipant is retired from the employ of all
of the employers at any age because of
disability (physical or mental), as deter-
mined by a qualified physician selected by
the committee. A participant will be con-
sidered disabled for purposes of this sub-
paragraph if, on account of a disability,
he is no longer capable of performing the
duties assigned to him by his employer.
(d) Death. The date of the participant's
death.
(e) Resignation or Dismissal. The date the
participant resigns or is dismissed from
the employ of all of the employers before
he attains age 60 years and for a reason
other than disability retirement.
If a participant is transferred from employment with an employ-
er to employment with a controlled group member, his termina-
tion date will not be considered to have occurred until his
employment with all employers and controlled group members has
terminated, but his participation in the plan will be restrict-
ed as provided in subsection 5.2.
5.2. Restricted Participation. If (i) payment of
all of a participant's account balances is not made prior to
the accounting date next following his termination date, or
(ii) a participant transfers to a controlled group member which
is not an employer, or (iii) a participant transfers to a group
or class of employees who are not eligible to participate in
the plan pursuant to the requirements of subparagraph 2.1(a) or
(b), the participant or his beneficiary will be treated as a
participant for all purposes of the plan, except as follows:
(a) The participant may not make income defer-
ral contributions and will not share in
employer contributions and forfeitures (as
defined in subsection 7.3) under Section 3
after his termination date, or during any
period described in (i), (ii), or (iii)
above, except as provided in subsection
6.5.
(b) The participant may not make contributions
under Section 4 after his termination date
or during any period described in (i),
(ii), or (iii) above.
(c) The beneficiary of a decreased participant
cannot designate a beneficiary under sub-
section 7.6.
If such participant subsequently again satisfies the
requirements for participation in the plan, he will become an
active participant in the plan on the date he satisfies the
requirements of subparagraph 2.1(a) and (b) and will be
eligible to make income deferral contributions under subsection
3.2 effective with the first payment date (i.e., a date on
which regular salary payments are made to employees of the
employer) coincident with or next following the date that he
satisfies the requirements of subsection 2.4.
SECTION 6
ACCOUNTING
6.1. Separate Accounts. The committee will maintain
the following accounts in the name of each participant:
(a) Income Deferral Contribution Account. If a
participant elects to make income deferral
contributions under subsection 3.1 of the
plan, this account will reflect such con-
tributions and the income, losses, appreci-
ation, and depreciation attributable there-
to.
(b) Matched Employer Contribution Account. If
a participant has elected to make income
deferral contributions under the plan, this
account will reflect the matching employer
contributions made under subsection 3.3 of
the plan and certain forfeitures arising
under the plan, and the income, losses,
appreciation, and depreciation attributable
thereto.
(c) Participant Contribution Account. If a
participant has elected to make voluntary
participant contributions under subsection
4.1 of the plan, this account will reflect
such participant contributions and the
income, losses, appreciation, and deprecia-
tion attributable thereto.
(d) Prior Plan Account. If a participant has
amounts attributable to his participation
in any prior plan transferred to this plan
as provided in Section 8, this account will
reflect such amounts and the income, loss-
es, appreciation, and depreciation attrib-
utable thereto.
The committee also may maintain such other accounts (including
accounts reflecting amounts invested in any particular invest-
ment fund) in the names of participants or otherwise as it
considers advisable. Unless the context indicates otherwise,
references in the plan to a participant's "accounts" means all
accounts maintained in his name under the plan.
6.2. Accounting Dates. A "regular accounting date"
is the last day of each month. A "special accounting date" is
any date designated as such by the committee and a special
accounting date occurring under subsection 11.4. The term
"accounting date" includes both a regular accounting date and a
special accounting date.
6.3. Adjustment of Participants' Accounts. As of
each accounting date, the committee shall:
(a) First, charge to the proper accounts all
payments, distributions, or withdrawals
made since the last preceding accounting
date that have not been charged previously;
(b) Next, adjust the credit balances in the
accounts of all participants upward or
downward, pro rata, according to the credit
balances so that the total of the credit
balances will equal the then adjusted net
worth (as defined below) of the trust fund
or any separate investment fund (as defined
below) established for such accounts;
(c) Next, subject to the provisions of subsec-
tion 6.7, credit any income deferral con-
tributions that are to be credited as of
that date in accordance with subsection
3.1;
(d) Next, credit matching employer contribu-
tions and forfeitures, if any, that are to
be credited as of that date in accordance
with subsection 3.3;
(e) Finally, credit any participant contribu-
tions that are to be credited as of that
date in accordance with subsection 4.2.
The "trust fund" as at any date will consist of all property of
every kind then held by the trustee. The "adjusted net worth"
of the trust fund as at any date means the then net worth of
the trust fund as determined by the trustee, less an amount
equal to the sum of employer and participant contributions not
yet credited to the accounts of participants. The committee
may establish one or more investment funds for the investment
of employer and participant contributions under the plan and
may adjust participant accounts in accordance with the account-
ing provisions established under any such investment funds.
The investment funds established by the committee are described
in subsection 6.6. The term "investment fund" includes any
trust account, group annuity contract, separate account, or
other investment vehicle established under a contract with a
licensed insurance company or under a trust agreement with a
trustee.
6.4. Statement of Account. Each participant will be
furnished with a statement reflecting the condition of his
accounts in the trust fund as of the last day of each plan year
or more frequently, if so provided by the committee. No par-
ticipant, except one authorized by the committee, shall have
the right to inspect the records reflecting the accounts of any
other participant.
6.5. Contribution Limitations. Notwithstanding any
provisions in the plan to the contrary, the following limita-
tions shall apply to each participant in the plan:
(a) If such participant is not an active par-
ticipant in any other defined contribution
or defined benefit plan [as defined in
Section 415(k) of the Internal Revenue Code
of 1986] maintained by an employer or a
controlled group member which is not an
employer, the maximum "annual additions"
(as defined below) to such participant's
accounts for any plan year shall not exceed
the lesser of $30,000 [or, if greater, 1/4
of the dollar limitation in effect under
Section 415(b)(1)(a) of the Code for the
calendar year which begins with or within
that plan year] or twenty-five percent
(25%) of the participant's compensation for
the plan year. A participant's "annual
additions" shall mean the sum of (i) em-
ployer contributions and forfeitures to be
allocated and credited to his employer
contribution account for the year, (ii) any
income deferral contributions credited to
his income deferral contribution account
for the year, and (iii) participant
contributions credited to his participant
contribution account for such year. For
purposes of this subparagraph, annual
additions shall include excess aggregate
contributions (as defined in Section
401(m)(6)(B) of the Code) and excess income
deferrals (as described in Section 402(g)
of the Code), regardless of whether such
amounts are distributed or forfeited. For
purposes of this subsection, "compensation"
means compensation as defined for purposes
of Section 415 of the Internal Revenue
Code.
(b) If such participant is an active partici-
pant in any other defined contribution plan
maintained by an employer or a controlled
group member which is not an employer, the
maximum "annual additions" provided in
subparagraph (a) above shall apply to this
plan and all such other defined contribu-
tion plans as if all such plans were one
plan.
(c) If such participant is an active partici-
pant in any other defined benefit plan
maintained by an employer or a controlled
group member which is not an employer, the
limitations provided in subparagraph (a) or
(b) above, whichever is applicable, shall
apply, and, in addition, the following
additional limitation shall be applicable.
If such participant's "defined contribution
fraction" (as described below) when added
to is "defined benefit fraction," deter-
mined under such other defined benefit plan
as of the end of each plan year, exceeds
1.0 as calculated under Section 415(e) of
the Code, the annual additions under this
plan, the annual additions under such other
defined contribution plan, or the annual
additions under such other defined contri-
bution plan, or the annual benefit expected
to be paid under the defined benefit plan
shall be adjusted, in the sole discretion
of the plan administrators under the plans,
so that the defined contribution fraction
when added to the defined benefit fraction
will not exceed 1.0. A participant's de-
fined contribution fraction as of the end
of any plan year shall consist of a numera-
tor which is the sum of the annual addi-
tions to such participant's accounts for
all years, computed under subparagraph (a)
or (b) above, whichever is applicable, and
the denominator of which is the sum of the
adjusted limitations for each year of such
participant's service with the employers or
controlled group members. For purposes of
this subparagraph, the "adjusted limita-
tion" for a year shall mean the lesser of:
(i) $30,000 [or, if greater, 1/4 of the
dollar limitation in effect under Section
415(b)(1)(A) of the Code for the calendar
year which begins with or within that plan
year] multiplied by one hundred twenty-five
percent (125%), and (ii) twenty-five per-
cent (25%) of such participant's compensa-
tion for such year multiplied by one hun-
dred forty percent (140%).
If, as a result of the limitations provided above, any partici-
pant contributions cannot be credited to a participant's par-
ticipant contribution account, the committee, after consulting
with the participant, may in its sole discretion:
(a) Reduce any future participant contributions
to be made by the participant for such plan
year.
(b) Return to the participant any participant
contributions which, because of the limi-
tations contained in this subsection, can-
not be credited to his participant contri-
bution account for the year, without inter-
est or earnings.
Any employer contributions which cannot be credited to a par-
ticipant's account because of the foregoing limitations will be
used to reduce employer contributions for the next plan year
(and succeeding plan years in order of time).
6.6. Investment Funds. Each participant may elect,
subject to the following provisions, to have a portion or all
of his income deferral contributions, matching employer contri-
butions, and participant contributions invested in one or more
investment funds established by the committee. As at Janu-
ary 1, 1993, the following investment funds have been estab-
lished:
(a) Conservative Equity Fund. This fund will
be primarily invested in equity securities
that are deemed to have "defensive" char-
acteristics, the investment objective being
a favorable rate of return paralleling the
pattern of the general stock market, but
the variability of its results expected to
be lower than those of the general stock
market.
(b) Aggressive Equity Fund. This fund will be
primarily invested in equity securities
that are deemed to have 'aggressive' char-
acteristics, the investment objective being
a favorable rate of return paralleling the
pattern of the general stock market, but
the variability of its results expected to
be greater than those of the general stock
market.
(c) Interest Accumulation Investment Fund.
This fund will be invested with any
insurance company under a group annuity
contract or in an eligible pooled fund or
funds consisting of such guaranteed
investment contracts, or in a money market
fund or funds, the investment objective
being the preservation of principal and a
favorable rate of interest on such
principal.
(d) Parent Company Stock Fund. This fund will
be invested solely in the shares of common
stock issued by Western Publishing Group,
Inc., the parent of the company.
An election by a participant will be subject to the following
requirements:
(a) Each election made in accordance with this
subsection must be in writing and filed
with the committee at such time as the
committee determines.
(b) Each election shall be effective on the
first day of any plan year quarter (after
all adjustments as of the next preceding
accounting date have been made) for which a
new election is effective. If no election
is in effect with respect to a participant,
such participant's income deferral
contributions, matching employer
contributions and participant contributions
will be invested in the Interest
Accumulation Investment Fund.
(c) Any election made in accordance with this
subsection to have amounts invested in one
or more investment funds shall be in in-
crements of 10 percent of such partici-
pant's contributions or account balances.
(d) Effective as of the dates specified in
subparagraph (b) above, a participant may
elect to have a portion or all of the
amounts credited to his income deferral
contribution account, matching employer
contribution account, participant contri-
bution account or prior plan account (after
all adjustments as of the next preceding
accounting date have been made) transferred
from one investment fund to another invest-
ment fund. Each such election shall be
subject to the provisions of subparagraphs
(a) and (c) above and no election to trans-
fer from the Interest Accumulation
Investment Fund to another investment fund
shall be effective unless such transfer is
permitted under the Interest Accumulation
Investment Fund, without penalty.
(e) With respect to each participant who has an
interest in the Parent Company Stock Fund
(as defined in subparagraph 6.6(d) above),
the trustee shall provide a copy of the
notice and proxy statement for each meeting
of the holders of common stock issued by
Western Publishing Group, Inc., together
with an appropriate form for the partici-
pant's use in instructing the trustee with
respect to the voting of the shares of such
stock that, at the record date for the
determination of the shareholders entitled
to such notice, and to vote at, such meet-
ing, are allocable to such participant
under the Parent Company Stock Fund as of
such date. If a participant furnishes
timely instructions to the trustee, the
trustee (in person or by proxy) shall vote
the shares (including fractional shares) of
the common stock of Western Publishing
Group, Inc. allocable to such participant
in the Parent Company Stock Fund in accor-
dance with the directions of the partici-
pant. Shares of such stock allocable to
participants in the Parent Company Stock
Fund for which timely voting instructions
are not received by the trustee shall be
voted by the trustee as directed by the
committee.
SECTION 7
PAYMENT OF ACCOUNT BALANCES
7.1. Retirement or Death. If a participant's em-
ployment with all of the employers and controlled group members
is terminated because of retirement under subparagraph 5.1(a),
(b), or (c), or if a participant dies while in the employ of an
employer, any income deferral contributions or participant con-
tributions made by him previously but not credited to his ap-
propriate account will be returned to him or, in the event of
his death, to his beneficiary. The balances in all of his
accounts as at the accounting date coincident with or next
following his termination date (after all adjustments required
under the plan as of that date have been made) shall be nonfor-
feitable and shall be distributable to him or, in the event of
his death, to his beneficiary, under subsection 7.4.
7.2. Resignation or Dismissal. If a participant who
immediately prior to July 1, 1987 was an active participant in
the Western Publishing Company Employees' Savings & Security
Plan and who became a participant in this plan on July 1, 1987
resigns or is dismissed from the employ of all of the employers
before retirement under subparagraph 5.(a), (b) or (c), any
income deferral contributions or participant contributions made
by him previously but not credited to his appropriate account
will be returned to him and the balances in all of his accounts
as at the accounting date coincident with or next following his
termination date (after all adjustments required under the plan
as of that date have been made) shall be nonforfeitable and
shall be distributable to him under subsection 7.4. In the
case of any other participant who resigns or is dismissed under
subparagraph 5.1(a) (b) or (c), any income deferral
contributions or participant contributions made by him
previously but not credited to his appropriate account will be
returned to him and the balances in his income deferral contri-
bution account, participant contribution account and prior plan
account, if any, as at the accounting date coincident with or
next following his termination date (after all adjustments
required under the plan as of that date have been made) shall
be nonforfeitable and shall be distributable to him under sub-
section 7.4 along with the vested balance in his matched em-
ployer contribution account as at the accounting date coinci-
dent with or next following his termination date (after all
adjustments required under the plan as of that date have been
made) determined in accordance with the following schedule:
Years of continuous
employment under Vested Percentage of matched
subsection 2.2 employer contribution account
------------------- -----------------------------
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
7.3. Forfeitures. The amount by which a partici-
pant's matched employer contribution account is reduced under
subsection 7.2 shall be treated as a "forfeiture" on the
earlier of the date of distribution of such participant's
account balances or the date such participant incurs five
consecutive one-year breaks in employment. Prior to that date,
such accounts will continue to be adjusted pursuant to the
provisions of subparagraph 6.3(b). Forfeitures attributable to
a participant's matched employer contribution account will be
used to reduce the employer's contribution otherwise required
under subsection 3.4 and shall be credited to the matched
employer contribution accounts of other participants in
accordance with that subsection. If a participant is
reemployed by an employer or controlled group member before he
incurs five consecutive one-year breaks in employment, any for-
feitures attributable to such participant shall be recredited
to such participant's matched employer contribution account on
the accounting date coincident with or next following the date
of such participant's reemployment if the participant repays
the total amount of any previous distribution attributable to
his matched employer contribution account within five years of
his date of reemployment. Such participant's matched employer
contribution account shall be recredited from current
unallocated forfeitures or, to the extent there are
insufficient unallocated forfeitures for this purpose, from
supplemental employer contributions necessary to restore such
amount. The actual amount restored to such participant's
account shall be the amount of such forfeitures, without
investment adjustments.
7.4. Manner of Distribution. After each partici-
pant's termination date, and subject to the conditions set
forth below and in subsections 7.5 and 7.11, distribution of
the net credit balance in the participant's accounts will be
made to or for the benefit of the participant or, in the case
of his death, to or for the benefit of his beneficiary, by one
or both of the following methods:
(a) By purchase of an annuity subject to the
following requirements:
(i) Except as otherwise provided in
subparagraph (v) below, if such
participant has a spouse to whom he
is legally married as of the date
payment of his account balances is
to commence as a result of his term-
ination of employment for a reason
other than death, the participant's
account balances shall be applied to
purchase an annuity for the life of
the participant with a survivor
annuity payable for the life of his
spouse which is one-half of the
annuity payable during the joint
lives of the participant and his
spouse.
(ii) Except as otherwise provided in
subparagraph (v) below, if such
participant has a spouse to whom he
is legally married as of the date of
his death, an annuity providing
payments for the life of the spouse
shall be purchased for the spouse
with at least fifty percent (50%) of
the participant's account balances
unless such amount is less than
$3,500, in which case, such amount
shall be distributed to the spouse
in a lump sum. Such spouse may
elect in writing to have any amounts
payable to the spouse paid in a lump
sum.
(iii) The portion of a participant's
account balances, if any, which is
not paid to the participant's spouse
under subparagraph (ii) shall be
paid to such participant's
designated beneficiary under one or
more of the methods described in
subparagraph (v) below; provided
such distributions commence within
one year of the participant's death.
(iv) The premium paid to the insurance
company for a contract will be
charged to the participant's
accounts when paid. The committee
may direct the trustee to cause the
contract to be assigned or delivered
to the person or persons then
entitled to payments under it but,
prior to assignment or delivery of
the contract, it shall be rendered
nontransferable and noncommutable.
(v) In the event a participant does not
have a spouse as of the date payment
of his account balances is to com-
mence to him or upon his death, or
such participant elects, with the
written consent of his spouse (which
consent acknowledges the effect of
such election and is witnessed by a
plan representative or notary
public), not to receive distribution
in the form of an annuity described
in (i) or (ii) above, the committee,
after consulting with the
participant, will direct the trustee
to distribute such participant's
benefits to him or, in the event of
his death, to or for the benefit of
his designated beneficiary, by any
one or more of the following
methods:
(1) An annuity for life,
with or without a
refund feature.
(2) An annuity for life
and a period certain,
which period certain
may not exceed the
joint life expectancy
of the participant
and his designated
beneficiary.
(3) An annuity for the
joint life expectancy
of the participant
and his designated
beneficiary.
(4) With the written
consent of the par-
ticipant and, where
applicable, his
spouse, a lump sum
under subparagraph
(b) below.
If such participant's designated
beneficiary is not the participant's spouse
and is more than 10 years younger than the
participant, an annuity shall be paid over
a period not exceeding the joint life
expectancy of the participant and a
designated beneficiary 10 years younger
than the participant.
(vi) Within a reasonable period of time
prior to the earliest date on which
a married participant could receive
payment of benefits under the plan,
the committee will furnish him with
a written explanation of the terms
and conditions of the form of
payment specified in subparagraph
(a)(i) above, and the financial
effect of making an election not to
receive payment in such form. An
election not to receive payment in
the form specified in subparagraph
(a)(i) shall be in writing and
signed by the participant and
consented to by his spouse and may
be made or revoked by the
participant at any time during the
90-day period prior to commencement
of his benefits. Within the three
plan year period beginning (i) on
the first day of the plan year in
which a participant attains age 32
or (ii) if such employee becomes a
participant in the plan after
attaining age 32, with the plan year
in which such employee becomes a
participant, the committee will
furnish him with a written
explanation of the terms and
conditions of the form of payment
specified in subparagraph (a)(ii)
above and the financial effect of
making an election not to receive
payment in such form. An election
not to receive payment in the form
specified in subparagraph (a)(ii)
may be made by a participant at any
time on or after the first day of
the plan year in which he attains
age 35 years. Such election shall
be in writing and consented to by
his spouse and may be made or
revoked by the participant at any
time prior to his death.
(b) Subject to the provisions of subparagraph
(a), by payment in a lump sum.
Subject to the requirements of subparagraph (a) above, the par-
ticipant may elect the method of distributing his benefits to
him and may direct how his benefits are to be paid to his bene-
ficiary. The committee shall select the method of distributing
the participant's benefits to his beneficiary if the partici-
pant has not filed a direction with the committee. The trustee
may make distributions in cash or property, or partly in each,
provided property is distributed at its fair market value as at
the date of distribution as determined by the trustee. All
distributions under the plan shall comply with the requirements
of Section 401(a)(9) of the Code and the regulations
thereunder.
7.5. Commencement of Distributions. Except as pro-
vided in the following sentence, payment of a participant's
benefits will be made within a reasonable time after his termi-
nation date, but not later than 60 days after (a) the end of
the plan year in which his termination date occurs, or (b) such
later date on which the amount of the payment can be ascer-
tained by the committee. However, if a participant's
termination date occurs before he attains age 65 and if the
aggregate nonforfeitable balance in his accounts at his
termination date or at the time of any prior distribution
exceeds $3,500, then payment of such benefits shall be deferred
to his attainment of age 65 (or, if elected by the participant,
age 70-1/2) unless the participant (or, in the event of his
death, his surviving spouse) consents in writing to an
immediate distribution. A (i) participant or (ii) former
participant who previously made an election to defer
commencement of his benefits whose nonforfeitable balance in
his accounts as at his termination date (after any required
adjustments) was less than $3,500 will automatically receive
his distribution in a lump sum. A participant who previously
made an election to defer commencement of his benefits may
elect, not more frequently than once each plan year and in an
amount not less than $1,000 in each such plan year, to receive
a distribution from his account(s) in a lump sum payment.
7.6. Designation of Beneficiary. Each participant
from time to time, by signing a form furnished by the commit-
tee, may designate any person or persons (who may be designated
concurrently, contingently, or successively) to whom his bene-
fits are to be paid if he dies before he receives all of his
benefits. A beneficiary designation form will be effective
only when the form is filed with the committee while the par-
ticipant is alive and will cancel all beneficiary designation
forms previously files with the committee. If a deceased par-
ticipant failed to designate a beneficiary as provided above,
or if the designated beneficiary dies before the participant or
before complete payment of the participant's benefits, the
committee, in its discretion, may direct the trustee to pay the
participant's benefits as follows:
(a) To or for the benefit of any one or more of
his relatives by blood, adoption, or mar-
riage and in such proportions as the com-
mittee determines; or
(b) To the legal representative or representa-
tives of the estate of the last to die of
the participant and his designated benefi-
ciary.
The term "designated beneficiary" as used in the plan means the
person or persons (including a trustee or other legal represen-
tative acting in a fiduciary capacity) designated by a partici-
pant as his beneficiary in the last effective beneficiary des-
ignation form filed with the committee under this subsection
and to whom a deceased participant's benefits are payable under
the plan. The term "beneficiary" as used in the plan means the
natural or legal person or persons to whom a deceased partici-
pant's benefits are payable under this subsection.
7.7. Missing Participants or Beneficiaries. Each
participant and each designated beneficiary must file with the
committee from time to time in writing his post office address
and each change of post office address. Any communication,
statement, or notice addressed to a participant or beneficiary
at his last post office address filed with the committee, or if
no address is filed with the committee then, in the case of a
participant, at his last post office address as shown on the
employer's records, will be binding on the participant and his
beneficiary for all purposes of the plan. Neither the employ-
ers nor the committee will be required to search for or locate
a participant or beneficiary. If the committee notifies a par-
ticipant or beneficiary that he is entitled to a payment and
also notifies him of the provisions of this subsection, and the
participant or beneficiary fails to claim his benefits or make
his whereabouts known to the committee within three years after
the notification, the benefits of the participant or beneficia-
ry will be disposed of, to the extent permitted by applicable
law, as follows:
(a) If the whereabouts of the participant then
is unknown to the committee, but the
whereabouts of the participant's designated
beneficiary then is known to the committee,
payment will be made to the designated
beneficiary;
(b) If the whereabouts of the participant and
the participant's designated beneficiary
then is unknown to the committee, but the
whereabouts of one or more relatives by
blood, adoption, or marriage of the par-
ticipant is known to the committee, the
committee may direct the trustee to pay the
participant's benefits to one or more of
such relatives and in such proportions as
the committee decides; or
(c) If the whereabouts of such relatives and
the participant's designated beneficiary
then is unknown to the committee, the bene-
fits of such participant or beneficiary
will be disposed of in an equitable manner
permitted by law under rules adopted by the
committee.
7.8. Facility of Payment. When a person entitled to
benefits under the plan is under legal disability, or in the
committee's opinion, is in any way incapacitated so as to be
unable to manage his financial affairs, the committee may di-
rect the trustee to pay the benefits to such person's legal
representatives, or to a relative or friend of such person for
such person's benefits, or the committee may direct the appli-
cation of such benefits for the benefit of such person. Any
payment made in accordance with the preceding sentence shall be
a full and complete discharge of any liability for such payment
under the plan.
7.9. Latest Date for Distribution. Notwithstanding
any provision of the plan to the contrary, payment of benefits
to a participant shall be made (or commence) no later than the
April 1 of the calendar year following the calendar year in
which the participant has attained age 70-1/2.
7.10 Loans to Participants. While it is the primary
purpose of the plan to accumulate funds for participants when
they retire, it is recognized that under some circumstances it
is in the best interests of participants to permit loans to be
made to them while they continue in the active service of the
employers. Accordingly, the committee, pursuant to such rules
as it may from time to time establish, and upon written
application by a participant supported by such evidence as the
committee may request, may direct the trustee to make a loan to
a participant subject to the following:
(a) Subject to the provisions of this sub-
section, each participant may borrow from
his accounts (other than his matched
employer contribution account) for general
purposes or for residential purposes by
filing a written application with the
committee requesting such loan. The
minimum amount which can be borrowed for
any loan will be $1,000. All loans shall
be made on a pro rata basis from a
participant's income deferral contribution
account, participant contribution account
and prior plan account and no more than two
loans may be outstanding at any time.
(b) For loans made before October 18, 1989, the
principal amount of any loan made to a
participant, when added to the outstanding
balance of all other loans made to the
participant from all qualified plans
maintained by the employers, shall not
exceed the least of: (i) $50,000, reduced
by the excess (if any) of the highest
outstanding balance during the one-year
period ending immediately preceding the
date of the loan, over the outstanding
balance of all such loans from all such
plans on the date of the loan; (ii) 50 per-
cent of the amount to which the participant
would be entitled under all such plans if
he were to terminate his employment with
the employers on the date the loan is made,
or $10,000, whichever is greater; and
(iii) the sum of a participant's income
deferral contribution account, participant
contribution account and prior plan account
(excluding any amounts in such account
attributable to the Western IRA Plan).
(c) For loans made on or after October 18,
1989, the principal amount of any loan made
to a participant, when added to the
outstanding balance of all other loans made
to the participant from all qualified plans
maintained by the employers, shall not
exceed the least of: (i) $50,000, reduced
by the excess (if any) of the highest
outstanding balance during the one-year
period ending immediately preceding the
date of the loan, over the outstanding
balance of all such loans from all such
plans on the date of such loan; (ii)
50 percent of the participant's vested
account balances under the plan; or
(iii) the sum of a participant's income
deferral contribution account, participant
contribution account and prior plan account
(excluding any amounts in such account
attributable to the Western IRA Plan).
(d) Each loan must be evidenced by a written
note in a form approved by the committee,
shall require substantially level
amortization payments (with payments at
least quarterly), shall be repaid by regu-
lar payroll deduction and shall be secured
by the participant's account balances.
Each loan made before October 18, 1989
shall bear interest at the rate then
payable under the guaranteed investment
contract established under subsection 6.6
at the time such loan is made. Each loan
made on or after October 18, 1989 shall
bear interest at the rate established by
the committee and be commensurate with
rates charged by commercial lenders on
similar loans. Any loan to a married
participant must be consented to by the
participant's spouse. Such spousal consent
shall be obtained no earlier than the
beginning of the ninety-day period ending
on the date of the loan, must acknowledge
the effect of the loan and must be
witnessed by a plan representative or
notary public. Such consent shall be
binding with respect to the consenting
spouse or any subsequent spouse with
respect to that loan unless such loan is
renegotiated, extended, renewed or
otherwise revised.
(e) Each loan shall specify a repayment period
which shall not be less than 18 months (or
12 months, if the loan is made on or after
October 18, 1989), nor more than 60 months
for general purposes and not less than 18
months (or 120 months, if the loan is made
on or after October 18, 1989) nor more than
360 months (or 240 months if the loan is
made on or after October 18, 1989) for
residential loans used to acquire, con-
struct, reconstruct or substantially
rehabilitate 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. No
repayment period shall extend beyond a par-
ticipant's normal retirement date. Amounts
repaid by the participant will be
recredited to the participant's accounts in
the same ratio as the loan is made from
such accounts.
(f) If, on a participant's termination date
(other than a termination date described in
paragraph 5.1(c)), any loan or portion of a
loan made to him under the plan, together
with the accrued interest thereon, remains
unpaid, the entire amount of the unpaid
loan and accrued interest shall be due and
payable by the participant; provided that,
if such amount is not repaid by the end of
the calendar month beginning after his ter-
mination date, an amount equal to the
outstanding balance of the loan, together
with the accrued interest thereon, shall be
charged to the participant's accounts after
all other adjustments required under the
plan, but before any distribution pursuant
to subsection 7.4. A participant who has a
termination date under subparagraph 5.1(c)
need not repay the entire amount of the
loan by the end of the calendar month
beginning after his termination date, but
if payments are in default at the end of
any calendar month, such loan shall be
charged against the participant's accounts
as provided in the preceding sentence.
(g) In determining the adjusted net worth of
the trust fund as of each accounting date,
the committee shall disregard any
promissory notes held by the trustee
evidencing loans made to participants,
together with any interest and principal
payments on such loans received by the
trustee since the preceding accounting
date. For purposes of adjusting partic-
ipants' accounts under subsection 6.3, the
committee shall exclude from the credit
balance of a participant's accounts the
unpaid amount of any loan made to him
(disregarding any principal payments made
since the last preceding accounting date).
Interest paid by a participant on a loan
made to him under this subsection 7.10
shall be credited to the accounts of the
participant as of the accounting date which
ends the accounting period during which
such interest payment was made, after all
adjustments required under the plan as of
the date have been made.
(h) Notwithstanding any provision to the
contrary, the participant's ability to
withdraw amounts from his participant
contribution account under subsection 4.3
and from his prior plan account under
subsection 8.3 shall be restricted to the
extent that the outstanding principal and
interest due on a loan equals or exceeds
50% of his vested account balances.
7.11. Direct Transfer of Eligible Rollover
Distributions. Effective January 1, 1993, if payment of
benefits to a participant, a participant's surviving spouse, or
the spouse or former spouse of the participant who is an
alternate payee under a qualified domestic relations order (as
defined in Section 414(p) of the Code) constitutes an 'eligible
rollover distribution' under Section 402(c)(4) of the Code,
then the participant or the participant's spouse (or former
spouse) may elect to have such distribution paid directly to an
eligible retirement plan described in Section 402(c)(8)(B) of
the Code (except that in the case of an eligible rollover
distribution to a participant's surviving spouse on the death
of a participant, the definition of an eligible retirement plan
is limited to an individual retirement account or individual
retirement annuity). Each election by a participant under this
subsection shall be made at such time and in such manner as the
committee shall determine and shall be effective only in
accordance with such rules as shall be established from time to
time by the committee. Any election by a participant under
this subsection will be subject to the requirements of
subparagraph 7.4(a)(v) of the plan.
7.12 Withdrawal of Income Deferral Contributions.
With the consent of the committee, a participant may elect to
withdraw any income deferral contributions made by such par-
ticipant because of a "hardship" (as defined below) causing an
immediate and heavy financial need on the participant. For
purposes of this subsection a hardship shall include:
(a) Medical expenses incurred (or not yet
incurred but necessary to obtain such
medical care) by the participant, the
participant's spouse or the participant's
dependents (as defined in Section 152 of
the Internal Revenue Code) which are not
reimbursed by insurance or otherwise;
(b) Purchase of a principal residence for the
participant, excluding mortgage payments;
(c) Payment of tuition and related educational
fees for the next twelve months of post-
secondary education for the participant or
the participant's spouse, children or
dependents;
(d) The need to prevent the eviction of the
participant from his principal residence or
foreclosure under the mortgage on the
participant's principal residence;
(e) Casualty losses or catastrophes such as
flooding, hurricanes or tornadoes; or
(f) Any other hardship which in the opinion of
the committee creates an immediate and
heavy financial need on the participant.
A withdrawal will be considered necessary to satisfy an immedi-
ate and heavy financial need only if the participant represents
in writing to the committee that the need cannot reasonably be
relieved (i) through reimbursement or compensation by insurance
or otherwise, (ii) by liquidation of the employee's assets and
the assets of the employee's spouse and minor children that are
reasonably available to the employee, (iii) from other
available distributions and loans under this plan or any other
qualified retirement plan maintained by the employers or by
borrowing from commercial sources on reasonable commercial
terms in amounts sufficient to satisfy the need; or (iv) the
cessation of income deferral contributions or voluntary
contributions to the plan. Each such election shall be in
writing, shall be filed with the committee at such time and in
such manner as the committee shall determine and shall be
effective in accordance with such rules as the committee may
establish from time to time. Any withdrawal by a married
participant must be consented to in writing by the
participant's spouse, must acknowledge the effect of the
withdrawal and must be witnessed by a plan representative or
notary public.
SECTION 8
PRIOR PLAN ACCOUNT
8.1. Transfer of Prior Plan Balance. Each partici-
pant in the plan who, prior to July 1, 1987, was covered by the
Western Publishing Company Employees' Savings and Security Plan
("savings and security plan") has had his account balance under
such plan transferred in a lump sum to this plan. The balance
attributable to such participant's participation in such plan
(a "prior plan") will be subject to the provisions of this
section.
8.2. Prior Plan Accounts. All such amounts which
have been transferred to this plan from a prior plan will be
held in a separate prior plan account established for the
participant which will be fully vested and nonforfeitable at
all times. Such prior plan account will be adjusted from time
to time in accordance with the provisions of Section 6 and,
except as otherwise provided in subsection 8.3, will be
distributed in accordance with the provisions of Section 7.
Appropriate subaccounts will be maintained reflecting each
participant's interest in a prior plan.
8.3. Withdrawals from Prior Plan Accounts. No
withdrawals of any portion of a participant's prior plan
account will be permitted prior to distribution in accordance
with Section 7 of the plan unless such amounts are attributable
to such participant's participation in the Savings and Security
Plan or unless such amounts are attributable "rollover" amounts
as described in subsection 8.4. As of any day during any plan
year quarter (but not more frequently than once in each plan
year quarter), a participant may withdraw all or any portion of
the net credit balance in his prior plan account reflecting his
participation in the savings and security plan.
8.4. Other Transferred Amounts and Rollovers. Sub-
ject to such rules and requirements as the committee may estab-
lish, a participant may direct the trustee to receive a "roll-
over" amount either in the form of a direct rollover (as
defined in Section 401(a)(31) of the Code) or an indirect
rollover as defined in Section 402(c)(5) or Section 408(d)(3)
of the Code attributable to such participant's participation in
any other qualified pension or profit sharing plan under
Section 401(a) of the Code. Any such rollover amount shall be
credited to a prior plan account and will be subject to the
provisions of subsection 8.2. At the direction of a
participant and with the consent of the committee, the trustee,
under this plan, may receive assets held for a participant
under any other plan pursuant to a trust-to-trust transfer
between such qualified pension or profit sharing plan and this
plan. Any such transferred amounts will be credited to a prior
plan account and shall be subject to the provisions of subsec-
tion 8.2.
SECTION 9
THE COMMITTEE
9.1. Membership. A committee consisting of three or
more persons (who may but need not be employees of the employ-
ers) shall be appointed by the company. The secretary of the
company shall certify to the trustee from time to time the
appointment to (and termination of) office of each member of
the committee and the person who is selected as secretary of
the committee.
9.2. Committee's General Powers, Rights, and Duties.
Except as otherwise specifically provided and in addition to
the powers, rights, and duties specifically given to the com-
mittee elsewhere in the plan and the trust agreement, the com-
mittee shall have the following powers, rights, and duties:
(a) To select a secretary, if it believes it
advisable, who may but need not be a com-
mittee member.
(b) To determine all questions arising under
the plan, including the power to determine
the rights or eligibility of employees or
participants and any other persons to bene-
fit under the plan, and the amount of their
benefits under the plan, and to remedy
ambiguities, inconsistencies, or omissions.
(c) To adopt such rules of procedures and regu-
lations as in its opinion may be necessary
for the proper and efficient administration
of the plan and as are consistent with the
plan and trust agreement.
(d) To enforce the plan in accordance with the
terms of the plan and the trust agreement
and the rules and regulations adopted by
the committee.
(e) To direct the trustee as respects payments
or distributions from the trust fund in
accordance with the provisions of the plan.
(f) To furnish the employers with such infor-
mation as may be required by them for tax
or other purposes in connection with the
plan.
(g) To employ agents, attorneys, accountants,
or other persons (who also may be employed
by the employers) and to allocate or dele-
gate to them such powers, rights, and du-
ties as the committee may consider neces-
sary or advisable to properly carry out
administration of the plan, provided that
such allocation or delegation and the ac-
ceptance thereof by such agents, attorneys,
accountants, or other persons shall be in
writing.
9.3. Manner of Action. During a period in which two
or more committee members are acting, the following provisions
apply where the context admits:
(a) A committee member by writing may delegate
any or all of his rights, powers, duties,
and discretions to any other member, with
the consent of the latter.
(b) The committee members may act by meeting or
by writing signed without meeting, and may
sign any document by signing one document
or concurrent documents.
(c) An action or a decision of a majority of
the members of the committee as to a matter
shall be as effective as if taken or made
by all members of the committee.
(d) If, because of the number qualified to act,
there is an even division of opinion among
the committee members as to a matter, a
disinterested party selected by the commit-
tee shall decide the matter, and his deci-
sion shall control.
(e) Except as otherwise provided by law, no
member of the committee shall be liable or
responsible for an act or omission of the
other committee members in which the former
has not concurred.
(f) The certificate of the secretary of the
committee or of a majority of the committee
members that the committee has taken or
authorized any action shall be conclusive
in favor of any person relying on the cer-
tificate.
9.4. Interested Committee Member. If a member of
the committee is also a participant in the plan, he may not
decide or determine any matter or question concerning distribu-
tions of any kind to be made to him or the nature or mode of
settlement of his benefits unless such decision or determina-
tion could be made by him under the plan if he were not serving
on the committee.
9.5. Resignation or Removal of Committee Members. A
member of the committee may be removed by the company at any
time by ten days' prior written notice to him and the other
members of the committee. A member of the committee may resign
at any time by giving ten days' prior written notice to the
company and the other members of the committee. The company
may fill any vacancy in the membership of the committee provid-
ed, however, that if a vacancy reduces the membership of the
committee to less than three, such vacancy shall be filled as
soon as practicable. The company shall give prompt written
notice thereof to the other members of the committee. Until
any such vacancy is filled, the remaining members may exercise
all of the powers, rights, and duties conferred on the commit-
tee.
9.6. Committee Expenses. All costs, charges, and
expenses reasonably incurred by the committee will be paid by
the employers in such proportions as the company may direct.
No compensation will be paid to a committee member as such.
9.7. Information Required by Committee. Each person
entitled to benefits under the plan shall furnish the committee
with such documents, evidence, data, or information as the
committee considers necessary or desirable for the purpose of
administering the plan. The employers shall furnish the com-
mittee with such data and information as the committee may deem
necessary or desirable in order to administer the plan. The
records of the employers as to an employee's or participant's
period of employment, termination of employment, and the reason
therefor, leave of absence, reemployment, compensation, and
adjusted compensation, will be conclusive on all persons unless
determined to the committee's satisfaction to be incorrect.
9.8. Uniform Rules. The committee shall administer
the plan on a reasonable and nondiscriminatory basis and shall
apply uniform rules to all persons similarly situated.
9.9. Review of Benefit Determinations. The commit-
tee will provide notice in writing to any participant or bene-
ficiary whose claim for benefits under the plan is denied, and
the committee shall afford such participant or beneficiary a
full and fair review of its decision if so requested.
9.10. Committee's Decision Final. Subject to appli-
cable law, any interpretation of the provisions of the plan and
any decisions on any matter within the discretion of the com-
mittee made in good faith shall be binding on all persons. A
misstatement or other mistake of fact shall be corrected when
it becomes known, and the committee shall make such adjustment
on account thereof as it considers equitable and practicable.
SECTION 10
GENERAL PROVISIONS
10.1. Additional Employers. Any United States sub-
sidiary of the company may adopt the plan and become a party to
the trust agreement by:
(a) Filing with the company, the committee, and
the trustee a written instrument to that
effect; and
(b) Filing with the committee and the trustee a
certified copy of a resolution of the com-
pany's Board of Directors consenting to
such action.
10.2. Action by Employers. Any action required or
permitted to be taken by an employer under the plan shall be by
resolution of its Board of Directors, by resolution of a duly
authorized committee of its Board of Directors, or by a person
or persons authorized by resolution of its Board of Directors
or such committee.
10.3. Waiver of Notice. Any notice required under
the plan may be waived by the person entitled to such notice.
10.4. Controlling Law. Except to the extent super-
seded by laws of the United States, the laws of Wisconsin shall
be controlling in all matters relating to the plan.
10.5. Employment Rights. The plan does not consti-
tute a contract of employment, and participation in the plan
will not give any employee the right to be retained in the
employ of an employer, nor any right or claim to any benefit
under the plan, unless such right or claim has specifically
accrued under the terms of the plan.
10.6. Litigation by Participants. If a legal action
begun against the trustee, an employer or the committee or any
member thereof by or on behalf of any person results adversely
to that person, or if a legal action arises because of con-
flicting claims to a participant's or other person's benefits,
the cost to the trustee, the employers, or the committee or any
member thereof of defending the action will be charged to the
extent permitted by law to the sums, if any, which were in-
volved in the action or were payable to the person concerned.
10.7. Interests Not Transferable. The interests of
persons entitled to benefits under the plan are not subject to
their debts or other obligations and, except as may be required
by the tax withholding provisions of the Internal Revenue Code
or any state's income tax act or pursuant to any qualified
domestic relations order as defined in Section 414(p) of the
Code, may not be voluntarily or involuntarily sold,
transferred, alienated, assigned or encumbered, except as
otherwise provided in Section 401(a)(13) of the Code.
Notwithstanding any other provisions of the plan, the committee
may direct the trustee to distribute benefits to an alternate
payee on the earliest date specified in a qualified domestic
relations order, without regard to whether such distribution is
made or commences prior to the participant's earliest
retirement age (as defined in Section 414(p)(4)(B) of the Code)
or the earliest date that the participant could commence
receiving benefits under the plan.
10.8. Absence of Guaranty. Neither the committee
nor the employers in any way guarantee the trust fund from loss
or depreciation. The liability of the trustee or the committee
to make any payment under the plan will be limited to the as-
sets held by the trustee which are available for that purpose.
10.9. Evidence. Evidence required of anyone under
the plan may be by certificate, affidavit, document, or other
information which the person acting on it considers pertinent
and reliable, and signed, made, or presented by the proper
party or parties.
SECTION 11
AMENDMENT AND TERMINATION
11.1. Amendment. While the employers expect and
intend to continue the plan, the company reserves the right to
amend the plan from time to time, except as follows:
(a) The duties and liabilities of the committee
cannot be changed substantially without its
consent;
(b) No amendment shall reduce the accrued bene-
fit (as defined in Section 411(d)(6) of the
Code) the participant would be entitled to
receive if he had resigned from the employ
of all the employers on the date of the
amendment; and
(c) Except as provided in subsection 3.8, under
no condition shall an amendment result in
the return or repayment to any employer of
any part of the trust fund or the income
from it or result in the distribution of
the trust fund for the benefit of anyone
other than persons entitled to benefits
under the plan.
11.2. Termination. The plan will terminate as to
all employees (i) on any date specified by the company if 30
days' advance written notice of the termination is given to the
committee, the trustee, and the other employers, or (ii) on the
date that contributions by all employers are completely discon-
tinued under the plan. A partial termination of the plan may
occur as to an individual employer or as to a group or class of
employees on any date so specified by the company or as re-
quired by law.
11.3. Reorganizations. No plan termination will
occur solely as a result of the judicially declared bankruptcy
or insolvency of an employer, or the dissolution, merger, con-
solidation, or reorganization of an employer, or the sale by
that employer of all or substantially all of its assets, or the
termination or complete discontinuance of contributions by any
one employer. However, arrangement may be made with the con-
sent of the company whereby the plan will be continued by any
successor to that employer or any purchaser of all or substan-
tially all of its assets, in which case the successor or pur-
chaser will be submitted for that employer under the plan and
trust agreement provided that, if an employer is merged, dis-
solved, or in any other way organized into, or consolidated
with, any other employer, the plan as applied to the former
employer will automatically continue in effect without a termi-
nation thereof.
11.4. Vesting and Distribution on Termination. On
termination or partial termination of the plan, the date of
termination will be a "special accounting date" and, after all
adjustments then required have been made, each affected partic-
ipant's benefits will be nonforfeitable. If, on termination of
the plan, the participant remains an employee of an employer,
the amount of his benefits shall be retained in the trust fund
until his termination of employment with all of the employers
and then shall be paid to him in accordance with the provisions
of subsection 7.4. In the event that the participant's employ-
ment with all of the employers is terminated coincident with
the termination of the plan, his benefits shall be paid to him
in a lump sum, subject to the provisions of subsection 7.4.
11.5. Notice of Amendment or Termination. Partici-
pants will be notified of an amendment or termination of the
plan within a reasonable time.
11.6. Plan Merger, Consolidation, Etc. In the case
of any merger or consolidation of this plan with, or the trans-
fer of assets or liabilities of this plan to any other plan,
each participant's benefits if such plan terminated immediately
after such merger, consolidation, or transfer shall be equal to
or greater than the benefits he would have been entitle to
receive if this plan had terminated immediately before the
merger, consolidation, or transfer.
SECTION 12
TOP-HEAVY RULES
12.1. Purpose and Effect. The purpose of this sec-
tion is to comply with the requirements of Section 416 of the
Code. The provisions of this section shall be effective for
each plan year in which the plan is a "top-heavy plan" within
the meaning of Section 416(g) of the Code.
12.2. Top-Heavy Plan. In general, the plan will be
a top-heavy plan for any plan year if, in the case of the first
plan year, on the last day of such plan year, and in the case
of any subsequent plan year, as of the last day of the preced-
ing plan year (the "determination date"), the sum of the
amounts in (a), (b), and (c) below for key employees (defined
below and in Section 416(i)(1) of the Code) exceeds sixty per-
cent (60%) of the sum of such amounts for all employees who are
covered by a defined contribution plan or defined benefit plan
which is aggregated in accordance with subsection 12.4 below:
(a) The aggregate account balances of partici-
pants under this plan.
(b) The aggregate account balances of partici-
pants under any other defined contribution
plan included in subsection 12.4.
(c) The present value of cumulative accrued
benefits of participants calculated under
any defined benefit plan included in sub-
section 12.4.
In determining the account balances of participants under this
plan, (i) such participant's account balances shall be in-
creased by the aggregate distributions, if any, made with re-
spect to the participant during the five-year period ending on
the determination date, (ii) the account balances of a partici-
pant who was previously a key employee, but who is no longer a
key employee, shall be disregarded, (iii) the accounts of a
beneficiary of a participant shall be considered accounts of
the participant, and (iv) the account balances of a participant
who has not performed any services for an employer during the
5-year period ending on the determination date shall be disre-
garded.
12.3. Key Employee. In general, a "key employee" is
an employee who, at any time during the plan year ending on the
determination date or during any of the four preceding plan
years, is:
(a) an officer of employer or a controlled
group member whose compensation (as defined
in subparagraph 6.5(a)) exceeds fifty per-
cent (50%) of the dollar limitation speci-
fied in Section 415(b)(1)(A) of the Code
for a plan year (including only the greater
of three or ten percent of the total
employees of the employer and controlled
group members but not exceeding 50);
(b) one of the ten employees owning the largest
interests in an employer and all other
controlled group members in excess of a
one-half percent interest and whose compen-
sation [as defined in subparagraph 6.5(a)]
exceeds the dollar limitation specified in
subparagraph 6.5(a);
(c) a five percent (5%) owner of an employer or
controlled group member; or
(d) a one percent (1%) owner of an employer or
controlled group member receiving annual
compensation from the employer and all
other controlled group members of more than
$150,000.
A "key employee" for purposes of any other plan included in
subsection 12.4 means a key employee as determined in accor-
dance with such plan.
12.4. Aggregated Plans. Each other defined contri-
bution plan and defined benefit plan maintained by an employer
or controlled group member which covers a "key employee" as a
participant or which is maintained by such employer or control-
led group member in order for a plan covering a key employee to
be qualified shall be aggregated in determining whether this
plan is top-heavy. In addition, any other defined contribution
or defined benefit plan or an employer or controlled group mem-
ber may be included if all such plans which are included when
aggregated will not discriminate in favor of officers, share-
holders, or highly compensated employees.
12.5. Minimum Contribution. For any plan year in
which the plan is a top-heavy plan, employer contributions and
forfeitures (other than income deferral contributions) credited
to each participant who is not a key employee shall not be less
than 3 percent of such participant's adjusted compensation for
that year, except that, in no event shall the employer contri-
butions and forfeitures credited in any year to a participant
who is not a key employee (expressed as a percentage of such
participant's adjusted compensation) exceed the maximum employ-
er contributions, income deferral contributions and forfeitures
credited in that year to a key employee expressed as a
percentage of such key employee's adjusted compensation up to
$200,000 or such greater amount as may be determined by the
Commissioner of Internal Revenue for that year.
12.6. Maximum Earnings. For any plan year in which
the plan is a top-heavy plan, a participant's adjusted compen-
sation in excess of $200,000 (or such greater amount as may be
determined by the Commissioner of Internal Revenue for that
plan year) shall be disregarded for purposes of subsections
3.4, and 6.5 of the plan.
12.7. No Duplication of Benefits. If a participant
is covered by another plan maintained by an employer or con-
trolled group member, appropriate modification may be made in
the plan in accordance with regulations issued by the Internal
Revenue Service to prevent inappropriate duplication of minimum
contributions or benefits under Section 416 of the Code.
12.8. Adjustment of Combined Benefit Limitations.
For any plan year in which the plan is a top-heavy plan, the
determination of the defined contribution plan fraction and
defined benefit plan fraction under subsection 6.5 of the plan
shall be adjusted in accordance with the provisions of Section
416(h) of the Code.
SUPPLEMENT A
TO
GOLDEN RETIREMENT SAVINGS PROGRAM
1. This Supplement A to the Golden Retirement Savings Program
(the "plan") extends the plan to certain employees and
former employees who are included in the following groups
or classes of employees employed by Western Publishing
Company, Inc. (the "employer'), as of the effective dates
specified below:
Group or Class Effective Date
-------------- --------------
(a) Hourly rated Employees who July 1, 1987
are not represented by a
collective bargaining agent
and certain other former
employees as designated by the company.
(b) Employees who are members of the July 1, 1988
collective bargaining unit
represented by Local 254M of
the Graphic Communications
International Union.
(c) Employees who are members of the July 1, 1987
collective bargaining unit
represented by Local 223B of
the Graphic Communications
International Union.
(d) Employees who are members of the July 1, 1987
collective bargaining unit
represented by Local 309 of
the International Union of
Operating Engineers.
(e) Employees who are members of the July 1, 1987
collective bargaining unit
represented by Local 43 of
the International Brotherhood of
Teamsters, Chauffeurs, Warehousemen,
and Helpers of America.
(f) Employees who are members of the July 1, 1988
collective bargaining unit
represented by Local 1007 of the
International Union, United Automobile,
Aerospace & Agricultural Implement
Workers of America, UAW.
(g) Former employees who are members July 1, 1988
of the collective bargaining unit
represented by Local 62B of the
Graphic Communications
International Union.
2. All provisions of the plan to the extent such provisions
are not inconsistent with this Supplement A shall apply to
plan participants covered by this Supplement A.
3. This Supplement A is effective as of July 1, 1988.
TENTH AMENDMENT
OF
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
WHEREAS, this corporation maintains the Penn
Corporation Comprehensive Security Program (the "plan"); and
WHEREAS, further amendment of the plan now is
considered desirable;
NOW, THEREFORE, IT IS RESOLVED that by virtue and
in exercise of the power reserved to this corporation under
subsection 10.1 of the plan, the plan, as previously amended,
be and it hereby is further amended, effective as of April 1,
1993, in the following particulars:
1. By deleting subparagraph 3.5(c)(iv) of the plan.
2. By substituting the reference "(iii)" for the
reference "(iv)" where the latter reference appears in
subsection 3.6 of the plan.
3. By substituting the following for subsection 7.3
of the plan:
"7.3. Forfeitures. The amount by which a
participant's employer contribution account is
reduced under subsection 7.2 shall be treated
as a 'forfeiture' on the earlier of the date of
distribution of such participant's account balances
or the date such participant incurs five consecu-
tive one-year breaks in employment (as defined in
subparagraph 2.2(g)). Prior to that date, such
account will continue to be adjusted pursuant to
the provisions of subparagraph 6.4(b). Forfeitures
attributable to a participant's employer contribu-
tion account will be used to reduce the employer's
contribution otherwise required under subsection 3.1
and shall be allocated and credited to the employer
contribution accounts of other participants in ac-
cordance with subsection 6.5. If a participant is
reemployed by an employer or controlled group member
before he incurs five consecutive one-year breaks in
employment, any forfeitures attributable to such par-
ticipant shall be recredited to such participant's
appropriate account on the accounting date coincident
with or next following the date of such participant's
reemployment if the participant repays the total
amount of any previous distribution attributable to
his employer contribution account within five years
of his date of reemployment. Such participant's
account shall be recredited from current unallocated
forfeitures or, to the extent there are insufficient
unallocated forfeitures for this purpose, from
supplemental employer contributions necessary to
restore such amount. The actual amount restored to
such participant's account shall be the amount of
such forfeitures, without investment adjustments."
4. By substituting the following for that portion of
subsection 7.4 of the plan immediately preceding subparagraph
7.4(a) thereof:
"7.4. Manner of Distribution. After each
participant's termination date, and subject to the
conditions set forth below and in subsections 7.5
and 7.12, distribution of the net credit balance in
the participant's accounts will be made to or for
the benefit of the participant or, in the case of
his death, to or for the benefit of his beneficiary,
by one or more of the following methods:"
5. By adding the following new subsection 7.12 to
the plan immediately after subsection 7.11 thereof:
"7.12. Direct Transfer of Eligible Rollover
Distributions. Effective January 1, 1993, if pay-
ment of benefits to a participant, a participant's
surviving spouse, or the spouse or former spouse of
the participant who is an alternate payee under a
qualified domestic relations order (as defined in
Section 414(p) of the Code) constitutes an 'eligible
rollover distribution' under Section 402(c)(4) of
the Code, then the participant or the participant's
spouse (or former spouse) may elect to have such
distribution paid directly to an eligible retirement
plan described in Section 402(c)(8)(B) of the Code
(except that in the case of an eligible rollover
distribution to a participant's surviving spouse on
the death of a participant, the definition of an
eligible retirement plan is limited to an individual
retirement account or individual retirement annuity).
Each election by a participant under this subsection
shall be made at such time and in such manner as the
committee shall determine and shall be effective only
in accordance with such rules as shall be established
from time to time by the committee. Any election by
a participant under this subsection will be subject
to the requirements of subparagraph 7.4(a)(v) of the
plan."
6. By adding the following new subsection 7.13 to
the plan immediately after subsection 7.12 thereof:
"7.13 Withdrawal of Income Deferral
Contributions. With the consent of the committee, a
participant may elect to withdraw any income deferral
contributions made by such participant because of a
"hardship" (as defined below) causing an immediate
and heavy financial need on the participant. For
purposes of this subsection a hardship shall include:
(a) Medical expenses incurred (or not
yet incurred but necessary to obtain
such medical care) by the participant,
the participant's spouse or the par-
ticipant's dependents (as defined in
Section 152 of the Code) which are not
reimbursed by insurance or otherwise;
(b) Purchase of a principal residence for
the participant, excluding mortgage
payments;
(c) Payment of tuition and related
educational fees for the next twelve
months of post-secondary education for
the participant or the participant's
spouse, children or dependents;
(d) The need to prevent the eviction of
the participant from his principal
residence or foreclosure under the
mortgage on the participant's
principal residence;
(e) Casualty losses or catastrophes such
as flooding, hurricanes or tornadoes;
or
(f) Any other hardship which in the
opinion of the committee creates an
immediate and heavy financial need on
the participant.
A withdrawal will be considered necessary to satisfy
an immediate and heavy financial need only if the
participant represents in writing to the commit-
tee that the need cannot reasonably be relieved
(i) through reimbursement or compensation by in-
surance or otherwise, (ii) by liquidation of the
employee's assets and the assets of the employee's
spouse and dependents (as defined in Section 152
of the Code) that are reasonably available to the
employee, (iii) from other available distributions
and loans under this plan or any other qualified
retirement plan maintained by the employers or by
borrowing from commercial sources on reasonable
commercial terms in amounts sufficient to satisfy
the need; or (iv) the cessation of income deferral
contributions or voluntary contributions to the plan.
Each such election shall be in writing, shall be
filed with the committee at such time and in such
manner as the committee shall determine and shall
be effective in accordance with such rules as the
committee may establish from time to time. Any
withdrawal by a married participant must be con-
sented to in writing by the participant's spouse,
must acknowledge the effect of the withdrawal and
must be witnessed by a plan representative or notary
public."
7. By substituting the following for subsection 9.7
of the plan:
"9.7. Interests Not Transferable. The in-
terests of persons entitled to benefits under the
plan are not subject to their debts or other obli-
gations and, except as may be required by the tax
withholding provisions of the Code or any state's
income tax act or pursuant to any qualified domestic
relations order as defined in Section 414(p) of the
Code, may not be voluntarily or involuntarily sold,
transferred, alienated, assigned or encumbered, ex-
cept as otherwise provided in Section 401(a)(13) of
the Code. Notwithstanding any other provisions of
the plan, the committee may direct the trustee to
distribute benefits to an alternate payee on the
earliest date specified in a qualified domestic
relations order, without regard to whether such
distribution is made or commences prior to the
participant's earliest retirement age (as defined
in Section 414(p)(4)(B) of the Code) or the earliest
date that the participant could commence receiving
benefits under the plan."
* * *
I, James A. Cohen, Secretary of Penn Corporation,
hereby certify that the foregoing is a correct copy of a
resolution duly adopted by the Board of Directors of said
corporation on December 28, 1993, and that said resolution
has not been changed or repealed.
Dated this 28 day of December, 1993.
/s/ James A. Cohen
--------------------------------
Secretary as Aforesaid
(Corporate Seal)
* * *
The undersigned, as committee members under the Penn
Corporation Comprehensive Security Program, hereby acknowledge
receipt of a certified copy of the foregoing amendment and
hereby consent thereto, this 28th day of December, 1993.
/s/ Stuart Turner
---------------------------------
/s/ James A. Cohen
---------------------------------
/s/ Steven M. Grossman
---------------------------------
/s/ Hal Weiss
---------------------------------
As Committee Members As Aforesaid
FOURTH AMENDMENT
OF
BEACH PRODUCTS (DIVISION OF PENN CORPORATION)
RETIREMENT SAVINGS PROGRAM
WHEREAS, this corporation maintains the Beach
Products (Division of Penn Corporation) Retirement Savings
Program (the "plan"); and
WHEREAS, further amendment of the plan now is
considered desirable;
NOW, THEREFORE, IT IS RESOLVED that by virtue and
in exercise of the power reserved to this corporation under
subsection 10.1 of the plan, the plan, as previously amended,
be and it hereby is further amended, effective as of April 1,
1993, in the following particulars:
1. By substituting a period for the semicolon at
the end of subparagraph 3.4(iii) of the plan and by deleting
subparagraph 3.4(iv) of the plan.
2. By substituting the reference "(iii)" for
the reference "(iv)" where the latter reference appears in
subsection 4.4 of the plan.
3. By substituting the following for that portion of
subsection 7.4 of the plan immediately preceding subparagraph
7.4(a) thereof:
"7.4. Manner of Distribution. After each
participant's termination date, and subject to the
conditions set forth below and in subsections 7.5
and 7.11, distribution of the net credit balance in
the participant's accounts will be made to or for
the benefit of the participant or, in the case of
his death, to or for the benefit of his beneficiary,
by one or more of the following methods:"
4. By adding the following new subsection 7.11 to
the plan immediately after subsection 7.10 thereof:
"7.11. Direct Transfer of Eligible Rollover
Distributions. Effective January 1, 1993, if pay-
ment of benefits to a participant, a participant's
surviving spouse, or the spouse or former spouse of
the participant who is an alternate payee under a
qualified domestic relations order (as defined in
Section 414(p) of the Code) constitutes an 'eligible
rollover distribution' under Section 402(c)(4) of
the Code, then the participant or the participant's
spouse (or former spouse) may elect to have such
distribution paid directly to an eligible retirement
plan described in Section 402(c)(8)(B) of the Code
(except that in the case of an eligible rollover
distribution to a participant's surviving spouse
on the death of a participant, the definition of an
eligible retirement plan is limited to an individual
retirement account or individual retirement annuity).
Each election by a participant under this subsection
shall be made at such time and in such manner as the
committee shall determine and shall be effective only
in accordance with such rules as shall be established
from time to time by the committee. Any election by
a participant under this subsection will be subject
to the requirements of subparagraph 7.4(a)(v) of the
plan."
5. By adding the following new subsection 7.12 to
the plan immediately after subsection 7.11 thereof:
"7.12 Withdrawal of Income Deferral
Contributions. With the consent of the committee, a
participant may elect to withdraw any income deferral
contributions made by such participant because of a
"hardship" (as defined below) causing an immediate
and heavy financial need on the participant. For
purposes of this subsection a hardship shall include:
(a) Medical expenses incurred (or not
yet incurred but necessary to obtain
such medical care) by the participant,
the participant's spouse or the par-
ticipant's dependents (as defined in
Section 152 of the Code) which are not
reimbursed by insurance or otherwise;
(b) Purchase of a principal residence for
the participant, excluding mortgage
payments;
(c) Payment of tuition and related
educational fees for the next twelve
months of post-secondary education for
the participant or the participant's
spouse, children or dependents;
(d) The need to prevent the eviction of
the participant from his principal
residence or foreclosure under the
mortgage on the participant's
principal residence;
(e) Casualty losses or catastrophes such
as flooding, hurricanes or tornadoes;
or
(f) Any other hardship which in the
opinion of the committee creates an
immediate and heavy financial need
on the participant.
A withdrawal will be considered necessary to
satisfy an immediate and heavy financial need only
if the participant represents in writing to the
committee that the need cannot reasonably be re-
lieved (i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the
employee's assets and the assets of the employee's
spouse and dependents (as defined in Section 152
of the Code) that are reasonably available to the
employee, (iii) from other available distributions
and loans under this plan or any other qualified
retirement plan maintained by the employers or by
borrowing from commercial sources on reasonable
commercial terms in amounts sufficient to satisfy
the need; or (iv) the cessation of income deferral
contributions or voluntary contributions to the plan.
Each such election shall be in writing, shall be
filed with the committee at such time and in such
manner as the committee shall determine and shall
be effective in accordance with such rules as the
committee may establish from time to time. Any
withdrawal by a married participant must be con-
sented to in writing by the participant's spouse,
must acknowledge the effect of the withdrawal and
must be witnessed by a plan representative or notary
public."
6. By substituting the following for the first
sentence of Section 8 of the plan:
"Subject to such rules and requirements as the
committee may establish, a participant may direct
the trustee to receive a 'rollover' amount either in
the form of a direct rollover (as defined in Section
401(a)(31) of the Code) or an indirect rollover as
defined in Section 402(c) and Section 408(d)(3) of
the Code attributable to such participant's partic-
ipation in any other qualified pension or profit
sharing plan under Section 401(a) of the Code."
7. By substituting the following for subsection 10.6
of the plan:
"10.6. Interests Not Transferable. The
interests of persons entitled to benefits under
the plan are not subject to their debts or other
obligations and, except as may be required by the
tax withholding provisions of the Code or any state's
income tax act or pursuant to any qualified domestic
relations order as defined in Section 414(p) of the
Code, may not be voluntarily or involuntarily sold,
transferred, alienated, assigned or encumbered,
except as otherwise provided in Section 401(a)(13)
of the Code. Notwithstanding any other provisions
of the plan, the committee may direct the trustee
to distribute benefits to an alternate payee on
the earliest date specified in a qualified domestic
relations order, without regard to whether such
distribution is made or commences prior to the
participant's earliest retirement age (as defined
in Section 414(p)(4)(B) of the Code) or the earliest
date that the participant could commence receiving
benefits under the plan."
* * *
I, James A. Cohen, Secretary of Penn Corporation,
hereby certify that the foregoing is a correct copy of a
resolution duly adopted by the Board of Directors of said
corporation on December 28, 1993, and that said resolution
has not been changed or repealed.
Dated this 28 day of December, 1993.
/s/ James A. Cohen
--------------------------------
Secretary as Aforesaid
(Corporate Seal)
* * *
The undersigned, as committee members under the Beach
Products (Division of Penn Corporation) Retirement Savings
Program, hereby acknowledge receipt of a certified copy of the
foregoing amendment and hereby consent thereto, this 28th day
of December, 1993.
/s/ Stuart Turner
---------------------------------
/s/ James A. Cohen
---------------------------------
/s/ Steven M. Grossman
---------------------------------
/s/ Hal Weiss
---------------------------------
As Committee Members As Aforesaid
AMENDMENT No. 1
AMENDMENT No. 1 dated as of July 31, 1993 ("this Amendment No. 1"),
between WESTERN PUBLISHING GROUP, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (the
"Company"); each of the banks listed on the signature pages hereof
(individually, a "Bank" and, collectively, the "Banks"); FLEET BANK, a
New York bank, as agent for the Banks (in such capacity, together with
its successors in such capacity, the "Agent"); and THE BANK OF NEW YORK,
a New York bank, as co-agent for the Banks (in such capacity, together
with its successors in such capacity, the "Co-Agent").
The Company, the Banks, the Agent and the Co-Agent are parties to a
Credit Agreement dated as of November 12, 1992 (as heretofore modified
and supplemented and in effect on the date hereof, the "Credit
Agreement"), providing, subject to the terms and conditions thereof, for
extensions of credit (by making of loans and issuing letters of credit)
by the Banks to the Company in an aggregate principal or face amount not
exceeding $200,000,000. The Company, the Banks, the Agent and the
Co-Agent wish to amend the Credit Agreement in certain respects, and
accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment
No. 1, terms defined in the Credit Agreement and are used herein as
defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date
hereof, the Credit Agreement shall be amended as follows:
A. The definition of Applicable Margin appearing in Section 1.01 of the
Credit Agreement is hereby amended and restated in its entirety to read
as follows:
"Applicable Margin" shall mean, with respect to Eurodollar Loans during
any fiscal quarter of the Company, a rate per annum equal to (i) 0.75%
if the Interest Coverage Ratio for the then most recently ended period
of four consecutive fiscal quarters of the Company shall be greater than
or equal to 3.00 to 1, or (ii) 1.00% if the Interest Coverage Ratio for
the then most recently ended period of four consecutive fiscal quarters
of the Company shall be less than 3.00 to 1. During any period after the
commencement of a fiscal quarter but prior to the delivery of the
certificate of a senior financial officer of the Company which is to
accompany the financial statements delivered pursuant to Section 8.01(a)
or (b) (as the case may be) with respect to the immediately preceding
fiscal period (any such period being hereinafter called a "Gap Period"),
interest on each Eurodollar Loan shall be paid at the Eurodollar Rate
plus the Applicable Margin as in effect at the end of the immediately
preceding fiscal quarter. If such certificate of a senior financial
officer of the Company, when delivered to the Agent, demonstrates an
Interest Coverage Ratio requiring a change in the Applicable Margin,
such change shall be retroactive to the beginning of such Gap Period. If
such change in the Applicable Margin results in additional amounts of
interest being payable by the Company, such amounts shall be immediately
due and payable. If such change in the Applicable Margin results in an
overpayment of interest by the Company, each Bank shall promptly return
(through the Agent) to the Company the amount of overpayment paid to
such Bank.
B. Section 8.12 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
8.12 Interest Coverage Ratio. The Company will not permit the Interest
Coverage Ratio for any period of four consecutive fiscal quarters of the
Company set forth below to be less than the ratio set forth below
opposite such period of four consecutive fiscal quarters:
Period of Four Consecutive
Fiscal Quarters ending on Ratio
-------------------------- -----
July 31, 1993 2.15 to 1
October 30, 1993 2.25 to 1
January 29, 1994 2.35 to 1
April 30, 1994 2.65 to 1
July 30, 1994 and each fiscal
quarter thereafter 3.00 to 1
Section 3. Representations and Warranties. The Company represents and
warrants to the Banks that the representations and warranties set forth
in Section 7 of the Credit Agreement are true and complete in all
material respects on the date hereof as if made on and as of the date
hereof and as if each reference in said Section 7 to "this Agreement"
included reference to this Amendment No. 1 (except to the extent that
such representations and warranties expressly relate to an earlier date).
Section 4. Condition Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon execution and delivery of
this Amendment No. 1 by the Company and by the Majority Banks.
Section 5. Expenses. Without limiting its obligations under Section
11.03 of the Credit Agreement, the Company agrees to pay, promptly
following demand, all reasonable out-of-pocket costs and expenses of the
Agent and the Banks (including the fees and disbursements of Whitman &
Ransom, special New York counsel to the Banks) incurred in connection
with the negotiation, preparation, execution and delivery of this
Amendment No. 1.
Section 6. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This
Amendment No. 1 may be executed in any number of counterparts, all of
which taken together shall constitute one and the same amendatory
instrument and any of the parties hereto may execute this Amendment No. 1
by signing any such counterpart. This Amendment No. 1 shall be
governed by, and construed in accordance with, the law of the State on
New York, without reference to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be duly executed as of the day and year first above written.
WESTERN PUBLISHING GROUP, INC.
By /s/ Stuart Turner
---------------------
Title: Treasurer
FLEET BANK
By /s/ Peter C. Hall
---------------------
Title: Assistant Vice President
THE BANK OF NEW YORK
By /s/ David K. Nichols
---------------------
Title: Senior Vice President
CREDIT LYONNAIS
NEW YORK BRANCH
By /s/ Sebastian Rocco
---------------------
Title: First Vice President
CAYMAN ISLAND BRANCH
By /s/ Sebastian Rocco
---------------------
Title: First Vice President
THE DAIWA BANK LTD.
By /s/ James H. Broadley
---------------------
Title: Vice President
By /s/ Barry W. Henry
---------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ Bryan T. Denney
---------------------
Title: Banking Officer
NATIONAL WESTMINSTER BANK USA
By /s/ Phillip H. Sorace
---------------------
Title: Vice President
STANDARD CHARTERED BANK
By /s/ Gerard Lob
---------------------
Title: Vice President
By /s/ K. McDavid
---------------------
Title: Assistant Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By /s/ Lou D. Banack
---------------------
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Anne K. Helgen
---------------------
Title: Director
FLEET BANK, as Agent
By /s/ Peter C. Hall
---------------------
Title: Assistant Vice President
THE BANK OF NEW YORK, as Co-Agent
By /s/ David K. Nichols
---------------------
Title: Senior Vice President
AMENDMENT No. 2
AMENDMENT No. 2 dated as of October 30, 1993 ("this Amendment No. 2"),
between WESTERN PUBLISHING GROUP, INC., a corporation duly organized and
validly existing under the laws of the State of Delaware (the
"Company"); each of the banks listed on the signature pages hereto
(individually, a "Bank" and, collectively, the "Banks"); FLEET BANK, a
New York bank, as agent for the Banks (in such capacity, together with
its successors in such capacity, the "Agent"); and THE BANK OF NEW YORK,
a New York bank, as co-agent for the Banks (in such capacity, together
with its successors in such capacity, the "Co-Agent").
The Company, the Banks, the Agent and the Co-Agent are parties to a
Credit Agreement dated as of November 12, 1992 (as heretofore amended and
in effect on the date hereof, the "Credit Agreement"), which provides,
subject to the terms and conditions thereof, for extensions of credit
(by making of loans and issuing letters of credit) by the Banks to the
Company in an aggregate principal or face amount not exceeding
$200,000,000. The Company, the Banks, the Agent and the Co-Agent wish to
amend the Credit Agreement in certain respects, and accordingly, the
parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment
No. 2, terms defined in the Credit Agreement that are used herein shall
have the same meanings herein as are ascribed to such terms in the
Credit Agreement.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 4 below, but effective as of the date
hereof, the Credit Agreement shall be amended as follows:
A. The definition of Applicable Margin appearing in Section 1.01 of the
Credit Agreement is hereby amended and restated in its entirety to read
as follows:
"Applicable Margin" shall mean, with respect to Eurodollar Loans during
any fiscal quarter of the Company, a rate per annum equal to (i)
0.75% if the Interest Coverage Ratio for the then most recently ended
Fiscal Period of the Company shall be greater than or equal to 3.00 to
1, or (ii) 1.00% if the Interest Coverage Ratio for the then most
recently ended Fiscal Period of the Company shall be less than 3.00 to 1
and greater than or equal to 2.25 to 1, or (iii) 1.25% if the Interest
Coverage Ratio for the then most recently ended Fiscal Period of the
Company shall be less than 2.25 to 1 and greater than or equal to 1.50
to 1, or (iv) 1.50% if the Interest Coverage Ratio for the then most
recently ended Fiscal Period of the Company shall be less than 1.50 to
1. As used herein, "Fiscal Period" shall mean (i) the fiscal quarter of
the Company ending on or about October 30, 1993, (ii) the period of two
consecutive fiscal quarters of the Company ending on or about January
29, 1994, (iii) the period of three consecutive fiscal quarters of the
Company ending on or about April 30, 1994, (iv) the period of four
consecutive fiscal quarters of the Company ending on or about July 30,
1994 and (v) each subsequent period of four consecutive fiscal quarters
of the Company. During any period after the commencement of a fiscal
quarter but prior to the delivery of the certificate of a senior
financial officer of the Company which is to accompany the financial
statements delivered pursuant to Section 8.01(a) or (b) (as the case
may be) with respect to the immediately preceding fiscal quarter
(any such period being hereinafter called a "Gap Period"), interest on
each Eurodollar Loan shall be paid at the Eurodollar Rate plus the
Applicable Margin as in effect at the end of such immediately preceding
fiscal quarter. If such certificate of a senior financial officer
of the Company, when delivered to the Agent, demonstrates an Interest
Coverage Ratio requiring a change in the Applicable Margin, such change
shall be retroactive to the beginning of such Gap Period. If such
change in the Applicable Margin results in additional amounts of interest
being payable by the Company, such amounts shall be immediately due
and payable. If such change in the Applicable Margin results in an
overpayment of interest by the Company, each Bank shall promptly return
(through the Agent) to the Company the amount of overpayment paid to
such Bank. The Applicable Margin shall be increased by 0.50% per annum
above the margins specified above for the period (if any) from February 1,
1994 until the date on which (i) the Company's Subsidiary, Western
Publishing Company, Inc., a Delaware corporation, issues a guarantee of
all of the Company's obligations to the Banks, the Agent and the Co-Agent
hereunder, in substantially the form set forth as Exhibit B to Amendment
No. 2 to this Credit Agreement and (ii) the Company shall have pledged for
the ratable benefit of the Banks and the holders (the "Holders") of the
Company's 7.65% Debentures due 2002 (the "Debentures"), all of the issued
and outstanding capital stock of Western Publishing Company, Inc. The
pledge of the stock of Western Publishing Company, Inc. shall be to a
Person reasonably acceptable to the Agent, the Holders of not less than
a majority in aggregate principal amount of the outstanding Debentures
(the "Majority Holders") and the Trustee for the Debentures.
B. The definition of Commitment Termination Date appearing in Section
1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"Commttment Termination Date" shall mean the last Business Day of May,
1995.
C. The definition of Interest Coverage Ratio appearing in Section 1.01
of the Credit Agreement is hereby amended and restated in its entirety
to read as follows:
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a)
Cash Flow for such period to (b) Interest Expense for such period.
D. Section 2.01 of the Credit Agreement is hereby amended by adding the
following sentence at the end thereof:
Notwithstanding the foregoing, during the period from and including
December 13, 1993 through and including the date of delivery by the
Company of its financial statements in respect of the fiscal quarter
ending on or about July 31, 1994 (as required by Section 8.01(a) hereof)
and delivery of the quarterly compliance certificate of a senior
financial officer of the Company required by Section 8.01 hereof and
demonstrating compliance by the Company with the financial covenants for
which calculations are to be set forth therein, the aggregate principal
amount of all Loans hereunder together with the aggregate face amount of
all Letter of Credit Liabilities shall not exceed $145,000,000 during
the portion of such period on or prior to December 27, 1993 and shall
not exceed $140,000,000 during the portion of such period on or after
December 28, 1993.
E. Section 2.04 of the Credit Agreement is hereby amended by
redesignating subsection (c) thereof as subsection (d) and by adding a
new subsection (c) reading as follows:
(c) Without affecting Section 8.05 in any way, concurrently with the
making of any Disposition by the Company or any of its Subsidiaries, the
Company shall prepay the principal of the Loans hereunder, and the
Commitments shall be reduced, in an aggregate principal amount equal to
50% of the amount of the net cash proceeds (net of expenses reasonably
incurred in connection therewith and taxes paid or payable in connection
therewith) actually received by the Company or such Subsidiary from such
Disposition. As used herein, "Disposition" shall mean, with respect to
any Person, any sale, assignment, transfer or other disposition by such
Person of any tangible or intangible assets (but excluding any inventory
or Permitted Investments or other assets sold or disposed of in the
ordinary course of business according to ordinary terms and any obsolete
or worn-out assets), whether now owned or hereafter acquired.
F. Section 2.05 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
2.05 Commitment Fee. The Company shall pay to the Agent for account of
each Bank a commitment fee on the daily average unused amount of such
Bank's Commitment (for which purpose the aggregate amount of any Letter
of Credit Liabilities shall be deemed to be a pro rata (based on the
Commitments) use of each Bank's Commitment), for the period from and
including the date of this Agreement to but not including the earlier of
the date such Commitment is terminated and the Commitment Termination
Date, at a rate per annum equal, for each day during such period, to:
(i) 0.25% if the Interest Coverage Ratio for the then most recently
ended Fiscal Period shall be greater than or equal to 2.25 to 1, or (ii)
0.375% if the Interest Coverage Ratio for the then most recently ended
Fiscal Period shall be less than 2.25 to 1. During any period after the
commencement of a fiscal quarter but prior to the delivery of the
certificate of a senior financial officer of the Company which is to
accompany the financial statements delivered pursuant to Section 8.01(a)
or (b) (as the case may be) with respect to the immediately preceding
fiscal quarter (any such period being hereinafter called a "Gap
Period"), commitment fees shall be paid at the rate as in effect at the
end of the immediately preceding fiscal quarter. If such certificate of
a senior financial officer of the Company, when delivered to the Agent,
demonstrates an Interest Coverage Ratio requiring a change in the
applicable rate of commitment fee, such change shall be retroactive to
the beginning of such Gap Period. If such change in the
applicable rate of commitment fee results in additional amounts of
commitment fee being payable by the Company, such amounts shall be
immediately due and payable. If such change in the applicable rate of
commitment fee results in an overpayment of commitment fee by the
Company, each Bank shall promptly return (through the Agent) to the
Company the amount of overpayment paid to such Bank. Accrued commitment
fee shall be payable in arrears on each Quarterly Date and on the
earlier of the date the Commitments are terminated and the Commitment
Termination Date.
G. Subsection (d) of Section 8.05 of the Credit Agreement is hereby
amended in its entirety to read as follows:
(d) the Company may convey, sell, lease, transfer or otherwise dispose
of any business (whether maintained as a Subsidiary or division) to
which is attributable at the time of such conveyance, sale, lease,
transfer or other disposition less than 10% of the consolidated assets
of the Company and its Consolidated Subsidiaries and to which is
attributable less than 10% of the consolidated earnings of the Company
and its Consolidated Subsidiaries, determined before taking into account
Interest Expense and income taxes for the most recent twelve-month
period.
H. Section 8.10 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
8.10 Leverage Ratio. The Company shall not permit the Leverage Ratio to
exceed 2.50 to 1 as at the end of the third fiscal quarter of any fiscal
year of the Company, and shall not permit the Leverage Ratio to exceed
2.00 to 1 as at the end of any first, second or fourth fiscal quarter of
any fiscal year of the Company (being the fiscal quarters ending on or
about the last day of the months of April, July or January,
respectively).
1. Section 8.12 of the Credit Agreement is hereby amended and restated
in its entirety to read as follows:
8.12 Interest Coverage Ratio. The Company will not permit the Interest
Coverage Ratio for the fiscal quarter of the Company ending on or about
October 30, 1993 to be less than 1.90 to 1. The Company will not permit
the Interest Coverage Ratio for the period of two consecutive fiscal
quarters of the Company ending on or about January 29, 1994 to be less
than 0.60 to 1. The Company will not permit the Interest Coverage Ratio
for the period of three consecutive fiscal quarters of the Company
ending on or about April 30, 1994 to be less than 0.60 to 1. The Company
will not permit the Interest Coverage Ratio for any period of four
consecutive fiscal quarters of the Company set forth below to be less
than the ratio set forth below opposite such period of four consecutive
fiscal quarters:
Period of Four Consecutive
Fiscal Quarters ending on or about Ratio
---------------------------------- -------
July 30, 1994 0.85 to 1
October 30, 1994 1.75 to 1
January 31, 1995 2.50 to 1
April 30, 1995 and each fiscal quarter thereafter 3.00 to 1
J. The Credit Agreement is hereby amended by adding a new Section 8.17
reading as follows:
8.17 Clean-Down. The Company will not permit the aggregate principal
amount of Loans outstanding hereunder to exceed $115,000,000 for a
period of thirty consecutive days during the first fiscal quarter of
each fiscal year of the Company (beginning with the fiscal year
commencing on or about January 31, 1994) and thereafter until delivery
by the Company of the compliance certificate required by Section 8.01
hereof in respect of the financial statements for the preceding fiscal
year.
K. The Credit Agreement is hereby amended by adding a new Section 8.18
reading as follows:
8.18 Cash Flow. The Company will not permit its Cash Flow for any fiscal
quarter of the Company set forth below to be less than the amount set
forth below opposite such fiscal quarter:
Fiscal Quarter ending on or about Amount
---------------------------------- -----------
October 30, 1993 $ 8,700,000
January 29, 1994 ($5,100,000)
April 30, 1994 $ 3,000,000
July 30, 1994 $ 6,900,000
October 30, 1994 $25,000,000
January 31, 1995 $16,000,000
L. Section 9 of the Credit Agreement shall be amended by redesignating
clause (j) thereof as clause (k) and by inserting a new clause (j)
reading as follows:
(j) Any Person (including any "person" as defined in Section 13(d) of
the Securities Exchange Act of 1934, as amended), other than Richard A.
Bernstein and/or any affiliates of Mr. Bernstein, shall acquire direct
or indirect beneficial ownership of securities representing more than
50% of the total number of votes which may be cast in the election of
directors of the Company by all stockholders entitled to vote in such
election; or
Section 3. Representations and Warranties. The Company represents and
warrants to the Banks that the representations and warranties set forth
in Section 7 of the Credit Agreement are true and complete in all
material respects on the date hereof (except to the extent that such
representations and warranties expressly relate to an earlier date) as
if made on and as of the date hereof and as if each reference in said
Section 7 to "this Agreement" included reference to the Credit Agreement
as amended by this Amendment No. 2.
Section 4. Conditions Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 shall
become effective, as of the date hereof, upon the satisfaction of the
following conditions precedent:
A. This Amendment No. 2 shall have been executed and delivered by the
Company and by the Majority Banks.
B. Western Publishing Company, Inc., a Delaware corporation ("Western"),
shall have executed and delivered to the Agent (in a sufficient number
of counterparts for each of the Banks) a guarantee (the "Western
Guarantee") in substantially the form of Exhibit A hereto.
C. The Agent shall have received the following documents, each of which
shall be satisfactory to the Agent in form and substance:
(1) Corporate Documents. The following documents, each certified as
indicated below:
(a) if the certificate of incorporation of the Company or Western, as
applicable, has been amended since the date of the certification thereto
delivered pursuant to Section 6.01 of the Credit Agreement, a copy of
such certificate, as amended, of each of the Company and Western;
(b) a certificate of the Secretary or an Assistant Secretary of each of
the Company and Western, dated as of a recent date and certifying (i)
that attached thereto is a true and complete copy of the by-laws of such
Person as in effect on the date of such certificate or that the by-laws
of such Person have not been amended since the date of the certification
thereto delivered pursuant to Section 6.01 of the Credit Agreement, (ii)
that attached thereto is a true and complete copy of resolutions duly
adopted by the board of directors of such Person authorizing the
execution, delivery and performance of this Amendment No. 2 and the
Credit Agreement as amended hereby and the extensions of credit under
the Credit Agreement as amended hereby and, in the case of Western, the
Western Guarantee, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (iii) that the
certificate of incorporation of such Person has not been amended since
the date of the certification thereto furnished pursuant to clause (a)
above or Section 6.01 of the Credit Agreement, as the case may be, and
(iv) as to the incumbency and specimen signature of each officer of such
Person executing this Amendment No. 2 and each other document to be
delivered by such Person from time to time in connection with the Credit
Agreement as amended hereby (and the Agent and each Bank may
conclusively rely on such certificate until it receives notice in
writing from such Person); and
(c) a certificate of another officer of each of the Company and Western
as to the incumbency and specimen signature of the Secretary or such
Assistant Secretary of such Person.
(2) Opinion of Counsel to the Company and Western. An opinion of Shea &
Gould, counsel to the Company and Western, as to the legal, valid and
binding nature of the obligations of the Company and Western, as the
case may be, under this Amendment No. 2, the Credit Agreement, as
amended hereby, and the Western Guarantee and covering such other
matters as the Agent or its special New York counsel may reasonably request.
(3) Other Documents. Such other documents as the Agent or any Bank or
special New York counsel to the Banks may reasonably request.
Section 5. Amendment Fees. In connection with the amendments to the
Credit Agreement effected hereby, the Company agrees to pay, on the date
hereof, to the Agent for the pro rata account of each Bank executing
this Amendment No. 2, an amendment fee in an aggregate amount equal to
$350,000. The Company further agrees to pay to the Agent for the account
of each Bank an additional fee equal to 0.25% of the amount of increase
in the available portion of such Bank's Commitment when the aggregate
amount of Loans together with the aggregate amount of Letter of Credit
Liabilities can be up to (but not in excess of) $200,000,000, such
additional fee to be payable on the effective date of such increase.
Section 6. Expenses. Without limiting its obligations under Section
11.03 of the Credit Agreement, the Company agrees to pay, promptly
following demand, all reasonable out-of-pocket costs and expenses of
the Agent (including the reasonable fees and disbursements of Whitman
Breed Abbott & Morgan, New York counsel to the Agent and the Banks)
incurred in connection with the negotiation, preparation, execution and
delivery of this Amendment No. 2.
Section 7. Additional Agreement. The Company agrees to use its best
efforts to obtain the consent of the Majority Holders to the pledge of
the capital stock of Western Publishing Company, Inc. and the guarantee
by Western Publishing Company, Inc., each as described in clauses (i)
and (ii) of the last sentence of the definition of "Applicable Margin"
(as amended hereby), on or before March 31, 1994. The Company further
agrees that any breach of the agreement set forth in the preceding
sentence shall constitute an Event of Default for all purposes of the
Credit Agreement. In connection with employing its best efforts as required by
this Section 7, the Company shall not be required to pay any
unreasonable amendment or other fees (other than out-of-pocket costs and
expenses, including reasonable legal fees and disbursements) to the
Agent, the Banks or the Holders of the Debentures.
Section 8. Miscellaneous. Except as expressly herein provided, the
Credit Agreement shall remain unchanged and in full force and effect.
This Amendment No. 2 may be executed in any number of counterparts, all
of which taken together shall constitute one and the same amendatory
instrument and any of the parties hereto may execute this Amendment No. 2
by signing any such counterpart. This Amendment No. 2 shall be governed
by, and construed in accordance with, the law of the State on New York,
without reference to its principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to be duly executed as of the day and year first above written.
WESTERN PUBLISHING GROUP, INC.
By /s/ Stuart Turner
---------------------
Title: Treasurer
FLEET BANK
By /s/ Peter C. Hall
---------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Howard F. Bascom, Jr.
-------------------------
Title: Vice President
CREDIT LYONNAIS
NEW YORK BRANCH
By /s/ Mark A. Campellone
-----------------------
Title: Vice President
By /s/ S. Burdick
---------------------
Title: Vice President
THE DAIWA BANK, LTD.
By /s/ James H. Broadley
---------------------
Title: Vice President
By /s/ Brian M. Smith
---------------------
Title: Senior Vice President
MELLON BANK, N.A.
By /s/ Martin T. Hanning
---------------------
Title: Vice President
NATIONAL WESTMINSTER BANK USA
By /s/ Janet Pickering
---------------------
Title: Senior Vice President
STANDARD CHARTERED BANK
By /s/ Gerard Lob
---------------------
Title: Vice President
By /s/ Bruce H. Wehlau
---------------------
Title: Senior Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By
---------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Mary M. Barcus
---------------------
Title:
FLEET BANK, as Agent
By /s/ Peter C. Hall
---------------------
Title: Vice President
THE BANK OF NEW YORK, as Co-Agent
By /s/ Howard F. Bascom, Jr.
-------------------------
Title: Vice President
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of December 13, 1993 made by WESTERN
PUBLISHING COMPANY, INC., a corporation duly organized and validly
existing under the laws of Delaware (the "Guarantor").
Western Publishing Group, Inc., a Delaware corporation (the "Company"),
certain banks and Fleet Bank, as agent for said banks (in such capacity,
together with its successors in such capacity, the "Agent") and The
Bank of New York, as co-agent for the Banks (the "Co-Agent") are parties
to a Credit Agreement dated as of November 12, 1992, as heretofore
amended (as so amended and in effect from time to time, the "Credit
Agreement"), which provides, subject to the terms and conditions
thereof, for extensions of credit (by making of loans and issuing
letters of credit) to be made by said banks to the Company in an
aggregate principal or face amount not exceeding $200,000,000. In
addition, the Company has issued $150,000,000 in outstanding principal
amount of its 7.65% Debentures Due 2002 (the "Debentures") under an
Indenture (the "Indenture") dated as of September 15, 1992 between the
Company and The Bank of New York, as trustee.
The Company, the Banks, the Agent and the Co-Agent are entering into
Amendment No. 2, dated as of even date herewith, to the Credit
Agreement. As a condition to the effectiveness of said Amendment No. 2,
the Guarantor is required to enter into this Agreement. Accordingly,
the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement or in the
Indenture are used herein as defined therein.
Section 2. The Guarantee.
2.01 The Guarantee. Subject to the limitation set forth in Section 2.07
hereof, the Guarantor hereby guarantees to each Bank and the Agent and
their respective successors and assigns (to the extent permitted by the
Credit Agreement) the prompt payment in full as and when due (whether at
stated maturity, by acceleration or otherwise) of the principal of and
interest on the Loans made by the Banks to, and the Note(s) held by each
Bank of, the Company and all other amounts from time to time owing to
the Banks or the Agent by the Company under the Credit Agreement and
under the Notes and all Reimbursement Obligations, and interest thereon,
in each case strictly in accordance with the terms thereof. The
obligations of the Company guaranteed pursuant to the immediately
preceding sentence are hereinafter collectively called the "Guaranteed
Obligations". The Guarantor hereby further agrees that if the Company
shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the
Guarantor will promptly pay the same, promptly upon demand by the Agent,
and that in the case of any extension of time of payment or renewal of
any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
2.02 Obligations Unconditional. Subject to the limitation set forth in
Section 2.07 hereof, the obligations of the Guarantor under Section 2.01
hereof are absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of the Credit
Agreement, the Notes or any other agreement or instrument evidencing any
of the Guaranteed Obligations, or any substitution, release or exchange
of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or
guarantor, it heing the intent of this Section 2.02 that the obligations
of the Guarantor hereunder shall be absolute and unconditional under any
and all circumstances. Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following
shall not affect the liability of the Guarantor hereunder:
(i) at any time or from time to time, without notice to the Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall
be waived;
(ii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iii) any lien or security interest granted to, or in favor of, the
Agent or any Bank or Banks as security for any of the Guaranteed
Obligations shall fail to be perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that
the Agent or any Bank exhaust any right, power or remedy or proceed
against the Company under the Credit Agreement or the Notes or any other
agreement or instrument referred to herein or therein, or against any
other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Guarantor under this Section 2
shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise.
2.04 Subrogation. The Guarantor hereby agrees that until the payment and
satisfaction in full of all Guaranteed Obligations and the expiration or
termination of the Commitments and all Letter of Credit Liabilities of
the Banks under the Credit Agreement it shall not exercise any right or
remedy arising by reason of any performance by it of its guarantee in
Section 2.01 hereof, whether by subrogation or otherwise, against the
Company or any other guarantor of any of the Guaranteed Obligations or
any security for any of the Guaranteed Obligations.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor and
the holders of the Guaranteed Obligations, the obligations of the
Company under the Credit Agreement and the Notes may be declared to be
forthwith due and payable as provided in Section 9 of the Credit
Agreement (and shall be deemed to have become automatically due and
payable in the circumstances expressly provided for in said Section 9),
for purposes of Section 2.01 hereof notwithstanding any stay, injunction
or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Company and
that, in the event of such declaration (or such obligations being
deemed to have become automatically due and payable), such obligations
(whether or not due and payable by the Company) shall forthwith become
due and payable by the Guarantor for purposes of said Section 2.01.
2.06 Continuing Guarantee. The guarantee in this Section 2 is a
continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
2.07 Limitation on Guarantee. Notwithstanding the foregoing provisions
of this Section 2, the aggregate amount which the Guarantor may be
required to pay under Section 2.01 hereof in respect of the Guaranteed
Obligations shall not exceed an amount equal to 10% of the Company`s
Consolidated Net Tangible Assets (as defined in the Indenture) at the
time of demand for payment hereunder.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Banks and the Agent that:
3.01 Corporate Existence. Each of the Guarantor and its Subsidiaries: (a)
is a corporation duly organized and validly existing under the laws of
the jurisdiction of its incorporation; (b) has all requisite corporate
power, and has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (c) is
qualified to do business in all jurisdictions in which the nature of the
business conducted by it makes such qualification necessary and where
failure so to qualify would have a material adverse effect on the
consolidated financial condition, operations or business taken as a
whole of the Guarantor and its Consolidated Subsidiaries.
3.02 No Breach. None of the execution and delivery of this Agreement,
the consummation of the transactions herein contemplated or compliance
with the terms and provisions hereof will conflict with or result
in a breach of, or require any consent under, the charter or by-laws of
the Guarantor, or any applicable law or regulation, or any order, writ,
injunction or decree of any court or governmental authority or agency,
or any material agreement or instrument to which the Guarantor or any of
its Subsidiaries is a party or by which any of them is bound or to which
any of them is subject, or constitute a default under any such agreement
or instrument.
3.03 Corporate Action. The Guarantor has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Agreement; the execution, delivery and performance by the Guarantor of
this Agreement have been duly authorized by all necessary corporate
action on its part; and this Agreement has been duly and validly
executed and delivered by the Guarantor and constitutes its legal, valid
and binding obligation, enforceable in accordance with its terms, except
as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application
of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.04 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority
or agency are necessary for the execution, delivery or performance by
the Guarantor of this Agreement or for the validity or enforceability hereof.
Section 4. Miscellaneous.
4.01 No Waiver. No failure on the part of the Agent or any of its agents
to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or
any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right,
power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
4.02 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York, without reference to
its principles of conflicts of law.
4.03 Waivers, Etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by the Guarantor
and the Agent (with the consent of the Banks as specified in the Credit
Agreement). Any such amendment or waiver shall be binding upon each
holder of any of the Guaranteed Obligations and the Guarantor.
4.04 Successors and Assigns. This Agreement shall he binding upon and
inure to the benefit of the respective successors and assigns of the
Guarantor and the holders of the Guaranteed Obligations (to the extent
permitted by the Credit Agreement).
4.05 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the
same instrument.
4.06 Severability. If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law, (i)
the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in order to carry out
the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, the Guarantor has caused this Agreement to
be duly executed as of the day and year first above written.
WESTERN PUBLISHING COMPANY, INC.
By /s/ Stuart Turner
---------------------
Title: Executive Vice President
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated May 13, 1994,
included in the Annual Report on Form 10-K of Western Publishing Group, Inc.
for the fiscal year ended January 29, 1994, in Registration Statements on
Form S-8 (File Nos. 33-18430, 33-18692, 33-18693 and 33-28019) and on Forms
S-3 (File Nos. 33-36582 and 33-43214).
We further consent to the incorporation by reference of our reports dated
April 15, 1994, relating to Penn Corporation Comprehensive Security Program,
Golden Comprehensive Security Program and Golden Retirement Savings Program,
appearing as Exhibits to the Annual Report on Form 10-K of Western Publishing
Group, Inc., for the fiscal year ended January 29, 1994 in Registration
Statements on Form S-8, as follows:
FILE NO. REPORT ON AUDIT OF FINANCIAL STATEMENTS
33-18430 Penn Corporation Comprehensive Security Program
33-18692 Golden Comprehensive Security Program
33-18693 Golden Retirement Savings Program
DELOITTE & TOUCHE
Milwaukee, Wisconsin
May 13, 1994
GOLDEN COMPREHENSIVE
SECURITY PROGRAM
Financial Statements for the Years Ended
December 31, 1993 and 1992 and
Independent Auditors' Report
GOLDEN COMPREHENSIVE SECURITY PROGRAM
TABLE OF CONTENTS
- - --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits--
December 31, 1993 and 1992 2
Statements of Changes in Net Assets Available for Benefits--
Years ended December 31, 1993 and 1992 3
Notes to Financial Statements 4-11
ALL FUNDS OF THE PLAN ARE HELD IN A MASTER TRUST.
AS A RESULT, SUPPLEMENTAL SCHEDULES ARE OMITTED
BECAUSE THEY ARE INAPPLICABLE UNDER THE DEPARTMENT
OF LABOR'S RULES AND REGULATIONS.
INDEPENDENT AUDITORS' REPORT
Benefit Plans Administration Committee
Western Publishing Company, Inc.:
We have audited the accompanying statements of net assets available for
benefits of Golden Comprehensive Security Program as of December 31,
1993 and 1992, and the related statements of changes in net assets
available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the net assets available for benefits of the Plan at
December 31, 1993 and 1992, and the changes in net assets available for
benefits for the years then ended in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE
Milwaukee, Wisconsin
April 15, 1994
GOLDEN COMPREHENSIVE SECURITY PROGRAM
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1993 AND 1992
- - --------------------------------------------------------------------------------
1993 1992
ASSETS:
Investments in Western Publishing Group, Inc. Master
Retirement Trust pooled investment accounts:
Investment funds--Note 5 $24,924,230 $11,700,925
Guaranteed investment contracts--Note 6 33,635,413 38,139,286
Parent company stock--Note 7 2,473,163 1,557,734
Loans receivable from participants 2,229,615 2,191,808
Accrued income receivable 151,273 225,265
Receivable from investments sold 18,555 4,480,000
Contributions receivable:
Employers 1,507,925 1,321,917
Participants 240,682 231,585
----------- -----------
Total assets 65,180,856 59,848,520
----------- -----------
LIABILITIES:
Payable to:
Participants 356,160
Third parties 33,114 58,631
----------- -----------
Total liabilities 33,114 414,791
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $65,147,742 $59,433,729
----------- -----------
----------- -----------
See notes to financial statements.
GOLDEN COMPREHENSIVE SECURITY PROGRAM
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1993 AND 1992
- - --------------------------------------------------------------------------------
1993 1992
Investment income--Increase in equity of allocable portion
of Western Publishing Group, Inc. Master Retirement Trust
pooled investment accounts--Note 9:
Interest $ 3,332,445 $ 3,637,208
Dividends 674,687 433,087
Appreciation on pooled investment accounts 106,692 898,654
Contributions--Note 8:
Employers 2,831,222 2,477,377
Participants 3,420,620 2,954,153
----------- -----------
Total additions 10,365,666 10,400,479
----------- -----------
Payments to or on behalf of participants 4,497,840 5,113,582
Administrative expenses 153,813 170,049
----------- -----------
Total deductions 4,651,653 5,283,631
----------- -----------
Net increase 5,714,013 5,116,848
Net assets available for benefits:
Beginning of year 59,433,729 54,316,881
----------- -----------
End of year $65,147,742 $59,433,729
----------- -----------
----------- -----------
See notes to financial statements.
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 and 1992
- - --------------------------------------------------------------------------------
1. THE PLAN
Golden Comprehensive Security Program (the "Plan") is a contributory
defined contribution plan offered to all eligible employees of Western
Publishing Company, Inc. (the "Company") and effective April 23, 1986,
to all eligible employees of Western Publishing Group, Inc., the
Company's parent, and eligible employees of any United States subsidiary
of the Company or the parent which adopts the Plan, with the consent of
the Company, who meet certain eligibility requirements. The Plan became
effective on November 1, 1984 and conforms with the requirements of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Beginning November 1, 1984, an employee becomes a participant of the
Plan on specified quarterly entry dates after meeting the following
requirements:
a. Is a salaried employee or a member of a group or class of employees to
which the Plan has been extended by the Board of Directors of the
Company; and
b. Is not a member of a collective bargaining unit of employees
represented by a collective bargaining representative, except to the
extent that an agreement between the participating company ("employer")
and such representative extends the Plan to such unit of employees; and
c. Has completed six months of continuous employment (as defined in the
Plan).
Participants, by means of authorized payroll deductions, may elect to
make contributions to the Plan in amounts based on a percentage of
compensation, as defined in the Plan. A participating employee's total
contribution ("income deferral" and "participant") is limited to 16% of
compensation. Income deferral contributions were limited to no more
than $8,994 for 1993 and $8,728 for 1992 in accordance with the
Internal Revenue Code ("Code").
Each participating employer annually contributes to the Plan an amount
equal to 3% of the aggregate compensation of participants entitled to
share in the contribution for that year. In addition, the employers
contribute for a participant an amount equal to 60% of the first 6% of
"income deferral contributions" made by, or on behalf of the
participant. Employer contributions are reduced by any forfeitures to
be credited for the applicable period. Forfeitures for 1993 and 1992
totalled $54,717 and $45,465, respectively.
The employers' 3% contribution is always invested in the Interest
Accumulation Fund. Amounts credited to a participant's account are
designated as "Plan Credits." Contributions made by, or on behalf of,
a participant are invested (in proportions designated by the
participant) in one or more of the following funds:
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
Number of Participants
Invested in Fund at
Fund Type December 31, 1993
Conservative Equity Fund 547
Aggressive Equity Fund 508
Interest Accumulation Fund 1,537
Parent Company Stock Fund 398
Interest, dividends and net realized and unrealized gains and losses on
Plan investments are allocated to participants' accounts monthly based
on their proportionate share of the applicable fund's assets.
The employers' 3% contribution for each plan year is allocated to the
participants' accounts pro rata based on the eligible compensation paid
to the participant by the employer in that year.
If a participant's employment terminates for any reason other than
retirement, disability or death, the participant is entitled to receive
Plan Credits resulting from employer contributions which are then
vested according to the following schedule:
Vested Percentage
Years of Continuous of Employer
Employment Contribution Account
Less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Balances in a participant's income deferral contribution account,
participant contribution account and prior plan account are fully
vested at all times.
In the event of a participant's retirement, disability or death, Plan
Credits not previously vested, become fully vested and are not subject
to forfeiture, and all Plan Credits become immediately distributable in
the manner described below.
When a participant's employment terminates for any reason, all vested
Plan Credits of the participant may be distributed to the participant
or, in the event of death, to the beneficiary by one or both of the
following methods:
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
a. By a lump-sum distribution of any or all Plan Credits.
b. By applying the cash equivalent of any or all such Plan Credits
towards the purchase of an annuity contract, subject to certain
requirements as defined in the Plan.
A participant may elect to defer distribution of vested Plan Credits
until age 70-1/2.
No more often than once per quarter, a participant may elect to withdraw
all or any portion of the net credit balance in the participant's
contribution account, prior plan account or rollover account.
Participants may borrow, up to certain limits, against their account
balance. The loan must be repaid over a period not to exceed 60 months
unless the proceeds were used for the purchase of a primary residence
in which case it must be repaid within 240 months (360 months for loans
made prior to October 18, 1989). Generally, loan repayments are made
by payroll deduction.
2. ACCOUNTING PRINCIPLES
The Plan participates in investment accounts under the Western
Publishing Group, Inc. Master Retirement Trust (the "Master Trust").
Investment income, realized gains and losses on investment
transactions, expenses and investment appreciation or depreciation on
assets held in the Master Trust are allocated monthly to each fund
under the Plan based on its proportionate share of Master Trust assets.
Plan participation in the Master Trust is adjusted monthly for
withdrawals for benefit payments to Plan participants and for
contributions made to the Plan.
Investments in the Master Trust pooled investment accounts and parent
company stock are valued at fair value. Investments in guaranteed
investment contracts are valued at contract value. Contract value
represents contributions made under the contract plus interest at the
contract rate, less funds used to purchase annuities and pay
administrative expenses.
Plan expenses, such as trustee and accounting fees, are charged to the Plan.
In 1993, the Plan changed its method of accounting for benefits payable
to comply with the 1993 AICPA Audit and Accounting Guide, Audits of
Employee Benefit Plans. The new guidance requires that benefits
payable to persons who have withdrawn from participation in a defined
contribution plan be disclosed in the footnotes to the financial
statements rather than be recorded as a liability of the Plan. As of
December 31, 1993, net assets available for benefits included benefits
of $726,457 due to participants who have withdrawn from participation in
the Plan.
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
3. INTERNAL REVENUE SERVICE STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated May 10, 1985, that the Plan is qualified and the trust
established under the Plan is tax-exempt, under the appropriate
sections of the Code. The Plan has been amended since receiving the
determination letter. However, the plan administrator believes that
the plan is currently designed and being operated in compliance with
the applicable requirements of the Code. Therefore, the plan
administrator believes that the Plan was qualified and the related trust
was tax-exempt as of the financial statement date.
4. TERMINATION OF THE PLAN
In the event that the Plan is terminated at some future time, each
participant's account will become fully vested and will be distributed
in accordance with provisions of the Plan.
5. INVESTMENTS IN MASTER TRUST POOLED INVESTMENT FUNDS
Investments in Master Trust pooled investment funds at December 31, 1993
and 1992 were as follows:
December 31, 1993
---------------------------
Units Fair Value
Conservative Equity Fund
(Evergreen Total Return Fund) 261,867 $ 5,137,839
Aggressive Equity Fund (Evergreen Fund) 303,284 4,306,646
Bankers Trust Pyramid Directed
Account Cash Fund 15,479,745 15,479,745
-----------
$24,924,230
-----------
-----------
December 31, 1992
---------------------------
Units Fair Value
Conservative Equity Fund
(Evergreen Total Return Fund) 189,351 $ 3,679,092
Aggressive Equity Fund (Evergreen Fund) 260,156 3,649,995
Bankers Trust Pyramid Directed
Account Cash Fund 4,371,838 4,371,838
-----------
$11,700,925
-----------
-----------
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
6. GUARANTEED INVESTMENT CONTRACTS
Investments in guaranteed investment contracts at December 31, 1993 and
1992 were as follows:
1993 1992
----------- -----------
Massachusetts Mutual Life Insurance
Company Contract #GAC-10121-1 $10,155,206
Principal Mutual Life Insurance Company
Contract #GA4-6187-1 $ 8,154,315
CNA Insurance Company
Contract #12732-006 7,315,142 7,892,356
Allstate Life Insurance Company
Group Annuity Contract #GA-5343-1 7,217,607 8,707,741
New York Life Insurance Company
Contract #GIC GA-06701-2-1 6,864,703
New York Life Insurance Company
Contract #GA-06701-1 4,083,646
Metropolitan Life Insurance Company
Contract #12177-069 5,915,113
Principal Mutual Life Insurance Company
Contract #11948-1 5,468,870
----------- -----------
$33,635,413 $38,139,286
----------- -----------
----------- -----------
7. INVESTMENTS IN PARENT COMPANY STOCK
Investments in parent company stock at December 31, 1993 and 1992 were
as follows:
Fair
Shares Value
Western Publishing Group, Inc.
common stock:
December 31, 1993 128,476 $2,473,163
----------
----------
December 31, 1992 74,622 $1,557,734
----------
----------
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
Transactions in the common stock of Western Publishing Group, Inc. were
as follows:
1993 1992
--------------- ---------------
Shares Amount Shares Amount
Aggregate purchases 57,960 $923,155 21,739 $392,118
-------- --------
-------- --------
Aggregate sales and
distributions to participants 4,106 $60,154 65,095 $895,306
-------- --------
-------- --------
8. CONTRIBUTIONS
Contributions from the Company, Western Publishing Group, Inc. and their
respective participants were as follows:
1993
----------------------------------
Employer Employee Total
Western Publishing Company, Inc. $2,743,409 $3,324,537 $6,067,946
Western Publishing Group, Inc. 87,813 96,083 183,896
---------- ---------- ----------
$2,831,222 $3,420,620 $6,251,842
---------- ---------- ----------
---------- ---------- ----------
1992
-----------------------------------
Employer Employee Total
Western Publishing Company, Inc. $2,409,245 $2,884,234 $5,293,479
Western Publishing Group, Inc. 68,132 69,919 138,051
---------- ---------- ----------
$2,477,377 $2,954,153 $5,431,530
---------- ---------- ----------
---------- ---------- ----------
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
9. CHANGES IN NET ASSETS BY FUND:
Plan participants have the ability to self-direct employee and certain
employer contributions into any of the funds described in Note 1.
Net assets at December 31, 1993 and the changes in net assets available
for benefits for the year then ended were as follows:
<TABLE>
<CAPTION>
Interest
Conservative Aggressive Parent Company Accumulation
Equity Fund Equity Fund Stock Fund Fund Loan Fund Total
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 60,284 $ 344 $ 1,772 $ 3,096,813 $ 173,232 $ 3,332,445
Dividends 472,265 202,422 674,687
Appreciation (depreciation)
on pooled investment
accounts (4,223) 53,369 57,546 106,692
---------- ---------- ---------- ----------- ---------- -----------
Total investment income 528,326 256,135 59,318 3,096,813 173,232 4,113,824
---------- ---------- ---------- ----------- ---------- -----------
Contributions:
Employers 202,714 224,299 140,944 2,263,265 2,831,222
Participants 514,548 559,459 329,655 2,016,958 3,420,620
Transfers of assets from (to)
other funds 559,625 (692,763) (90,793) 301,317 (77,386) --
---------- ---------- ---------- ----------- ---------- -----------
Total additions 1,805,213 347,130 439,124 7,678,353 95,846 10,365,666
---------- ---------- ---------- ----------- ---------- -----------
Payments to or on behalf
of participants 182,068 274,059 43,315 3,940,359 58,039 4,497,840
Administrative expenses 7,757 7,829 2,497 135,730 153,813
---------- ---------- ---------- ----------- ---------- -----------
Total deduction 189,825 281,888 45,812 4,076,089 58,039 4,651,653
---------- ---------- ---------- ----------- ---------- -----------
Net increase 1,615,388 65,242 393,312 3,602,264 37,807 5,714,013
---------- ---------- ---------- ----------- ---------- -----------
Net assets available for
benefits:
Beginning of year 3,969,533 4,003,820 1,517,658 47,750,910 2,191,808 59,433,729
---------- ---------- ---------- ----------- ---------- -----------
End of year $5,584,921 $4,069,062 $1,910,970 $51,353,174 $2,229,615 $65,147,742
---------- ---------- ---------- ----------- ---------- -----------
---------- ---------- ---------- ----------- ---------- -----------
</TABLE>
GOLDEN COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - --------------------------------------------------------------------------------
Net assets at December 31, 1992 and the changes in net assets available
for benefits for the year then ended were as follows:
<TABLE>
<CAPTION>
Interest
Conservative Aggressive Parent Company Accumulation
Equity Fund Equity Fund Stock Fund Fund Loan Fund Total
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 264 $ 256 $ 900 $ 3,458,278 $ 177,510 $ 3,637,208
Dividends 263,750 169,337 433,087
Appreciation on pooled
investment accounts 69,248 100,712 728,694 898,654
---------- ---------- ---------- ----------- ---------- -----------
Total investment income 333,262 270,305 729,594 3,458,278 177,510 4,968,949
Contributions:
Employers 148,027 176,572 95,731 2,057,047 2,477,377
Participants 347,484 415,701 226,311 1,964,657 2,954,153
Transfers of assets from (to)
other funds 616,118 592,133 (887,108) (323,585) 2,442
---------- ---------- ---------- ----------- ---------- -----------
Total addition 1,444,891 1,454,711 164,528 7,156,397 179,952 10,400,479
---------- ---------- ---------- ----------- ---------- -----------
Payments to or on behalf
of participants 68,711 166,998 50,326 4,751,142 76,405 5,113,582
Administrative expenses 7,293 8,101 4,742 149,913 170,049
---------- ---------- ---------- ----------- ---------- -----------
Total deduction 76,004 175,099 55,068 4,901,055 76,405 5,283,631
---------- ---------- ---------- ----------- ---------- -----------
Net increase 1,368,887 1,279,612 109,460 2,255,342 103,547 5,116,848
---------- ---------- ---------- ----------- ---------- -----------
Net assets available for
benefits:
Beginning of year 2,600,646 2,724,208 1,408,198 45,495,568 2,088,261 54,316,881
---------- ---------- ---------- ----------- ---------- -----------
End of year $3,969,533 $4,003,820 $1,517,658 $47,750,910 $2,191,808 $59,433,729
---------- ---------- ---------- ----------- ---------- -----------
---------- ---------- ---------- ----------- ---------- -----------
</TABLE>
GOLDEN RETIREMENT
SAVINGS PROGRAM
Financial Statements for the Years
Ended December 31, 1993 and 1992 and
Independent Auditors' Report
GOLDEN RETIREMENT SAVINGS PROGRAM
TABLE OF CONTENTS
- - -----------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits -
December 31, 1993 and 1992 2
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 1993 and 1992 3
Notes to Financial Statements 4-11
ALL FUNDS OF THE PLAN ARE HELD IN A MASTER TRUST.
AS A RESULT, SUPPLEMENTAL SCHEDULES ARE OMITTED
BECAUSE THEY ARE INAPPLICABLE UNDER THE DEPARTMENT
OF LABOR'S RULES AND REGULATIONS.
INDEPENDENT AUDITORS' REPORT
Benefit Plans Administration Committee
Western Publishing Company, Inc.:
We have audited the accompanying statements of net assets available for benefits
of Golden Retirement Savings Program as of December 31, 1993 and 1992, and the
related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31,
1993 and 1992, and the changes in net assets available for benefits for the
years then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Milwaukee, Wisconsin
April 15, 1994
GOLDEN RETIREMENT SAVINGS PROGRAM
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1993 AND 1992
- - ------------------------------------------------------------------------------
1993 1992
ASSETS:
Investments in Western Publishing Group, Inc. Master
Retirement Trust pooled investment accounts:
Investment funds - Note 5 $ 8,574,837 $ 4,163,032
Guaranteed investment contracts - Note 6 17,737,713 17,506,240
Parent company stock - Note 7 963,135 605,521
Loans receivable from participants 1,425,192 1,342,578
Accrued income receivable 79,092 101,579
Receivable from investments sold 2,174,432
Contributions receivable:
Western Publishing Company, Inc. 70,547 73,043
Participants 220,260 208,203
----------- -----------
Total assets 29,070,776 26,174,628
LIABILITIES:
Payable to:
Participants 375,866
Third parties 28,689 45,203
----------- -----------
Total liabilities 28,689 421,069
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $29,042,087 $25,753,559
----------- -----------
----------- -----------
See notes to financial statements.
GOLDEN RETIREMENT SAVINGS PROGRAM
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1993 AND 1992
- - -------------------------------------------------------------------------------
1993 1992
Investment income - Increase in equity of allocable portion
of Western Publishing Group, Inc. Master Retirement
Trust pooled investment accounts - Note 8:
Interest $ 1,554,415 $ 1,642,859
Dividends 181,828 112,332
Appreciation on pooled investment accounts 32,483 231,805
Contributions:
Western Publishing Company, Inc. 843,875 840,170
Participants 2,366,834 2,347,383
----------- -----------
Total additions 4,979,435 5,174,549
Payments to or on behalf of participants 1,584,775 1,660,923
Administrative expenses 106,132 111,340
----------- -----------
Total deductions 1,690,907 1,772,263
----------- -----------
Net increase 3,288,528 3,402,286
Net assets available for benefits:
Beginning of year 25,753,559 22,351,273
----------- -----------
End of year $29,042,087 $25,753,559
----------- -----------
----------- -----------
See notes to financial statements.
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 and 1992
- - ------------------------------------------------------------------------------
1. THE PLAN
Golden Retirement Savings Program (the "Plan") is a
contributory defined contribution plan offered to all
eligible employees of Western Publishing Company, Inc. (the
"Company") and eligible employees of any United States
subsidiary of the Company which adopts the Plan, with the
consent of the Company, who meet certain eligibility
requirements. The Plan became effective on July 1, 1987 and
conforms with the requirements of the Employee Retirement
Income Security Act of 1974 ("ERISA").
An employee becomes a participant of the Plan on specified
quarterly entry dates after meeting the following
requirements:
a. Is a member of a group of employees to which the Plan has
been and continues to be extended by the participating
company ("employer"), either unilaterally or through
collective bargaining; and
b. Has completed six months of continuous employment (as defined
in the Plan).
Participants, by means of authorized payroll deductions, may
elect to make contributions to the Plan in amounts based on
a percentage of compensation, as defined in the Plan. A
participating employee's total contribution ("income
deferral" and "participant") is limited to 16% of
compensation. Income deferral contributions were limited to
no more than $8,994 in 1993 and $8,728 for 1992 in
accordance with the Internal Revenue Code ("Code").
Each participating employer contributes to the Plan an
amount equal to 50% of the first 6% of income deferral
contributions made by or on behalf of the participant.
Employer contributions are reduced by any forfeitures to be
credited for the applicable period. Forfeitures for 1993
and 1992 totalled $10,329 and $3,539, respectively.
Amounts credited to a participant's account are designated
as "Plan Credits." Contributions made by, or on behalf of,
a participant are invested (in proportions designated by the
participant) in one or more of the following funds:
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
Number of Participants
Invested in Fund at
Fund Type December 31, 1993
Conservative Equity Fund 324
Aggressive Equity Fund 356
Interest Accumulation Fund 1,411
Parent Company Stock Fund 366
Interest, dividends and net realized and unrealized gains
and losses on Plan investments are allocated to
participants' accounts monthly based on their proportionate
share of the applicable fund's assets.
If a participant's employment terminates for any reason
other than retirement, disability or death, the participant
is entitled to receive Plan Credits resulting from employer
contributions which are then vested according to the
following schedule:
Vested Percentage
Years of Continuous of Employer
Employment Contribution Account
Less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Balances in a participant's income deferral contribution
account, participant contribution account and prior plan
account are fully vested at all times.
In the event of a participant's retirement, disability or
death, Plan Credits not previously vested, become fully
vested and are not subject to forfeiture, and all Plan
Credits become immediately distributable in the manner
described below.
When a participant's employment terminates for any reason,
all vested Plan Credits of the participant will be
distributed to the participant or, in the event of death, to
the beneficiary by one or both of the following methods:
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
a. By a lump-sum distribution of any or all Plan Credits.
b. By applying the cash equivalent of any or all such Plan
Credits towards the purchase of an annuity contract,
subject to certain requirements as defined in the Plan.
A participant may elect to defer distribution of vested Plan
Credits until age 70-1/2.
No more often than once per quarter, a participant may elect
to withdraw all or any portion of the net credit balance in
the participant's contribution account, prior plan account
or rollover account. In addition, effective July 1, 1988
participants may borrow, up to certain limits, against
their account balance. The loan must be repaid over a
period not to exceed 60 months unless the proceeds were used
for the purchase of a primary residence in which case it
must be repaid within 240 months (360 months for loans made
prior to October 18, 1989). Generally, loan repayments are
made by payroll deduction.
2. ACCOUNTING PRINCIPLES
The Plan participates in investment accounts under the
Western Publishing Group, Inc. Master Retirement Trust (the
"Master Trust"). Investment income, realized gains and
losses on investment transactions, expenses and investment
appreciation or depreciation on assets held in the Master
Trust are allocated monthly to each fund under the Plan
based on its proportionate share of Master Trust assets.
Plan participation in the Master Trust is adjusted monthly
for withdrawals for benefit payments to Plan participants
and for contributions made to the Plan.
Investments in the Master Trust pooled investment accounts
and parent company stock are valued at fair value.
Investments in guaranteed investment contracts are valued at
contract value. Contract value represents contributions
made under the contract plus interest at the contract rate,
less funds used to purchase annuities and pay administrative
expenses.
Plan expenses, such as trustee and accounting fees, are
charged to the Plan.
In 1993, the Plan changed its method of accounting for
benefits payable to comply with the 1993 AICPA Audit and
Accounting Guide, Audits of Employee Benefit Plans. The
new guidance requires that benefits payable to persons who
have withdrawn from participation in a defined contribution
plan be disclosed in the footnotes to the financial
statements rather than be recorded as a liability of the
Plan. As of December 31, 1993, net assets available for
benefits included benefits of $160,070 due to participants
who have withdrawn from participation in the Plan.
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
3. INTERNAL REVENUE SERVICE STATUS
The Internal Revenue Service has determined and informed the
Company by a letter dated July 27, 1989, that the Plan is
qualified and the trust established under the Plan is
tax-exempt, under the appropriate sections of the Code. The
plan has been amended since receiving the determination
letter. However, the plan administrator believes that the
plan is currently designed and being operated in compliance
with the applicable requirements of the Code. Therefore,
the plan administrator believes that the Plan was qualified
and the related trust was tax-exempt as of the financial
statement date.
4. TERMINATION OF THE PLAN
In the event that the Plan is terminated at some future
time, each participant's account will become fully vested
and will be distributed in accordance with provisions of the
Plan.
5. INVESTMENTS IN MASTER TRUST POOLED INVESTMENT FUNDS
Investments in Master Trust pooled investment funds at
December 31, 1993 and 1992 were as follows:
December 31, 1993
-------------------------
Units Fair Value
Conservative Equity Fund
(Evergreen Total Return Fund) 68,486 $1,343,705
Aggresive Equity Fund (Evergreen Fund) 90,663 1,287,415
Bankers Trust Pyramid Directed
Account Cash Fund 5,943,717 5,943,717
----------
$8,574,837
----------
----------
December 31, 1992
-------------------------
Units Fair Value
Conservative Equity Fund
(Evergreen Total Return Fund) 44,524 $ 865,096
Aggresive Equity Fund (Evergreen Fund) 79,082 1,109,524
Bankers Trust Pyramid Directed
Account Cash Fund 2,188,412 2,188,412
----------
$4,163,032
----------
----------
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
6. GUARANTEED INVESTMENT CONTRACTS
Investments in guaranteed investment contracts at December 31, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Principal Mutual Life Insurance Company
Contract #GA4-6187-2 $ 4,188,938
New York Life Insurance Company
Contract #GIC-GA-06701-2-2 4,013,043
Allstate Life Insurance Company
Group Annuity Contract #GA-5343-2 3,857,719 $ 4,652,259
Massachusetts Mutual Life Insurance
Company Contract #GAC-10121-2 4,328,700
CNA Insurance Company
Contract #12732-016 3,666,600 3,940,364
New York Life Insurance Company
Contract #GA-06701-2 2,011,413
Principal Mutual Life Insurance Company
Contract #11948-2 2,728,562
Metropolitan Life Insurance Company
Contract #12177-169 1,856,355
----------- -----------
$17,737,713 $17,506,240
----------- -----------
----------- -----------
</TABLE>
7. INVESTMENTS IN PARENT COMPANY STOCK
Investments in parent company stock at December 31, 1993 and 1992 were as
follows:
Fair
Shares Value
Western Publishing Group, Inc.
common stock:
December 31, 1993 50,033 $963,135
--------
--------
December 31, 1992 29,007 $605,521
--------
--------
GOLDEN RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
Transactions in the common stock of Western Publishing Group, Inc. were as
follows:
1993 1992
-------------------- -------------------
Shares Amount Shares Amount
Aggregate purchases 23,096 $366,846 8,610 $155,959
-------- --------
Aggregate sales and
distributions to
participants 2,070 $ 34,220 6,438 $104,798
-------- --------
-------- --------
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - ------------------------------------------------------------------------------
8. Changes in Net Assets by Fund:
Plan participants have the ability to self-direct employee and employer
contributions into any of the funds described in Note 1. Net assets at
December 31, 1993 and the changes in net assets available for benefits
for the year then ended were as follows:
<TABLE>
<CAPTION>
Interest
Conservative Aggressive Parent Company Accumulation
Equity Fund Equity Fund Stock Fund Fund Loan Fund Total
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 14,442 $ 98 $ 712 $ 1,437,019 $ 102,144 $ 1,554,415
Dividends 121,673 60,155 181,828
Appreciation (depreciation) on pooled
investment accounts (7,868) 14,321 26,030 32,483
---------- --------- -------- ----------- ---------- -----------
Total investment income 128,247 74,574 26,742 1,437,019 102,144 1,768,726
Contributions:
Western Publishing Company, Inc. 62,292 61,821 50,787 668,975 843,875
Participants 170,581 180,852 141,856 1,873,545 2,366,834
Transfers of assets from (to)
other funds 187,194 (94,329) 76,847 (167,048) (2,664)
---------- --------- -------- ----------- ---------- -----------
Total additions 548,314 222,918 296,232 3,812,491 99,480 4,979,435
---------- --------- -------- ----------- ---------- -----------
Payments to or on behalf
of participants 22,992 17,879 19,194 1,507,844 16,866 1,584,775
Administrative expenses 3,573 3,780 2,034 96,745 106,132
---------- --------- -------- ----------- ---------- -----------
Total deductions 26,565 21,659 21,228 1,604,589 16,866 1,690,907
---------- --------- -------- ----------- ---------- -----------
Net increase 521,749 201,259 275,004 2,207,902 82,614 3,288,528
Net assets available for benefits:
Beginning of year 951,158 1,098,135 577,465 21,784,223 1,342,578 25,753,559
---------- --------- -------- ----------- ---------- -----------
End of year $1,472,907 $1,299,394 $852,469 $23,992,125 $1,425,192 $29,042,087
---------- --------- -------- ----------- ---------- -----------
---------- --------- -------- ----------- ---------- -----------
</TABLE>
GOLDEN RETIREMENT SAVINGS PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Net assets at December 31, 1992 and the changes in net assets available
for benefits for the year then ended were as follows:
<TABLE>
<CAPTION>
Interest
Conservative Aggressive Parent Company Accumulation
Equity Fund Equity Fund Stock Fund Fund Loan Fund Total
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 59 $ 76 $ 318 $ 1,557,754 $ 84,652 $ 1,642,859
Dividends 60,858 51,474 112,332
Appreciation on pooled
investment accounts 17,167 30,242 184,396 231,805
-------- ---------- -------- ----------- ---------- -----------
Total investment income 78,084 81,792 184,714 1,557,754 84,652 1,986,996
Contributions:
Western Publishing Company, Inc. 49,225 52,328 31,496 707,121 840,170
Participants 135,526 157,554 92,498 1,961,805 2,347,383
Transfers of assets from (to)
other funds 142,703 (11,886) (99,236) (354,956) 323,375
-------- ---------- -------- ----------- ---------- -----------
Total additions 405,538 279,788 209,472 3,871,724 408,027 5,174,549
-------- ---------- -------- ----------- ---------- -----------
Payments to or on behalf
of participants 11,291 12,689 11,971 1,605,053 19,919 1,660,923
Administrative expenses 3,123 3,743 2,323 102,151 111,340
-------- ---------- -------- ----------- ---------- -----------
Total deductions 14,414 16,432 14,294 1,707,204 19,919 1,772,263
-------- ---------- -------- ----------- ---------- -----------
Net increase 391,124 263,356 195,178 2,164,520 388,108 3,402,286
Net assets available for benefits:
Beginning of year 560,034 834,779 382,287 19,619,703 954,470 22,351,273
-------- ---------- -------- ----------- ---------- -----------
End of year $951,158 $1,098,135 $577,465 $21,784,223 $1,342,578 $25,753,559
-------- ---------- -------- ----------- ---------- -----------
-------- ---------- -------- ----------- ---------- -----------
</TABLE>
PENN CORPORATION
COMPREHENSIVE
SECURITY PROGRAM
Financial Statements for the Years
Ended December 31, 1993 and 1992 and
Independent Auditors' Report
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
TABLE OF CONTENTS
- - -------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits -
December 31, 1993 and 1992 2
Statements of Changes in Net Assets Available for Benefits -
Years Ended December 31, 1993 and 1992 3
Notes to Financial Statements 4-11
ALL FUNDS OF THE PLAN ARE HELD IN A MASTER TRUST.
AS A RESULT, SUPPLEMENTAL SCHEDULES ARE OMITTED
BECAUSE THEY ARE INAPPLICABLE UNDER THE DEPARTMENT
OF LABOR'S RULES AND REGULATIONS.
INDEPENDENT AUDITORS' REPORT
Benefit Plans Administration Committee
Penn Corporation:
We have audited the accompanying statements of net assets available for
benefits of Penn Corporation Comprehensive Security Program as of
December 31, 1993 and 1992, and the related statements of changes in
net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the net assets available for benefits of the Plan at
December 31, 1993 and 1992, and the changes in net assets available for
benefits for the years then ended in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE
Milwaukee, Wisconsin
April 15, 1994
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1993 AND 1992
_______________________________________________________________________________
1993 1992
---------- ----------
ASSETS:
Investments in Western Publishing Group, Inc. Master
Retirement Trust pooled investment accounts:
Investment funds - Note 5 $1,077,562 $ 485,035
Guaranteed investment contracts - Note 6 1,880,389 1,859,999
Parent company stock - Note 7 165,319 177,333
Loans receivable from participants 79,017 51,687
Accrued income receivable 8,604 10,837
Receivable from investments sold 280,000
Contributions receivable:
Penn Corporation 383,865 332,016
Participants 46,968 40,306
---------- ----------
Total assets 3,641,724 3,237,213
---------- ----------
LIABILITIES:
Payable to:
Participants 40,656
Third parties 2,401 570
---------- ----------
Total liabilities 2,401 41,226
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $3,639,323 $3,195,987
---------- ----------
---------- ----------
See notes to financial statements.
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1993 AND 1992
- - -------------------------------------------------------------------------------
1993 1992
---------- ----------
Investment income - Increase in equity of allocable
portion of Western Publishing Group, Inc.
Master Retirement Trust pooled investment
accounts - Note 8:
Interest $ 171,927 $ 173,069
Dividends 21,945 11,644
(Depreciation) appreciation on pooled
investment accounts (14,252) 51,170
Contributions:
Penn Corporation 383,915 332,445
Participants 524,379 457,433
---------- ----------
Total additions 1,087,914 1,025,761
---------- ----------
Payments to or on behalf of participants 627,373 352,136
Administrative expenses 17,205 11,280
---------- ----------
Total deductions 644,578 363,416
---------- ----------
Net increase 443,336 662,345
Net assets available for benefits:
Beginning of year 3,195,987 2,533,642
---------- ----------
End of year $3,639,323 $3,195,987
---------- ----------
---------- ----------
See notes to financial statements.
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1992
- - -------------------------------------------------------------------------------
1. THE PLAN
Penn Corporation Comprehensive Security Program (the "Plan") is a
contributory defined contribution plan offered to certain employees of
Penn Corporation (the "Company"), a wholly- owned subsidiary of Western
Publishing Group, Inc., and eligible employees of any other United
States corporation that is a member of the controlled group of
corporations of which Penn Corporation is a member, which adopts the
Plan, with the consent of the Company, who meet certain eligibility
requirements. The Plan became effective on January 1, 1987 and conforms
with the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA").
An employee becomes a participant of the Plan on specified quarterly
entry dates after meeting the following requirements:
a. Is a salaried employee or a member of a group or class of employees to
which the Plan has been extended by the Board of Directors of the
employer; and
b. Is not a member of a collective bargaining unit of employees
represented by a collective bargaining representative, except to the
extent that an agreement between the participating company ("employer")
and such representative extends the Plan to such unit of employees; and
c. Has completed six months of continuous employment (as defined in the
Plan).
Participants, by means of authorized payroll deductions, may elect to
make contributions to the Plan in amounts based on a percentage of
compensation, as defined in the Plan. A participating employee's total
contribution ("income deferral" and "voluntary participant") is limited
to 16% of compensation. Income deferral contributions were limited to
$8,994 for 1993 and $8,728 for 1992 in accordance with the Internal
Revenue Code ("Code").
The Company contributes to the Plan an amount equal to 3% of the
aggregate compensation of participants entitled to share in the
contribution for that year. Employer contributions are reduced by any
forfeitures to be credited for the applicable period. Forfeitures for
1993 and 1992 totaled $4,769 and $12,908, respectively. The employers'
contributions are always invested in the Interest Accumulation Fund.
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
Amounts credited to a participant's account are designated as "Plan
Credits." Contributions made by, or on behalf of, a participant, are
invested (in proportions designated by the participant) in one or more
of the following funds:
Number of Participants
Invested in Fund at
Fund Type December 31, 1993
--------- ----------------------
Conservative Equity Fund 97
Aggressive Equity Fund 93
Interest Accumulation Fund 612
Parent Company Stock Fund 81
Interest, dividends and net realized and unrealized gains and losses on
Plan investments are allocated to participants' accounts based on their
proportionate share of the applicable fund's assets.
If a participant's employment terminates for any reason other than
retirement, disability or death, the participant is entitled to receive
Plan Credits resulting from employer contributions which are then
vested according to the following schedule:
Vested Percentage
Years of Continuous of Employer
Employment Contribution Account
------------------- --------------------
Less than 1 0%
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Balances in a participant's income deferral contribution account and
voluntary participant account are fully vested at all times.
In the event of a participant's retirement, disability or death, Plan
Credits not previously vested, become fully vested and are not subject
to forfeiture, and all Plan Credits become immediately distributable in
the manner described below.
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
When a participant's employment terminates for any reason, all vested
Plan Credits of the participant may be distributed to the participant
or, in the event of death, to the beneficiary by one or both of the
following methods:
a. By a lump-sum distribution of any or all Plan Credits.
b. By applying the cash equivalent of any or all such Plan Credits
towards the purchase of an annuity contract, subject to certain
requirements as defined in the Plan.
A participant may elect to defer distribution of vested Plan Credits
until age 70-1/2.
No more often than once per quarter, a participant may elect to withdraw
all or any portion of the net credit balance in the voluntary
participant contribution account or rollover account. In addition,
participants may borrow, up to certain limits, against their account
balance. The loan must be repaid over a period not to exceed 60 months
unless the proceeds were used for the purchase of a primary residence
in which case it must be repaid within 360 months. Generally, loan
repayments are made by payroll deduction.
2. ACCOUNTING PRINCIPLES
The Plan participates in investment accounts under the Western
Publishing Group, Inc. Master Retirement Trust (the "Master Trust").
Investment income, realized gains and losses on investment
transactions, expenses and investment appreciation or depreciation on
assets held in the Master Trust are allocated monthly to each fund
under the Plan based on its proportionate share of Master Trust assets.
Plan participation in the Master Trust is adjusted monthly for
withdrawals for benefit payments to Plan participants and annually for
employer contributions made to the Plan.
Investments in the Master Trust pooled investment accounts and parent
company stock are valued at fair value. Investments in guaranteed
investment contracts are valued at contract value. Contract value
represents contributions made under the contract plus interest at the
contract rate, less funds used to purchase annuities and pay
administrative expenses.
Plan expenses, such as trustee and accounting fees, are chargeable to
the Plan. During 1993 and 1992, $17,205 and $11,280, respectively, of
such expenses were paid by the Plan.
In 1993, the Plan changed its method of accounting for benefits payable
to comply with the 1993 AICPA Audit and Accounting Guide, Audits of
Employee Benefit Plans. The new guidance requires that benefits
payable to persons who have withdrawn from participation in a defined
contribution plan be disclosed in the footnotes to the financial
statements rather than be recorded as a liability of the Plan. As of
December 31, 1993, net assets available for benefits included benefits
of $61,944 due to participants who have withdrawn from participation in
the Plan.
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
3. INTERNAL REVENUE SERVICE STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated September 15, 1989, that the Plan is qualified and the
trust established under the Plan is tax- exempt, under the appropriate
sections of the Code. The Plan has been amended since receiving the
determination letter. However, the plan administrator believes that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Code. Therefore, the plan administrator
believes that the Plan was qualified and the related trust was tax-
exempt as of the financial statement date.
4. TERMINATION OF THE PLAN
In the event that the Plan is terminated at some future time, each
participant's account will become fully vested and will be distributed
in accordance with provisions of the Plan.
5. INVESTMENTS IN MASTER TRUST POOLED INVESTMENT FUNDS
Investments in Master Trust pooled investment funds at December 31, 1993
and 1992, were as follows:
December 31, 1993
Units Fair Value
------- ----------
Conservative Equity Fund
(Evergreen Total Return Fund) 8,792 $ 172,491
Aggresive Equity Fund (Evergreen Fund) 12,533 177,973
Bankers Trust Pyramid Directed
Account Cash Fund 727,098 727,098
----------
$1,077,562
----------
----------
December 31, 1992
Units Fair Value
------- ----------
Conservative Equity Fund
(Evergreen Total Return Fund) 4,814 $ 93,542
Aggresive Equity Fund (Evergreen Fund) 8,935 125,358
Bankers Trust Pyramid Directed
Account Cash Fund 266,135 266,135
---------
$485,035
---------
---------
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
6. GUARANTEED INVESTMENT CONTRACTS
Investments in guaranteed investment contracts at December 31, 1993 and
1992 were as follows:
1993 1992
---------- ----------
Principal Mutual Life Insurance Company
Contract #GA4-6187-3 $ 711,685
Massachusetts Mutual Life Insurance
Company Contract #GAC 10121-3 $ 705,173
CNA Insurance Company
Contract #12732-026 478,308 581,421
New York Life Insurance Company
Contract #GIC-06701-2-3 255,940
New York Life Insurance Company
Contract #GA-06701-3 222,404
Allstate Life Insurance Company
Group Annuity Contract #GA-5343-3 212,052 288,156
Metropolitan Life Insurance Company
Contract #12177-269 156,201
Principal Mutual Life Insurance Company
Contract #11948-3 129,048
---------- ----------
$1,880,389 $1,859,999
---------- ----------
---------- ----------
7. INVESTMENTS IN PARENT COMPANY STOCK
Investments in parent company stock at December 31, 1993 and 1992 were
as follows:
Fair
Shares Value
---------- ----------
Western Publishing Group, Inc.
common stock:
December 31, 1993 8,588 $ 165,319
----------
----------
December 31, 1992 8,495 $ 177,333
----------
----------
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
Transactions in the common stock of Western Publishing Group, Inc. were
as follows:
1993 1992
-------------- ---------------
Shares Amount Shares Amount
------ ------- ------ -------
Aggregate purchases 1,466 $23,267 2,525 $46,773
------- -------
------- -------
Aggregate sales 1,373 $22,835 2,453 $39,585
------- -------
------- -------
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
8. CHANGES IN NET ASSETS BY FUND:
Plan participants have the ability to self-direct employee
contributions into any of the funds described in Note 1. Net assets at
December 31, 1993 and the changes in net assets available for benefits
for the year then ended were as follows:
<TABLE>
<CAPTION>
Interest
Conservative Aggressive Parent Company Accumulation
Equity Fund Equity Fund Stock Fund Fund Loan Fund Total
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 1,731 $ 12 $ 2 $ 165,436 $ 4,746 $ 171,927
Dividends 14,375 7,570 21,945
(Depreciation) appreciation on
pooled investment accounts (2,463) 2,044 (13,833) (14,252)
-------- -------- ---------- ---------- ------- ---------
Total investment income (loss) 13,643 9,626 (13,831) 165,436 4,746 179,620
Contributions:
Penn Corporation 383,915 383,915
Participants 67,909 70,258 52,196 334,016 524,379
Transfers of assets from (to)
other funds 6,319 (10,230) (26,028) 4,297 25,642
--------- --------- ---------- ---------- --------- --------
Total additions 87,871 69,654 12,337 887,664 30,388 1,087,914
--------- --------- ---------- ---------- --------- ---------
Payments to or on behalf
of participants 8,328 10,058 16,354 589,574 3,059 627,373
Administrative expenses 598 367 858 15,382 17,205
--------- --------- ---------- ---------- --------- ---------
Total deductions 8,926 10,425 17,212 604,956 3,059 644,578
--------- --------- ---------- ---------- --------- ---------
Net increase (decrease) 78,945 59,229 (4,875) 282,708 27,329 443,336
--------- --------- ---------- ---------- --------- ---------
Net assets available for benefits:
Beginning of year 101,099 115,826 167,160 2,760,214 51,688 3,195,987
End of year $180,044 $175,055 $162,285 $3,042,922 $79,017 $3,639,323
--------- --------- ---------- ---------- --------- ---------
--------- --------- ---------- ---------- --------- ---------
</TABLE>
PENN CORPORATION COMPREHENSIVE SECURITY PROGRAM
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- - -------------------------------------------------------------------------------
8. CHANGES IN NET ASSETS BY FUND:
Net assets at December 31, 1992 and the changes in net assets available for
benefits for the year then ended were as follows:
<TABLE>
<CAPTION>
Interest
Conservative Aggressive Parent Company Accumulation
Equity Fund Equity Fund Stock Fund Fund Loan Fund Total
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 7 $ 10 $ 105 $ 170,601 $ 2,346 $ 173,069
Dividends 6,278 5,366 11,644
Appreciation on pooled
investment accounts 1,312 3,850 46,008 51,170
--------- --------- ---------- ---------- -------- ----------
Total investment income 7,597 9,226 46,113 170,601 2,346 235,883
Contributions:
Penn Corporation 332,445 332,445
Participants 35,747 49,265 43,694 328,727 457,433
Transfers of assets from (to)
other funds 4,264 (15,244) (14,905) (1,940) 27,825
--------- --------- ---------- ---------- -------- ----------
Total additions 47,608 43,247 74,902 829,833 30,171 1,025,761
--------- --------- ---------- ---------- -------- ----------
Payments to or on behalf
of participants 11,144 46,263 24,167 270,562 352,136
Administrative expenses 246 414 542 10,078 11,280
--------- --------- ---------- ---------- -------- ----------
Total deductions 11,390 46,677 24,709 280,640 363,416
--------- --------- ---------- ---------- -------- ----------
Net increase (decrease) 36,218 (3,430) 50,193 549,193 30,171 662,345
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Net assets available for benefits:
Beginning of year 64,881 119,256 116,967 2,211,021 21,517 2,533,642
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End of year $101,099 $115,826 $167,160 $2,760,214 $51,688 $3,195,987
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</TABLE>
