FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 29, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-631
ROSE'S STORES, INC.
Incorporated Under the Laws of Delaware
I.R.S. Employer Identification No. 56-0382475
P. H. Rose Building
218 South Garnett Street
Henderson, North Carolina 27536
Telephone No. 919/430-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
As of August 28, 1995, of the 10,000,000 shares of common stock delivered
to First Union National Bank of North Carolina ("FUNB") as Escrow Agent
pursuant to the Modified and Restated First Amended Joint Plan of
Reorganization, the Company has 7,160,730 shares of common stock outstanding.
The remaining 2,258,692 shares held in escrow will be distributed by FUNB in
satisfaction of disputed Class 3 claims as and when such claims are resolved.
If all pending claims are resolved adversely to the Company, approximately
9,380,253 shares of common stock will be outstanding. If all pending claims
are resolved in accordance with the Company's records, approximately 8,630,463
shares of common stock will be outstanding. The foregoing estimates do not
include any additional shares that may be issued with respect to late-filed
claims which the Bankruptcy Court may allow which have not been filed as of
the date hereof. To the extent that escrowed shares of Common Stock are not
used to satisfy claims, they will revert to the Company and will be retired or
held in the treasury of the Company.
<PAGE>
ROSE'S STORES, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
(Amounts in thousands except per share amounts)
The following summary of financial information of Rose's Stores, Inc. (the
"Company"), which is unaudited, reflects all adjustments which are, in the
opinion of management, necessary to reflect a fair statement of the
information presented. Beginning in May 1995, the statements of operations
and balance sheets reflect the application of fresh start accounting as
described in the Company's quarterly report on Form 10-Q, dated April 29,
1995, and are therefore not comparable to the prior year.
ROSE'S STORES, INC.
STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Successor Predecessor
Thirteen Thirteen
Weeks Ended Weeks Ended
July 29, 1995 July 30, 1994
<S> <C> | <C>
Revenue: |
Gross sales $ 168,488 | 175,231
Leased department sales 5,764 | 6,368
Net sales 162,724 | 168,863
Leased department income 1,178 | 1,150
Total revenue 163,902 | 170,013
Costs and Expenses: |
Cost of sales 122,471 | 127,535
Selling, general and administrative 40,596 | 39,406
Depreciation and amortization (791) | 2,387
Interest 1,718 | 1,621
Total costs and expenses 163,994 | 170,949
|
Earnings (Loss) before reorganization benefit (expense) (92) | (936)
Reorganization benefit (expense) (Note 1) - | 7,971
|
Net earnings (loss) $ (92) | 7,035
Earnings (Loss) per share (Note 2) $ (.01) | 0.38
Weighted average shares (Note 2) 9,380 | 18,758
</TABLE>
<PAGE>
Note 1
Certain information concerning benefits (expenses) resulting from the Company's
reorganization are as follows:
<TABLE>
<CAPTION>
Successor Predecessor
Thirteen Thirteen
Weeks Ended Weeks Ended
July 29, 1995 July 30, 1994
<S> <C> | <C>
Closed store provision (59 closings) $ - | 12,000
DIP financing fees, amortization and expenses - | (510)
Estimated professional fees - | (3,399)
Other reorganization costs and expenses - | (120)
TOTAL REORGANIZATION BENEFIT (EXPENSE) $ - | 7,971
</TABLE>
Note 2
The 18,758 formerly outstanding shares of the Company used to calculate
Predecessor's earnings (loss) per share were cancelled on April 28, 1995. The
number of shares used in the Successor's earnings (loss) per share calculations
is 9,380, the number of shares that will be issued and outstanding if all
pending claims are resolved adversely to the Company. If all pending claims are
resolved in accordance with the Company's records, 8,630 shares will be issued
and outstanding. Currently, 7,161 shares are outstanding. The foregoing esti-
mates do not include any additional shares that may be issued with respect to
late-filed claims which the Bankruptcy Court may allow which have not been filed
as of the date hereof. To the extent that escrowed shares of Common Stock are
not used to satisfy claims, they will revert to the Company and will be retired
or held in the treasury of the Company.
See notes to financial statements
<PAGE>
ROSE'S STORES, INC.
STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Successor Predecessor
Thirteen Thirteen Twenty-Six
Weeks Ended Weeks Ended Weeks Ended
July 29, 1995 April 29, 1995 July 30, 1994
<S> <C> <C> <C>
Revenue: |
Gross sales $ 168,488 | 159,407 349,814
Leased department sales 5,764 | 5,117 11,882
Net sales 162,724 | 154,290 337,932
Leased department income 1,178 | 1,114 2,450
Total revenue 163,902 | 155,404 340,382
Costs and Expenses: |
Cost of sales 122,471 | 116,838 254,231
Selling, general and administrative 40,596 | 35,486 79,587
Depreciation and amortization (791) | 1,812 4,862
Interest 1,718 | 726 3,405
Total costs and expenses 163,994 | 154,862 342,085
|
Earnings (Loss) before reorganization |
benefit (expense) (92) | 542 (1,703)
Reorganization benefit (expense) (Note 1) - | (3,847) (50,810)
Fresh start revaluation - | (17,432) -
Loss before extraordinary item (92) | (20,737) -
Extraordinary item - gain on debt discharge - | 90,924 -
Net earnings (loss) (Note 2) $ (92) | 70,187 (52,513)
Earnings (Loss) per share before |
extraordinary item (Note 3) $ (.01) | (1.11) (2.80)
Net Earnings (Loss) per share (Note 3) $ (.01) | 3.74 (2.80)
Weighted average shares (Note 3) 9,380 | 18,758 18,758
</TABLE>
Note 1
Certain information concerning benefits (expenses) resulting from the Company's
reorganization are as follows:
<TABLE>
<CAPTION>
Successor Predecessor
Thirteen Thirteen Twenty-Six
Weeks Ended Weeks Ended Weeks Ended
July 29, 1995 April 29, 1995 July 30, 1994
<S> <C> <C>
Closed store provision (59 closings) $ - | - (43,000)
DIP financing fees, amortization and expenses - | (1,342) (934)
Estimated professional fees - | (2,318) (6,514)
Other reorganization costs and expenses - | (187) (362)
TOTAL REORGANIZATION BENEFIT (EXPENSE) $ - | (3,847) (50,810)
</TABLE>
Note 2
If the Company had emerged from Chapter 11 proceedings at the beginning of the
year, the application of Fresh Start accounting would have resulted in year-to-
date (twenty-six weeks ended July 29, 1995) net earnings on a proforma basis of
approximately $1,863.
<PAGE>
Note 3
The 18,758 formerly outstanding shares of the Company used to calculate
Predecessor earnings (loss) per share were cancelled on April 28, 1995. The
number of shares used in the Successor earnings (loss) per share calculations is
9,380, the number of shares that will be issued and outstanding if all pending
claims are resolved adversely to the Company. If all pending claims are resolved
in accordance with the Company's records, 8,630 shares will be issued and
outstanding. Currently, 7,161 shares are outstanding. The foregoing estimates
do not include any additional shares that may be issued with respect to late-
filed claims which the Bankruptcy Court may allow which have not been filed as
of the date hereof. To the extent that escrowed shares of Common Stock are not
used to satisfy claims, they will revert to the Company and will be retired or
held in the treasury of the Company.
See notes to financial statements
<PAGE>
ROSE'S STORES, INC.
BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
Successor Predecessor Predecessor
July 29, January 28, July 30,
1995 1995 1994
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C>
Assets |
Current Assets |
Cash and cash equivalents $ 641 | 1,350 11,009
Accounts receivable 10,646 | 12,140 14,895
Inventories 178,551 | 119,567 144,302
Other current assets 6,661 | 12,163 15,133
Total current assets 196,499 | 145,220 185,339
Property and Equipment, at cost |
Less accumulated depreciation and amortization 1,566 | 34,707 38,411
Other Assets - | 3,259 7,044
$ 198,065 | 183,186 230,794
Liabilities and Stockholders' Equity (Deficit) |
Current Liabilities |
DIP financing $ - | 600 595
Accounts payable 26,717 | 23,392 26,190
Short-term debt 72,094 | - -
Reserve for store closings and remerchandising 1,551 | 8,530 10,747
Deferred tax liabilities - | 3,164 6,447
Accrued salaries and wages 7,169 | 7,821 9,364
Other current liabilities 17,503 | 9,704 16,896
Total current liabilities 125,034 | 53,211 70,239
|
Liabilities Subject to Settlement Under |
Reorganization Proceedings - | 156,474 188,420
Excess of Net Assets Over Reorganization Value, |
Net of Amortization 31,221 | - -
Deferred Income 1,312 | 1,993 1,547
Other Liabilities 5,590 | 6,694 7,005
Stockholders' Equity (Deficit) |
Common Stock, Authorized 10,000 shares 35,000 | - -
Voting common stock (Cancelled 4/28/95) - | 2,250 2,250
Non-voting Class B stock (Cancelled 4/28/95) - | 18,795 18,795
Paid-in Capital-Stock Warrants (Cancelled 4/28/95) - | 2,700 2,700
Retained earnings (Accumulated deficit) (92) | (40,313) (41,544)
34,908 | (16,568) (17,799)
Treasury stock, at cost (Cancelled 4/28/95) - | (18,618) (18,618)
Total stockholders' equity (deficit) 34,908 | (35,186) (36,417)
$ 198,065 | 183,186 230,794
</TABLE>
See notes to financial statements
<PAGE>
ROSE'S STORES, INC.
STATEMENT OF CASH FLOWS (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
Thirteen Thirteen Twenty-Six
Weeks Ended Weeks Ended Weeks Ended
July 29, 1995 April 29, 1995 July 30, 1994
<S> <C> <C> <C>
Cash flows from operating activities: |
Net earnings (loss) $ (92) | 70,187 (52,513)
Adjustments to reconcile net loss to net cash |
provided by (used in) operating activities: |
Depreciation and amortization (791) | 1,812 4,862
(Gain) loss on disposal of property |
and equipment (1) | (1) (300)
LIFO expense (credit) - | (364) (576)
Provision for closed stores - | - 43,000
Fresh start revaluation and debt discharge - | (73,492) -
Cash provided by (used in) assets and liabilities: |
(Increase) decrease in accounts receivable (1,411) | (630) 162
(Increase) decrease in inventories 6,578 | (40,291) 59,424
(Increase) decrease in other current |
and non-current assets 1,555 | (3,620) 2,983
Increase (decrease) in accounts payable (10,925) | 14,361 (14,327)
Increase (decrease) in accrued expenses |
and other current liabilities 579 | (2,142) (2,021)
Net cash increase (decrease) in provisions for |
closed stores (3,401) | (1,108) (7,303)
Increase (decrease) in deferred income (169) | (201) (749)
Increase (decrease) in other liabilities 30 | 7 193
Net cash provided by (used in) operating |
activities (8,048) | (35,482) 32,835
|
Cash flows from investing activities: |
Purchases of property and equipment (1,575) | (510) (784)
Proceeds from disposal of property |
and equipment 1 | 5 715
Net cash provided by (used in) investing |
activities (1,574) | (505) (69)
|
Cash flows from financing activities: |
Net activity on short-term debt 13,440 | 58,654 (33,134)
Proceeds (payments) of DIP Facility - | (600) 595
Payments on pre-petition secured debt - | (26,423) -
Payments of unsecured claims (1,372) | (1,593) -
Principal payments on capital lease |
obligations (163) | (281) (1,173)
Increase (decrease) in bank drafts outstanding (2,264) | 5,502 -
Net cash provided by (used in) financing |
activities 9,641 | 35,259 (33,712)
|
Net decrease in cash 19 | (728) (946)
Cash and cash equivalents at beginning of period 622 | 1,350 11,955
Cash and cash equivalents at end of period $ 641 | 622 11,009
|
Non cash activities in closed store reserve: |
Provision for closed stores - | - (43,000)
Retirement of net book value of assets - | 623 7,035
Write-off of leases - | - (44)
</TABLE>
See notes to financial statements
<PAGE>
Notes to Financial Statements:
(1) On September 5, 1993, the Company filed a voluntary Petition for Relief
under Chapter 11, Title 11 of the United States Code (the "Bankruptcy
Code") with the United States Bankruptcy Court for the Eastern District
of North Carolina (the "Bankruptcy Court"). The Company's Modified and
Restated First Amended Joint Plan of Reorganization (the "Plan") was
approved by order of the Bankruptcy Court on April 24, 1995. On April 28,
1995, the Company's Modified and Restated First Amended Joint Plan of
Reorganization (the "Plan") became effective. The periods and dates prior
to the Company's emergence from Chapter 11 are referred to as those of the
predecessor company (the "Predecessor") while the period and dates
subsequent to its emergence are referred to as those of the successor
company (the "Successor").
During the second quarter, distributions of the common stock, no par
value, of the Company (the "Common Stock") were made to holders of Allowed
Class 3 Unsecured Claims (as defined under the Plan) in accordance with
the provisions of the Plan. As the result of distributions of the Common
Stock pursuant to the Plan, as of August 28, 1995, the Company had 7,161
shares of Common Stock outstanding of the 10,000 shares of Common Stock
which were delivered to First Union National Bank of North Carolina
("FUNB") as escrow agent pursuant to the Plan on the Effective Date. In
addition, as of August 28, 1995, and pursuant to the provisions of the
Plan, 580 shares reverted to the Company from escrow to be retired or held
in the treasury of the Company.
The remaining 2,259 shares held in escrow will be distributed by FUNB in
satisfaction of disputed Class 3 claims as and when such claims are
resolved.
The disputed Class 3 claims which remain unresolved at August 28, 1995
were primarily claims of landlords with respect to leases which were
rejected during the course of the Chapter 11 proceeding and general liabi-
lity claims being resolved under an alternative dispute resolution program
established by the Bankruptcy Court. If all pending claims are resolved
adversely to the Company, approximately 2,220 additional shares of Common
Stock will be issued and outstanding, and there will be a total of approx-
imately 9,380 shares of Common Stock issued and outstanding. If all pend-
ing claims are resolved in accordance with the Company's records and/or
position as to such claims, approximately 1,470 additional shares of Com-
mon Stock will be issued, and there will be a total of approximately 8,630
shares of Common Stock issued and outstanding. The foregoing estimates do
not include any additional shares that may be issued with respect to late-
filed claims which the Bankruptcy Court may allow which have not been
filed as of the date hereof. To the extent that escrowed shares of Common
Stock are not used to satisfy claims, they will revert to the Company and
will be retired or held in the treasury of the Company.
The Company's New Equity Compensation Plan was adopted on February 14,
1995 and was designed for the benefit of the executives and key employees
of the Company by allowing the grant of a variety of different types of
equity-based compensation to eligible participants. The plan provides for
the granting of a maximum of 700 shares of stock. Under the New Equity
Compensation Plan, 388 nonqualified stock options were granted on July 27,
1995. The option price per share is $2.875 for the first half of the
shares and $5.750 for the remainder of the shares. The options vest over
a three year period. One half of the options expire in five years and the
remainder in seven years.
The exercise of outstanding stock options and warrants would result in an
anti-dilutive effect on loss per share and are excluded from the
calculations of earnings (loss) per share.
(2) Accounts receivable is net of allowance for doubtful accounts of $2,571 as
of July 29, 1995 and $25 as of January 28, 1995 and July 30, 1994.
(3) As part of fresh start accounting adopted as of April 29, 1995, the Com-
pany recorded an excess of net assets over reorganization value of
$32,021, which is being amortized over 10 years. The amortization of this
deferred credit is included with depreciation and amortization.
(4) The Company's consolidated financial statements for years prior to January
1995 include the accounts of a wholly-owned subsidiary after elimination
of intercompany accounts and transactions. In January 1995, the wholly-
owned subsidiary was merged with the Company.
(5) The operating results presented herein are not necessarily indicative of
the operating results for a full year due to seasonal factors, among other
reasons.
(6) Included in the reorganization costs for the second quarter of 1994 was a
$12,000 reduction of the first quarter charge of $55,000 for the costs of
closing 59 stores in 1994 and to realign corporate and administrative
costs accordingly. The reduction resulted from better than expected going-
out-of-business sales proceeds and less than expected closing costs.
(7) LIFO expense (credit) is included as an adjustment to reconcile net loss
to net cash used in operating activities in the statements of cash flows
because LIFO expense (credit) is a noncash item included in cost of sales
to adjust inventories stated on a FIFO basis to a LIFO basis.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollar amounts in thousands)
General
On May 1, 1995, the Company announced that it had satisfied all conditions
required under its plan of reorganization and had emerged from Chapter 11 of the
United States Bankruptcy Code on April 28, 1995 (the "Effective Date"). In
accordance with SOP 90-7, the Company adopted fresh start reporting. Under fresh
start reporting, a new reporting entity is created, and the Company was required
to adjust its assets and liabilities to reflect their estimated fair market
value at the Effective Date, which reduced depreciation and amortization related
to property and equipment; and created a deferred credit, excess of net assets
over reorganization value, which is being amortized over 10 years.
At the same time, the Company made certain reclassifications between gross mar-
gin and expenses and changed the method of accruing certain expenses between
<PAGE>
periods. In addition, as a result of the Company's emergence, reorganization
expense and income taxes recognized by the Company prior to April 28, 1995, are
not comparable to amounts, if any, recognized subsequent to the Effective Date.
For further information, see Note 1 to the financial statements and the Com-
pany's quarterly report on Form 10-Q for the quarter ended dated April 29, 1995.
To facilitate a better comparison of the Company's operating results for the
periods presented, the following discussion of the results of operations is
partially presented on a pro forma basis (as described below) for the twenty-six
weeks ended July 29, 1995. The combined historical statements of operations for
the thirteen weeks ended April 29, 1995 (Predecessor) and thirteen weeks ended
July 29, 1995 (Successor), are not included in the discussion due to the lack of
comparability caused by the adoption of fresh start accounting at the end of the
first quarter. Certain items in the Successor's pro forma statements of
operations are not affected by fresh start adjustments and are comparable to the
historical combined results of the Predecessor and the Successor.
The pro forma statements of operations combine the results of operations of the
Predecessor and Successor for the twenty-six weeks ended July 29, 1995 and give
effect to the transactions occurring in conjunction with the Plan as if the
Effective Date had occurred, and such transactions had been consummated, on
January 29, 1995. The statements of operations have been adjusted to reflect:
the reduction in depreciation and amortization expense due to the write-off of
property and equipment, property under capital leases and other intangible
assets; the elimination of the effects of historical reorganization items;
amortization of excess net assets over reorganization value; and the recording
of an appropriate income tax expense.
<PAGE>
Proforma Results of Operations (Unaudited)
The following table sets forth the results of operations for the thirteen and
twenty-six weeks ended July 29, 1995, and July 30, 1994:
(Dollar amounts in thousands,
except per share amounts.)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
July 29, 1995 July 30, 1994 July 29, 1995 July 30, 1994
Successor Predecessor Successor Predecessor
Historical Historical Proforma Historical
<S> <C> <C> <C> <C>
Revenue: | |
Gross sales $ 168,488 | 175,231 327,896 (a)| 349,814
Leased department sales 5,764 | 6,368 10,881 (a)| 11,882
Net sales 162,724 | 168,863 317,015 (a)| 337,932
Leased department income 1,178 | 1,150 2,292 (a)| 2,450
Total revenue 163,902 | 170,013 319,307 | 340,382
| |
Costs and Expenses: | |
Cost of sales 122,471 | 127,535 237,681 | 254,231
Selling, general and administrative 40,596 | 39,406 77,711 | 79,587
Depreciation and amortization (791) | 2,387 (1,592) | 4,862
Interest 1,718 | 1,621 2,444 (a)| 3,405
Total costs and expenses 163,994 | 170,949 316,244 | 342,085
| |
Earnings (Loss) Before Reorganization | |
Benefit (Expense) and Income Taxes (92) | (936) 3,063 | (1,703)
Reorganization benefit (expense) - | 7,971 - | (50,810)
| |
Earnings (Loss) Before Income Taxes (92) | 7,035 3,063 | (52,513)
Income taxes - | - 1,200 | -
Net Earnings (Loss) (92) | 7,035 1,863 | (52,513)
Earnings (Loss) Per Share (.01)(b)| 0.38(b) 0.20(b) | (2.80)(b)
Weighted Average Shares 9,380 (b)| 18,758(b) 9,380(b) | 18,758 (b)
</TABLE>
(a) The Successor proforma amounts represent the combination of the Successor's
historical amounts with the Predecessor's historical amounts. See
statements of operations included in the historical financial statements.
(b) The 18,758 formerly outstanding shares of the Company used to calculate
earnings (loss) per share were cancelled on April 28, 1995. The number of
shares used in the 1995 earnings (loss) per share calculations is 9,380,
the number of shares that will be issued and outstanding if all pending
claims are resolved adversely to the Company. If all pending claims are
resolved in accordance with the Company's records, 8,630 shares will be
issued and outstanding. Currently, 7,161 shares are outstanding. The
foregoing estimates do not include any additional shares that may be issued
with respect to late-filed claims which the Bankruptcy Court may allow
which have not been filed as of the date hereof. To the extent that
escrowed shares of Common Stock are not used to satisfy claims, they will
revert to the Company and will be retired or held in the treasury of the
Company.
<PAGE>
Revenue
The Company reported sales for the second quarter of 1995 of $168,488, a de-
crease of $6,743, or 3.8%, from the second quarter of 1994, and year-to-date
sales were $327,896, a decrease of $21,918, or 6.3%, from the comparable period
of the prior year. The decreases for the quarter and year-to-date were due in
part to the decrease in the number of stores (106 in 1995 as compared to 113 in
1994). Sales on a comparable store basis increased 1.6% for the second quarter
of 1995 as compared to the comparable year-earlier quarter, and decreased .7%
year-to-date as compared to the comparable year-earlier period.
Costs and Expenses
Cost of sales as a percent of net sales was 75.3% for the second quarter and
75.5% for the comparable period of the prior year. Cost of sales for the year-
to-date as a percent of net sales was 75.0% for 1995 (proforma) and 75.2% for
the comparable period of the prior year. The decrease in the quarter and year-
to-date cost of sales was due primarily to the reclassification of advertising
co-op and cash discounts to cost of sales resulting in a decrease of 1.2% in the
cost of sales. Cost of sales increased .3% for the quarter and .9% year-to-date
due to an increase in markdowns; and .5% for the quarter and .1% year-to-date
due to higher inventory shrinkage compared to the comparable periods of the
prior year.
Selling, general and administrative expenses (SG&A) as a percent of sales for
the second quarter were 24.9% in 1995 and 23.3% in the comparable period of the
prior year. Year-to-date SG&A expenses as a percentage of sales were 24.5% in
1995 (proforma) and 23.6% in 1994. The increase as a percentage of sales was
due to the reclassification of advertising co-op and cash discounts from SG&A to
gross margin.
On a proforma basis, reorganization costs for 1995 would not have been incurred.
The actual reorganization costs in the first quarter of $3,847 included
professional fees, DIP fees and expense amortizations, and other expenditures
related to the Chapter 11 filing. No reorganization costs were incurred in the
second quarter of 1995.
Included in the reorganization costs for the second quarter of 1994 was a
$12,000 reduction of the first quarter provision of $55,000 for the costs of
closing 59 stores in 1994 and to realign corporate and administrative costs
accordingly. This reduction resulted from better than expected going-out-of-
business sales proceeds and lower than expected closing costs.
Also included in reorganization costs for the second quarter of 1994 were $4,029
and for the twenty-six weeks of 1994 were $7,810 for professional fees, DIP fees
and expense amortizations, and other expenditures related directly to the
Chapter 11 filing.
Liquidity and Capital Resources
The Company is a party to a revolving credit agreement, which provides for a
revolving credit facility of up to $125,000 based on the Company's eligible
inventory. As of September 9, 1995, the Company had $75,743 outstanding in
short-term debt under its working capital facility, $19,032 in outstanding
letters of credit and unused availability of $10,910. The Company's unused
availability may decrease depending on future sales results and inventory
levels. However, the Company believes that during the third and fourth
quarters it will be able to maintain sufficient liquidity through its
cash flow, the receipt of cash from tax refunds and other sources, and based on
discussions with its lenders, from additional borrowing availability under such
credit agreement.
The Company's liquidity is also impacted by vendor credit terms. In order to
support vendor credit terms, the Company provides its vendors which extend
credit with a second lien security interest in $15,000 of its real property
and a $5,000 letter of credit. This security interest continues through the end
of April, 1996.
The Company invested $1,575 in cash for property and equipment in the second
quarter of 1995 compared to $506 invested in the second quarter of 1994. Year-
to-date cash investment in property and equipment was $2,085 in 1995 (combined
successor and predecessor) compared to $784 in 1994.
Cash used in operating activities was $8,048 in the second quarter of 1995 and
$43,530 year-to-date (combined successor and predecessor). Cash provided by
operating activities during 1994 was $55,853 in the second quarter and $32,835
year-to-date.
<PAGE>
PART II. OTHER INFORMATION
No securities (debt or equity) which were not registered under the
Securities Act of 1933 were sold by the registrant during the fiscal quarter
ended July 29, 1995.
ITEM 2: Changes in Securities
For information with respect to this Item, see Item 1 - Legal Proceedings.
ITEM 4: Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on July 14, 1995. At the
meeting, the following matters were approved:
(1) All nominees for directors listed in the proxy statement, relating to
such meeting were elected by a vote in favor of such elections of at
least 2,119,817.
(2) The resolution to confirm the appointment of KPMG Peat Marwick LLP as
the Company's independent certified public accountants for the
current year was approved by a vote of 2,165,063 shares voting in
favor of, and 9,661 shares voting against the resolution.
The total number of shares of the common stock, no par value, of the Company
which were issued, outstanding and entitled to vote at the meeting was
4,034,839.
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 - Employment Agreement with R. Edward Anderson, Chairman
of the Board, President and Chief Executive Officer, dated May 29,
1995.
Exhibit 10.2 - New Retirement Benefits Savings Plan, effective July
1, 1995.
(b) The Company filed the following current reports on Form 8-k during
the quarter ended July 29, 1995:
(i) Report on Form 8-K dated June 3, 1995, reporting under Item 5
the monthly and year-to-date financial results and other
financial data for the period ended June 3, 1995, together with
projected financial information for similar periods as
contained in the Company's plan for the year ending January
27, 1996. The financial results were included as an exhibit in
Item 7.
(ii) Report on Form 8-K dated July 1, 1995, reporting under Item 5
the monthly and year-to-date financial results and other
financial data for the period ended July 1, 1995, together with
projected financial information for similar periods as
contained in the Company's plan for the year ending January 27,
1996. The financial results were included as an exhibit in
Item 7.
<PAGE>
(iii) Report on Form 8-K dated July 29, 1995, reporting under Item 5
the monthly and year-to-date financial results and other
financial data for the period ended July 29, 1995, together
with projected financial information for similar periods as
contained in the Company's plan for the year ended January 27,
1996. The financial results were included as an exhibit in
Item 7.
(iv) Report on Form 8-K dated August 18, 1995, reporting under Item
5 the final 30% distribution of 2,044,050 shares of common
stock to the holders of Allowed Class 3 claims. In addition, a
summary of shares distributed and currently outstanding as well
as the estimated final number of shares that will be
distributed and outstanding was provided.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSE'S STORES, INC.
Date September 12, 1995 By /s/ R. Edward Anderson
R. Edward Anderson
President,
Chief Executive Officer
Date September 12, 1995 By /s/ Jeanette R. Peters
Jeanette R. Peters
Senior Vice President,
Chief Financial Officer
EMPLOYMENT AGREEMENT
This Agreement, dated as of May 29, 1995 between Rose's Stores,
Inc., a Delaware corporation having its principal place of business
at 218 South Garnett Street, Henderson, North Carolina 27536 (the
"Company"), and R. Edward Anderson, residing in Raleigh, North
Carolina (the "Executive").
WHEREAS, the Company desires to engage the Executive to perform
services for the Company, and the Executive desires to perform such
services, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements contained herein, the parties agree as
follows:
1. Term of Employment. Except for earlier termination as
provided in Sections 4 through 9 hereof, the Executive's employment
under this Agreement shall be for a three-year term commencing on May
29, 1995 (the "Initial Term"). Subject to Sections 4 through 9
hereof, the Initial Term shall be automatically extended for
additional terms of successive one-year periods (the "Additional
Term(s)"), unless the Company or the Executive gives written notice
to the other party of its intention not to extend this Agreement at
least 90 days prior to the expiration of the Initial Term or the
current Additional Term, as the case may be. The Initial Term and
the Additional Term(s), if any, shall be collectively referred to as
the "Employment Term."
2. Duties and Services.
(a) During the Employment Term, the Executive shall serve
as Chairman of the Board, President and Chief Executive Officer of the
Company, reporting only to the Board of Directors of the Company (the
"Board"). The Executive agrees that in such offices he shall perform
such duties and functions as are commensurate with his status as
Chairman, President and Chief Executive Officer of the Company as may
be determined by the Board from time to time. The Executive shall
devote substantially all of his working time, attention, skill and
efforts to the performance of his duties hereunder; provided, however,
that with the prior approval of the Board, which it may grant or deny
in its sole discretion, the Executive may serve on the board of
directors of other corporations, if such service does not conflict
with his duties hereunder or with his fiduciary duties to the Company.
In addition, nothing herein shall prevent the Executive from managing
his passive personal investments and participating in charitable and
civic endeavors as long as such activities do not interfere in more
than a de minimis manner with the Executive's performance of his
duties hereunder. The services to be performed by the Executive
pursuant to the terms of this Agreement shall be rendered principally
at the Company's principal offices; provided, however, that the
<page.
Executive shall be available for reasonable business travel as the
needs of the business require.
(b) Upon the request of the Board, the Executive shall
also serve as an officer or director of any subsidiary or affiliate
of the Company (collectively, the "Control Group") with no additional
compensation.
3. Compensation, Benefits and Vacation.
(a) During the Employment Term, the Company shall pay the
Executive, in accordance with its normal payroll practices and subject
to required withholding, a base salary at the annual rate of not less
than $395,000. Such annual salary rate shall be reviewed by the Board
or its designee each year and upon such review, the annual salary rate
may be increased to such rate as shall be considered appropriate and
fixed by the Board. The first such increase, if any, shall become
effective on August 22, 1995, and subsequent annual increases, if any,
shall be made as of each anniversary of such date during the
Employment Term. The annual salary rate and such annual increases
shall collectively be referred to as the "Base Salary."
(b) During the Employment Term, the Executive shall be
eligible to participate in such bonus, incentive or equity plans
maintained by the Company from time to time for its senior executives
in accordance with the terms of such plans at the time of
participation. In the event that either (i) the Executive is not
eligible to participate in the annual incentive bonus plans
established by the Company, or (ii) the Company has not established
such plans, the Executive shall be eligible to receive an incentive
compensation bonus contingent upon the Company achieving targeted
goals which are to be established by the Board from time to time, in
its discretion.
(c) During the Employment Term, the Executive shall be
eligible to participate in all pension, health, insurance and fringe
benefit plans, as well as perquisites, maintained by the Company from
time to time for its officers and directors in accordance with the
terms of such plans at the time of participation. However, the
Company shall be under no obligation to establish any such plan or
otherwise to pay any such additional compensation in lieu of a plan.
(d) During the Employment Term, the Executive shall be
entitled to reimbursement for all reasonable out-of-pocket travel and
entertainment expenses incurred in connection with the performance of
his duties hereunder, upon submission of appropriate documentation,
in accordance with the Company's policies for senior officers as then
in effect.
(e) The Executive shall be entitled to four weeks vacation
for each fiscal year during the Employment Term, to be taken at such
time as is mutually convenient to the Executive and the Company.
4. Death.
<PAGE>
(a) The Company agrees to obtain and maintain life
insurance on the life of the Executive, with the Executive's estate
named as beneficiary on the policy with a death benefit in an amount
equal to two times the Base Salary in effect from time to time (the
"Death Benefit"); provided, however, that if the Executive is
uninsurable at standard rates, the Company, at its option, may
purchase life insurance in a lesser amount and pay the difference
between the Death Benefit and such amount to the Executive's estate
upon the Executive's death. Executive agrees to cooperate, in all
reasonable respects, in assisting the Company to obtain such life
insurance, including submitting to physical examinations as required
by the insurer.
(b) Upon the death of the Executive during the Employment
Term, the Employment Term shall terminate and the Company shall pay
the Executive's estate (or, if properly designated under an applicable
plan or arrangement, his beneficiary) any accrued and unpaid amounts
of Base Salary and bonus through the date of termination and any
unreimbursed travel and entertainment expenses. In addition, all
stock options and stock subject to vesting requirements under any of
the Company's plans shall become fully vested as of the date of the
Executive's death. Upon such payment and vesting, the Company shall
have no liability or further obligations to the Executive's estate.
5. Disability. If the Board reasonably shall determine that
the Executive has become physically or mentally incapable of
performing his material duties as provided in Section 2 hereof and
that such incapacity is likely to last for a period of at least six
months from the onset of such incapacity, the Company may, at its
election at any time thereafter while the Executive remains incapable
of performing his duties, terminate the Employment Term effective
immediately by giving the Executive written notice of such
termination. In such event, the Company shall have no obligation to
the Executive except as follows:
(a) a lump sum payment equal to two times the greater of
(i) the average cash bonus payable to the Executive for the previous
two years prior to the date of termination and (ii) 50% of the Base
Salary in effect on the date of termination;
(b) a lump sum payment to be made as soon as
administratively possible equal to 24 months' Base Salary (in effect
on the date of termination);
(c) continued health insurance coverage under the Company's
plans in existence at such time, for a period of 24 months from the
date of termination. Any benefits or payments under this subsection
shall be in addition to any extended group health coverage to which
the Executive is entitled under the provisions of the Consolidated
Omnibus Reconciliation Act of 1985;
(d) a payment equal to the additional amount (without tax
adjustments) that the Executive would receive if he were credited with
<PAGE>
24 months of additional service credits under the Company's pension
plans in existence at such time; and
(e) all stock options and stock subject to vesting
requirements under any of the Company's plans shall become fully
vested as of the date of termination.
6. Cause.
(a) If the Board shall determine that there are grounds for
terminating the Employment Term and discharging the Executive for
"cause" (as hereinafter defined), the Company may, at its election at
any time within six months after the Company shall obtain knowledge
of the grounds for termination, give the Executive notice of its
intention to terminate the Executive for cause, stating the grounds
for termination and specifying a reasonable date (the "Meeting Date")
on which the Executive shall be given an opportunity to discuss such
grounds for termination at a meeting of the Board, if he so desires.
(b) If the grounds for termination are those specified in
clause (ii)(X), (iv) or (v) of paragraph (d) hereof, the Executive
shall have a period of ten days from the Meeting Date to cure the
neglect, refusal or breach, as the case may be, provided that if
similar grounds arise again within one year of such cure, no new
notice need be given and the Company, at its option, may immediately
terminate the Executive for cause.
(c) If the grounds for termination are those specified in
clauses (i), (ii)(Y) or (iii) of paragraph (d) hereof, it is
understood and agreed that no satisfactory cure is available. If,
following discussion with the Executive of the grounds for his
termination at the Board meeting or, if the Executive does not appear,
following the Board meeting, the Company shall continue to be intent
on discharging the Executive for cause on the grounds specified in
clause (i), (ii)(Y) or (iii) of paragraph (d), the Company shall so
notify the Executive, and such termination shall be effective
immediately.
(d) For purposes of this Agreement, the term "cause" shall
mean:
(i) the conviction (or plea of guilty or nolo
contendere) of the Executive of any felony, or of any crime
involving fraud, dishonesty or misappropriation, or moral
turpitude or, if any of the foregoing involves the Company
or any member of the Control Group, the commission of any
of the foregoing (other than good faith disputes involving
expense account items);
(ii) the Executive's (X) continued willful neglect of
his duties and responsibilities under this Agreement or (Y)
gross negligence;
(iii) the Executive's willful misconduct with regard
to the Control Group;
<PAGE>
(iv) the Executive's refusal to follow the written
direction of the Board with regard to the Executive's
responsibilities as set forth herein; and
(v) material breach of any of the provision of this
Agreement by the Executive.
(e) If the Company shall terminate the Employment Term
pursuant to this Section 6, the Company shall have no liability or
further obligation hereunder except as provided in Section 9.
7. Good Reason. In the event that the Company shall (i) reduce
the Executive's annual salary below the Base Salary, (ii) materially
change or diminish the duties and responsibilities of the Executive
as Chairman, President and Chief Executive Officer (except in
connection with the termination of the Executive's employment for
cause, disability or death), (iii) assign to the Executive duties and
responsibilities inconsistent with his positions, (iv) relocate the
Company's principal executive offices to a location outside a 100-
mile radius of Raleigh, North Carolina, (v) give the Executive written
notice of its intention not to extend the Employment Term as provided
in Section 1, or (vi) breach a material provision of this Agreement
(each of the foregoing, a "Triggering Event"), then the Executive may
give notice to the Company of his intention to terminate the
Employment Term pursuant to this Section 7, effective 60 days from the
date of such notice, unless the Company shall have cured the default
within such notice period (or if the breach can be cured but is not
capable of being cured within 60 days, is diligently pursuing a cure).
If the Employment Term is terminated pursuant to this Section 7, the
Company shall have no liability or further obligation hereunder except
as provided in Section 8. If the Executive does not notify the
Company of his intention to terminate within 90 days from the date on
which the Executive had knowledge of a Triggering Event, the Executive
shall be deemed to have waived his right to terminate based on such
Triggering Event but such waiver shall not prejudice his right to
terminate pursuant to this Section 7 based on the occurrence of a
subsequent Triggering Event.
8. Termination of Employment for Good Reason or Without Cause.
(a) In the event that (X) the Executive terminates the
Employment Term for good reason pursuant to Section 7, (Y) the Company
terminates the Employment Term other than pursuant to Sections 4, 5
or 6, or (Z) a plan or proposal for the complete liquidation or
dissolution of the Company is duly approved by all requisite corporate
authority, in which event the Employment Term shall terminate on the
date specified in such plan or proposal, or if not specified, on the
date of approval, then the Company shall have no obligation to the
Executive except as follows:
(i) a lump sum payment to be made as soon as
administratively possible equal to 24 months' Base Salary
(in effect on the date of termination);
<PAGE>
(ii) continued health insurance coverage under the
Company's plans in existence at such time, for a period of
24 months from the date of termination. Any benefits or
payments under this subsection shall be in addition to any
extended group health coverage to which the Executive is
entitled under the provisions of the Consolidated Omnibus
Reconciliation Act of 1985; and
(iii) a payment equal to the additional amount (without
tax adjustments) that the Executive would receive if he were
credited with 24 months of additional service credits under
the Company's pension plans in existence at such time; and
(iv) all stock options and stock subject to vesting
requirements under any of the Company's plans held by the
Executive which would vest within 60 days from the date of
termination shall become fully vested as of the date of
termination.
(b) The Executive shall not be required to mitigate the
amount of any payment or benefit provided for in this Section 8 by
seeking other employment nor shall any amount to be received by the
Executive pursuant to this Section 8 be reduced by any other
compensation earned.
9. Termination of Employment for Cause or Without Good Reason.
In the event that (i) the Company terminates the Employment Term for
cause pursuant to Section 6, or (ii) the Executive terminates the
Employment Term without good reason (as described in Section 7)
pursuant to a written notice of resignation to the Board, specifying
a termination date that shall be no sooner than 90 days after the
submission of such notice, the Executive shall be entitled to receive
only his Base Salary through the date of termination, any bonus that
was due and payable at the time of termination and any unreimbursed
business expenses.
10. Change of Control.
(a) In the event of a Change of Control, as defined below,
the Executive may terminate the Employment Term by giving 30-days
written notice to the Board at any time during the six-month period
following the date on which the Change of Control event occurred.
Such termination shall be effective as of the date of such notice.
In such event, or if the Employment Term is terminated by the Company,
without cause pursuant to Section 6, or by the Executive during the
seven-month period after a Change of Control event for good reason
pursuant to Section 7, the Company shall have no obligation to the
Executive except as follows:
(i) a lump sum payment to be made as soon as
administratively possible equal to 36 months' Base Salary
(in effect on the date of termination),
<PAGE>
(ii) a lump sum payment equal to three times the
greater of (X) the average cash bonus payable to the
Executive for the previous two years prior to the date of
termination and (Y) 50% of the Base Salary in effect on the
date of termination,
(iii) continued health insurance coverage under the
Company's plans in existence at such time, for a period of
36 months from the date of termination. Any benefits or
payments under this subsection shall be in addition to any
extended group health coverage to which the Executive is
entitled under the provisions of the Consolidated Omnibus
Reconciliation Act of 1985,
(iv) a payment equal to the additional amount (without
tax adjustments) that the Executive would receive if he were
credited with 36 months of additional service credits under
the Company's pension plans in existence at such time, and
(v) all stock options and stock subject to vesting
requirements under any of the Company's plans held by the
Executive shall become fully vested as of the date of
termination.
(b) For purposes of this Agreement, a "Change of Control"
shall be deemed to occur if (i) any "person" (as such term is defined
in Sections 3(a)(9) and 13 (d)(3) of the Exchange Act) (a "Person")
becomes a "beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) (a "Beneficial Owner") of
securities of the Company representing 50.1% or more of the total
combined voting power of the Company's then outstanding voting
securities, (ii) the Company merges or is consolidated with any Person
or substantially all of the Company's assets are sold or disposed of
to a Person other than (A) in a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior to such event to continue to represent (either by remaining
outstanding or by conversion into voting securities of the surviving
or parent entity) 50.1% or more of the combined voting power of the
voting securities of the Company or such surviving or parent entity
outstanding immediately after such merger or consolidation or (B) a
merger or capitalization effected to implement a recapitalization of
the Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities
representing more than 50.1% or more of the total combined voting
power of the Company's then outstanding voting securities, or (iii)
during any period of not more than two consecutive years, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a Person who has entered
into an agreement with the Company to effect a transaction described
in (i) and (ii) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by
at vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof.
<PAGE>
11. Gross-up.
(a) In the event that the Executive shall become entitled
to the payments and/or benefits provided by Section 10 or any other
amounts (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose
actions result in a change of ownership covered by Section 280G(b)(2)
of the Internal Revenue Code of 1986 (the "Code") or any person
affiliated with the Company or such person) as a result of a Change
in Control, (collectively the "Company Payments"), and such Company
Payments are subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code (and any similar tax that may hereafter be imposed),
the Company shall pay to the Executive at the time specified in
paragraph (d) below, an additional amount (the "Gross-up Payment")
such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Company Payments and any federal, state and
local income and payroll tax and Excise Tax upon the Gross-up Payment
provided for by this paragraph (a), but before deduction for any
federal, state or local income or payroll tax on the Company Payments,
shall be equal to the Company Payments.
(b) For purposes of determining whether any of the Company
Payments and Gross-up Payments (collectively the "Total Payments")
will be subject to the Excise Tax and the amount of such Excise Tax,
(i) the Total Payments shall be treated as "parachute payments" within
the meaning of Section 280G(b)(2) of the Code, and all "parachute
payments" in excess of the "base amount" (as defined under Section
280G(b)(3) of the Code) shall be treated as subject to the Excise Tax,
unless and except to the extent that, in the opinion of the Company's
independent certified public accountants (the "Accountants") appointed
prior to any change in ownership (as defined under Section 280G(b)(2)
of the Code) or tax counsel selected by the Accountants (the
"Accountants") such Total Payments (in whole or in part) either do not
constitute "parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4)
of the Code in excess of the "base amount" or are otherwise not
subject to the Excise Tax, and (ii) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280(G) of the
Code.
(c) For purposes of determining the amount of the Gross-
up Payment, the Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence for the calendar year
in which the Company Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes if paid in such year. In the
event that the Excise Tax is subsequently determined by the
Accountants to be less than the amount taken into account hereunder
at the time the Gross-up Payment is made, the Executive shall repay
the Company, at the time that the amount of such reduction in Excise
<PAGE>
Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up
Payment attributable to the Excise Tax and federal and state and local
income tax imposed on the portion of the Gross-up Payment being repaid
by the Executive if such repayment results in a reduction in Excise
Tax or a federal and state and local income tax deduction), plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in
the event any portion of the Gross-up Payment to be refunded to the
Company has been paid to any federal, state or local tax authority,
repayment thereof (and related amounts) shall not be required until
actual refund or credit of such portion has been made to the
Executive, and interest payable to the Company shall not exceed the
interest received or credited to the Executive by such tax authority
for the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and the
method of allocating the expense thereof) if the Executive's claim for
refund or credit is denied.
In the event that the Excise Tax is later determined by the
Accountant or the Internal Revenue Service to exceed the amount taken
into account hereunder at the time the Gross-up Payment is made
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-up Payment), the Company
shall make an additional Gross-up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided for
in paragraph (c) above shall be paid not later than the 30th day
following an event occurring which subjects the Executive to the
Excise Tax; provided, however, that if the amount of such Gross-up
Payment or portion thereof cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Accountant, of the
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), subject to further payments pursuant to
paragraph (c) hereof, as soon as the amount thereof can reasonably be
determined, but in no event later than the 90th day after the
occurrence of the event subjecting the Executive to the Excise Tax.
In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
fifth day after demand by the Company (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code).
(e) The Company shall be responsible for all charges of the
Accountant and tax counsel, if any.
12. Confidentiality and Non-Competition.
(a) The Executive acknowledges that as a result of his
employment by the Company, the Executive will obtain secret and
confidential information as to the Company and the Control Group,
<PAGE>
that the Company will suffer substantial damage, which would be
difficult to ascertain, if the Executive shall enter into Competition,
as defined below, with the Company or any member of the Control Group
and that because of the nature of the information that will be known
to the Executive it is necessary for the Company to be protected by
the prohibition against Competition set forth herein, as well as the
Confidentiality restrictions set forth herein. The Executive
acknowledges that the provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company and the
Control Group and that part of the compensation paid under this Agree-
ment and the agreement to pay severance in certain instances is in
consideration for the agreements in this Section 12.
(b) Competition shall mean: (i) participating, directly
or indirectly, as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender,
consultant or in any capacity whatsoever (in any country where the
Company or any member of the Control Group does business) in a
business having retail locations in the states of Delaware, Georgia,
Kentucky, Maryland, Mississippi, North Carolina, South Carolina,
Tennessee, Virginia or West Virginia in competition with any business
conducted by the Company (or any member of the Control Group), with
regard to which the Executive worked or otherwise had responsibilities
or had access to material confidential information while employed by
the Company; provided, however, that such participation shall not
include (X) the mere ownership of not more than one percent (1%) of
the total outstanding stock of a publicly held company; or (Y) the
performance of services for any enterprise to the extent such services
are not performed, directly or indirectly, for a business in the
aforesaid competition; or
(ii) recruiting, soliciting or inducing, any
nonclerical employee or employees of the Company or any member of the
Control Group to terminate their employment with, or otherwise cease
their relationship with, the Company or the Control Group or hiring
or assisting another person or entity to hire any nonclerical employee
of the Company or the Control Group or any person who had been a
nonclerical employee of the Company or the Control Group within six
months before the date of solicitation. Notwithstanding the
foregoing, if requested by an entity with which the Executive is not
affiliated, the Executive may serve as a reference for any person who
at the time of the request is not an employee of the Company or the
Control Group.
(c) If any restriction with regard to Competition is found
by a court of competent jurisdiction, or an arbitrator, to be
unenforceable due to the length of time of the covenant, the range of
activities covered or the size of the geographic area, such
restriction shall be interpreted to extend over the maximum period of
time, range of activities or geographic area as to which it may be
enforceable.
(d) During and after the Employment Term, the Executive
shall hold in a fiduciary capacity for the benefit of the Company and
the Control Group all secret, proprietary or confidential information,
<PAGE>
knowledge or data relating to the Company and the Control Group, and
their respective businesses, including any confidential information
as to customers of the Company or the Control Group, (i) obtained by
the Executive during his employment by the Company and the Control
Group and (ii) not otherwise public knowledge or known within the
Company's industry. The Executive shall not, without prior written
consent of the Company, unless compelled pursuant to the order of a
court or other governmental or legal body having jurisdiction over
such matter, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it.
In the event the Executive is compelled by order of a court or other
governmental or legal body to communicate or divulge any such
information, knowledge or data to anyone other than the Company and
those designated by it, he shall promptly notify the Company of any
such order and he shall cooperate fully with the Company in protecting
such information to the extent possible under applicable law.
(e) Upon termination of his employment with the Company and
the Control Group, or at any time as the Company may request, the
Executive will promptly deliver to the Company all documents (whether
prepared by the Company, a member of the Control Group, the Executive
or a third party) relating to the Company or the Control Group or any
of their businesses or property which he may possess or have under his
direction or control.
(f) During the Employment Term and, except in connection
with a termination by the Executive pursuant to Sections 7 or 10, or
by the Company without cause as defined in Section 6, for one year
thereafter, Executive will not enter into Competition with the Company
or the Control Group.
(g) In the event of a breach or potential breach this
Section 12, the Executive acknowledges that the Company and the
Control Group will be caused irreparable injury and that money damages
may not be an adequate remedy and agree that the Company and the
Control Group shall be entitled to injunctive relief (in addition to
its other remedies at law) to have the provisions of this Section 12
enforced.
13. Executive's Representation. The Executive represents and
warrants to the Company that there is no legal impediment to the
performance by him of his obligations under this Agreement and that
entering into this Agreement and performing his contemplated services
hereunder will not violate any agreement to which he is a party or any
other legal restriction.
14. Independent Review. The Executive acknowledges that he has
been advised by the Company to have the Agreement reviewed by
independent counsel and has been given the opportunity to do so.
15. Notice. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered
personally, telecopy, or overnight courier against receipt to the
party to whom it is to be given at the address set forth in the
introductory paragraph of this Agreement (or to such other address as
<PAGE>
the party shall have furnished in writing in accordance with the
provisions of this Section 15). Any notice or other communication
given by hand, telecopy or overnight courier shall be deemed given at
the time of receipt thereof.
16. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by
arbitration conducted in New York under the Commercial Arbitration
Rules then prevailing of the American Arbitration Association and such
submission shall request the American Arbitration Association to: (i)
appoint an arbitrator experienced and knowledgeable concerning the
matter then in dispute, (ii) require the testimony to be transcribed,
(iii) require the award to be accompanied by finding of fact and the
statement for reasons for the decision, and (iv) request the matter
to be handled by and in accordance with the expedited procedures
provided for in the Commercial Arbitration Rules. The determination
of the arbitrators, which shall be based upon a de novo interpretation
of this Agreement, shall be final and binding and judgment may be
entered on the arbitrators' award in any court having jurisdiction.
The Company and the Executive shall each pay 50% of the costs of the
American Arbitration Association and the arbitrator.
17. Assignment; Successors.
(a) The Executive's rights and benefits under this
Agreement are personal to him and such rights and benefits shall not
be subject to voluntary or involuntary assignment, alienation or
transfer, except to the extent such rights and benefits are lawfully
available to the Executive's spouse, beneficiary or estate upon his
death.
(b) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the Company or any
member of the Control Group that employs the Executive to expressly
assume and agree in writing to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform if such succession had not taken place, or in the event the
Company remains in existence after such purchase, merger consolidation
or otherwise, the Company may continue to employ the Executive under
the terms hereof. Upon such assignment and assumption, the Company
shall be released of any further obligation or liability hereunder.
18. Governing Law. This Agreement shall be governed by and
enforce in accordance with the law of the State of North Carolina,
without regard to its conflict of law provisions.
19. Miscellaneous.
(a) This Agreement constitutes the entire agreement between
the parties hereto, and supersedes all prior agreements and
understandings, whether written or oral, with respect to the subject
matter hereof. No terms, conditions or provisions of this Agreement
may be changed, waived, modified or discharged unless such change,
waiver, modification or discharge is agreed to in writing by the
<PAGE>
paries hereto. All references to any law shall be deemed also to
refer to any successor provisions to such laws.
(b) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
(c) If any provisions of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, shall not affect
the remaining provisions hereof which shall remain in full force and
effect.
(d) The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction
or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date opposite each party's signature.
Date: _________, 1995 ROSE'S STORES, INC.
By:__________________________
Name:
Title:
Date: _________, 1995 R. EDWARD ANDERSON
_____________________________
ROSE'S STORES, INC.
RETIREMENT SAVINGS 401(K) PLAN
<PAGE>
TABLE OF CONTENTS
Rose's Stores, Inc.
Retirement Savings 401(k) Plan
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . 1
1.1. Account Balance . . . . . . . . . . . . . . . . 1
1.2 Adjustment Date . . . . . . . . . . . . . . . . 1
1.3. Adjustment Factor . . . . . . . . . . . . . . . 1
1.4. Advisory Committee. . . . . . . . . . . . . . . 1
1.5. Affiliated Company. . . . . . . . . . . . . . . 1
1.6. Age . . . . . . . . . . . . . . . . . . . . . . 1
1.7. Agent for Service of Legal Process. . . . . . . 1
1.8. Anniversary Date. . . . . . . . . . . . . . . . 1
1.9. Annual Addition . . . . . . . . . . . . . . . . 2
1.10. Associate . . . . . . . . . . . . . . . . . . . 2
1.11. Beneficiary . . . . . . . . . . . . . . . . . . 3
1.12. Board of Directors. . . . . . . . . . . . . . . 3
1.13. Break in Service. . . . . . . . . . . . . . . . 3
1.14. C.E.O.. . . . . . . . . . . . . . . . . . . . . 3
1.15. Code. . . . . . . . . . . . . . . . . . . . . . 3
1.16. Commencement Date . . . . . . . . . . . . . . . 3
1.17. Company . . . . . . . . . . . . . . . . . . . . 3
1.18. Company Contribution Account. . . . . . . . . . 3
1.19. Company Contributions . . . . . . . . . . . . . 3
1.20. Company Securities. . . . . . . . . . . . . . . 4
1.21. Compensation. . . . . . . . . . . . . . . . . . 4
1.22. Contribution Participant. . . . . . . . . . . . 5
1.23. Deferral . . . . . . . . . . . . . . . . . . . 5
1.24. Deferred Income Account . . . . . . . . . . . . 5
1.25. Defined Contribution Dollar Limitation. . . . . 5
1.26. Disability. . . . . . . . . . . . . . . . . . . 6
1.27. Early Retirement. . . . . . . . . . . . . . . . 6
1.28. Early Retirement Age. . . . . . . . . . . . . . 6
1.29. Effective Date. . . . . . . . . . . . . . . . . 6
1.30. Entry Date. . . . . . . . . . . . . . . . . . . 6
1.31. ERISA . . . . . . . . . . . . . . . . . . . . . 6
1.32. Family Member . . . . . . . . . . . . . . . . . 6
1.33. Fiduciaries . . . . . . . . . . . . . . . . . . 6
1.34. Forfeitures . . . . . . . . . . . . . . . . . . 7
1.35. Highly Compensated Associate. . . . . . . . . . 7
1.36. Hour of Service . . . . . . . . . . . . . . . . 7
1.37. Inactive Participant. . . . . . . . . . . . . . 8
1.38. Increment or Decrement. . . . . . . . . . . . . 8
1.39. Investment Fund . . . . . . . . . . . . . . . . 8
1.40. Limitation Suspense Account . . . . . . . . . . 8
1.41. Limitation Year . . . . . . . . . . . . . . . . 8
1.42. Matching Contributions. . . . . . . . . . . . . 8
1.43. Named Fiduciary . . . . . . . . . . . . . . . . 8
<PAGE>
1.44. Normal Retirement . . . . . . . . . . . . . . . 8
1.45. Normal Retirement Age . . . . . . . . . . . . . 8
1.46. Participant . . . . . . . . . . . . . . . . . . 9
1.47. Plan. . . . . . . . . . . . . . . . . . . . . . 9
1.48. Plan Rules. . . . . . . . . . . . . . . . . . . 9
1.49. Plan Year . . . . . . . . . . . . . . . . . . . 9
1.50. Profit Sharing Contribution . . . . . . . . . . 9
1.51. Retirement. . . . . . . . . . . . . . . . . . . 9
1.52 Tax Deferred Contribution . . . . . . . . . . . .9
1.53. Taxable Year. . . . . . . . . . . . . . . . . . 9
1.54. Trust . . . . . . . . . . . . . . . . . . . . . 9
1.55. Trust Fund. . . . . . . . . . . . . . . . . . . 9
1.56. Trustee . . . . . . . . . . . . . . . . . . . . 10
1.57. Valuation Date. . . . . . . . . . . . . . . . . 10
1.58. Voluntary Contributions . . . . . . . . . . . . 10
1.59 Warrants. . . . . . . . . . . . . . . . . . . . 10
1.60. Year of Service . . . . . . . . . . . . . . . . 10
ARTICLE II Administration of the Plan. . . . . . . . . . . 11
2.1. Advisory Committee. . . . . . . . . . . . . . . 11
2.2. Authority . . . . . . . . . . . . . . . . . . . 11
2.3. Advisory Committee Procedure. . . . . . . . . . 12
2.4. Forms . . . . . . . . . . . . . . . . . . . . . 12
2.5. Funding . . . . . . . . . . . . . . . . . . . . 12
2.6. Successor Fiduciary . . . . . . . . . . . . . . 12
2.7. Delegation of Services. . . . . . . . . . . . . 13
2.8. Signature Authority . . . . . . . . . . . . . . 13
2.9. Fiduciary Notice Requirements . . . . . . . . . 13
2.10. Reliance. . . . . . . . . . . . . . . . . . . . 13
2.11. Duties of the Advisory Committee. . . . . . . . 14
2.12. Powers of the Advisory Committee. . . . . . . . 15
2.13. Limitations on Powers of the Advisory
Committee . . . . . . . . . . . . . . . . . . . 15
2.14. Investment Funds. . . . . . . . . . . . . . . . 16
2.15. Investment in Insurance . . . . . . . . . . . . 17
2.16. Delegation of Investment Responsibility . . . . 19
2.17. Special Accounting Rules for the Company Stock
Fund. . . . . . . . . . . . . . . . . . . . . . 19
2.18. Valuation of Company Securities . . . . . . . . 20
2.19. Voting of Company Securities. . . . . . . . . . 21
2.20. Withdrawals . . . . . . . . . . . . . . . . . . 22
2.21. Limitations of the Securities Exchange Act of
1934. . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III Eligibility and Participation . . . . . . . . . 23
3.1. Eligibility . . . . . . . . . . . . . . . . . . 23
3.2. Authorized Leave of Absence . . . . . . . . . . 23
3.3. Maternity or Paternity Leave. . . . . . . . . . 24
3.4. Status During Leave of Absence. . . . . . . . . 25
3.5. Voluntary Participation . . . . . . . . . . . . 25
<PAGE>
3.6. Determination as to Eligibility . . . . . . . . 25
3.7. Leased Employees. . . . . . . . . . . . . . . . 25
3.8. Years of Service for Eligibility Purposes . . . 25
3.9. Participation Upon Return to Eligible Class . . 26
ARTICLE IV Company and Associate Contributions . . . . . . 27
4.1. Plan Contributions. . . . . . . . . . . . . . . 27
4.2. Tax Deferred Contributions. . . . . . . . . . . 27
4.3. Fail-Safe Contributions . . . . . . . . . . . . 28
4.4. Matching Contributions. . . . . . . . . . . . . 28
4.5. Profit Sharing Contributions. . . . . . . . . . 29
4.6. Rollovers of Retirement Benefits. . . . . . . . 29
4.7. Trustee-to-Trustee Transfers. . . . . . . . . . 30
4.8. Payment of Contributions. . . . . . . . . . . . 31
4.9. Form of Contribution. . . . . . . . . . . . . . 31
4.10. Exclusive Benefit of Associates . . . . . . . . 31
4.11. Impact of Plan Merger . . . . . . . . . . . . . 32
ARTICLE V Allocations and Limitations on Allocations. . . 33
5.1. Establishment of Accounts . . . . . . . . . . . 33
5.2. Account Allocations . . . . . . . . . . . . . . 35
5.3. No Interest in Specific Assets. . . . . . . . . 36
5.4. Forfeitures . . . . . . . . . . . . . . . . . . 36
5.5. Maximum Company Contributions . . . . . . . . . 37
5.6. Determination of Maximum Annual Addition. . . . 37
5.7. Rules Relating to Company Which Maintains One
or More Qualified Defined Contribution Plans
in Addition to this Plan. . . . . . . . . . . . 39
5.8. Aggregation With Defined Benefit Plan . . . . . 40
5.9. Excess Annual Additions . . . . . . . . . . . . 43
5.10. Limitations on Tax Deferred Contributions . . . 44
5.11. Special Rules for Tax Deferred Contributions. . 46
5.12. Excess Tax Deferred Contributions . . . . . . . 47
5.13. Limitations on Aggregate Contributions. . . . . 48
5.14. Special Rules for Aggregate Contributions . . . 51
5.15. Excess Aggregate Contributions. . . . . . . . . 53
5.16. Excess Tax Deferred Contributions . . . . . . . 53
5.17. Deduction of Legal Expenses . . . . . . . . . . 54
ARTICLE VI Trust Fund Valuation. . . . . . . . . . . . . . 55
6.1. Valuation of Trust Fund . . . . . . . . . . . . 55
6.2. Unallocated Contributions . . . . . . . . . . . 56
6.3. Special Rule for Earmarked Investments. . . . . 56
ARTICLE VII Benefits. . . . . . . . . . . . . . . . . . . . 57
7.1. Retirement. . . . . . . . . . . . . . . . . . . 57
7.2. Severance Benefits. . . . . . . . . . . . . . . 57
<PAGE>
7.3. Rehired Participants. . . . . . . . . . . . . . 59
7.4. Death . . . . . . . . . . . . . . . . . . . . . 61
7.5. Payment of Benefits . . . . . . . . . . . . . . 63
7.6. Limitation on the Distribution of Benefits. . . 64
7.7. Commencement of Distribution of Benefits. . . . 64
7.8. Restriction on Methods of Distribution. . . . . 65
7.9. Procedure for the Payment of Benefits . . . . . 66
7.10. Direct Rollovers. . . . . . . . . . . . . . . . 66
ARTICLE VIII Powers, Duties and Responsibilities of
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.1. Trust . . . . . . . . . . . . . . . . . . . . . 68
8.2. Trust Fund. . . . . . . . . . . . . . . . . . . 68
8.3. Powers of Trustee . . . . . . . . . . . . . . . 68
8.4. Exercise of Powers. . . . . . . . . . . . . . . 70
8.5. Accounting. . . . . . . . . . . . . . . . . . . 71
8.6. Removal, Resignation, and Appointment of
Successor Trustee . . . . . . . . . . . . . . . 71
8.7. Payment of Compensation, Expenses and Taxes . . 72
8.8. Limitations on Responsibility . . . . . . . . . 72
8.9. Non-Corporate Trustee . . . . . . . . . . . . . 72
8.10. Merger of Trustee . . . . . . . . . . . . . . . 72
ARTICLE IX Allocation of Fiduciary Responsibilities. . . . 74
9.1. Allocation of Responsibility Among Fiduciaries
for Plan and Trust Administration . . . . . . . 74
9.2. Fiduciary Warranty. . . . . . . . . . . . . . . 75
9.3. Reliance on Other Fiduciaries . . . . . . . . . 75
9.4. No Responsibility for Others. . . . . . . . . . 75
9.5. Bond. . . . . . . . . . . . . . . . . . . . . . 75
9.6. Fiduciary Responsibility. . . . . . . . . . . . 75
9.7. Indemnification . . . . . . . . . . . . . . . . 76
ARTICLE X Amendment, Termination, Merger, Consolidation
or Transfer of Assets . . . . . . . . . . . . . 77
10.1. Amendment of Plan and Trust . . . . . . . . . . 77
10.2. Limitation on Amendment . . . . . . . . . . . . 77
10.3. Election of Prior Vesting . . . . . . . . . . . 78
10.4. Discontinuance of Contributions and Termination
of Plan and Trust . . . . . . . . . . . . . . . 78
10.5. Merger, Consolidation, or Transfer. . . . . . . 79
10.6. De Facto Termination. . . . . . . . . . . . . . 79
10.7. Succession of Power . . . . . . . . . . . . . . 80
10.8. Continuation of Payment . . . . . . . . . . . . 80
ARTICLE XI Withdrawals and Loans . . . . . . . . . . . . . 81
11.1. In-Service Withdrawals. . . . . . . . . . . . . 81
<PAGE>
11.2. Withdrawals on Account of Plan Termination or
Sale of Assets. . . . . . . . . . . . . . . . . 83
11.3. Loans to Participants . . . . . . . . . . . . . 83
ARTICLE XII Miscellaneous Provisions. . . . . . . . . . . . 87
12.1. No Guaranty of Employment . . . . . . . . . . . 87
12.2. Limitation of Rights. . . . . . . . . . . . . . 87
12.3. Provision of Benefits . . . . . . . . . . . . . 87
12.4. Headings. . . . . . . . . . . . . . . . . . . . 87
12.5. Governing Law . . . . . . . . . . . . . . . . . 87
12.6. Alienation of Benefits. . . . . . . . . . . . . 87
12.7. Severability. . . . . . . . . . . . . . . . . . 88
12.8. Claims. . . . . . . . . . . . . . . . . . . . . 88
12.9. Number and Gender . . . . . . . . . . . . . . . 89
ARTICLE XIII Top-Heavy Rules . . . . . . . . . . . . . . . . 90
13.1. Effect of Article XIII on Plan. . . . . . . . . 90
13.2. Definitions . . . . . . . . . . . . . . . . . . 90
13.3. Minimum Contribution. . . . . . . . . . . . . . 94
13.4. Adjustments to Aggregate Limit. . . . . . . . . 95
ARTICLE XIV Qualified Domestic Relations Orders . . . . . . 96
14.1. Notice. . . . . . . . . . . . . . . . . . . . . 96
14.2. Requirements of Qualified Domestic Relations
Order . . . . . . . . . . . . . . . . . . . . . 96
14.3. Segregated Account. . . . . . . . . . . . . . . 97
14.4. Limitations on Benefits and Distributions . . . 97
<PAGE>
STATE OF NORTH CAROLINA
ROSE'S STORES, INC.
COUNTY OF VANCE RETIREMENT SAVINGS 401(K) PLAN
THIS AGREEMENT, made and entered into as of the ____ day of
___________, 1995, and except where specifically stated otherwise,
effective as of July 1, 1995, by and between Rose's Stores, Inc.,
a corporation organized and existing under the laws of the State
of Delaware with offices in the State of North Carolina
(hereinafter referred to as the "Company"), and First Union
National Bank of North Carolina, a bank having trust powers in the
State of North Carolina, as Trustee;
W I T N E S S E T H:
WHEREAS, the Company previously established and adopted the
Rose's Stores, Inc. Variable Investment Plan, effective October
25, 1984, and as last amended and restated generally effective
January 1, 1989; and
WHEREAS, the Company previously established and adopted the
Rose's Stores, Inc. Profit Sharing Plan in 1945, as last amended
and restated effective January 1, 1989; and
WHEREAS, the Company has taken action to merge the Rose's
Stores, Inc. Profit Sharing Plan with and into the Rose's Stores,
Inc. Variable Investment Plan effective July 1, 1995, to make such
amendments to the Rose's Stores, Inc. Variable Investment Plan as
are necessary or desirable on account of the merger, and to change
the name of the Rose's Stores, Inc. Variable Investment Plan, as
merged, to the Rose's Stores, Inc. Retirement Savings 401(k) Plan.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and Trustee hereby
agree that the Rose's Stores, Inc. Retirement Savings 401(k) Plan
shall read as set forth below effective July 1, 1995. A
Participant who is not an Associate at any time on or after July
1, 1995 shall be entitled to benefits, if any, under the Rose's
Stores, Inc. Profit Sharing Plan and/or the Rose's Stores, Inc.
Variable Investment Plan based on the terms of such plans in effect
prior to that date.
<PAGE>
ARTICLE i
Definitions
When used herein, the following words shall have the following
meaning unless the context clearly indicates otherwise:
i.1. "Account Balance" shall mean the balance of a
Participant's Company Contribution Account, Deferred Income
Account, Rollover Account and Transfer Account, and except when
the context clearly indicates otherwise, "Account" shall mean the
above specific accounts.
i.2. "Adjustment Date" shall mean the 31st day of
December of each year.
i.3. "Adjustment Factor" shall mean the cost of living
adjustment factor prescribed by the Secretary of the Treasury under
Section 415(d) of the Code, for calendar years beginning after
December 31, 1987, as applied to such items and in such manner as
the Secretary shall provide.
i.4. "Advisory Committee" shall mean the committee
appointed by the Board of Directors of the Company to be the named
fiduciary with authority to control and manage the operation and
the administration of the Plan.
i.5. "Affiliated Company" shall mean any corporation
which is a member of a controlled group of corporations (as defined
in Section 414(b) of the Code) which includes the Company; any
trade or business (whether or not incorporated) which is under
common control (as defined in Section 414(c) of the Code) with the
Company; any organization (whether or not incorporated) which is
a member of an affiliated service group (as defined in
Section 414(m) of the Code) which includes the Company; and any
other entity required to be aggregated with the Company pursuant
to regulations under Section 414(o) of the Code.
i.6. "Age" shall mean, with respect to a Participant,
the number of full years that have elapsed between the
Participant's date of birth and the date as of which the
Participant's age is being determined.
i.7. "Agent for Service of Legal Process" shall be Thomas
Dowd or such other person as shall be so designated by the Advisory
Committee.
i.8. "Anniversary Date" shall mean the first day of each
Plan Year following the Effective Date of the Plan, which is the
1st day of January in each year.
<PAGE>
i.9. "Annual Addition" shall mean the amount during the
Limitation Year that constitutes:
(a) Company Contributions and Tax Deferred Contributions
allocated to a Participant's Account;
(b) Voluntary Contributions allocated to a Participant's
Account (not currently allowed);
(c) Forfeitures allocated to a Participant's Account;
(d) Amounts allocated after March 31, 1984, to an
individual medical account, as defined in Section 415(l)(2)
of the Code, which is part of a defined benefit pension or
annuity plan maintained by the Company; and
(e) Amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such
date, which are attributable to post-retirement medical
benefits allocated to the separate account of a key associate
(which shall have the meaning given to the term "key employee"
in Section 419A(d)(3) of the Code), under a welfare benefit
plan (as defined in Section 419(e) of the Code) maintained by
the Company.
i.10. "Associate" shall mean any person receiving
remuneration for personal services rendered to the Company or to
an Affiliated Company (or who would be receiving remuneration
except for an Authorized Leave of Absence), excluding independent
contractors, persons employed on a retainer or fee basis, those
persons covered by a bona fide collective bargaining agreement
between Associate representatives and the Company, and members of
the Board of Directors (except for such members who are otherwise
employed by the Company). The term "Associate" shall also include
any "leased employee" within the meaning of Sections 414(n) or (o)
of the Code. Notwithstanding the foregoing, a leased employee
shall not be considered an Associate if: (i) such employee is
covered by a money purchase pension plan maintained by the leasing
organization providing: (1) a non-integrated employer contribution
rate of at least ten percent (10%) of compensation, as defined in
Section 415(c)(3) of the Code, but including amounts contributed
pursuant to a salary reduction agreement which are excludable from
the employee's gross income under Sections 125, 402(e)(3), 402(h)
or 403(b) of the Code, (2) immediate participation, and (3) full
and immediate vesting; and (ii) leased employees do not constitute
more than twenty percent (20%) of the recipient's nonhighly
compensated workforce. A leased employee shall constitute an
Associate only for minimum coverage and participation testing
purposes and in no event will be eligible for participation in the
Plan. The term "Associate" corresponds to the term "employee" as
used in the Code and ERISA.
i.11. "Beneficiary" shall mean, subject to the limitations
of Paragraph 7.4, and in accordance with the procedures prescribed
<PAGE>
by the Advisory Committee, such person or persons or legal entity
as may be legally entitled or designated by a Participant to
receive benefits hereunder upon the death of the Participant. The
word "person" as used in this Paragraph may include the
Participant's estate, executor, administrator, or testamentary or
inter vivos trust, if properly designated by the Participant.
i.12. "Board of Directors" shall mean the Board of
Directors of Rose's Stores, Inc.
i.13. "Break in Service" shall mean a twelve (12)
consecutive month period during which a Participant completes five
hundred (500) or fewer Hours of Service with the Company
(excluding, however, any period covered by an Authorized Leave of
Absence); and except as stated below, the computation of any twelve
(12) consecutive month period for purposes of vesting, Breaks in
Service, determining the timing of benefit payments, and
forfeitures shall be made with reference to the Plan Year.
i.14. "C.E.O." shall mean the chief executive officer of
the Company.
i.15. "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
i.16. "Commencement Date" shall mean the date on which an
Associate first performs an Hour of Service for the Company;
provided, however, if an Associate shall have incurred a Break in
Service, as defined in Paragraph 1.13, his or her Commencement Date
shall be the date on which he or she first performs an Hour of
Service following his or her return after such Break in Service.
i.17. "Company" shall mean Rose's Stores, Inc., any
corporation or entity with or into which Rose's Stores, Inc. may
be merged or consolidated or to which its assets may be sold, and
any entity which may be or become an Affiliated Company. The
inclusion of an entity within or the removal of any organization
from the meaning of the word "Company," except as provided
otherwise in this Plan, shall be effected only by action of its
Board of Directors, or its successors, as the case may be.
i.18. "Company Contribution Account" shall mean the
Account of a Participant to which Company Contributions made
pursuant to Paragraph 5.1, and the Increment or Decrement thereon,
are credited.
i.19. "Company Contributions" shall mean Matching
Contributions and Profit Sharing Contributions.
i.20. "Company Securities" shall mean Common Stock of
Rose's Stores, Inc. and, subject to such approval of the Department
<PAGE>
of Labor as is determined to be necessary by the Advisory
Committee, Warrants.
i.21. "Compensation" shall mean compensation paid by the
Company to the Participant during the Plan Year which is required
to be reported as wages on the Participant's Form W-2, and shall
also include the amount of any salary reduction elected by a
Participant pursuant to a plan maintained by the Company which is
qualified under Section 401(k) or 125 of the Code, but shall
exclude any income imputed to a Participant (including but not
limited to income imputed by reason of personal use of an
automobile owned by the Company and the Code Section 79 cost for
group term insurance), and shall further exclude severance pay and
pay in lieu of vacations. For Plan Years beginning on or after
January 1, 1989, the maximum amount of Compensation that may be
taken into account pursuant to Section 401(a)(17) of the Code, is
limited to $200,000, which limit shall be adjusted, pursuant to
Section 415(d) of the Code, beginning in 1990, to reflect post-1986
cost-of-living increases measured by the Consumer Price Index,
except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar
year and the first adjustment to the $200,000 limitation is
effected on January 1, 1990. If the Plan determines Compensation
on a period of time that contains fewer than twelve (12) calendar
months, then the annual Compensation limit is an amount equal to
the annual Compensation limit for the calendar year in which the
Compensation period begins, multiplied by the ratio obtained by
dividing the number of full months in the period by twelve (12).
If Compensation for any prior Plan Year is taken into account
in determining an Associate's contributions or benefits for the
current year, the Compensation for such prior year is subject to
the applicable annual Compensation limit in effect for that prior
year. For this purpose, for years beginning before January 1,
1990, the applicable annual Compensation limit is $200,000.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994,
the annual Compensation of each Associate taken into account under
the Plan shall not exceed the annual compensation limit imposed by
the Omnibus Budget Reconciliation Act of 1993 ('OBRA'93'). The
OBRA'93 annual Compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in accordance with
Section 401(a)(17)(B) of the Code. The cost-of-living adjustment
in effect for a calendar year applies to any period, not exceeding
12 months, over which Compensation is determined (determination
period) beginning in such calendar year. If a determination period
consists of fewer than 12 months, the OBRA'93 annual Compensation
limit will be multiplied by a fraction, the numerator of which is
the number of months in the determination period, and the
denominator of which is 12.
<PAGE>
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section 401(a)(17)
of the Code shall mean the OBRA'93 annual Compensation limit set
forth in this provision.
If Compensation for any prior determination period is taken
into account in determining Participant's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the OBRA'93 annual Compensation limit in
effect for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first
Plan Year beginning on or after January 1, 1994, the OBRA'93 annual
compensation limit is $150,000.
In determining the Compensation of a Participant for purposes
of this limitation, the rules of Section 414(q)(6) of the Code
shall apply, except in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal
descendants of the Participant who have not attained age nineteen
(19) before the close of the year. If, as a result of the
application of such rules, the adjusted limitation is exceeded,
then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation
as determined under this Paragraph 1.21 prior to the application
of this limitation.
i.22. "Contribution Participant" shall mean a Participant
(i) who is an Associate on the last day of the Plan Year and who
completed at least one thousand (1000) Hours of Service during the
Plan Year, or (ii) who ceased to be an Associate during the Plan
Year on account of Retirement, death, or a Company Store Closing
(within the meaning of Paragraph 7.2(c)).
i.23. "Deferral" shall mean a salary reduction arrangement
between a Participant and the Company pursuant to which an amount
is contributed to the Plan by the Company in lieu of payment to the
Participant in the form of salary or wages, which is credited to
the Participant's Deferred Income Account, and which is fully
vested at all times.
i.24. "Deferred Income Account" shall mean the Account of
a Participant to which Tax Deferred Contributions made pursuant to
the Participant's Deferral election under Paragraph 4.2 and the
Increments or Decrements thereon are credited.
i.25. "Defined Contribution Dollar Limitation" shall mean
$30,000, or, if greater, one-fourth (1/4) of the defined benefit
dollar limitation set forth in Section 415(b)(1) of the Code, which
is in effect for the Limitation Year.
<PAGE>
i.26. "Disability" shall mean total and permanent
physical, nervous or mental condition of a Participant resulting
in the Participant's inability to perform his or her usual duties
for the Company, or the duties of such other position or job that
the Company makes available to the Participant, and for which the
Participant is qualified by reason of training, education or
experience; and such incapacity shall be deemed to exist when
determined by the Advisory Committee upon the basis of the
certificate of a qualified physician approved by the Advisory
Committee, and such other evidence as the Advisory Committee deems
acceptable; and the decision of the Advisory Committee shall be
final and conclusive for all purposes of the Plan. Disability
shall be effective as of the Valuation Date coinciding with or
following the determination of disability.
i.27. "Early Retirement" shall mean the Valuation Date
coinciding with or immediately following the Participant's
attainment of Early Retirement Age, provided that the Participant
has completed five (5) Years of Service with the Company, and
further provided the Participant notifies the Advisory Committee
in writing at least sixty (60) days prior to the Valuation Date
upon which Early Retirement shall be effective. Each Participant
who terminates employment after satisfying the service requirement
for Early Retirement and who thereafter reaches Early Retirement
Age shall be entitled to receive his benefits under the Plan.
i.28. "Early Retirement Age" shall mean age fifty-five
(55).
i.29. "Effective Date" shall mean the date the Plan was
originally adopted, or effective. The Effective Date of this
amendment and restatement shall mean July 1, 1995, except where
specifically stated otherwise.
i.30. "Entry Date" shall mean the January 1, April 1,
July 1 or October 1 coinciding with or following the date the
Associate meets the eligibility requirements under the Plan.
i.31. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
i.32. "Family Member" shall mean an individual described
in Section 414(q)(6)(B) of the Code, and defined in subparagraph
5.10(b)(v) and 5.13(b)(iv).
i.33. "Fiduciaries" shall mean the Company, C.E.O.,
Advisory Committee, and Trustee, but only with respect to the
respective specific responsibilities of each for the Plan and
Trust, all as described in Article IX.
i.34. "Forfeitures" shall mean the sum of the non-vested
portion of the Account Balances of all Participants who terminate
<PAGE>
employment prior to becoming fully vested, resulting in a
forfeiture pursuant to the provisions of the Plan.
i.35. "Highly Compensated Associate" shall mean a highly
compensated employee described in Section 414(q) of the Code, and
defined in subparagraphs 5.10(b)(iv) and 5.13(b)(v).
i.36. "Hour of Service" shall mean:
(a) Each hour for which an Associate is directly or
indirectly paid, or entitled to payment, from the Company for
the performance of duties, including each hour (to the extent
not included pursuant to the foregoing provisions of this
sentence) for which back pay (irrespective of mitigation of
damages) has been either awarded or agreed to by the Company;
and
(b) Each hour for which an Associate is paid, either
directly or indirectly, or entitled to payment, by the Company
even though no duties are performed (irrespective of whether
the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence (including
maternity or paternity leave). No more than 501 Hours of
Service shall be credited under this subparagraph 1.36(b) for
any single continuous period during which no duties are
performed (whether or not such period occurs in a single Plan
Year). Hours of Service shall be calculated and credited
pursuant to subparagraphs (b) and (c) in accordance with
Section 2530.200b-2 of the Department of Labor Regulations,
which are incorporated herein by reference. Notwithstanding
the above, no Hours of Service shall be credited to an
Associate if attributable to payments made or due under a plan
maintained solely for the purpose of complying with applicable
workers' compensation, unemployment compensation or disability
insurance laws or to a payment which solely reimburses the
Associate for medical or medically-related expenses incurred
by the Associate; and
(c) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the
Company. The same Hours of Service shall not be credited both
under subparagraph (a) or (b) above, as the case may be, and
under this subparagraph 1.36(c). Hours credited under this
subparagraph (c) shall be credited to the Associate for the
time as of which the award or agreement pertains rather than
the time the award, agreement or payment is made; and
(d) Each Hour of Service completed with a predecessor
company, provided the Company maintains the qualified plan of
a predecessor company.
<PAGE>
i.37. "Inactive Participant" shall mean a former Associate
on whose behalf an Account is maintained under the Plan.
i.38. "Increment or Decrement" shall mean the net gain or
loss, net of expenses, incurred by the Trust Fund or Account
determined by the Trustee as of the Valuation Date and allocated
in accordance with Paragraph 5.2.
i.39. "Investment Fund" shall mean the investment
alternatives within the Trust Fund, selected by the Advisory
Committee and maintained by the Trustee, among which Participants
are allowed to direct the investment of their Accounts.
i.40. "Limitation Suspense Account" shall mean the
separate account maintained for the purposes of holding excess
Annual Additions as provided in Paragraphs 5.9(c) and (d), which
shall not share in any Increment or Decrement of the Trust Fund.
i.41. "Limitation Year" shall mean the Plan Year, during
which the limitations on Plan contributions and allocations are
determined.
i.42. "Matching Contributions" shall mean contributions
to the Plan made by the Company in its discretion for the Plan
Year, and allocated to a Participant's Company Contribution Account
by reason of the Participant's Tax Deferred Contributions.
i.43. "Named Fiduciary" shall mean the Advisory Committee,
which shall be in charge of the operation and administration of the
Plan.
i.44. "Normal Retirement" shall mean the termination of
a Participant's employment after the attainment of Normal
Retirement Age, provided that to facilitate the training of
replacements, the Participant shall give the Department of Human
Resources of the Company ninety (90) days' advance notice in
writing of the date on which he or she wishes to retire. The
Normal Retirement of a Participant shall be effective as of the
Valuation Date on which the Participant satisfies the above
requirements.
i.45. "Normal Retirement Age" shall mean age sixty (60).
i.46. "Participant" shall mean any Associate who shall
have acquired either a forfeitable or nonforfeitable interest in
the Trust Fund pursuant to the provisions of the Plan.
i.47. "Plan" shall mean the Rose's Stores, Inc. Retirement
Savings 401(k) Plan, as set forth in and by this plan and trust
document and all subsequent amendments thereto.
<PAGE>
i.48. "Plan Rules" shall mean rules adopted by the
Advisory Committee for the administration, interpretation or
application of the Plan.
i.49. "Plan Year" shall mean the twelve-month period
beginning on the first day of January and ending on the last day
of December of each year.
i.50. "Profit Sharing Contribution" shall mean any
contribution made to the Plan on account of the Plan Year, by the
Company, in its discretion, on behalf of the Participants, without
regard to current or accumulated earnings or profits.
i.51. "Retirement" shall mean, with respect to a
Participant, the Participant's termination of employment on account
of (a) Normal Retirement; (b) Early Retirement; or (c) Disability.
If a Participant shall remain an Associate after becoming eligible
for Retirement, the Associate shall continue to be treated in all
respects as a Participant until his or her actual retirement.
i.52. "Tax Deferred Contributions" shall mean
contributions made to the Plan by the Company pursuant to
Participant Deferral elections.
i.53. "Taxable Year" shall mean, except as provided below,
the twelve-month period adopted by the Company for its tax
purposes, which is the twelve-month period ending on the last
Saturday in January. If, at any time, the term "Company" shall
include more than one separate entity and all such separate
entities shall not have the same fiscal year, then such fiscal year
of each separate entity shall be the "Taxable Year" for each such
separate entity.
i.54. "Trust" shall mean the legal entity resulting from
this agreement between the Company and the Trustee pursuant to
which the assets of Trust Fund shall be received, held, invested,
and disbursed to or for the benefit of Participants or
Beneficiaries. The Company and Trustee may establish more than
one Trust.
i.55. "Trust Fund" shall mean all funds received by the
Trustee, together with Increments or Decrements thereon.
i.56. "Trustee" shall mean First Union National Bank of
North Carolina, or such person, persons, other corporation, or
association, designated by the Company to serve as trustee pursuant
to Article VIII hereunder.
i.57. "Valuation Date" shall mean each business day.
i.58. "Voluntary Contributions" shall mean voluntary
after-tax contributions made to the Plan by a Participant during
<PAGE>
the Plan Year. No Voluntary Contributions may be made to this
Plan.
i.59. "Warrants" shall mean warrants, evidencing the right
to purchase shares of Common Stock of Rose's Stores, Inc., that
were acquired by the Rose's Stores, Inc. Variable Investment Plan
pursuant to the Modified and Restated First Amended Joint Plan of
Reorganization of Rose's Stores, Inc., as approved by the United
States Bankruptcy Court for the Eastern District of North Carolina,
Raleigh Division, on April 24, 1995.
i.60. "Year of Service" shall mean, with respect to an
Associate, any Plan Year during which the Associate has completed
at least one thousand (1,000) Hours of Service with the Company.
Years of Service completed by any Associate with an Affiliated
Company shall be recognized as Years of Service with the Company.
<PAGE>
ARTICLE ii
Administration of the Plan
ii.1. Advisory Committee. The Advisory Committee
shall be the "Plan Administrator" (as that term is defined in
Section 3(16)(A) of ERISA and Section 414(g) of the Code) in charge
of the operation and the administration of the Plan and shall also
be the "Named Fiduciary" (as that term is defined in ERISA). The
Advisory Committee shall have the power to delegate specific
fiduciary responsibilities (other than the fiduciary
responsibilities of the Trustee relating to the control of the
assets of the Plan). The delegation of fiduciary responsibilities
may be to Associates or to other individuals, all of whom shall
serve at the pleasure of the Company; any individuals who are
Associates shall serve without compensation. A delegation of
duties shall be accomplished by a written instrument executed by
the Advisory Committee specifying responsibilities delegated and
the fiduciary responsibilities allocated to such delegate. The
allocation of such responsibilities shall be effective upon the
date specified in the delegation, subject to written acceptance by
the delegate. Any delegation of responsibilities shall provide for
reports no less often than annually by such delegate to the
Advisory Committee. Such reports shall contain information
necessary fully to inform the Advisory Committee of the status and
operation of the Plan and of the delegate's discharge of
responsibilities delegated. Any person to whom fiduciary duties
have been delegated may resign by delivering a written resignation
to the Advisory Committee; however, the resignation shall not
relieve such person from any breach of fiduciary duty that arose
prior to the resignation or because of the resignation. Vacancies
created by resignation, death or other cause may be filled by the
Advisory Committee or the assigned responsibilities may be
reabsorbed by or redelegated by the Advisory Committee. Consistent
with the requirements of ERISA, all usual and reasonable expenses
of the Advisory Committee shall be paid by the Trustee from the
Trust Fund to the extent not paid by the Company.
ii.2. Authority. The Advisory Committee, as Plan
Administrator, shall administer the Plan in accordance with its
terms and shall have full power to exercise its discretion in
determining all questions arising in connection with the
administration, interpretation, and application of the Plan,
including adopting such Plan Rules as it deems necessary, desirable
or appropriate. The Advisory Committee shall interpret and
construe the provisions of the Plan, decide any disputes which may
arise with regard to the rights of Associates, Participants, their
legal representatives, or Beneficiaries under the terms of this
Plan, and, in general, direct the administration of this Plan. The
decision of the Advisory Committee for matters within its
jurisdiction shall be final, binding, and conclusive upon the
Company, Associates, Participants, Beneficiaries, and every other
<PAGE>
person or party interested or concerned. All rules and decisions
of the Advisory Committee shall be uniformly and consistently
applied to all Participants in similar circumstances.
ii.3. Advisory Committee Procedure. The Advisory
Committee may act at a meeting or in writing without a meeting.
The Advisory Committee shall elect one of its members as Chairman,
appoint a Secretary, who may or may not be an Advisory Committee
member, and advise the Trustee of such actions in writing. The
Secretary shall keep a record of all meetings and forward all
necessary communications to the Company or the Trustee. The
Advisory Committee may adopt such by-laws and regulations as it
deems desirable for the conduct of its affairs. All decisions of
the Advisory Committee shall be made by the vote of the majority
including actions in writing, or by telecommunications confirmed
in writing.
A member of the Advisory Committee shall not vote or act upon
any matter which relates to such person as a Participant or to any
other matter in which the member has an interest which may affect
such member's best judgment as a fiduciary. If a matter arises
affecting one of the members of the Advisory Committee and the
other members of the Advisory Committee are unable to agree as to
the disposition of such matter, the Board of Directors shall
appoint a substitute member of the Advisory Committee in the place
of the affected member for the sole purpose of passing upon and
deciding the particular matter.
ii.4. Forms. The Advisory Committee may prescribe
such forms as may be necessary or desirable under this Plan for its
efficient administration, including, but not limited to application
for benefits, designation of Beneficiaries, request for Early,
Normal or Disability Retirement, and investment elections. The
Advisory Committee may also prescribe how such forms shall be
executed, witnessed and/or approved and to whom and within what
time they must be delivered to be effective, except to the extent
otherwise specifically provided by the Plan.
ii.5. Funding. The Advisory Committee shall be
charged with the authority and responsibility for establishing and
implementing a funding method and policy consistent with the needs
of the Plan and the requirements of ERISA. The funding policy
shall include the short and long term estimated cash requirements
needed for payment of benefits under the terms of the Plan. The
funding method and policy so established shall be in writing, and
a copy thereof shall be delivered to the Trustee.
ii.6. Successor Fiduciary. Upon the death,
resignation, or inability to serve of any person to whom the
Advisory Committee has delegated fiduciary duties, a successor
Fiduciary shall be appointed within thirty (30) days. If the
Advisory Committee shall cease to exist, or be dissolved,
<PAGE>
voluntarily or involuntarily, or have a receiver or trustee in
bankruptcy appointed, a successor Fiduciary shall be appointed
within thirty (30) days by the then remaining persons (if any) to
whom fiduciary duties have been delegated and, if there are no
remaining persons to whom fiduciary duties have been delegated, or
because of the inability, failure, or refusal of the then remaining
fiduciaries to make such appointment, a successor Fiduciary shall
be selected by a majority of the Participants of the Plan who are
Associates at the time of the occurrence of the foregoing events.
ii.7. Delegation of Services. The Advisory Committee
and those persons to whom it has delegated fiduciary duties may
employ such counsel and agents and obtain such clerical and other
services (including accounting, legal counsel, and investment
managers and advisors) as may be required in carrying out the
provisions of the Plan. Consistent with the requirements of ERISA,
reasonable expenses for services of individuals who are not
Associates, with respect to services rendered on behalf of the
Plan, shall be paid by the Trustee from the Trust, to the extent
not paid by the Company.
ii.8. Signature Authority. If the Advisory Committee
shall delegate specific fiduciary responsibilities, it may
designate and authorize one or more of the persons being so
delegated to sign documents; and shall further notify the Trustee
of such action and the name or names of the person or persons so
designated. The Trustee shall thereafter accept and rely upon any
document executed by such person or persons as representing action
by the Advisory Committee until the Advisory Committee shall
deliver the Trustee a written revocation of such designation.
ii.9. Fiduciary Notice Requirements. The Advisory
Committee and those persons to whom it has delegated fiduciary
duties shall notify the Trustee of any action taken with respect
to the Plan, and when required to do so, shall notify any other
interested party. The Advisory Committee and those persons to whom
it has delegated fiduciary duties shall maintain all books of
account, records, and other data as shall be necessary to properly
administer the Plan and satisfy the disclosure and reporting
requirements of ERISA and the Code. The Advisory Committee shall
ensure that the Plan is in compliance with the various regulatory
requirements set forth in ERISA, the Code and the regulations
thereunder.
ii.10. Reliance. The Advisory Committee shall be entitled
to rely conclusively upon, and shall be fully protected in any
actions taken by it in good faith and in reliance upon, any
opinions or reports which shall be furnished to it by any
accountant, actuary, counsel, or other specialist. The Advisory
Committee shall accept and rely upon information furnished it by
the Company or obtained from the Company's books and records,
either directly or from the Company, C.E.O., or furnished it by a
<PAGE>
Participant or Beneficiary, or the Trustee, and such information
shall be presumed by the Advisory Committee to be correct. The
Advisory Committee shall not incur any liability for its action or
failure to act, unless such liability arises from its own gross
negligence or willful misconduct. Except to the extent provided
otherwise, and consistent with the requirements of ERISA, the
Company shall indemnify each person employed by the Company to whom
the Advisory Committee has delegated fiduciary duties against all
claims, losses, damages, expenses, and liabilities arising from any
action or failure to act, except when the same is judicially
determined to be due to the gross negligence or willful misconduct
of such person.
ii.11. Duties of the Advisory Committee. The Advisory
Committee shall have the responsibility for the operation and
administration of the Plan, and in addition to those duties
specifically enumerated elsewhere herein, shall have the following
specific duties:
(a) The Advisory Committee shall receive, review and
keep on file (as it deems convenient or proper) reports of
the financial condition and the receipts and disbursements of
the Trust Fund from the Trustee, and shall furnish to the
Company such reports as it may request. The Advisory
Committee shall file the reports required by ERISA and
maintain records to comply with governmental regulations
issued thereunder relating to records of Participants'
service, account balances and the percentage of such account
balances which are nonforfeitable under the Plan;
notifications to Participants; annual registration with the
Internal Revenue Service; and annual reports to the Department
of Labor.
(b) The Advisory Committee shall communicate to each
Associate a summary of the Plan and of any subsequent
amendments thereto in the manner and within the time
prescribed by applicable law and regulations thereunder. A
copy of the Plan, as well as all other documents required to
be made available to Participants or Beneficiary pursuant to
ERISA, shall be made available to each Participant or
Beneficiary hereunder by having the appropriate copies
available at the principal office of the Company, and in such
other locations as may be required by ERISA, during business
hours.
(c) The Advisory Committee shall provide the Trustee
with all information and instructions necessary for the
Trustee to carry out its administrative functions under this
Plan including all directions to the Trustee concerning all
benefits which are to be paid from the Trust Fund pursuant to
the provisions of the Plan, and warrants that all such
directions are in accordance with the Plan.
<PAGE>
(d) Consistent with the requirements of ERISA and the
Code, the Advisory Committee shall have the duty to correct
errors of omission or commission in the administration of the
Plan as promptly as possible after discovery.
ii.12. Powers of the Advisory Committee. The Advisory
Committee shall have all powers necessary or desirable to discharge
all of its responsibilities and duties hereunder, including, but
not limited to, the following:
(a) The Advisory Committee shall have the power to
select and change Investment Funds, including insurance, among
which Participants are allowed to direct the investment of
their Accounts.
(b) Consistent with the requirements of ERISA and the
Code, the Advisory Committee shall have the power to correct
errors of omission or commission in the administration of the
Plan in such manner as, in its sole discretion, seems most
equitable and practical, including specifically the power to
correct errors in Participants' Accounts occurring in one Plan
Year but discovered later by debiting or crediting Increment
or Decrement of the Plan Year in which the error is discovered
and corrected.
(c) The Advisory Committee shall review the investment
performance of the various Investment Funds at such intervals
as it determines are necessary to comply with its duties
herein, which review shall be no less frequently than
quarterly.
ii.13. Limitations on Powers of the Advisory Committee.
Anything else herein to the contrary notwithstanding, the Advisory
Committee shall not have the power to:
(a) Add to, subtract from or modify any of the terms of
this Plan.
(b) Terminate this Plan.
(c) Add to any Benefits provided by this Plan, or waive
or fail to apply any requirements for eligibility to Benefits
under this Plan.
(d) Appoint or remove the Trustee.
ii.14. Investment Funds. For investment purposes, the
assets of the Trust Fund (other than earmarked investments
described in Paragraph 6.3) shall be invested among available
Investment Funds, which shall be selected by the Advisory Committee
and may be changed from time-to-time.
<PAGE>
Subject to the limitations discussed herein with respect to
those Participants subject to the restrictions of Section 16(b) of
the Securities Exchange Act of 1934, as amended, when an Associate
becomes a Participant, the Advisory Committee shall give the
Participant the right to specify how his or her Account shall be
invested among each of the Investment Funds. The Advisory
Committee shall be specifically authorized to establish procedures
for the individual direction of the investment of a Participant's
Account so as to comply with the substance of Section 404(c) of
ERISA, and the regulations promulgated thereunder, such that if it
is determined that the requirements of Section 404(c) of ERISA have
been satisfied, when a Participant exercises his investment
authority, the fiduciaries of the Plan shall not be liable for such
exercise of control and the Participant shall not be deemed a
fiduciary by reason of such exercise of control. Nothing
hereinabove shall mandate compliance, as to all or any portion of
the Plan, with any discretionary provision of Section 404(c) of
ERISA and the regulations promulgated thereunder, especially to the
extent compliance is inconsistent with the purposes of the Plan,
and in particular with the investment in the Company Stock Fund.
Each Participant may elect to invest his or her Account among
the Investment Funds in five percent (5%) increments. As of every
Valuation Date, the Advisory Committee shall give all Participants
the opportunity to elect to change how future amounts credited to
their Accounts are invested or to change how amounts previously
credited to their Accounts are invested. Investment directions
shall be made in writing in the manner specified by the Advisory
Committee and in accordance with applicable Plan Rules. In the
absence of a proper election under this Article, the affected
portion of a Participant's Account shall be invested in the fund
specified by the Advisory Committee and all distributions shall be
charged first to the portion of the Participant's Account invested
in that fund and then to the balance of his or her Account.
An Investment Fund shall be credited with all Increments and
Decrements thereon. Each fund shall be separately valued, and the
Increments and Decrements on an investment fund shall be credited
among the Accounts in proportion to their interests in the
Investment Fund. Consistent with the requirements of ERISA, the
Advisory Committee may establish procedures for charging expenses
incurred in the maintenance of an Investment Fund against Accounts
invested in such Investment Fund; and may establish procedures for
charging a Participant's Account for the reasonable expenses of
consummating the investment instructions of the Participant. Such
procedures shall provide for the communication to Participants that
such charges shall be made and further provide for the periodic
communication to Participants of the actual expenses charged to
Accounts.
<PAGE>
Subject to approval by the Internal Revenue Service of the
provisions of this paragraph, an intra-plan transfer between the
Company Stock Fund and another Investment Fund with respect to a
Participant who is subject to the restrictions of Section 16(b) of
the Securities Exchange Act of 1934, as amended, may be made only
pursuant to (i) an election made on a quarterly date specified in
Rule 16b-3(e)(3) promulgated under the Securities Exchange Act of
1934, as amended, at least six months after the date of the
Participant's previous intra-plan transfer election relating to the
Company Stock Fund, if any, which election shall be effective as
of the first date, following the election, that a change would be
effective for Plan Participants, or (ii) an irrevocable election
made by the Participant at least six months in advance of the
effective date of the transaction. Further, such a Participant
must also comply with the provisions of Paragraph 2.20 hereof when
making intra-plan transfers between the Company Stock Fund and
another Investment Fund.
ii.15. Investment in Insurance. Except as provided herein,
investments in insurance shall not be allowed. However, if any
Participant invested a portion of his or her Account in insurance
policies prior to January 1, 1992, pursuant to the terms of the
Plan in effect at that time, such investment may continue to be
maintained under the Plan. Any provisions under this Plan relating
to investment in insurance policies shall be applicable only with
respect to such investments made prior to January 1, 1992. Any
such investment in insurance also shall be subject to the following
limitations:
(a) Subject to the limitations contained herein or
imposed by the Advisory Committee, a Participant may elect to
invest his or her Account in individual or group insurance
policies covering the Participant or his or her spouse or
children, and in individual or group annuity contracts issued
by one or more insurance companies. A Participant may not
invest his or her Account in term life insurance contracts.
Only ordinary life insurance contracts and universal life
insurance contracts offered to Plan Participants by the
Advisory Committee may be purchased. Individual policies
shall be considered an earmarked investment of the
Participant's Account and premiums on such policies shall be
charged to such Account in such manner as shall be determined
by the Advisory Committee. Except to the extent that the
Advisory Committee adopted alternative provisions, the
insurance contract must provide that proceeds will be payable
to the Trustee; however, the Trustee shall be required to pay
over all the proceeds of the contract to the Participant's
Beneficiary in accordance with Article VII.
(b) Subject to all other distribution requirements of
Article VII and the requirements of ERISA, the Participant
may request that the Advisory Committee direct the Trustee to
<PAGE>
distribute such policies or contracts intact to the
Participant. Any policies or contracts distributed must be
nontransferable. Alternatively, the Advisory Committee, at
the election of a Participant, may convert into cash the
entire value of any individual policies or contracts purchased
for a Participant's Account and credit such amount to the
Participant's Account.
(c) Not more than twenty five percent (25%) of the
aggregate amount of Company Contributions made on behalf on
any Participant may be used to pay premiums on ordinary or
universal life insurance contracts on the life of such
Participant, his or her spouse and children, provided however,
subject to the approval of the Advisory Committee that an
insurance contract meets the requirements of Treasury
Regulation Section 1.401-1(b)(1)(i), as interpreted by the
Internal Revenue Service, that insurance benefits provided
pursuant to the Plan be "incidental," the Plan limitation on
the aggregate amount of Company Contributions which may be
used to pay premiums on such an insurance contract shall be
increased from twenty-five percent (25%) to not in excess of
fifty percent (50%) of the aggregate amount of Company
Contributions made on behalf of the Participant.
(d) Any dividends which become payable on any contracts
shall be used to provide additional benefits for the
Participant or shall be credited to the Participant's Account,
as determined by the Advisory Committee.
(e) A Participant may not borrow amounts from insurers
issuing such policies or on the collateral of such policies;
however, the Advisory Committee in its sole discretion may
direct the Trustee to borrow against the policies to fund
loans under Paragraph 11.3.
(f) The modes of settlement of any life insurance
contract distributed to a Participant must be limited to those
provided under Article VII.
(g) In the case of any conflict between the provisions
of the Plan and the Trust Agreement and the terms of any
insurance contract, the provisions of the Plan and the Trust
Agreement shall control.
ii.16. Delegation of Investment Responsibility. If an
insurance contract has been purchased with assets of the Trust Fund
and assets of the insurer are or may be considered assets of the
Trust, such insurer shall be the investment manager (within the
meaning of Section 3(38) of ERISA) with respect to such assets.
Similarly, if assets of the Trust are invested in a collective,
common or group trust (other than one trusteed by the Trustee) and
the assets of such other trust are or may be considered assets of
<PAGE>
this Trust, the entity or person with investment management
responsibility with respect to such other trust shall be a "named
fiduciary" with respect to the investment management of such other
trust or if the person or entity qualifies under Section 3(38) of
ERISA, such person or entity shall be the investment manager of
such trust. In either case, however, such persons or entities
shall exercise their investment management responsibilities with
respect to such assets in accordance with the terms of the
insurance contract or collective, common or group trust and without
any notice to the Trustee. The insurance contract or collective,
common or group trust itself shall, nevertheless, be an asset of
the Trust. Any decisions concerning the purchase, retention,
modification or termination of the contract or other trust shall
be made by the person with investment responsibilities with respect
to the contract or other trust.
ii.17. Special Accounting Rules for the Company Stock Fund.
The Company Stock Fund shall be maintained as described below:
(a) Accounts invested in the Company Stock Fund shall
be credited with a specific number of Warrants and a specific
number of shares of Common Stock of Rose's Stores, Inc.
Accordingly, the unit accounting procedures set forth in this
Article shall not apply to the Company Stock Fund.
(b) Cash dividends on Company Securities allocated to
a Participant's Account shall be allocated among the other
Investment Funds in which the Participant's Account is
invested in accordance with the Participant's investment
elections.
(c) Stock dividends on Company Securities shall be
credited to Accounts invested in the Company Stock Fund in
proportion to the shares of Common Stock of Rose's Stores,
Inc. allocated to such Accounts.
(d) Subject to such approval of the Department of Labor
as the Advisory Committee determines is necessary, the Plan
is expressly authorized to acquire and hold any rights,
warrants or options issued with respect to Company Securities
held under the Plan. A Participant shall be entitled to
exercise any or all of the rights, warrants or options
received on Company Securities allocated to his or her Account
pursuant to the forms and procedures that shall be established
by the Advisory Committee for this purposes. Company
Securities so acquired shall be credited to the Stock Account.
Alternatively, the fiduciary may sell any such rights,
warrants or options for the benefit of the Cash Account
corresponding to the Stock Account.
Subject to such approval of the Department of Labor as
the Advisory Committee determines is necessary, a Participant
<PAGE>
shall be entitled to exercise Warrants allocated to his or her
Account pursuant to the procedures and forms that shall be
established and prepared by the Advisory Committee for this
purpose. Such procedures may provide that the exercise price
under the Warrants will be paid from the portion of the
Participant's Account that is invested in assets other than
Company Securities.
(e) Except as provided above, a Participant shall have
no right to request, direct or demand that the Trustee
exercise on his or her behalf rights to purchase shares of
Company Securities or other securities of the Company.
ii.18. Valuation of Company Securities.
(a) To the extent that a Participant's Account is
invested in the Company Stock Fund, the Account shall include
the Company Securities allocated to its Account within the
Fund at the time in question. Such Account, at any relevant
time, shall be worth the fair market value on that date of the
Company Securities credited to it. To the extent that Company
Securities in such an Account are to be distributed or
withdrawn in cash or are otherwise required to be valued,
their value shall be determined by the Trustee based on the
mean trading price based on the average of the quoted closing
prices of the Company Securities credited to the Account on
the twenty (20) consecutive trading days immediately preceding
the date of valuation provided the security is in fact traded
for at least ten (10) days of such twenty (20) day period.
For purposes of fixing the valuation of Company Securities
which are neither traded on a national securities exchange nor
quoted on any system sponsored by a national securities
association for at least ten (10) of the twenty (20)
consecutive trading days preceding the date of valuation, the
contribution shall be valued at its fair market value as
determined in good faith and in accordance with Treasury
Regulations. For purposes of a distribution, the valuation
shall be made by the Trustee as of the Valuation Date on which
the distribution is effective, or as of such other date
specified by the Advisory Committee under a reasonable method
consistently applied. For purposes of determining the value
of Company Securities contributed in kind, the value shall be
as determined above. To the extent necessary to comply with
the requirements of ERISA and the Code, the Advisory Committee
may establish an alternative method for valuing Company
Securities, which method shall be communicated to the Trustee
in writing.
(b) For purposes of informing Participants of the Plan's
basis in Company Securities distributed in kind, the Trustee
shall keep records of the Plan's basis in Company Securities
in accordance with Treasury Regulation
Section 1.402(a)-1(b)(2).
<PAGE>
ii.19. Voting of Company Securities. A Participant shall
not have the right to vote, either directly or through proxy,
Company Securities contributed to the Plan, except when the
Company's certificate of incorporation is to be amended in a manner
affecting the capitalization of the Company. When such an
amendment is subject to vote or if a vote is otherwise required by
ERISA or the Code as determined by the Advisory Committee, Company
Securities in the Company Stock Fund shall be voted by the Trustee
in accordance with the following procedure:
(a) As soon as practicable following the record date
for voting at any meeting of the shareholders of Company
Securities, the Advisory Committee shall furnish each
Participant with an appropriate form whereby he or she may
instruct the Trustee as to the manner in which the Trustee is
to vote the number of full shares (if any) of Company
Securities in his or her Account as of the end of the last
Plan Year quarter preceding the record date. If the
management of the Company is soliciting proxies in connection
with any such meeting, a copy of management's proxy soliciting
materials shall be furnished to the Participant at the same
time. Subject to the requirements of ERISA, the Trustee shall
vote shares in the manner instructed by the Participant.
(b) If instructions are not received from a Participant
by the tenth day prior to the date of the meeting, the Trustee
shall vote the Participant's shares in whatever manner the
Trustee deems appropriate, or may give its proxy thereon as
so solicited.
(c) Special voting rules shall apply if an acquisition
offer is made for Company Securities. An "acquisition offer"
shall be an offer subject to Section 14(d) of the Securities
Exchange Act of 1934, as amended, made by any person or group
to acquire all or part of the outstanding Company Securities,
including Company Securities held in the Plan. Upon an
acquisition offer, each Participant shall be entitled to
direct the Trustee (on a form to be prescribed by the Advisory
Committee) to tender all or part of the shares of Company
Securities in his or her Account as of the end of the last
Plan Year quarter preceding the date the acquisition offer was
made. Subject to the requirements of ERISA, if the Trustee
receives such an instruction by a deadline determined by the
Trustee and communicated to Participants, the Trustee shall
tender the Participant's Company Securities in accordance with
his or her instructions. Any Company Securities as to which
the Trustee does not receive instructions before the deadline
shall not be tendered by the Trustee. The Trustee shall
obtain and distribute to each Participant all appropriate
materials pertaining to the acquisition offer, including the
statement of the position of the Company with respect to the
<PAGE>
offer issued pursuant to Regulation 14e-2 of the Securities
Exchange Act of 1934, as amended, as soon as practicable after
such materials are issued. (If the Company fails to issue such
a statement within five (5) business days after the
commencement of the offer, the Trustee shall distribute the
acquisition offer materials to each Participant without the
Company statement but shall distribute the Company statement
separately, as soon as practicable after it is issued.)
ii.20. Withdrawals. Subject to approval by the Internal
Revenue Service, and notwithstanding anything herein to the
contrary, with respect to withdrawals of Company Securities from
the Company Stock Fund (including an intra-plan transfer between
the Company Stock Fund and another Investment Fund of the Plan),
by Participants subject to the restrictions of Section 16(b) of
the Securities Exchange Act of 1934, such Participants must
thereafter cease further purchases in the Company Stock Fund for
six months; provided, however, that extraordinary distributions of
all of the Company Securities held by the Plan and the
distributions in connection with death, retirement, disability,
termination of employment, or a qualified domestic relations order
as defined by the Code or ERISA, or the rules thereunder, shall not
be subject to the above provision restricting distributions. Any
Participant who is subject to the restrictions of Section 16(b) of
the Securities Exchange Act of 1934 who ceases participation in the
Company Stock Fund may not participate again for at least six
months.
ii.21. Limitations of the Securities Exchange Act of 1934.
Notwithstanding any contrary provision herein, subject to approval
by the Internal Revenue Service, the Plan shall be interpreted
consistent with the limitations imposed on insiders by the
Securities Exchange Act of 1934, as amended, and the Advisory
Committee is authorized to establish such rules and procedures,
including imposing limitations on insiders, as it determines are
necessary to comply with the requirements of the Securities
Exchange Act of 1934, as amended.
<PAGE>
ARTICLE iii
Eligibility and Participation
iii.1. Eligibility. An Associate shall be eligible
to participate in the Plan as of the first Entry Date coinciding
with or following the date on which the person completes one
thousand (1,000) Hours of Service during a twelve (12) consecutive
month period commencing on the day he or she first performs an Hour
of Service for the Company. Each successive twelve (12) month
period shall begin on the Anniversary Date following the date the
Associate first completes an Hour of Service. For eligibility
purposes only, an Associate shall not be credited with a Year of
Service until the end of the twelve (12) consecutive month period
in which the Associate first completes one thousand (1,000) Hours
of Service. No one shall become a Participant prior to the
original adoption date of the Plan. A rehired Associate whose
prior Employment terminated after he or she met all eligibility
requirements shall become a Participant on the first Entry Date
following or coinciding with the date he or she regains his or her
status as an Associate.
iii.2. Authorized Leave of Absence. For purposes of
determining the period of employment of any Participant, a
Participant shall be deemed to be actively employed with the
Company during periods covered by an Authorized Leave of Absence,
with or without pay. No more than 501 Hours of Service shall be
credited on behalf of a Participant during an Authorized Leave of
Absence except if otherwise provided by law. Absence from work
for the following reasons shall constitute an Authorized Leave of
Absence:
(a) Illness or accident;
(b) A leave of absence authorized by the Company, under
the Company's standard personnel practices (as from time to
time amended), provided that the terms thereof shall be
applied uniformly to all Participants similarly situated, and,
provided, further, that a Participant gives the Company a
written request for an Authorized Leave of Absence, or an
extension of a previously granted Authorized Leave of Absence
within ninety (90) days following the close of the Plan Year
during which such leave begins, and that the Participant
returns to service after the end of the Authorized Leave of
Absence.
(c) During a period of national emergency or as required
by the Selective Service Act of 1948 or a subsequent act of
like intent or purpose requiring service with the armed
forces, the government of the United States, the Coast Guard,
or Public Health Service, provided the Associate returns to
the service of the Company within ninety (90) days after
<PAGE>
completion of service as described above, or such longer
period during which the Associate's employment rights are
protected by law.
Notwithstanding any of the above provisions, an Associate
who is not a Participant of the Plan at the time such
Authorized Leave of Absence commences shall not become
eligible to participate in the Plan until he or she returns
to active employment with the Company.
iii.3. Maternity or Paternity Leave. During a
maternity or paternity leave of absence, no more than 501 Hours of
Service shall be credited on behalf of a Participant, and shall be
credited solely to prevent a Break in Service. With regard to a
maternity or paternity leave of absence, the following special
provisions shall apply:
(a) An Associate shall be deemed to be on a maternity
or paternity leave of absence if he or she is absent from work
for any period because of the Associate's pregnancy, the birth
of a child of the Associate, or the placement of a child with
the Associate in connection with the adoption of the child by
the Associate, or for purposes of caring for the child for the
period immediately following the child's birth or placement.
(b) An Associate shall be credited with the number of
Hours of Service which would otherwise normally have been
credited to him or her but for such absence or, if such Hours
of Service cannot be determined, the Associate will be
credited with eight (8) Hours of Service per day for the
duration of the absence; provided, however, the total number
of Hours of Service credited to the Associate by reason of
such pregnancy, birth or placement shall not exceed 501 hours.
(c) Hours of Service credited as a result of maternity
or paternity leave shall be credited in the computation period
in which the absence from work begins, if solely because such
Hours of Service are credited, the Associate would be
prevented from incurring a Break in Service in such period;
and in all other cases, such Hours of Service shall be
credited in the immediately following computation period.
(d) No credit will be given for a maternity or paternity
leave of absence unless the Associate furnishes the Advisory
Committee whatever timely information it may require to
establish that the absence from work is for one of the reasons
described in subparagraph (a) above, as well as whatever
timely information is necessary to establish the number of
days of the absence.
iii.4. Status During Leave of Absence. If a
Participant is on an Authorized Leave of Absence, he or she shall
<PAGE>
continue to remain a Participant; however, no Company Contributions
or forfeitures shall be allocated to the credit of the
Participant's Account, except upon the basis of such Compensation
as the Participant may receive from the Company during the
Authorized Leave of Absence. If the Participant does not return
to the employ of the Company on or prior to the expiration of the
Authorized Leave of Absence, it shall be conclusively presumed that
his or her employment was terminated as of the date of the
expiration of such Authorized Leave of Absence. If, however, the
death of such Participant occurs prior to the expiration of such
Authorized Leave of Absence, the Participant shall be entitled to
the death benefit provided in Paragraph 7.4.
iii.5. Determination as to Eligibility. Any question
as to the eligibility of any Associate hereunder shall be
determined by the Advisory Committee, in its sole discretion, in
accordance with the terms hereof, and such determination shall be
final and conclusive for all purposes. The Advisory Committee
shall determine the eligibility of Participants in accordance with
the provisions of this Plan and from the books and records of the
Company, or from such other information or evidence as it may deem
sufficient, and shall provide notice to each Associate when he or
she has become eligible to participate hereunder.
iii.6. Leased Employees. Notwithstanding any other
provisions of the Plan, for purposes of determining the number or
identity of Highly Compensated Associates and for purposes of the
requirements of Section 414(n)(3) of the Code, the Associates of
the Company shall include individuals defined as Associates in
Paragraph 1.10 of the Plan. A "leased employee" within the meaning
of Section 414(n)(2) of the Code, shall not become a Participant
of the Plan.
iii.7. Years of Service for Eligibility Purposes.
(a) In the case of a Participant who does not have any
nonforfeitable right to the Account Balance derived from
Company Contributions, Years of Service before a period of
consecutive Breaks in Service will not be taken into account
in computing Years of Service for eligibility if the number
of consecutive one-year Breaks in Service in such period
equals or exceeds the greater of five (5) or the aggregate
number of Years of Service. Such aggregate number of Years
of Service will not include any Years of Service disregarded
under the preceding sentence by reason of prior Breaks in
Service.
(b) If a Participant's Years of Service are disregarded
pursuant to the preceding subparagraph, such Participant will
be treated as a new Associate for eligibility purposes. If
a Participant's Years of Service may not be disregarded
pursuant to the preceding subparagraph, such Participant shall
<PAGE>
continue to participate in the Plan or, if terminated, shall
participate immediately upon reemployment.
iii.8. Participation Upon Return to Eligible Class.
In the event a Participant is no longer a member of an eligible
class of Associates and becomes ineligible to participate but has
not incurred a Break in Service, such Associate will participate
immediately upon returning to an eligible class of Associates. If
such Associate incurs a Break in Service, eligibility will be
determined under the Break in Service rules of the Plan. In the
event an Associate who is not a member of an eligible class of
Associates becomes a member of an eligible class, such Associate
will participate immediately if such Associate has satisfied the
minimum age and service requirements and would have otherwise
previously become a Participant.
<PAGE>
ARTICLE iv
Company and Associate Contributions
iv.1. Plan Contributions. For each Taxable Year of
the Company during the continuance of this Plan, the Company shall
contribute to the Trust, the amount of Tax Deferred Contributions
required pursuant to Paragraph 4.2, the amount of Fail-Safe
Contributions required pursuant to Paragraph 4.3, the amount of
Matching Contributions as determined pursuant to Paragraph 4.4,
and any Profit Sharing Contributions as determined pursuant to
Paragraph 4.5.
iv.2. Tax Deferred Contributions. Subject to the
limitations established by this Article or Plan Rules, and further
subject to the limitations set forth in Paragraph 11.1(b) regarding
the safe-harbor hardship distribution requirements of Treasury
Regulation Section 1.401(k)-1(d)(2)(iii)(B), each Participant may
elect to make a Deferral from one percent (1%) to twenty percent
(20%) of his or her Compensation for the Plan Year, subject to the
limitations of Paragraphs 5.10 and 5.16. For the Plan Year in
which an Associate first becomes a Participant, his or her
Compensation shall be calculated from the Participant's Entry Date
for this purpose. The Company shall contribute the Tax Deferred
Contribution of each Participant to the Participant's Deferred
Income Account. If the Plan meets the requirements of Paragraph
5.10, the Advisory Committee may increase by a uniform percentage
the amount of each Participant's Compensation subject to Deferral.
A Tax Deferred Contribution will not be valid unless a Tax
Deferred Contribution Form is completed and delivered to the
Advisory Committee in a satisfactory manner. Except when
specifically allowed otherwise by the Advisory Committee, Tax
Deferred Contributions will be made by pro rata payroll deductions,
and must be made in whole percentages. A Participant may change
his or her Tax Deferred Contribution percentage effective as of the
beginning of any payroll period, provided that the necessary
election form is received by the Human Resources Department of the
Company at least seven (7) days prior to the commencement of such
payroll period. A Participant may elect to stop completely Tax
Deferred Contributions as of any payroll period, by giving
sufficient notice as shall be determined by the Advisory Committee.
If a Participant elects to terminate his or her Tax Deferred
Contributions, he or she may resume making Tax Deferred
Contributions as of any subsequent Entry Date by giving sufficient
notice as shall be determined by the Advisory Committee; provided,
however, the Advisory Committee may allow a Participant to resume
making Tax Deferred Contributions at any time if necessary to meet
the requirements of Paragraph 5.10.
Notwithstanding any provision in the Plan to the contrary:
(a) a Participant shall not be allowed to make Tax Deferred
<PAGE>
Contributions to the extent the election will cause the Plan to
exceed the maximum amount allowable as a deduction to the Company
pursuant to Section 404 of the Code; (b) pursuant to Section 402(g)
of the Code, a Participant shall not be permitted to make Tax
Deferred Contributions to this Plan during any calendar year in
excess of $7,000 multiplied by the Adjustment Factor as provided
by the Secretary of the Treasury, and any election for such an
"Excess Tax Deferred Contribution" shall be invalid and the
directed deferrals shall not be made.
iv.3. Fail-Safe Contributions. If the rate of
Deferrals made by Participants who are Highly Compensated
Associates would be excessive, the C.E.O. in his or her discretion
may direct the Company to make a fully vested "Fail-Safe"
Contribution for Participants, who are not Highly Compensated
Associates, to be allocated among their Deferred Income Accounts
in proportion to their Compensation for the Plan Year, except as
follows:
(a) The Fail-Safe Contribution may be allocated among
specific Participants designated by the Advisory Committee,
so long as such Participants are Non-Highly Compensated
Associates.
(b) The maximum amount allocated under this Paragraph
to any Participant shall be limited so as to preclude the
Participant's Deferral Percentage, from exceeding the Deferral
limits contained in Paragraph 4.2.
(c) As determined by the Advisory Committee, the
Fail-Safe Contribution may be allocated beginning with the
Non-Highly Compensated Associate who has the smallest Actual
Deferral Percentage and allocating a contribution until the
Actual Deferral Percentage equals that of the Non-Highly
Compensated Associate with the next lowest Actual Deferral
Percentage. The Fail-Safe Contribution, and the allocation
thereof, shall be the minimum amount necessary to satisfy the
appropriate test set forth in Paragraph 5.10. If two or more
Non-Highly Compensated Associates have identical Actual
Deferral Percentages, their Actual Deferral Percentages shall
be increased pro rata until the percentages equal those of the
Non-Highly Compensated Associates with the next smallest
Actual Deferral Percentage (or the test in Paragraph 5.10 is
otherwise satisfied).
iv.4. Matching Contributions. The C.E.O. in his or
her discretion may direct that the Company make a Matching
Contribution on behalf of Contribution Participants who have made
Tax Deferred Contributions for a Plan Year. The Matching
Contribution for a Plan Year shall be $0.50 for each $1.00 with
respect to a certain percentage of each Contribution Participant's
Deferral elected pursuant to Paragraph 4.2 for such Plan Year.
<PAGE>
Such percentage shall be determined by the Board of Directors for
each Plan Year based on the Company's profit for the Plan Year,
also as determined by the Board of Directors for the Plan Year, but
in no event shall exceed 6%. Matching Contributions shall be made
to the Plan in the form of cash. The amount to be contributed on
behalf of each Contribution Participant for the Plan Year shall be
determined by multiplying the Participant's Compensation for the
Plan Year by the smaller of the following amounts: (i) the
specified percentage, or (ii) a fraction, the numerator of which
is the total dollar amount of Tax Deferred Contributions elected
by the Contribution Participant for the Plan Year and the
denominator of which is the Participant's Compensation for the Plan
Year. For the Plan Year in which an Associate first becomes a
Participant, his or her Compensation shall be calculated from the
Participant's Entry Date for this purpose. Matching Contributions
shall be allocated to the Company Contribution Accounts of
Contribution Participants as provided in Paragraph 5.1 and shall
vest in accordance with the vesting schedule set forth in Paragraph
7.2.
iv.5. Profit Sharing Contributions. The C.E.O. in
his or her discretion may direct that the Company make a Profit
Sharing Contribution for a Plan Year without regard to current or
accumulated earnings or profits; provided, however that the Company
shall not make Profit Sharing Contributions pursuant to this
Paragraph 4.5 for a Plan Year unless the matching contribution
percentage applicable under Paragraph 4.4 for such Plan Year is 6%.
Notwithstanding the foregoing the Plan shall continue to be
designated a profit sharing plan for purposes of Section 401(a),
402, 412 and 417 of the Code. The Profit Sharing Contribution
shall be allocated to the Company Contribution Accounts of
Contribution Participants and shall vest in accordance with the
vesting schedule set forth in Paragraph 7.2.
iv.6. Rollovers of Retirement Benefits. If an
Associate receives a lump sum distribution as defined by
Section 402(e)(4)(A) of the Code, or a qualified total distribution
as defined by Section 402(a)(5)(E)(i), the maximum amount of which
constitutes the balance to the credit of the Associate in the
qualified plan reduced by nondeductible employee contributions
(other than accumulated deductible employee contributions within
the meaning of Section 72(o)(5) of the Code), and if the
distribution qualifies for tax-free rollover treatment within the
meaning of Section 402 or 403 of the Code, then the distribution
may be rolled over into this Plan, subject to the approval of the
Advisory Committee, in whole or in part, either directly from such
other qualified plan, or by the Associate individually, or through
the medium of a conduit individual retirement account or individual
retirement annuity, subject to the following requirements and
limitations:
(a) Any rollover of a distribution from a prior
qualified plan into this Plan must occur within sixty (60)
<PAGE>
days after the Associate receives the distribution from the
qualified plan.
(b) If a conduit individual retirement account or
individual retirement annuity is used, no amount in the
individual retirement account or individual retirement annuity
may be attributable to a source other than a qualified total
distribution or a lump sum distribution from a qualified plan.
(c) A rollover to this Plan will not be allowed if the
Associate was a five percent (5%) owner, as defined in
Section 416(i)(1)(B) of the Code, at the time of the
distribution, as defined in Section 402(a)(5)(E)(ii) of the
Code. An Associate requesting that a rollover be made to this
Plan must furnish the Advisory Committee sufficient
information, including any information that the Advisory
Committee requests, to determine whether the rollover would
violate any provision of the Code or this Plan.
The Advisory Committee shall establish a fully vested
"Rollover Account" for each Participant electing to make a rollover
contribution, to which shall be credited such rollover contribution
and the Increment or Decrement. If a Rollover Account is for an
Associate who is not otherwise a Participant, the individual shall
be considered a Participant with respect to his or her Rollover
Account, but for no other Plan purpose until the Associate becomes
a Participant. Rollover Accounts shall be distributed at the same
time the Participant is otherwise entitled to receive a
distribution (no in-service distribution of Rollover Accounts shall
be made).
iv.7. Trustee-to-Trustee Transfers.
(a) If an Associate is or was previously a participant
of another plan qualified under Section 401(a) of the Code,
including another qualified plan of the Company, the Trustee
shall be authorized to accept the balance to the credit of
the Associate in the other qualified plan if transferred by
the trustee of such other plan upon the following conditions:
(i) the trustee of the other plan is
authorized to distribute the balance to the credit of the
Participant in the other plan; and
(ii) for record-keeping and accounting
purposes, the transferred account of the Participant shall be
separately accounted for; and
(iii) the balance to the credit of the
Participant transferred to this Plan shall not in any way reduce
any obligations of the Company under this Plan; and
<PAGE>
(iv) in no event will transfers be accepted
which are in the form a life annuity or are subject to Section 412
of the Code.
(b) The Advisory Committee may direct the Trustee to
transfer in a direct trustee-to-trustee transfer the balance
to the credit of a Participant to the trustee of another
qualified plan, if the trustee of the other plan is authorized
to accept such a transfer.
iv.8. Payment of Contributions. Tax Deferred
Contributions made by payroll deduction shall be paid to the
Trustee by the Company as soon as administratively possible, within
the meaning of ERISA. No Tax Deferred Contributions shall be paid
by the Company to the Trustee later than thirty (30) days after the
last day of the Plan Year. Company Contributions shall be paid by
the Company to the Trustee for any Plan Year no later than two and
one-half (21/2) months after the Adjustment Date, or such later
date as may be prescribed in regulations under Section 412(c)(1)
of the Code.
iv.9. Form of Contribution. The Company's Fail-
Safe, Matching and/or Profit Sharing Contributions for each Plan
Year shall be made in cash.
iv.10. Exclusive Benefit of Associates. All contributions
made pursuant to the Plan shall be held by the Trustee in
accordance with the terms of this Plan for the exclusive benefit
of those Associates who are Participants of the Plan, including
former Associates, and their Beneficiaries, and shall be applied
to provide benefits under the Plan and, consistent with the
requirements of ERISA, to pay the expenses of the administration
of the Plan and the Trust to the extent that such expenses are not
otherwise paid by the Company. At no time prior to the
satisfaction of all liabilities with respect to such Associates and
their Beneficiaries shall any part of the Trust Fund (other than
such part as may be required to pay administration expenses and
taxes) be used for, or diverted to, purposes other than for the
exclusive benefit of such Associates and their Beneficiaries.
However, without regard to the provisions of this Paragraph 4.10,
the following exceptions, which shall be interpreted consistent
with the requirements of ERISA and the Code, shall apply:
(a) Because all contributions under the Plan are
conditioned on the qualification of the Plan under Sections
401(a) and 401(k) of the Code and are further conditioned on
the requalification of the Plan as amended, provided the
amendment is submitted to the Internal Revenue Service within
one year of its adoption, if the Plan does not so qualify or
requalify, the Trustee, upon written request of the Company,
shall return to the Company the amount of the Company
Contributions and any Increment or Decrement thereon within
<PAGE>
one (1) calendar year after the date that qualification or
requalification of the Plan is denied;
(b) Because all contributions are conditioned upon the
deductibility of the contributions under Section 404 of the
Code, then, to the extent a deduction is disallowed, the
Trustee, upon written request of the Company, shall return the
contribution (to the extent disallowed) and any Increment or
Decrement thereon to the Company within one (1) year after
the date the deduction is disallowed; and
(c) If a contribution or any portion thereof is made by
the Company because of a mistake of fact, as determined by the
Advisory Committee, the Trustee, upon written request of the
Company, shall return the contribution to the Company without
interest or other increment. The return of all or the
applicable portion of the contribution shall be made not later
than one (1) year after said contribution is made or after it
finally shall be determined that it was made because of a
mistake of fact, as the case may be. The amount to be
returned shall reflect Trust net losses, if any, following
said contribution, and shall be limited to the extent
necessary to avoid a reduction of the Account Balance of any
Participant to an amount smaller than what the Account Balance
would have been if such contribution (to the extent made by
mistake of fact or otherwise determined to be nondeductible)
had not been made.
4.11 Impact of Plan Merger. Applications for
determinations as to the tax-qualified status of the Rose's Stores,
Inc. Profit Sharing Plan and the Rose's Stores, Inc. Variable
Investment Plan are currently pending with the Internal Revenue
Service. To the extent the Internal Revenue Service requires
amendments to either or both of the merged plans as part of the
determination letter process and it is necessary to reflect such
amendments in this Plan in order to preserve the tax-qualified
status of this Plan, adoption of the amendments to the merged plans
shall be deemed to constitute amendments to this Plan.
<PAGE>
ARTICLE v
Allocations and Limitations on Allocations
v.1. Establishment of Accounts. The Advisory Committee
shall establish and maintain for purposes of administering the Plan
separate accounts for the various types of contributions made to
the Plan. The Accounts will be in the name of each Participant and
separate records shall be kept as to all transactions affecting the
respective accounts. The Increment or Decrement attributable to
the contributions and withdrawals therefrom shall be credited or
debited respectively from each Account. The respective accounts
need not be segregated and held by the Trustee as a separate fund
but may be held as a commingled Trust Fund together with the other
funds of the Plan. The Advisory Committee, in its discretion and
consistent with the requirements of ERISA, may charge any Account
for part or all of its proportionate part, according to its value,
of the expenses incurred in investing the Trust Fund and in the
administration of the Plan. Each Participant's Account shall
consist of his or her Deferred Income Account, Company Contribution
Account, Rollover Account, and Transfer Account, as follows:
(a) The amount of Tax Deferred Contributions, as
determined pursuant to Paragraph 4.2, and Fail-Safe
Contributions as determined pursuant to Paragraph 4.3, shall
be allocated as of the Valuation Date on which the Company
deposits such Tax Deferred Contributions in trust, or as soon
as administratively possible thereafter, to the Deferred
Income Account, and shall be fully vested at all times, and
credited with the Increment or Decrement thereon.
(b) The amount of Company Contributions, as determined
pursuant to Paragraphs 4.4 and 4.5 shall be allocated as of
the Adjustment Date, unless otherwise provided, to the Company
Contribution Account, and shall be credited with the Increment
or Decrement thereon. Company Contributions shall be
respectively allocated as follows:
(i) The Matching Contribution made on behalf
of each Contribution Participant for a Plan Year as determined
pursuant to Paragraph 4.4 shall be allocated as of the Adjustment
Date to the Contribution Participant's Company Contribution Account
and shall be credited with the Increment or Decrement thereon.
Matching Contributions shall vest in accordance with the applicable
vesting schedule set forth in Paragraph 7.2.
(ii) The amount of Profit Sharing Contributions
as determined pursuant to Paragraph 4.5 shall be allocated as of
the Adjustment Date to the Company Contribution Accounts of
Contribution Participants based on the ratio that each Contribution
Participant's Compensation bears to the aggregate Compensation of
all Contribution Participants and shall be credited with the
<PAGE>
Increment or Decrement thereon. For the Plan Year in which an
Associate becomes a Participant, the Participant's Compensation
shall be calculated from the Participant's Entry Date for this
purpose. Profit Sharing Contributions shall vest in accordance
with the applicable vesting schedule set forth in Paragraph 7.2.
As stated above, Matching Contributions and Profit
Sharing Contributions for a Plan Year shall be allocated only
to "Contribution Participants," which term is defined in
Paragraph 1.22 as a Participant (i) who is an Associate on the
last day of the relevant Plan Year and who completed at least
one thousand (1000) Hours of Service during the Plan Year, or
(ii) who ceased to be an Associate during the Plan Year on
account of Retirement, death or a Company Store Closing
(within the meaning of Paragraph 7.2(c)).
Notwithstanding anything herein to the contrary, if the
Plan fails to meet the requirements of Sections 401(a)(26),
410(b)(1) or 410(b)(2)(A)(i) of the Code and the Regulations
thereunder because Company Contributions made in accordance
with Paragraphs 5.1(b)(i) and (ii) above have not been
allocated to a sufficient number or percentage of Participants
for a Plan Year, then each Participant, other than those
Participants who terminate employment during the Plan Year
prior to completion of at least 501 Hours of Service, shall
be entitled to receive an allocation of such Company
Contributions for that Plan Year to the extent necessary to
satisfy the requirements of the Code.
Nothing in this Section shall permit the reduction of a
Participant's Account Balance. Therefore any amounts that
have previously been allocated to Participants may not be
reallocated to satisfy these requirements. In such event,
the Company shall make an additional contribution equal to
the amount such affected Participants would have received had
they been included in the allocations, even if it exceeds the
amount which would be deductible under
Code Section 404. Any adjustment to the allocations pursuant
to this Paragraph 5.1(b) shall be considered a retroactive
amendment adopted by the last day of the Plan Year.
(c) The amount of Rollovers made by a Participant, as
determined by Paragraph 4.6, shall be allocated as of each
Valuation Date to the "Rollover Account." These amounts shall
be fully vested at all times and shall be credited with the
Increment or Decrement thereon.
(d) The amount of Transfers to the Plan as determined
pursuant to Paragraphs 4.7, other than any transfers incident
to the merger of the Rose's Stores, Inc. Profit Sharing Plan
with and into the Rose's Stores, Inc. Variable Investment Plan
<PAGE>
effective July 1, 1995, shall be allocated as of each
Valuation Date to the "Transfer Account," and shall be
credited with the Increment or Decrement thereon.
(e) The Participant's account balance under the Rose's
Stores, Inc. Profit Sharing Plan immediately prior to the
merger of such plan with this Plan effective July 1, 1995,
shall be allocated to the Participant's Company Contribution
Account as of July 1, 1995.
v.2. Account Allocations. The Increment or Decrement
for each of the above Accounts shall be allocated in the following
manner:
(a) The Increment or Decrement of the Investment Fund
shall be determined by the Trustee as of the Valuation Date
as follows: (i) the fair market value of the Investment Fund
on the current Valuation Date, minus (ii) the fair market
value of the Investment Fund on the preceding Valuation Date,
minus (iii) all contributions paid to the Investment Fund from
the preceding valuation Date to the current Valuation Date,
plus (vi) all benefit payments made from the preceding
Valuation Date through the current Valuation Date.
(b) The Increment or Decrement of the Investment Fund
for the period as so determined shall then be allocated as of
the Valuation Date for such period in the proportion that each
Participant's Account Balance in the Investment Fund as of the
preceding Valuation Date (less any benefit payments or
withdrawals made since such Valuation Date) bears to the total
account balances in the Investment Fund of all Participants
as of the preceding Valuation Date (less any benefit payments
or withdrawals made since such Valuation Date).
(c) The Trustee shall adjust each Participant's Account
on each Valuation Date to reflect the effect of contributions
and the effect of any income received or accrued, realized and
unrealized profits and losses, expenses and all other
transactions of the preceding period. These adjustments shall
be reflected in a statement prepared as of the Valuation Date
and furnished to each Participant by the Advisory Committee.
(d) The determination of the Trustee as to the
proportion of any contribution, or net increase or decrease
in the value of an Investment Fund to be allocated among the
Participants shall be conclusive.
(e) An Account shall share in an Investment Fund's
Increment or Decrement only to the extent the Account is
invested in the Investment Fund. If the Company Stock Fund
is accounted for under the special rules set forth in
Paragraph 2.17, only the Cash Accounts within such Fund shall
<PAGE>
be revalued under this Paragraph, as more fully provided in
Paragraph 2.17.
v.3. No Interest in Specific Assets. The fact that an
allocation shall be made and credited to the Account of a
Participant shall not vest in such Participant any right, title,
or interest in any specific assets except at the time or times,
and upon the terms and conditions expressly set forth in the Plan.
v.4. Forfeitures. Prior to being allocated to the
Accounts of Participants in accordance with Paragraph 4.5, the
amount of forfeitures shall first be used to reinstate the
nonvested Account Balance of Participants who have returned to
employment or have been located after a forfeiture of their Account
and who are entitled to reinstatement of their Account pursuant to
Paragraphs 7.3 or 7.9.
If a Participant is entitled to have his or her nonvested
Account Balance reestablished, then at any given time, the vested
interest in such reestablished account shall be determined in
accordance with the following formula:
X = P [AB + (RxD)] - (RxD)
For purposes of the formula, P is the vested percentage at the time
of the subsequent termination; AB is the total of the Account
Balances at that time; D is the amount of the vested Account
Balance previously distributed; and R is the ratio of the Account
Balance at the time of the subsequent termination to the Account
Balance remaining after the previous distribution.
The amount required to make any reinstatement under Paragraphs
7.3 or 7.9 shall be provided first from the forfeitures which occur
during the Plan Year in which such reinstatement is required to be
made. If the amount of reinstatements exceeds this amount, then,
consistent with the requirements of ERISA and the Code, the
reinstatement shall be provided from among the following sources
as the Advisory Committee shall determine in its discretion, using
uniform principles consistently applied in a nondiscriminatory
manner:
(a) Profit Sharing Contributions for the Plan Year in
which the reinstatement is required.
(b) The net appreciation of the value of the Trust Fund
for the Plan Year in which the reinstatement is required.
(c) An additional contribution from the Company.
v.5. Maximum Company Contributions. Notwithstanding any
other provisions of the Plan, no annual contribution of the Company
to the Trust shall exceed the lesser of the following amounts: (i)
<PAGE>
the greater of an amount equal to the maximum deduction allowable
to the Company in such Taxable Year for Federal income tax purposes
pursuant to Section 404 of the Code or such maximum amount plus an
amount in excess of such deductible amount if the excess was
contributed pursuant to Paragraph 5.1(b); or (ii) the maximum
amount permitted to be contributed pursuant to the provisions of
Section 415 of the Code. For purposes of applying the limitations
of Section 415 of the Code, this Paragraph 5.5 and Paragraphs 5.6,
5.7, 5.8 and 5.9 herein, the Company and each entity that would
constitute an Affiliated Company if the phrase "more than 50%" were
substituted for the phrase "more than 80%" each place that it
appears in Section 1563(a)(1) of the Code shall be considered a
single company.
v.6. Determination of Maximum Annual Addition.
(a) The Maximum Annual Additions credited to a
Participant's account for any Limitation Year shall not exceed
the lesser of (i) the Defined Contribution Dollar Limitation
as defined in Paragraph 1.25 of the Plan, or (ii) twenty-five
percent (25%) of the Participant's compensation as defined by
Section 415(c)(3) of the Code for such Limitation Year. The
compensation limitation referred to in (ii) above shall not
apply to any contribution for medical benefits after
separation from service, within the meaning of Section 401(h)
or 419A(f)(2) of the Code, which is otherwise treated as an
Annual Addition; or any amount treated as an Annual Addition
under Section 415(l)(1) or Section 419A(d)(2) of the Code.
(b) For purposes of applying the limitations of this
Paragraph 5.6, "compensation" shall be defined as provided in
Treasury Regulations Section 1.415-2(d) and shall include
(1) the Associate's wages, salaries and fees for professional
services and other amounts received (without regard to whether
or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Company
to the extent that the amounts are includable in the
Associate's gross income (including but not limited to,
commissions paid salesman, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, and reimbursements
or other expense allowances under a nonaccountable plan (as
described in Section 1.62-2(c) of the Code), and excluding the
following: (a) contributions made by the Company to a plan
of deferred compensation to the extent that, before the
application of the Section 415 of the Code limitations to that
plan, the contributions are not includable in the gross income
of the Associate for the taxable year in which contributed;
(b) Company contributions made on behalf of an Associate to
a simplified employee pension plan described in Section 408(k)
of the Code; (c) any distributions from a plan of deferred
compensation; (2) amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or
<PAGE>
property) held by the Associate either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture; (d) amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock
option; and (e) other amounts which received special tax
benefits, or contributions made by the Company (whether or not
under a salary reduction agreement) towards the purchase of
an annuity contract described in Section 402(b) of the Code
(whether or not the contributions are actually excludable from
the gross income of the Associate).
(c) Prior to the determination of a Participant's actual
Code Section 415(c)(3) compensation for a Limitation Year, the
Maximum Annual Addition may be determined on the basis of the
Participant's estimated annual compensation for such
Limitation Year. Such estimated annual compensation shall be
determined on a reasonable basis and shall be uniformly
determined for all Participants similarly situated. Any
Company Contribution (including allocation of forfeitures)
based on estimated annual compensation shall be reduced by
any excess amounts carried over from prior years.
(d) As soon as is administratively feasible after the
end of the Limitation Year, the Maximum Annual Addition for
such Limitation Year shall be determined on the basis of the
Participant's actual Code Section 415(c)(3) compensation for
such Limitation Year.
(e) If the Participant does not participate in, and has
never participated in another qualified plan maintained by the
Company or a welfare benefit fund, as defined in
Section 419(e) of the Code, maintained by the Company, or an
individual medical account, as defined in Section 415(l)(2)
of the Code, maintained by the Company, which provides an
Annual Addition as defined in Paragraph 1.9, the amount of
Annual Additions which may be credited to the Participant's
Account for any Limitation Year will not exceed the lesser of
the maximum permissible amount or any other limitation
contained in this Plan. If the Company Contribution that
would otherwise be contributed or allocated to the
Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the maximum permissible amount, the
amount contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal the
maximum permissible amount, as provided in Paragraph 5.7.
v.7. Rules Relating to Company Which Maintains One or
More Qualified Defined Contribution Plans in Addition to this Plan.
(a) This Paragraph 5.7 applies if, in addition to this
Plan, the Participant is covered under another qualified
defined contribution plan maintained by the Company, a welfare
<PAGE>
benefit fund, as defined in Section 419(e) of the Code,
maintained by the Company, or an individual medical account,
as defined in Section 415(1)(2) of the Code, maintained by the
Company, which provides an Annual Addition as defined in
Paragraph 1.9, during any Limitation Year. The Annual
Additions which may be credited to a Participant's Account
under this Plan for any such Limitation Year will not exceed
the maximum permissible amount reduced by the Annual Additions
credited to a Participant's Account under the other plans and
welfare benefit funds for the same Limitation Year. To the
extent allowed by the Code, if the Annual Additions with
respect to the Participant under such other defined
contribution plans and welfare benefit funds in the aggregate
when added to the contributions under this Plan are equal to
or greater than the maximum permissible amount, the Annual
Additions with respect to the other plans and funds shall be
first reduced, and only if the Annual Additions with respect
to the other plans and funds cannot be reduced shall any
amount contributed or allocated to the Participant's Account
under this Plan for the Limitation Year be reduced.
(b) Prior to determining the Participant's actual
Compensation for the Limitation Year, the Company may
determine the maximum permissible amount for a Participant in
the manner described in subparagraph 5.6(b).
(c) As soon as is administratively feasible after the
end of the Limitation Year, the maximum permissible amount
for the Limitation Year will be determined on the basis of
the Participant's actual Compensation for the Limitation Year.
(d) If, pursuant to subparagraph 5.7(c) above, or as a
result of the allocation of forfeitures, a Participant's
Annual Additions under this Plan and such other plans would
result in an excess amount for a Limitation Year, the excess
amount will be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a
welfare benefit fund or individual medical account will be
deemed to have been allocated first regardless of the actual
date of allocation.
(e) If an excess amount was allocated to a Participant
on an allocation date of this Plan which coincides with an
allocation date of another plan, the excess amount attributed
to this Plan will be the product of,
(i) the total excess amount allocated as of
such date, times
(ii) the ratio of the Annual Additions
allocated to the Participant for the Limitation Year as of such
date under this Plan to the total Annual Additions allocated to the
<PAGE>
Participant for the Limitation Year as of such date under this and
all the other qualified defined contribution plans.
(f) Any excess amount attributed to this Plan will be
disposed in the manner described in Paragraph 5.9.
v.8. Aggregation With Defined Benefit Plan. The
following limitations shall apply if the Company maintains one or
more qualified defined benefit plans in addition to this Plan:
(a) If the Company shall maintain one or more defined
benefit plans (as defined in Section 414(j) of the Code) in
addition to this Plan, then in addition to the limitations
contained in this Article V, the sum of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction on
behalf of each Plan Participant for any Plan Year, computed
as of the close of the Plan Year, shall not exceed 1.0.
(b) Anything in this Paragraph 5.8 to the contrary
notwithstanding, if for any Plan Limitation Year the sum of
the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction, as determined by using the formulae hereinafter
set forth in subparagraph 5.8(d) shall exceed 1.0, the
numerator of the Defined Contribution Plan Fraction shall be
decreased to the extent necessary to reduce the sum of said
fractions to 1.0.
(c) If a Participant's allocation must be reduced by
reason of this Paragraph 5.8, the reduction shall be made in
this Plan and shall be effected in the manner provided for by
Paragraph 5.9.
(d) For purposes of determining the limitations of
subparagraph 5.8(a), the following terms shall have the
meanings hereinafter set forth:
(i) The "Defined Benefit Plan Fraction" is a
fraction, the numerator of which is the Participant's projected
normal retirement benefits under all of the defined benefit plans
(whether or not terminated) maintained by the Company payable in
the form of a straight life annuity and expressed as an annual
benefit (determined as of the close of the Plan Year), and the
denominator of which is the lesser of:
(A) The product of 1.25 times the dollar
limitation determined for the Limitation Year under
Sections 415(b) and (d) of the Code for such Plan
Year, or
(B) The product of 1.4 times 100% of the
Participant's Compensation for the three (3)
consecutive Limitation Years during which he or she
<PAGE>
had the greatest compensation from the Company while
an active Participant in the Plan, including any
adjustments under Section 415(b) of the Code.
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first Limitation
Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Company which
were in existence on May 6, 1986, the denominator of this
fraction will not be less than one hundred twenty-five
percent (125%) of the sum of the annual benefits under
such plans which the Participant had accrued as of the
close of the last Limitation Year beginning before
January 1, 1987, disregarding any changes in the terms
and conditions of the plans after May 5, 1986. The
preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the
requirements of Section 415 for all Limitation Years
beginning before January 1, 1987.
(ii) The "Defined Contribution Plan Fraction"
is a fraction, the numerator of which is the sum of the Annual
Additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Company for the current and all prior Limitation Years (including
the Annual Additions attributable to the Participant's
nondeductible Associate Contributions to all defined benefit plans,
whether or not terminated, maintained by the Company, and the
Annual Additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(1)(2) of the Code, maintained
by the Company), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior Limitation
Years of Service with the Company (regardless of whether a defined
contribution plan was maintained by the Company). The maximum
aggregate amount in any Limitation Year is the lesser of the
following amounts determined for such Plan Year and for each prior
Year of Service with the Company:
(A) The product of 1.25 times the dollar
limitation in effect under Sections 415(b) and (d)
of the Code in effect under Section 415(c)(1)(A) of
the Code for such Plan Year, or
(B) Thirty-five percent (35%) of the
Participant's Compensation for such Plan Year.
The Annual Addition for any Limitation Year
beginning before January 1, 1987, shall not be recomputed
to treat all Associate contributions as Annual Additions.
<PAGE>
If the Associate was a Participant as of the end of
the first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined
contribution plans maintained by the Company which were
in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction
and the defined benefit fraction would otherwise exceed
1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of (1) the excess of the
sum of the fractions over 1.0 times (2) the denominator
of this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated
using the fractions as they would be computed as of the
end of the last Limitation year beginning before
January 1, 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 5, 1986,
but using the Section 415 limitation applicable to the
first Limitation Year beginning on or after January 1,
1987.
(e) For purposes of applying the limitations of
subparagraph 5.8(a) all defined benefit plans of the Company
shall be considered as a single plan, and all defined
contribution plans of the Company shall be considered as a
single plan. If the Company maintains more than one defined
benefit plan, Section 415(b)(1)(B) of the Code (which limits
the annual benefit to which a Participant is entitled to 100%
of his average compensation for his highest three years) shall
be applied separately with respect to each such plan; but in
applying such limitation to the aggregate of such defined
benefit plans, the highest three years of compensation taken
into account shall be the period of consecutive Limitation
Years (not to exceed three) during which an individual had
the greatest aggregate compensation from the Company.
v.9. Excess Annual Additions. If, as a result of the
allocation of forfeitures, a reasonable error in estimating the
annual Compensation of a Participant, or a reasonable error in
determining the amount of elective deferrals (within the meaning
of Section 402(g)(3) of the Code) that may be made with respect to
any individual within the limits of Section 415 of the Code, the
Annual Additions with respect to any Participant for any Plan Year
would exceed the limitations set forth in the preceding paragraphs
of this Article V, the excess amount shall be treated as follows:
(a) First, Tax Deferred Contributions, if any, made by
the Participant which would constitute an Annual Addition for
the Plan Year shall be returned to the Participant.
(b) Second, any remaining excess shall be reallocated
to the other Participants proportionately on the basis that
Profit Sharing Contributions are allocated to the Participants
under the provisions of subparagraph 5.1(b)(ii) to the extent
<PAGE>
that such allocations do not cause the Annual Additions of any
other Participant's account to exceed the limitations of this
Article V.
(c) To the extent that such allocation or reallocation
of excess amounts causes the limitations of this Article V to
be exceeded with respect to all Plan Participants for the Plan
Year, then such amounts will be held unallocated in a
Limitation Suspense Account, to be allocated in the next Plan
Year(s) prior to the allocation of any amount that would
constitute an Annual Addition, on the basis that Profit
Sharing Contributions would be allocated pursuant to sub-
paragraph 5.1(b)(ii) of the Plan.
(d) If a Limitation Suspense Account is in existence at
any time during a Limitation Year pursuant to this
subparagraph 5.9(d), it will not participate in the allocation
of the Trust's investment gains and losses. If a Limitation
Suspense Account is in existence at any time during a
particular Limitation Year, all amounts in the Limitation
Suspense Account must be allocated and reallocated to
Participants' Accounts before any Company Contributions may
be made to the Plan for that Limitation Year. Excess amounts
may not be distributed to Participants or former Participants.
Upon termination of the Plan, any amount remaining in the
Limitation Suspense Account which is unallocable shall revert
to the Company.
(e) Notwithstanding anything in this Paragraph 5.9 to
the contrary, the Advisory Committee may distribute such
excess amounts which are attributable to a Participant's Tax
Deferred Contributions, provided such distribution will reduce
the excess amounts in the Participant's account. Any amounts
so distributed shall be disregarded for purposes of
determining the maximum deferral under Section 402(g), as well
as for purposes of the Average Deferral Percentage test, as
described in Paragraph 5.10.
v.10. Limitations on Tax Deferred Contributions.
(a) Tax Deferred contributions made to the Plan must
satisfy one of the two following tests:
(i) The Average Actual Deferral Percentage
for Eligible Participants who are Highly Compensated Associates for
the Plan Year shall not exceed the Average Actual Deferral
Percentage for Eligible Participants who are Nonhighly Compensated
Associates for the Plan Year multiplied by 1.25; or
(ii) The Average Actual Deferral Percentage
for Eligible Participants who are Highly Compensated Associates for
the Plan Year shall not exceed the Average Actual Deferral
<PAGE>
Percentage for Eligible Participants who are Nonhighly Compensated
Associates for the Plan Year multiplied by two (2), provided that
the Average Actual Deferral Percentage for Eligible Participants
who are Highly Compensated Associates does not exceed the Average
Actual Deferral Percentage for Eligible Participant who are
Nonhighly Compensated Associates by more than two (2) percentage
points, or such lesser amount as the Secretary of the Treasury
shall prescribe to prevent the multiple use of this alternative
limitation with respect to any Highly Compensated Associates.
(b) For purposes of this Paragraph 5.10, the following
definitions shall apply:
(i) "Average Actual Deferral Percentage" shall
mean the average (expressed as a percentage calculated to the
nearest one-hundredth of one percent) of the Actual Deferral
Percentages of the Eligible Participants in a group.
(ii) "Actual Deferral Percentage" shall mean
the ratio (expressed as a percentage calculated to the nearest
one-hundredth of one percent), of the sum of the Tax Deferred
Contributions under the Plan on behalf of the Eligible Participant
for the Plan Year, to the Eligible Participant's Total Compensation
for the Plan Year; and the determination and treatment of the
Actual Deferral Percentage shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
(iii) "Eligible Participant" shall mean any
Associate of the Company who is otherwise authorized under the
terms of the Plan to have Tax Deferred Contributions allocated to
his or her Account for the Plan Year.
(iv) "Highly Compensated Associate" includes
highly compensated active Associates and highly compensated former
Associates.
A highly compensated active Associate includes any
Associate who performs service for the Company during
the determination year and who, during the look-back
year: (a) received compensation from the Company in
excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) received compensation from the Company
in excess of $50,000 (as adjusted pursuant to
Section 415(d) of the Code) and was a member of the
top-paid group for such year; or (c) was an officer of
the Company and received compensation during such year
that is greater than fifty percent (50%) of the dollar
limitation in effect under Section 415(b)(1)(A) of the
Code. The term "Highly Compensated Associate" also
includes: (a) Associates who are both described in the
preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the
<PAGE>
Associate is one of the one hundred (100) Associates who
received the most compensation from the Company during
the determination year; and (b) Associates who are five
percent (5%) owners at any time during the look-back year
or determination year.
If no officer has satisfied the compensation
requirement of (c) above during either a determination
year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Associate.
For this purpose, the determination year shall be the
Plan Year. The look-back year shall be the twelve (12)
month period immediately preceding the determination
year.
A highly compensated former Associate includes any
Associate who separated from service (or was deemed to
have separated) prior to the determination year, performs
no service for the Company during the determination year,
and was a highly compensated active Associate for either
the separation year or any determination year ending on
or after the Associate's fifty-fifth (55th) birthday.
If an Associate is, during a determination year or
look-back year, a Family Member as defined in Paragraph
1.32, of either a five percent (5%) owner who is an
active or former Associate or a Highly Compensated
Associate who is one of the ten (10) most Highly
Compensated Associates ranked on the basis of
compensation paid by the Company during such year, then
the Family Member and the five percent (5%) owner or
top-ten Highly Compensated Associate shall be aggregated.
In such case, the Family Member and five percent (5%)
owner or top-ten Highly Compensated Associate shall be
treated as a single Associate receiving compensation and
Plan contributions or benefits equal to the sum of such
compensation and contributions or benefits of the Family
Member and five percent (5%) owner or top-ten Highly
Compensated Associate.
The determination of who is a Highly Compensated
Associate, including the determinations of the number
and identity of Associates in the top-paid group, the
top one hundred (100) Associates, the number of
Associates treated as officers and the compensation that
is considered, will be made in accordance with
Section 414(q) of the Code and the regulations
thereunder.
(v) "Family Member" shall mean an Associate
of the Company who is a spouse, lineal ascendant or descendant, or
a spouse of a lineal ascendant or descendant of a Highly
Compensated Associate who is a five percent (5%) owner of the
<PAGE>
Company, or one of the top ten (10) Highly Compensated Associate
by pay.
(vi) "Nonhighly Compensated Associate" shall
mean an Associate of the Company who is neither a Highly
Compensated Associate, nor a Family Member.
(vii) "Total Compensation" shall mean
compensation as defined by Section 415(c)(3) of the Code, without
regard to the reductions in compensation provided by Sections 125,
402(e)(3), 402(h)(1)(B) and 403(b) of the Code, which for Plan
Years beginning on or after January 1, 1989, and before January 1,
1994, shall not exceed $200,000 (as adjusted pursuant to
Section 401(a)(17) of the Code) and for Plan Years beginning on or
after January 1, 1994, shall not exceed $150,000 (as adjusted
pursuant to Section 401(a)(17) of the Code).
v.11. Special Rules for Tax Deferred Contributions.
(a) For purposes of Paragraph 5.10 and 5.12 , the Actual
Deferral Percentage for any Eligible Participant who is a
Highly Compensated Associate for the Plan Year, and who is
eligible to make Tax Deferred Contributions, under two (2) or
more plans described in Section 401(k) of the Code, that are
maintained by Affiliated Companies, shall be determined as if
any such Tax Deferred Contributions were made under a single
plan. If a Highly Compensated Associate participates in two
or more cash or deferred arrangements that have different Plan
Years, all cash or deferred arrangements ending with or within
the same calendar year shall be treated as a single
arrangement.
(b) If this Plan satisfies the requirements of
Sections 401(k), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this Paragraph
shall be applied by determining the Actual Deferral Percentage
of Associates as if all such plans were a single plan.
(c) The requirements of Paragraphs 5.10 and 5.12 must
be satisfied by aggregating Companies which are Affiliated
Companies as defined in Paragraph 1.5, and Companies which
are not Affiliated Companies may not be so aggregated.
(d) For purposes of determining the Actual Deferral
Percentage of an Eligible Participant who is a five percent
(5%) owner or one of the ten (10) most Highly Compensated
Associates, the Tax Deferred Contributions and Total
Compensation of such Participant shall include the Tax
Deferred Contributions and Total Compensation for the Plan
Year of Family Members, and such Family Members shall be
disregarded in determining the Actual Deferral Percentage for
<PAGE>
Eligible Participants who are Nonhighly Compensated Associates
and for Eligible Participants who are Highly Compensated
Associates.
(e) Pursuant to Section 414(q)(9) of the Code, a former
Associate or an Associate who performs only a de minimis
amount of service will be considered a Highly Compensated
Associate if such Associate or former Associate was a Highly
Compensated Associate when such individual separated from
service, or anytime after the individual attained age 55.
v.12. Excess Tax Deferred Contributions.
(a) If the Average Actual Deferral Percentage for
Eligible Participants who are Highly Compensated Associates
does not meet any of the tests set forth in Paragraph 5.10,
the Advisory Committee, as soon as administratively possible
after the end of the Plan Year, shall determine the amount of
Tax Deferred Contributions which would have to be returned to
the Highly Compensated Associates in order to meet the
appropriate test set forth in Paragraph 5.10. Such amount as
defined in Section 401(k)(8)(B) of the Code shall be known as
"Excess Contributions." The Excess Contributions shall be
returned to Highly Compensated Associates beginning with the
Highly Compensated Associates who have the largest Actual
Deferral Percentages. If two (2) or more Highly Compensated
Associates have identical Actual Deferral Percentages, their
Actual Deferral Percentages shall be reduced until they equal
those of the next lowest Highly Compensated Associates, and
then shall be reduced pro rata until the test set forth in
Paragraph 5.10 is satisfied. If the Highly Compensated
Associate is part of an aggregated family group, the Excess
Contributions assigned to the family unit shall be allocated
among the Family Members in proportion to the Elective
Contribution of each Family Member that is combined to
determine the Actual Deferral Percentage. The Advisory
Committee shall direct the Trustee to return such Excess
Contributions to the Highly Compensated Associates as soon as
possible after such determination is made and if at all
possible within two and one-half (21/2) months after the end
of the Plan Year (so as to avoid a 10% excise tax on the
Company), and in any event before the end of the Plan Year
following the year of the Excess Contributions. The Excess
Contributions to be distributed to the Participants shall be
adjusted for income or loss for the Plan Year pursuant to a
reasonable method provided by the Advisory Committee, but no
income or loss shall be allocated for the 'gap period' between
the end of the Plan Year and the date of distribution.
(b) The determination and treatment of any Excess
Contributions shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
<PAGE>
v.13. Limitations on Aggregate Contributions.
(a) Matching Contributions made to the Plan must satisfy
one of the two following tests:
(i) The Average Aggregate Contribution
Percentage for Eligible Participants who are Highly Compensated
Associates for the Plan Year shall not exceed the Average Aggregate
Contribution Percentage for Eligible Participants who are Nonhighly
Compensated Associates for the Plan Year multiplied by 1.25; or
(ii) The Average Aggregate Contribution
Percentage for Eligible Participants who are Highly Compensated
Associates for the Plan Year shall not exceed the Average Aggregate
Contribution Percentage for Eligible Participants who are Nonhighly
Compensated Associates for the Plan Year multiplied by two (2),
provided that the Average Aggregate Contribution Percentage for
Eligible Participants who are Highly Compensated Associates does
not exceed the Average Aggregate Contribution Percentage for
Eligible Participants who are Nonhighly Compensated Associates by
more than two (2) percentage points, or such lesser amount as the
Secretary of the Treasury shall prescribe to prevent the multiple
use of this alternative limitation with respect to any Highly
Compensated Associates.
(b) For purposes of this Paragraph 5.13, the following
definitions shall apply:
(i) "Aggregate Limit" shall mean the sum of
(A) 125% of the greater of the Actual Deferral Percentage of the
Nonhighly Compensated Associates under the Plan subject to Section
401(m) of the Code for the Plan Year beginning with or within the
Plan Year of the cash or deferred arrangement; and (B) the lesser
of 200% or two plus the lesser of such Actual Deferral Percentage
or Actual Contribution Percentage. "Lesser" is substituted for
"greater" in (A) above, and "greater" is substituted for "lesser"
after "two plus the" in (B) above if it would result in a larger
Aggregate Limit.
(ii) "Average Aggregate Contribution
Percentage" shall mean the average (expressed as a percentage
calculated to the nearest one-hundredth of one percent) of the
Aggregate Contribution Percentages of the Eligible Participants in
a group.
(iii) "Aggregate Contribution Percentage" shall
mean the ratio (expressed as a percentage calculated to the nearest
one-hundredth of one percent), of the Matching Contributions under
the Plan on behalf of the Eligible Participant for the Plan Year,
to the Eligible Participant's Total Compensation for the Plan Year;
and the determination and treatment of the Aggregate Contribution
<PAGE>
Percentage shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(iv) "Eligible Participant" shall mean any
Associate of the Company who is otherwise authorized under the
terms of the Plan to have Matching Contributions allocated to his
or her Account for the Plan Year.
(v) "Highly Compensated Associate" includes
highly compensated active Associates and highly compensated former
Associates.
A highly compensated active Associate includes any
Associate who performs service for the Company during
the determination year and who, during the look-back
year: (a) received compensation from the Company in
excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) received compensation from the Company
in excess of $50,000 (as adjusted pursuant to
Section 415(d) of the Code) and was a member of the top-
aid group for such year; or (c) was an officer of the
Company and received compensation during such year that
is greater than fifty percent (50%) of the dollar limita-
tion in effect under Section 415(b)(1)(A) of the Code.
The term "Highly Compensated Associate" also includes:
(a) Associates who are both described in the preceding
sentence if the term "determination year" is substituted
for the term "look-back year" and the Associate is one
of the one hundred (100) Associates who received the most
compensation from the Company during the determination
year; and (b) Associates who are five percent (5%) owners
at any time during the look-back year or determination
year.
If no officer has satisfied the compensation
requirement of (c) above during either a determination
year or look-back year, the highest paid officer for such
year shall be treated as a Highly Compensated Associate.
For this purpose, the determination year shall be the
Plan Year. The look-back year shall be the twelve (12)
month period immediately preceding the determination
year.
A highly compensated former Associate includes any
Associate who separated from service (or was deemed to
have separated) prior to the determination year, performs
no service for the Company during the determination year,
and was a highly compensated active Associate for either
the separation year or any determination year ending on
or after the Associate's fifty-fifth (55th) birthday.
<PAGE>
If an Associate is, during a determination year or
look-back year, a Family Member as defined in Paragraph
1.32, of either a five percent (5%) owner who is an
active or former Associate or a Highly Compensated
Associate who is one of the ten (10) most Highly
Compensated Associates ranked on the basis of
compensation paid by the Company during such year, then
the Family Member and the five percent (5%) owner or
top-ten Highly Compensated Associate shall be aggregated.
In such case, the Family Member and five percent (5%)
owner or top-ten Highly Compensated Associate shall be
treated as a single Associate receiving compensation and
Plan contributions or benefits equal to the sum of such
compensation and contributions or benefits of the Family
Member and five percent (5%) owner or top-ten Highly
Compensated Associate.
The determination of who is a Highly Compensated
Associate, including the determinations of the number
and identity of Associates in the top-paid group, the
top one hundred (100) Associates, the number of
Associates treated as officers and the compensation that
is considered, will be made in accordance with
Section 414(q) of the Code and the regulations
thereunder.
(vi) "Family Member" shall mean an Associate
of the Company who is a spouse, lineal ascendant or descendant, or
a spouse of a lineal ascendant or descendant of a Highly
Compensated Associate who is a five percent (5%) owner of the
Company, or one of the ten (10) most Highly Compensated Associates.
(vii) "Nonhighly Compensated Associate" shall
mean an Associate of the Company who is neither a Highly
Compensated Associate, nor a Family Member.
(viii) "Total Compensation" shall mean
compensation as defined by Section 415(c)(3) of the Code, without
regard to the reductions in compensation provided by Sections 125,
402(e)(3), 402(h)(1)(B) and 403(b) of the Code, which for Plan
Years beginning on or after January 1, 1989, and before January 1,
1994, shall not exceed $200,000 (as adjusted pursuant to
Section 401(a)(17) of the Code) and for Plan Years beginning on or
after January 1, 1994, shall not exceed $150,000 (as adjusted
pursuant to Section 401(a)(17) of the Code).
v.14. Special Rules for Aggregate Contributions.
(a) If one or more Highly Compensated Associates
participate in both a cash or deferred arrangement and a plan
subject to the Actual Contribution Percentage test maintained
by the Company and the sum of the Actual Deferral Percentage
and Actual Contribution Percentage of those Highly Compensated
Associates subject to either or both tests exceeds the
<PAGE>
Aggregate Limit, then the Actual Contribution Percentage of
those Highly Compensated Associates who also participate in
a cash or deferred arrangement will be reduced (beginning with
such Highly Compensated Associate whose Actual Contribution
Percentage is the highest) so that the limit is not exceeded.
The amount by which each Highly Compensated Associate's
Contribution Percentage Amounts is reduced shall be treated
as an Excess Aggregate Contribution. The Actual Deferral
Percentage and the Actual Contribution Percentage of the
Highly Compensated Associates are determined after any
corrections required to meet the Actual Deferral Percentage
and Actual Contribution Percentage tests. Multiple use does
not occur if either the Actual Deferral Percentage or Actual
Contribution Percentage of the Highly Compensated Associates
does not exceed 1.25 times the Actual Deferral Percentage and
Actual Contribution Percentage of the Nonhighly Compensated
Associates.
(b) For purposes of Paragraphs 5.13 and 5.15, the
Aggregate Contribution Percentage for any Eligible Participant
who is a Highly Compensated Associate for the Plan Year, and
who is eligible for Matching Contributions under this Plan,
and Matching Contributions or Voluntary Contributions under
another plan described in Section 401(k) of the Code, that are
maintained by Affiliated Companies, shall be determined as if
any such Matching Contributions and Voluntary Contributions
were made under a single plan. If a Highly Compensated
Associate participates in two or more cash or deferred
arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
(c) The requirements of Paragraphs 5.13 and 5.15 must
be satisfied by aggregating Companies which are Affiliated
Companies as defined in Paragraph 1.5, and Companies which
are not Affiliated Companies may not be so aggregated.
(d) For purposes of determining the Aggregate
Contribution Percentage of an Eligible Participant who is a
five percent (5%) owner or one of the ten (10) most Highly
Compensated Associates, the Matching Contributions and Total
Compensation of such Participant shall include the Matching
Contributions and Total Compensation for the Plan Year of
Family Members, and such Family Members shall be disregarded
in determining the Aggregate Contribution Percentage for
Eligible Participants who are Nonhighly Compensated Associates
and for Eligible Participants who are Highly Compensated
Associates.
(e) Pursuant to Section 414(q)(9) of the Code, a former
Associate, or an Associate who performs only a de minimis
amount of service will be considered a Highly Compensated
<PAGE>
Associate if such Associate or former Associate was a Highly
Compensated Associate when such individual separated from
service, or anytime after the individual attained age
fifty-five (55).
v.15. Excess Aggregate Contributions.
(a) If the Average Aggregate Contribution Percentage
for Eligible Participants who are Highly Compensated
Associates does not meet any of the tests set forth in
Paragraph 5.13, the Advisory Committee, as soon as
administratively possible after the end of the Plan Year,
shall determine the amount of Matching Contributions which
would have to be returned to the Highly Compensated Associates
in order to meet the appropriate test set forth in Paragraph
5.13. Such amount defined in Section 401(m)(6)(B) of the Code
shall be known as "Excess Aggregate Contributions." If the
limit is exceeded, the Matching Contributions, and after-tax
employee contributions, if any, including recharacterized
contributions, shall be reduced, beginning with the Highly
Compensated Associates who have the largest Aggregate
Contribution Percentage. If two or more Highly Compensated
Associates have identical Actual Contribution Percentages,
their Actual Contribution Percentages shall be reduced until
they equal those of the next lowest Highly Compensated
Associate, and then shall be pro rata reduced until the test
set forth in Paragraph 5.13 is satisfied. If the Highly
Compensated Associate is part of an aggregated family group,
the excess aggregate contributions assigned to the family unit
shall be allocated among the Family Members in proportion to
the contribution of each Family Member that is combined to
determine the Actual Contribution Percentage. Excess
Contributions and income allocable thereto shall be forfeited,
if otherwise forfeitable under the terms of the Plan, or if
not forfeited, distributed no later than the last day of the
Plan Year following the Plan Year in which Excess Aggregate
Contributions were made.
(b) The determination and treatment of any Excess
Aggregate Contributions shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
v.16. Excess Tax Deferred Contributions.
(a) Notwithstanding any other provision of the Plan,
Excess Tax Deferred Contributions, and income allocable
thereto shall be distributed no later than the April 15
following the calendar year for which Excess Tax Deferred
Contributions are claimed by a Participant.
(b) For purposes of this Paragraph 5.16, "Excess Tax
Deferred Contributions" shall mean the amount of Tax Deferred
<PAGE>
Contributions for a calendar year which the Participant
allocates to this Plan pursuant to the claims procedure of
subparagraph 5.16(c).
(c) The Participant's instruction shall be in writing;
shall be submitted to the Advisory Committee no later than
March 1 following the calendar year of the Excess Tax Deferred
Contributions; shall specify the Participant's Excess Tax
Deferred Contributions for the preceding calendar year; and
shall be accompanied by the Participant's written statement
that if such amounts are not distributed, such Excess Tax
Deferred Contributions when added to amounts deferred under
other plans or arrangements described in Sections 401(k),
408(k) or 403(b) of the Code, shall exceed the limit imposed
on the Participant by Section 402(g) of the Code for the year
in which the deferral occurred.
(d) No income shall be allocable to Excess Tax Deferred
Contributions provided that the Excess Tax Deferred Contribu-
tions are distributed prior to the Valuation Date of the Plan
Year following the Plan Year of the Excess Tax Deferred
Contributions.
(e) Amounts distributed under this Paragraph 5.16 shall
be treated as distributions from the Participant's Deferred
Income Account.
v.17. Deduction of Legal Expenses. On the Adjustment Date
or Valuation Date of the Plan Year in which a legal claim against
the Plan, Trustee, Advisory Committee or Company, pertaining to any
claim of interest in the assets of the Plan or the Trust Fund, is
disposed by final order of a court adversely to the claimant,
consistent with the requirements of ERISA, the Advisory Committee
shall direct the Trustee to debit the vested portion of the Account
of the claimant or the Account with respect to which the claim was
made, with all expenses including counsel fees actually paid by the
Plan or incurred by the Plan but not yet paid which were incurred
in the defense against the claim. The finality of any order and
the adversity of the order to the claimant shall be determined by
the Advisory Committee in accordance with the laws of the
jurisdiction in which said claim was litigated.
<PAGE>
ARTICLE vi
Trust Fund Valuation
vi.1. Valuation of Trust Fund.
(a) As of each Valuation Date (and before making any
distributions as of such date), the Trustee shall value the
entire Trust Fund. Earmarked investments described in
Paragraph 6.3 shall not be taken into account.
(b) The Trustee shall determine the fair market value
of Trust Fund assets in compliance with this Paragraph and
the principles of Section 3(26) of ERISA and regulations
issued pursuant thereto. Valuation shall be based upon
information reasonably available to the Trustee, including
data from, but not limited to, newspapers and financial
publications of general circulation, statistical and valuation
services, records of securities exchanges, appraisals by
qualified persons, transactions and bona-fide offers in assets
of the type in question and other information customarily used
in the valuation of property for purposes of ERISA and the
Code. Consistent with the requirements of ERISA, the Trustee
may elect to value any bank deposit, certificate of deposit,
bond, interest-bearing insurance contract, promissory note or
other evidence of indebtedness at its unpaid face value, with
interest accrued to the Valuation Date, if the obligation is
not in default. Consistent with the requirements of ERISA,
the value of any real property held in the Trust Fund,
determined as of the end of the fourth quarter of any Plan
Year, shall be considered to remain unchanged until the end
of the fourth quarter of the following Plan Year. In
determining the value of the Plan's investment in any
collective investment fund, separate account, partnership or
similar entity, the Trustee may (but need not) rely on the
most recent prior valuation of units or interests in the fund,
separate account, partnership or entity made by or on behalf
of the fund, separate account, partnership or entity. With
respect to securities for which there is a generally
recognized market, the published selling prices on or nearest
to such Valuation Date shall establish the fair market value
of such security. Fair market value so determined shall be
conclusive for all purposes of the Plan and Trust.
(c) Administrative expenses which are paid or payable
by the Plan, as determined by the Advisory Committee, shall
be accounted for in the manner specified by the Trustee. In
valuing the Trust Fund, the Trustee may elect to treat as a
Plan asset the unamortized amount of capitalized
administrative expenditures paid by the Plan.
<PAGE>
vi.2. Unallocated Contributions. Company
Contributions being held pending allocation shall share in any
Increment and Decrement to the extent specified by the Trustee.
vi.3. Special Rule for Earmarked Investments. The
Increment or Decrement on an investment earmarked to a
Participant's Account shall be credited to that Account. Earmarked
investments shall be ignored in establishing the value of Accounts
for purposes of allocating the Increment or Decrement under
Paragraph 5.2 and their value shall not be included in the Trust
Fund value determined under Paragraph 6.1. Investments earmarked
to Accounts are:
(a) Loans to Participants;
(b) Company securities allocated to a Participant's
Account under Paragraph 2.17; and
(c) Insurance contracts or policies purchased prior to
January 1, 1992.
<PAGE>
ARTICLE vii
Benefits
vii.1. Retirement. As of the Valuation Date
coinciding with or next following the Participant's Early
Retirement, Normal Retirement or Disability, his or her Account
shall be fully vested and nonforfeitable. Unless the Participant
shall request that his distribution be delayed in accordance with
rules and procedures adopted by the Advisory Committee, benefits
shall be paid pursuant to Paragraph 7.5 within sixty (60) days of
such Valuation Date or as soon as administratively possible
thereafter.
Pending complete distribution the Account of a Retired
Participant, the Participant (or Beneficiary) shall have the same
investment direction rights as any other Participant, except to
the extent the Advisory Committee elects to restrict or expand such
rights for persons awaiting distribution.
vii.2. Severance Benefits.
(a) If a Participant ceases to be an Associate of
the Company for reasons other than Retirement or death,
(hereinafter referred to as a "Terminated Participant"), the vested
Account Balance of the Terminated Participant, determined as of the
Valuation Date coinciding with or next following termination of
employment, shall be paid pursuant to Paragraph 7.5. Unless the
Participant shall request that his distribution be delayed in
accordance with rules and procedures adopted by the Advisory
Committee, the vested Account Balance shall be paid within sixty
(60) days of such Valuation Date or as soon as administratively
possible thereafter, at which time the nonvested Account Balance
of the Terminated Participant shall be forfeited. For purposes of
this Paragraph, if the value of a Terminated Participant's vested
Account Balance is zero, the Terminated Participant shall be deemed
to have received a distribution of such vested Account Balance as
of the date the Terminated Participant terminated employment.
(b) A Terminated Participant shall receive the
following benefit:
(i) One hundred percent (100%) of the total
amount credited to the Terminated Participant's Deferred Income
Account, Rollover Account and Transfer Account;
(ii) A percentage of the Terminated
Participant's Company Contribution Account determined on the basis
of the number of Years of Service with the Company then completed
and the following vesting schedule:
<PAGE>
Years of Service Percent Vested
Less than 1 year 0%
At least 1 year, but less than 2 years 20%
At least 2 years, but less than 3 years 40%
At least 3 years, but less than 4 years 60%
At least 4 years, but less than 5 years 80%
At least 5 years or more 100%
(c) Subject to the satisfaction of the nondiscrimination
and other requirements of the Code, if a Participant's employment
is terminated by reason of a Company Store Closing, a Permanent
Elimination of Position or the Plan is terminated pursuant to
Article X, such Participant's Account Balance shall become fully
vested and nonforfeitable. The determination as to whether
termination was on account of a Company Store Closing or Permanent
Elimination of Position shall be made by the Advisory Committee in
a uniform manner. The designation of a Company Store Closing or
a Permanent Elimination of Position shall initially be made by the
Department of Human Resources. The Department of Human Resources
may designate different dates as of which a Company Store Closing
exists for different personnel classifications. In order to be
considered terminated on account of a Company Store Closing, the
Participant must remain in the employment of the Company until, but
not later than, the last day of store operation. The last day of
store operation shall be determined by the Department of Human
Resources and may be different for different personnel
classifications. A Permanent Elimination of Position as designated
by the Department of Human Resources shall mean the permanent
elimination of a position in the Company either on account of a
substantial reduction in workforce of the Company or on account of
other facts and circumstances in which the elimination of the
position is determined by the Department of Human Resources to be
a termination comparable to a termination on account of a Company
Store Closing.
(d) A Participant whose termination of employment is on
account of a Company Store Closing shall have his or her fully
vested and nonforfeitable Account Balance paid in the same manner
and at the same time as is available to a Participant who
terminated employment on account of an event described in Paragraph
7.1.
(e) If a Participant's employment is terminated by
reason of a Permanent Elimination of Position, such Participant's
fully vested and nonforfeitable Account Balance shall be paid in
the same manner and at the same time as is available to a
Terminated Participant, as defined in this Paragraph 7.2.
vii.3. Rehired Participants. The following rules
apply to Terminated Participants who are rehired:
<PAGE>
(a) If a Terminated Participant who has received a lump
sum distribution of his or her vested Account Balance is
subsequently reemployed by the Company after having incurred
a Break in Service, occurring prior to January 1, 1985, or
five (5) consecutive Breaks in Service, occurring on or after
January 1, 1985, then the Company shall disregard all service
performed by such Associate for which he or she received such
lump sum distribution. In the case of a Participant who has
five (5) or more consecutive Breaks in Service, the
Participant's pre-break service will count in vesting of the
Company-derived accrued benefit only if either:
(i) such Participant has any nonforfeitable
interest in the accrued benefit attributable to Company
contributions at the time of separation from service; or
(ii) upon returning to service, the number of
consecutive Breaks in Service is less than the number of pre-break
Years of Service.
If the Terminated Participant returns to the employment of
the Company and repays the amount of the lump sum distribution
prior to incurring five (5) consecutive Breaks in Service, or
within five (5) years of his or her return to employment,
whichever shall occur first, his or her nonvested Account
Balance shall be reestablished by the Company and the
Participant's pre-break service with respect to which he or
she received the distribution shall be added to his or her
post-break service for purposes of determining his or her
vested Account Balance. In no circumstances will vesting or
eligibility years be eliminated solely on account of a lump
sum distribution of the vested Account Balance of a
Participant. If a Terminating Participant is deemed to
receive a distribution pursuant to subparagraph 7.2(a) above,
and the Terminating Participant resumes employment covered
under this Plan before incurring five (5) consecutive Breaks
in Service, upon the reemployment of such Terminating
Participant, his or her nonvested Account Balance will be
restored to the amount on the date of such deemed
distribution.
(b) If a Terminated Participant, who did not receive a
lump sum distribution returns to the employment of the Company
before incurring five (5) consecutive Breaks in Service after
incurring a forfeiture of his or her nonvested Account
Balance, then the nonvested portion of his or her Account
Balance shall be reinstated pursuant to Paragraph 5.4.
(c) If a Terminated Participant whose vested Account
Balance was not distributed in a lump sum shall return to the
employ of the Company prior to incurring a Break in Service
occurring prior to January 1, 1985, or five (5) consecutive
<PAGE>
Breaks in Service, occurring on or after January 1, 1985, then
the Participant's vested percentage in his or her pre-break
Account Balance shall be increased as a result of his or her
post-break service, and only a single Account need be
maintained. If such Terminated Participant shall return to
the employ of the Company after incurring a Break in Service
or five (5) consecutive Breaks in Service, as the case may be,
then the Participant's vested percentage in his or her
pre-break Account Balance shall not be increased as a result
of his or her post-break service, and separate Accounts shall
be maintained for the Participant's pre-break and post-break
Account Balance. Both Accounts will share in the earnings and
losses of the fund.
(d) If a Terminated Participant is rehired by the
Company, he or she must notify the Department of Human
Resources that he or she was previously a Participant of the
Plan within 30 days of his or her reemployment. Provided the
Department of Human Resources is timely notified, a Terminated
Participant who has a vested right in his or her Account
Balance who is rehired by the Company or a Terminated
Participant who does not have a vested right in his or her
Account Balance but whose prior service cannot be disregarded
under Section 410(a)(5) of the Code and who is rehired by the
Company after the Participant incurs a Break in Service, will
become a Participant of the Plan retroactively as of his or
her date of reemployment by the Company upon the completion
of a Year of Service measured as of his or her reemployment
commencement date.
(e) For purposes of participation and vesting, if an
Associate or Participant does not have any vested right in
his or her Account Balance derived from Company Contributions,
Years of Service completed by the Participant or Associate
prior to incurring a Break in Service shall be disregarded if
the number of consecutive Breaks in Service equals or exceeds
the greater of five (5) years or the aggregate number of Years
of Service the Participant or Associate completed prior to
incurring a Break in Service; however, the aggregate number
of Years of Service completed before such Break in Service
shall not be deemed to include any Years of Service not
required to be taken into account by reason of any prior
Breaks in Service.
vii.4. Death.
(a) If a Participant shall die while an Associate, his
or her Account as of the Valuation Date coinciding with or
next following the date of death shall be fully vested and
nonforfeitable and shall be paid as soon as reasonably
practicable following such Valuation Date. If a Participant
<PAGE>
shall die after he or she terminates employment, then his or
her vested Account Balance as of the Valuation Date coinciding
with or next following the date of death shall be paid as soon
as reasonably practicable following such Valuation Date,
unless the Beneficiary shall elect to delay his distribution
in accordance with rules and procedures adopted by the
Advisory Committee.
(b) Subject to Paragraph 7.4(c), death benefits shall
be paid in whichever of the following methods as shall be
selected by the Participant or his or her Beneficiary:
(i) lump sum:
(ii) quarterly installments in amounts estimated
to pay the entire Account Balance including estimated
earnings thereon, over a period not to exceed 5 years;
(iii) quarterly installments in amounts estimated
to pay the entire Account Balance, including estimated
earnings thereon, over a period not to exceed the life
expectancy of the surviving spouse of the Associate; or
(iv) any combination of the above, including
methods adopted by the Advisory Committee for
accelerating periodic distributions.
(c) At any time and from time to time, each Participant
shall have the right to designate the Beneficiary to receive
his or her death benefit and to revoke any such designation,
provided, that if the Participant shall be married, the
Participant may name someone other than his or her spouse as
the recipient of his or her death benefit only with the
consent of his or her spouse. The spousal consent must be in
writing, must be in the form of a waiver which must
acknowledge the effect of the waiver, must be either witnessed
by a Plan representative or acknowledged before a Notary
Public, and must state the specific non-spouse Beneficiary who
will receive the Participant's death benefit. If a
Participant shall die without designating a Beneficiary or if
such designation is not effective for any reason, as
determined by the Advisory Committee, then the benefit shall
be paid in the following priority: (i) first, to the
Participant's surviving spouse; (ii) second, to the
Participant's estate (provided that the benefits shall be paid
to the third priority class if the death benefits would
otherwise escheat to any state) ; (iii) to the Contribution
Participants in the Plan Year in which the death benefits
would otherwise be distributed. Participants of a priority
class shall cease to be entitled to benefits on the Advisory
Committee's determination that no members of the class exist,
<PAGE>
or the failure of the Advisory Committee to locate any members
of the class after making a reasonable effort.
Notwithstanding the above, if the designated beneficiary
of the deceased Participant cannot be located, such
Participant has no surviving spouse (or the surviving spouse
cannot be located) and no estate has been opened on behalf of
the deceased Participant, the Advisory Committee, in its
discretion, may make a distribution of the Participant's
Account Balance to the surviving family members of such
deceased Participant, if any, rather than making the
distribution pursuant to subsection (iii) above. Any decision
by the Advisory Committee to distribute assets to the
surviving family members of a deceased Participant shall be
made in a uniform and nondiscriminatory manner.
(d) The Advisory Committee shall notify the Trustee of
the death of a Participant or former Participant and shall
furnish the Trustee with an authenticated copy of the
Beneficiary designation for such deceased Participant. The
Trustee shall rely upon such designation for the purpose of
distributing death benefits hereunder.
(e) The Advisory Committee may require such proof of
death and such evidence of the right of any person to receive
distributions of the benefits of the deceased Participant as
it may deem advisable.
(f) Benefit payments shall be made to the deceased
Participant's Beneficiary, provided that if a Beneficiary
shall die before receiving payment of the entire balance of
the deceased Participant's Account, the then remaining balance
shall be paid to the estate of the deceased Beneficiary as of
the Valuation Date coinciding with or following the death of
the Beneficiary provided the Advisory Committee received
notification thereof prior to such date, but no earlier than
the Valuation Date as of which the Participant's termination
of employment occurred. If the Advisory Committee is unable
to locate a duly qualified personal representative of the
estate of a deceased Beneficiary after making reasonable
efforts to do so for one year, the undistributed remainder of
the account shall be distributed to Contribution Participants
in accordance with the priority classes of subparagraph 7.4(c)
above.
vii.5. Payment of Benefits.
(a) The benefits provided by Paragraphs 7.1 and 7.2
above shall be paid in cash or in kind pursuant to the method
listed below as may be elected by the Participant:
<PAGE>
(i) By payment of the Participant's vested Account
Balance in quarterly installments (including interest on the
undistributed balance) of at least three hundred dollars
($300) per quarter over a period not to exceed the life
expectancy of the Participant or the joint life expectancy of
the Participant and his or her Beneficiary, provided, however,
the period over which benefits are paid shall be limited to
a period which does not violate the incidental death benefit
rule; or
(ii) By payment of the Participant's vested Account
Balance in a lump sum, including methods adopted by the
Advisory Committee for accelerating periodic distributions.
(b) If a Participant elects an installment payment, such
Participant may request in writing that the installment
payments be increased, or that the remaining Account Balance
be paid in a lump sum, and such change shall be effective as
soon as reasonably practicable following the Valuation Date
on which the necessary documentation, as determined by the
Advisory Committee, is received by the Trustee. Any payment
made in kind shall have the same value on the date payment is
made by the Trustee as the amount of cash that otherwise would
have been payable on such date.
(c) If a Participant receives a distribution on account
of Retirement, death or a Company Store Closing as of a
Valuation Date prior to the Adjustment Date of the Plan Year
in which such event occurred and the Participant becomes
entitled to an allocation of Profit Sharing Contributions for
such Plan Year, the Participant shall receive a subsequent
distribution of such allocation as soon as reasonably
practicable following the date on which such allocation is
made.
(d) The Advisory Committee shall notify the Trustee in
writing of the termination of employment of any Participant,
and the reason employment terminated. The Trustee shall rely
upon such notice for the purpose of paying retirement benefits
hereunder.
(e) Notwithstanding anything herein to the contrary,
any distribution to a Participant who has a benefit that
exceeds $3,500, or has ever exceeded $3,500 at the time of
any prior distribution, shall require such Participant's
consent if such distribution commences prior to the
Participant's attainment of Normal Retirement Age. The
Participant must be informed of his right to defer receipt of
the distribution, subject to the requirements of Paragraph
7.6. Notice of the rights specified under this Paragraph
7.5(e) shall be provided no less than thirty (30) days and no
more than ninety (90) days prior to the first day on which all
<PAGE>
events have occurred which entitle the Participant to a
distribution. Written consent of the Participant to the
distribution must be obtained within the ninety (90) day
period ending on the first day on which all events have
occurred which entitle the Participant to the benefit.
Notwithstanding the foregoing, a distribution may
commence before the end of the thirty (30) day period
described above, provided that:
(i) the Advisory Committee clearly informs the
Participant that he or she has a right to a period of at
least thirty (30) days after receiving the notice to
consider the decision of whether or not to elect a
distribution (or, if applicable, the form of
distribution); and
(ii) the Participant, after receiving the notice,
affirmatively elects a distribution.
vii.6. Limitation on the Distribution of Benefits.
The lump sum payment of benefits from the Plan must be made no
later than the first day of April of the calendar year immediately
following the later of the year in which the Participant attains
the age of seventy and one-half (701/2), or retires, or, in the
case of a Participant who is a 5% Owner as defined in subparagraph
13.2(i)(i), payment shall be made no later than the first day of
April of the calendar year immediately following the calendar year
in which the Participant attains the age of seventy and one-half
(701/2). For Plan Years beginning on or after January 1, 1989,
lump sum payments for all Participants must be made no later than
the first day of April of the calendar year immediately following
the calendar year in which each Participant attains the age of
seventy and one-half (701/2).
vii.7. Commencement of Distribution of Benefits.
Subject to the provisions of Paragraph 7.6, distribution to any
Participant of the benefits provided pursuant to the provisions of
this Plan must commence within sixty (60) days after the close of
the Taxable Year in which the latest of the following events shall
occur:
(a) The Participant attains Normal Retirement Age;
(b) The tenth (10th) anniversary of such Participant's
commencement of participation in the Plan occurs; or
(c) The actual termination of the Participant's
employment with the Company.
The purpose of this Paragraph is to provide a limitation,
subject to the incidental death benefit rules, on the latest date
<PAGE>
upon which payment of benefits under the Plan can commence. This
Paragraph shall not preempt other provisions of the Plan which
require or permit payment of benefits at an earlier date.
vii.8. Restriction on Methods of Distribution.
Notwithstanding any other provision of the Plan, distribution of
benefits payable to Participants pursuant to the Plan shall be
subject to the following restrictions:
(a) If distributions to a Participant have commenced in
installment payments and such Participant dies before his or
her entire Account Balance has been distributed, then the
remaining portion of his or her Account Balance must be
distributed to the Participant's Beneficiary or Designated
Beneficiary using a method of distribution at least as rapid
as the method being used at the date of the Participant's
death.
(b) If a Participant dies before the distribution of
his or her Account Balance begins, distribution of the
Participant's entire Account Balance shall be completed by
December 31 of the calendar year containing the fifth (5th)
anniversary of the Participant's death.
(c) For purposes of this Paragraph 7.8, if the surviving
spouse dies after the Participant, but before payments to such
spouse begin, the provisions of this Paragraph 7.8, shall be
applied as if the surviving spouse were the Participant.
(d) For purposes of this Paragraph 7.8, any amount paid
to a child of the Participant will be treated as if it had
been paid to the surviving spouse if the amount becomes
payable to the surviving spouse when the child reaches the
age of majority.
(e) For the purposes of this Paragraph 7.8, distribution
of a Participant's Account Balance is considered to begin on
the Participant's Required Beginning Date (or, if subparagraph
(c) above is applicable, the date distribution is required to
begin to the surviving spouse pursuant to subparagraph (b)
above).
(f) Subject to the spouse's right of consent afforded
under the Plan, the restrictions imposed by this Paragraph
shall not apply if a Participant has, prior to January 1,
1984, made a written designation to have his or her benefits
paid in an alternative method acceptable under Section 401(a)
as in effect prior to the enactment of the Tax Equity and
Fiscal Responsibility Act of 1982.
vii.9. Procedure for the Payment of Benefits. Payment
of all benefits under the Plan shall be subject to written
<PAGE>
application by the Participant or Beneficiary, as the case may be,
submitted in such form as the Advisory Committee may direct from
time to time.
When a Participant who has terminated employment is entitled
to distribution of his or her benefits, the Advisory Committee
shall deliver or cause to be delivered to the Participant, directed
to his last known address, a notice informing the Participant as
to his rights with respect to his benefits. If the Participant is
not located at his last known address and his or her whereabouts
are unknown to the Advisory Committee at the expiration of six (6)
months, the Advisory Committee may treat the Participant's
termination benefit or the portion thereof remaining undistributed
as a forfeiture and allocate it in accordance with Paragraph 5.4;
provided, however, that such forfeited amount shall be reinstated
if the Participant or his Beneficiary subsequently makes a claim
for such benefit.
If any amount becomes payable under the Plan to a minor or a
person who, in the sole judgment of the Advisory Committee, is
considered to be unable to give a valid receipt for the payment by
reason of physical or mental condition, the Advisory Committee may
direct that such payment be made to any person found by the
Advisory Committee, in its sole judgment, to have assumed the care
of the person in question. Any payment made pursuant to such
determination shall constitute a full release and discharge of the
Trustee, the Advisory Committee and the Company and their officers,
directors, Associates, agents and representatives.
If the payment of benefits from the Plan shall be contested
by any person, the costs incurred by the Plan in settling any
dispute concerning the proper party to receive payment shall be
paid from the Account in question, unless otherwise paid by the
Trustee or Company.
vii.10. Direct Rollovers. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a distributee's
election under this Section, a distributee may elect, at the time
and in the manner prescribed by the Plan Administrator, to have any
portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct
rollover.
(a) An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of
the distributee, except that an eligible rollover distribution does
not include any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee
or the joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such
<PAGE>
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(b) An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code an
individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or
a qualified trust described in section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(c) A distributee includes an Associate or former
Associate. In addition, the Associate's or former Associate's
surviving spouse and the Associate's or former Associate's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(d) A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
<PAGE>
ARTICLE viii
Powers, Duties and Responsibilities of Trustee
viii.1. Trust. All assets of the Plan shall be held
in a Trust forming part of this Plan, which shall be administered
as a fund to provide for the payment of benefits as provided in the
Plan to the Participants or their successors in interest, out of
the income and principal of the Trust. The assets of the Plan
shall never inure to the benefit of the Company, except that
payment of taxes and reasonable administrative expenses may be paid
from the Trust as provided by the terms of the Plan. To the
maximum extent allowed by ERISA, such reasonable administrative
expenses shall specifically include all expenses that not do
otherwise constitute settlor functions as determined by the
Advisory Committee as well as any taxes levied or assessed upon
the Trust, as provided in Paragraph 8.7.
viii.2. Trust Fund. The Trustee, who shall be
appointed by the Company, shall hold the funds received by it from
the Company subject to the terms of this Plan, and upon the uses
and trusts, and for the purposes herein set forth. The funds
subject to the provisions of this Plan shall include, but shall not
be limited to, all monies, properties, securities, investments,
notes, bonds, mortgages, debentures, shares of stock, accounts,
and evidences of indebtedness of whatsoever kind or nature at any
time or from time to time acquired or held by the Trustee pursuant
to the terms of this Plan; however, the Trustee shall be
responsible only for such funds as shall actually be received by
it as Trustee hereunder.
viii.3. Powers of Trustee. The Trustee shall have, and
is hereby vested with, the following specific powers and authority
in addition to, but not in any limitation of, the general powers
and authority vested in Trustees by law, all of which shall be
exercised by the Trustee without prior application to or
confirmation by any court:
(a) To receive and accept in kind and to hold as an
investment, as long as shall seem expedient and advantageous,
any and all property which may come to it as Trustee
hereunder.
(b) To hold legal title to and have exclusive and sole
control and responsibility for the safekeeping of Trust
assets.
(c) To receive any contributions paid to it in cash or
other property and shall retain, manage, administer, hold,
and distribute the same, together with the income therefrom,
in accordance with the terms and provisions of the Plan. No
part of the corpus or income of the Trust Fund shall be used
<PAGE>
for any purpose except for the exclusive benefit of Associates
of the Company or their surviving spouses or other
Beneficiaries, and payment of the expenses of administration
of the Plan and Trust.
(d) To hold investments in the name of a nominee, or
the Trustee, without disclosing the fiduciary office, to vote
stock either in person or by proxy, to participate in
corporate reorganizations, and to exercise any and all other
rights arising out of any Trust investment.
(e) To do any and all acts and to make, execute, and
deliver, as Trustee, any and all instruments in writing
necessary or proper for the effective exercise of any of the
Trustee's powers as stated herein, or otherwise necessary to
accomplish the purposes of this Trust, as it shall determine
in its discretion.
(f) To make payments out of the Trust Fund to such
persons, in such manner, in such amounts, and for such
purposes as the Plan specifies and pursuant to the written
directions of the Advisory Committee. The Trustee shall
furnish to recipients of Plan benefits factual information
(but not advice) pertinent to the determination of the
taxability of such benefits, and shall provide such factual
information to governmental authorities as required by law.
The Trustee shall serve as "payor," and be solely responsible
for the withholding of income taxes on distributions from the
Trust Fund, to the extent withholding is required by law. The
Company in its sole discretion, without terminating the Trust,
may direct the Trustee at any time to transfer to the trustee
of another trust qualified under Section 401(a) of the Code,
and exempt from tax under Section 501(a) of the Code, such
cash and securities as the Company may direct, or the Accounts
of such Participants as the Company may specify.
(g) To employ such brokers, banks, custodians,
attorneys, accountants, other agents or appraisers; and to
delegate to them such of its duties, rights, and powers
(including, among others, the right to vote shares of stock
held by it), as it shall determine to be prudent and advisable
and for such periods as it shall deem proper.
(h) To keep accurate and detailed accounts of all
investments, receipts, disbursements, and other transactions
hereunder, including the basis of Company Securities. The
Trustee shall render to the Advisory Committee a complete
accounting of the Trust Fund each fiscal year of the Trust,
within ninety (90) days following the close of the fiscal year
of the Trust, and provide the Advisory Committee with an
annual statement for each Participant of his or her Account.
The Trustee shall submit such interim valuations, reports and
<PAGE>
other information to the Advisory Committee as it may
reasonably require. Except as otherwise provided by the
Advisory Committee all valuations of the Trust by the Trustee
shall show the carrying and market values of all Trust assets.
All accounts, books, and records relating to such transactions
shall be open to inspection and audit at all reasonable times
by the Company, Advisory Committee or any other person
designated by the Company.
(i) To receive and record Beneficiary designations made
by Participants.
(j) To enter into, modify, renew and terminate annuity
contracts of deposit administration or immediate participation
or other group or individual type, or (to the extent provided
for in the Plan) life insurance contracts, with one or more
insurance companies; to pay or deposit all or any part of the
Trust Fund under such contracts; to provide in any such
contract for the investment in separate accounts of all or any
part of funds so deposited with the insurance company; to
purchase annuities for retired Participants, including
variable annuities (to the extent provided for in the Plan);
to exercise and claim all rights and benefits granted to the
contract holder by any such contracts; to transfer assets to,
or receive assets from other trusts or insurance arrangements
maintained to fund the Plan, as directed by the Advisory
Committee.
(k) To invest, reinvest or hold "qualifying employer
securities" and "qualifying employer real property," as such
terms are defined in Section 407(d) of ERISA to the fullest
extent permissible under ERISA with respect to the Plan.
(l) Except as otherwise instructed by the Advisory
Committee and consistent with the requirements of ERISA, to
invest funds pending other investment directions in (i) any
short term investment fund; or (ii) any type of
interest-bearing "deposit," within the meaning of Section
408(b)(4) of ERISA, with any bank or savings and loan
association (including any such facility of the Trustee or its
affiliates provided that at least a reasonable rate of
interest is paid on the deposit.
viii.4. Exercise of Powers. The powers granted to the
Trustee pursuant to Paragraph 8.3 shall be exercised by the Trustee
in its discretion insofar as such exercise does not contravene any
written direction from the Company, or the policy for the funding
of this Plan to be developed under Paragraph 2.5. The decision of
the Trustee in matters within its jurisdiction shall be final,
binding, and conclusive upon the Company, and upon each Associate,
Participant, Beneficiary, and every other person interested or
concerned. Provided, however, in exercising such powers and
<PAGE>
authority, the Trustee shall not lend any funds of the Trust to the
Company under any circumstances, and shall not pay any compensation
to the Company in excess of reasonable compensation for services
actually rendered by the Company to the Trust.
viii.5. Accounting. Within ninety (90) days following
each Adjustment Date, and within sixty (60) days after the removal
or resignation of the Trustee as provided in Paragraph 8.6, the
Trustee shall file with the Company a written account setting forth
all investments, receipts, disbursements, and other transactions
effected by it during such fiscal year or during the period from
the close of the last fiscal year to the date of such removal or
resignation, and setting forth the value of the Trust Fund and the
amount in each Participant's Account as of the close of business
on each Adjustment Date or date of removal or resignation.
viii.6. Removal, Resignation, and Appointment of
Successor Trustee. The Trustee shall have the right to resign at
any time by giving at least ninety (90) days written notice thereof
to the Company; and the Trustee may be removed, with or without
cause, at any time by the Company by giving sixty (60) days written
notice of such removal to the Trustee; provided, however, the
Company and the Trustee shall each have the right to waive the
ninety (90) day period in writing within sixty (60) days following
the effective date of the removal or resignation of the Trustee,
the Trustee shall file with the Advisory Committee a written
account setting forth all transactions effected by it subsequent
to the end of the period covered by its last previous account and
listing the assets of the Trust. Upon a vacancy resulting from the
resignation or removal of a Trustee or from any other cause, the
Company shall designate a successor Trustee. The designation of
any successor Trustee shall be made by an instrument in writing
executed by the Company, and a copy thereof shall be delivered to
the former Trustee. A successor Trustee so designated shall have
all the rights, powers, privileges, liabilities, and duties of the
former Trustee and may be an individual or individuals, a corporate
fiduciary or fiduciaries, or a combination of an individual and
corporate fiduciary. The appointment and qualification of a
successor Trustee to whom the Trust Funds may be transferred are
conditions which must be fulfilled before the resignation or
removal of a Trustee shall be effective. Upon acceptance of such
appointment by the successor Trustee, the former Trustee shall
assign, transfer, and pay over to such successor Trustee the funds
and properties then constituting the Trust; however, the former
Trustee is authorized to reserve such sum of money as to whatever
it may seem advisable for payment of its fees and expenses in
connection with the settlement of its account or otherwise. Within
six (6) months after the successor Trustee takes office, the former
Trustee shall account for the reserve, including all disbursements
therefrom, and any balance of such reserve remaining after the
payment of such fees and expenses shall be paid over to the
successor Trustee.
<PAGE>
viii.7. Payment of Compensation, Expenses and Taxes.
The Trustee shall be paid such reasonable compensation as shall
from time to time be agreed upon in writing by the Company and the
Trustee. In addition, the Trustee shall be reimbursed for any
reasonable expenses, including reasonable counsel fees, incurred
by it in the administration of the Trust; provided, however, no
Trustee who already receives full-time pay from the Company shall
receive compensation from the Trust. Consistent with the
requirements of ERISA as determined by the Advisory Committee, all
taxes of any and all kinds whatsoever that may be levied or
assessed under existing or future laws upon, or in respect of, the
Trust or the income thereof shall be paid from the Trust.
viii.8. Limitations on Responsibility.
(a) The Trustee shall have no powers, duties or
responsibilities with regard to the administration of the Plan
nor shall it have any power, duty or responsibility to
determine the rights or benefits of any person having or
claiming an interest under the Plan or Trust.
(b) The Trustee shall have no liability for the adequacy
of contributions to the Plan and no responsibility to enforce
the payment of such contributions.
viii.9. Non-Corporate Trustee. The Company may appoint
one or more non-corporate entities or individuals to serve singly
or jointly as Trustee. The term "Trustee," as used in the Plan
shall refer collectively to all such persons serving as Trustee.
If there are three or more persons then serving as Trustee, such
persons shall act by majority vote; if there are two persons
serving as Trustee, such persons shall act by unanimous vote. A
single person acting as Trustee shall act singly as Trustee. Each
person acting as Trustee shall be separately subject to the
removal, resignation and replacement provisions of this Article.
If fewer than all persons serving as Trustee resign or are removed,
the "successor Trustee" referred to in Paragraph 8.6 shall be the
remaining persons serving as Trustee. Persons acting as the
Trustee may delegate ministerial responsibilities (such as the
responsibility for effecting investment transactions or making
disbursements) to other persons.
viii.10. Merger of Trustee. If any corporate Trustee
hereunder shall at any time merge or consolidate with, or shall
sell or transfer substantially all of its assets and business to
another corporation, the corporation resulting from such merger or
consolidation or the corporation into which it is converted or to
which such sale or transfer shall be made, shall thereupon become
the Trustee under this Trust with the same effect as though
originally so named.
<PAGE>
ARTICLE ix
Allocation of Fiduciary Responsibilities
ix.1. Allocation of Responsibility Among Fiduciaries
for Plan and Trust Administration. The Fiduciaries shall have only
those specific powers, duties, responsibilities and obligations
that are specifically given them under this Plan. Reference to a
particular responsibility herein shall in no way be construed as
evidence that such responsibility is a fiduciary function. In
general:
(a) The Company shall have the responsibility for:
(i) Making the contributions provided for
under Article IV.
(ii) Appointing and removing the Trustee or
its successor.
(iii) Appointing the members of the Advisory
Committee.
(iv) Amending or terminating the Plan.
(b) The C.E.O. shall have the responsibility for:
(i) Furnishing the Advisory Committee complete
and correct information concerning its Associates as is necessary
to the proper administration of this Plan.
(ii) Determining the amount, if any, of
Fail-Safe Contributions or Company Contributions.
(c) The Advisory Committee shall have the responsibility
for:
(i) The Administration of the Plan under this
instrument.
(ii) Those duties set forth in Article II.
(d) The Trustee shall have the responsibility for:
(i) The administration of the Trust Fund,
including valuation of Trust assets, and allocations of
contributions, forfeitures and Trust assets and maintenance of
Accounts.
(ii) Custody and safekeeping of all Trust
assets.
<PAGE>
(iii) Paying and disbursing benefits upon
direction of the Advisory Committee.
(iv) Those duties set forth in Article VI and
VIII.
ix.2. Fiduciary Warranty. Each Fiduciary warrants
that any directions given, information furnished, or action taken
by it shall be in accordance with the provisions of the Plan,
authorizing or providing for such direction, information or action.
ix.3. Reliance on Other Fiduciaries. Each Fiduciary
may rely upon any such direction, information or action of another
Fiduciary as being proper under the Plan, and is not required under
the Plan to inquire into the propriety of any such direction,
information or action.
ix.4. No Responsibility for Others. It is intended
under this Plan that each Fiduciary shall be responsible for the
proper exercise of its own powers, duties, responsibilities and
obligations under the Plan and shall not be responsible for any
act or failure to act of another Fiduciary. No Fiduciary
guarantees the Trust Fund in any manner against investment loss or
depreciation in asset value.
ix.5. Bond. A fidelity bond or other surety shall
be required of the Company, as well as any other person to whom
fiduciary duties have been delegated or will be delegated, and such
bond will be of the type required by the terms and provisions of
ERISA and the regulations issued pursuant thereto, and shall be in
a minimum amount of the lesser of $1,000 or ten percent (10%) of
the assets in the Plan, and, consistent with the requirements of
ERISA as determined by the Advisory Committee, the payment of
premiums for such bond or other surety shall be paid by the Trustee
from the Trust Fund to the extent not paid by the Company.
ix.6. Fiduciary Responsibility. All fiduciaries (as
defined in ERISA) with respect to the Plan shall discharge their
fiduciary duties as such solely in the interest of the Participants
and their successors in interest. In this connection, all
fiduciaries shall act:
(a) for the exclusive purposes of providing benefits to
Participants and their successors in interest and defraying
reasonable expenses of administering the Plan, including the
Trust, which is a part of the Plan;
(b) with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use
in the conduct of an enterprise of like character and with
like aims; and
<PAGE>
(c) in accordance with the Plan and Trust agreement,
except to the extent such document may be inconsistent with
ERISA.
ix.7. Indemnification. To the extent permitted by
applicable law, the Company shall indemnify and save harmless the
Board of Directors, the C.E.O., the Advisory Committee, any
Associate serving as Trustee and any other fiduciary who is an
Associate against any and all expenses, liabilities and claims
(including legal fees incurred to defend against such liabilities
and claims) arising out of their discharge in good faith of
responsibilities under or incident to the Plan. Expenses and
liabilities arising out of willful misconduct shall not be covered
under this indemnity. This indemnity shall not preclude
indemnities as may be available under insurance purchased by the
Company or provided by the Company under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, as such
indemnities are permitted under applicable law, and to the extent
any such insurance shall cover an act or omission otherwise subject
to this indemnity, then this indemnify shall be of no force or
effect to the extent of such insurance coverage. Payments with
respect to any indemnity and payment of expenses or fees shall be
made only from assets of the Company and shall not be made directly
or indirectly from Trust assets.
<PAGE>
ARTICLE x
Amendment, Termination, Merger, Consolidation
or Transfer of Assets
x.1. Amendment of Plan and Trust. The Company shall have the
right to amend the Plan and the Trust, in whole or in part, at any
time and from time to time. All amendments shall be adopted in
writing by resolution of the Board of Directors. However, no
change may be made in the Plan and Trust which shall vest in the
Company, directly or indirectly, any interest, ownership, or
control of any of the present or subsequent funds of the Trust, or
in any of the present or subsequent funds set aside for
Participants pursuant to the Plan; and no amendment shall increase
or change the duties or the liabilities of the Trustee without the
Trustee's specific consent thereto in writing. No portion of the
funds of the Trust shall, by reason of any amendment, be used for,
or diverted to, purposes other than for the exclusive benefit of
Participants and their Beneficiaries. Nor shall any amendment
reduce or restrict, either directly or indirectly, the vested
benefit provided any Participant prior to such amendment, except
as otherwise permitted by the Code or the regulations thereunder.
Subject to the foregoing limitations, the Company shall have the
power to amend the Plan and Trust in any manner which is deemed to
be desirable, including, but not by way of limitation, the right
to increase or diminish contributions hereunder to change or modify
the method of allocation of such contributions, to change any
provisions relating to the administration of the Plan, and to
change any provisions relating to the distribution or payment, or
both, of any of the assets of the Trust.
x.2. Limitation on Amendment.
(a) Notwithstanding the above, a Plan amendment which
has the effect of either eliminating or reducing an early
retirement benefit or a retirement-type subsidy, or
eliminating an optional form of benefit, shall be treated as
reducing an accrued benefit, and shall be disallowed (subject
to exceptions to be promulgated in Treasury Regulations).
With respect to an early retirement benefit or a
retirement-type subsidy, the above protection of accrued
benefits will apply only with respect to a Participant who
satisfies the preamendment conditions for the benefit either
before or after the amendment.
(b) No Plan amendment, unless it expressly provides
otherwise, shall be applied retroactively to increase the
vested percentage of a former Participant whose employment
terminated before the date such amendment became effective
unless and until he or she again becomes a Participant and
additional Company Contributions are allocated to the
Participant.
<PAGE>
(c) No Plan amendment, unless it expressly provides
otherwise, shall be applied retroactively to increase the
amount of service credited to any person for employment before
the date such amendment became effective.
(d) Except as provided in subparagraphs (b) and (c),
all rights under the Plan shall be determined under the terms
of the Plan as in effect at the time the determination is
made.
x.3. Election of Prior Vesting. No amendment to the vesting
schedule shall be permitted to decrease the vested Account Balance
of any Participant, and a Participant who has at least three (3)
Years of Service may elect to have his or her vested Account
Balance computed without regard to the amended vesting schedule.
Such election must be made without regard to the amended vesting
schedule. Such election must be made within sixty (60) days after
the latest of the following dates: (a) the date the amendment is
adopted, (b) the date the amendment becomes effective, or (c) the
date the Participant is notified in writing of the amendment.
x.4. Discontinuance of Contributions and Termination of Plan
and Trust.
(a) If the Company decides it is impossible or
inadvisable to make its contributions as herein provided, the
Company shall have the power to terminate the Plan with
respect to its Associates by appropriate resolution of the
Board of Directors. A certified copy of such resolution or
resolutions shall be delivered to the Trustee and as soon as
possible thereafter, the Advisory Committee shall notify each
Participant or Beneficiary entitled to receive benefits under
the Plan. After the date specified in such resolutions the
Company shall make no further contributions under the Plan.
(b) In the event of the termination or partial
termination of the Plan, or a complete discontinuance of
contributions under the Plan, the Account of each affected
Participant shall become fully vested and nonforfeitable.
The Trust, however, shall remain in existence as well as all
other provisions of the Plan, except for provisions for
contributions by the Company. Upon termination of the Plan,
the Trust Fund shall continue to be held, administered and
distributed by the Trustee in accordance with the provisions
of the Plan.
(c) Upon termination of the Plan and Trust and after
payment of all expenses and proportional adjustment of the
Accounts of Participants to reflect such expenses, Trust Fund
profit or losses, and reallocations to the date of
<PAGE>
termination, each employed or retired Participant (or
Beneficiary of such Participant) entitled to receive benefits
shall be entitled to receive his or her vested Account
Balance, conditioned on the satisfaction of all applicable
regulatory requirements. The Trustee shall make distribution
of such amounts to the Participants in the form and manner
provided in Article VII above, unless the Company shall direct
that payment be made in a Trustee-to-Trustee transfer to
another qualified plan. Such distribution or transfer shall
be made as soon as administratively feasible following the
date of termination.
x.5. Merger, Consolidation, or Transfer. Notwithstanding,
anything herein to the contrary, in the event of a merger or
consolidation with, or transfer of assets to any other plan, each
affected Participant will receive a benefit immediately after such
merger, etc. (as if the Plan then terminated) which is at least
equal to the benefit the Participant was entitled to immediately
before such merger, etc. (as if the Plan had terminated).
x.6. De Facto Termination. If the Advisory Committee
determines in its sole discretion that the Plan has been terminated
partially or completely, within the meaning of regulations under
Section 411 of the Code, the Advisory Committee shall determine the
date of such termination and who has been affected by the
termination. The Advisory Committee or the Company may also
request that the Internal Revenue Service determine whether a
partial termination has occurred and indentify the affected
Participants who shall become fully vested on account of any
partial termination. In addition, even though a partial
termination has not occurred, the Advisory Committee may vest the
Accounts of a group of affected Participants in full because they
are affected by a business divestiture, layoff or other similar
transaction (for purposes of this Paragraph, the partial
termination rules set forth herein shall apply in such event even
though a partial termination has not occurred). The Accounts of
all persons affected shall remain payable under the terms set forth
in the Plan, except as provided below:
(a) In connection with a termination or partial
termination of the Plan or thereafter, the Advisory Committee
may elect to discharge all of the Plan's obligations to
affected Participants. In such event, the Advisory Committee
shall direct the Trustee to liquidate the necessary portion
of the Trust Fund and distribute affected Accounts, less
proportionate shares of the expenses of termination, to the
persons entitled thereto.
(b) A Company shall have the right at any time to
discontinue contributions to the Plan completely or as to any
of the Company's divisions, facilities or operational units.
<PAGE>
A complete discontinuance of contributions, however, shall
constitute a Plan termination.
(c) This Paragraph has been included in the Plan to meet
requirements of federal law. It is not intended to create,
nor shall it be construed as creating, any contractual rights
whatsoever.
x.7. Succession of Power. On the effective date of the
termination of the Plan, the Trustee shall immediately succeed to
all of the duties, responsibilities and powers theretofore held by
the Advisory Committee, except as those powers are otherwise
modified by the terms of this Article.
x.8. Continuation of Payment. Benefit payments to
Participants whose termination of employment occurred before the
effective date of the Plan termination shall continue to be made
at the times and in the amounts provided in Article VII hereof.
<PAGE>
ARTICLE xi
Withdrawals and Loans
xi.1. In-Service Withdrawals. The purpose of the Plan is
to provide for each Participant's retirement; however, a
Participant, subject to the below described limitations, may make
an in-service withdrawal while an Associate as described below:
(a) A Participant who has attained 59-1/2 years of age
(or, with respect to amounts described in Paragraph 5.1(e),
age 55) may make a written request to the Advisory Committee
for a withdrawal of all or a portion of his Account Balance
in accordance with the Plan Rules as prescribed by the
Advisory Committee.
(b) Upon the written request of a Participant to the
Advisory Committee and upon compliance with such Plan Rules
as may be prescribed by the Advisory Committee, a hardship
withdrawal may be made from the Participant's Deferred Income
Account, without earnings thereon. Such distribution shall
comply with the safe-harbor approach of the final regulations
to Section 401(k) of the Code. The minimum amount of a
hardship withdrawal must be at least $500. A hardship
withdrawal shall be authorized by the Advisory Committee only
upon an immediate and heavy financial hardship of the
Participant determined in accordance with Treasury Regulation
Section 1.401(k)-1(d)(2)(iv)(A), which currently includes the
following:
(i) Expenses for medical care (as defined in
Section 213(d) of the Code) previously incurred by a Participant
or his or her spouse or dependent (as defined in Section 152 of the
Code) or necessary for such a person to obtain medical care (as
defined in Section 213(d) of the Code);
(ii) Payments necessary to prevent the eviction
of a Participant from the Participant's principal residence or
foreclosure on the mortgage on that residence;
(iii) Payment of tuition, related educational
fees, and room and board expenses, for the next twelve months of
post-secondary education for the Participant or his or her spouse,
children or dependent (as defined in Section 152 of the Code);
(iv) Costs directly related to the purchase of
a principal residence for a Participant (excluding
mortgage payments); and
(v) Any other event that may be deemed to give
rise to an immediate and heavy financial need for
purposes of Treas. Reg. Section 1.401(k)-1(d)(2)(iv)(A),
as prescribed by the Commissioner of the Internal Revenue
<PAGE>
Service in revenue rulings, notices, and other documents
of general applicability.
The determination by the Advisory Committee of whether
a hardship withdrawal is necessary to satisfy the financial
hardship of the Participant after the Participant has
exhausted other resources reasonably available shall be
determined in accordance with Treasury Regulation
Section 1.401(k)-1(d)(2)(iv)(B), which provides that a
hardship withdrawal may be made on a representation of the
Participant to the Advisory Committee that:
(i) The hardship distribution is not in excess
of the amount of the immediate and heavy financial need.
(ii) The Participant has obtained all
distributions other than hardship distributions and all
non-taxable loans currently available under all plans
maintained by the Company. A hardship distribution shall
not be denied solely because the Participant does not
receive a nontaxable loan pursuant to Paragraph 11.3 of
the Plan if the loan is not made on account of a
determination by the Advisory Committee that the loan
cannot be adequately secured.
Notwithstanding any provision of the Plan to the
contrary, the Plan shall be construed so as to comply with
the requirements of Treasury Regulation Section 1.401(k)-
1(d)(2)(iv) for a safe-harbor hardship withdrawal, which
requirements provide that the Participant's Tax Deferred
Contributions and any other voluntary employee contributions
will be suspended for a twelve (12) month period following the
receipt of the hardship withdrawal and that the maximum
allowable Tax Deferred Contribution for the taxable year
following the taxable year of the hardship withdrawal shall
be reduced by the amount of Tax Deferred Contributions made
by the Participant in the taxable year in which the hardship
withdrawal was received.
Hardship withdrawals shall be made as soon as
administratively possible following the date of the Advisory
Committee's approval of the Participant's request. The
Advisory Committee shall not authorize a hardship withdrawal
in an amount greater than the amount necessary to meet the
financial need created by the hardship, nor shall the hardship
request be authorized if the amount of the request is
reasonably available from other resources of the Participant.
xi.2. Withdrawals on Account of Plan Termination or Sale
of Assets. Except when specifically stated otherwise in the Plan,
and subject to any required or requested governmental approval, a
Participant may withdraw his or her Account Balance including
<PAGE>
income thereon, in a lump sum upon the happening of any of the
following:
(a) Plan termination without the establishment of a
successor plan;
(b) the date of the sale by the Company of substantially
all of its assets used in a trade or business if the
Participant continues employment with the corporation
acquiring the assets; or
(c) the date of the sale by the Company of its interest
in a subsidiary, if the Participant continues employment with
the subsidiary.
xi.3. Loans to Participants. The following provisions
with respect to Plan loans shall apply to Plan loans made or
renewed on or after the Effective Date of this amendment and
reinstatement of the Plan. The provisions of the Plan and the law
in effect prior to such Effective Date shall continue to apply to
all loans in existence on the Effective Date of this amendment and
reinstatement, provided such loans are not renewed. The loan
provisions set forth herein are designed to comply with the
requirements set forth in the final Department of Labor regulations
under Section 408(b)(1) of ERISA, and the Advisory Committee shall
interpret the provisions to the extent necessary to comply with the
final regulations, including any amendments and interpretations
thereto.
(a) The Advisory Committee shall have the authority to
establish a loan administration policy, which policy may
include revisions or modifications to the provisions of this
Paragraph 11.3 to the extent necessary to bring the provisions
herein into conformance with the requirements of
Section 408(b)(1) of ERISA, including any regulations,
amendments or interpretations thereto without the necessity
of amending the Plan. Such policy, which, when properly
executed, is hereby incorporated by reference and made a part
of the Plan, must include but need not be limited to the
following:
(i) The identity of the person or positions
authorized to administer the Participant loan program;
(ii) A procedure for applying for loans;
(iii) The basis on which loans will be approved
or denied;
(iv) Limitations, if any, on the types and
amounts of loans offered;
<PAGE>
(v) The procedure under the program for
determining a reasonable rate of interest;
(vi) The types of collateral which may secure
a Participant loan; and
(vii) The events constituting default and the
steps that will be taken to preserve Plan assets.
(b) A loan or loans may be made from the Trust to a
Participant who is also an Associate. The Participant must
submit a written application to the Advisory Committee
requesting a loan, in such form as determined by the Advisory
Committee. All loans shall be made on a reasonably equivalent
basis, as determined by the Advisory Committee in accordance
with Department of Labor Regulation Section 2550.408b-1(b).
(c) Loans shall not be made available to any Participant
who is a Highly Compensated Associate in an amount greater
than the amount made available to other Participants and no
loans shall be made to a Participant who is an owner-employee
as defined in Section 401(c) of the Code if such loan would
constitute a prohibited transaction.
(d) All loans shall be evidenced by a negotiable
promissory note and shall be adequately secured as determined
by the Advisory Committee in accordance with Department of
Labor Regulation Section 2550.408b-1(f), which security must
consist of that security required in a normal commercial
setting between unrelated parties in an arms-length
transaction. No more than fifty percent (50%) of the
Participant's vested Account Balance may be used as security.
If the Participant is married, the written consent of his or
her spouse will be required to obtain a Plan loan. No loan
shall be authorized unless it is determined that it will be
adequately secured.
(e) Except as otherwise authorized by the Advisory
Committee, loans shall be repayable in installments by payroll
deductions on a level amortization basis. A Participant may
prepay his or her loan without penalty at any time.
Prepayment procedures shall be governed by a written policy
adopted by the Advisory Committee.
(f) All loans shall provide for a reasonable rate of
interest in accordance with the requirements of Department of
Labor Regulation Section 2550.408b-1(e). The rate of interest
charged on the loan shall be determined pursuant to a written
policy adopted by the Advisory Committee, and shall provide
a return commensurate with interest rates charged by
commercial lenders in the local area under similar
circumstances.
<PAGE>
(g) The maximum term of a loan shall not exceed four
and one-half (41/2) years from the date of the loan unless
said loan shall have been obtained for the purpose of
purchasing or building a Participant's primary residence
(hereinafter referred to as a "Residential Loan") and the
Advisory Committee shall authorize a longer repayment period
for Residential Loans. A Residential Loan may be repaid over
such reasonable repayment period as the Advisory Committee
determines on a nondiscriminatory basis, not to exceed the
shorter of the average repayment period for Residential Loans
being made by commercial lending institutions in the area in
which the Participant is residing at the time of such loan,
or the maximum repayment period permitted by regulations in
effect at the time of such loan, but which period of repayment
shall not exceed fifteen (15) years.
(h) Loans shall not be granted to any Participant which
provide for a repayment period extending beyond such
Participant's Normal Retirement Date.
(i) A loan to a Participant shall not be permitted until
at least thirty (30) days after all other loans to the
Participant from the Plan have been repaid.
(j) In addition to the above limitations, the Advisory
Committee may further limit the amount loaned to any
Participant in order to maintain a reserve chargeable against
the Participant's benefit for income taxes which would have
to be withheld by the Trustee if the loan becomes a deemed
distribution to the Participant. Any such taxes required to
be withheld by the Trustee (whether or not such a reserve has
been created) shall be charged to and reduce the Participant's
benefit to the extent possible and any excess shall be treated
as an administrative expense of the Plan which shall be
reimbursed by the Participant in question.
(k) Any loan from the Plan shall be considered an
earmarked investment of the Participant who received the loan,
in accordance with Paragraph 6.3 of the Plan.
(l) The Advisory Committee shall adopt a uniform written
policy for dealing with delinquent loans, which policy must
be consistent with the requirements of the Code and ERISA.
Furthermore, if any loan to a Participant is unpaid on the
date that such Participant, or his or her beneficiary, becomes
entitled to a distribution from the Plan, such loan shall
become due and payable on such date and the balance of the
loan, together with any unpaid interest thereon, shall be
deducted from the amount of the distribution to which such
Participant, or his or her beneficiary, is otherwise entitled.
<PAGE>
(m) Any additional expenses incurred by the Advisory
Committee or Trustee in connection with the making of a loan
or the administration or enforcement thereof, may be charged
to the account of the Participant who requested or received
said loan.
(n) The loan shall be documented by such notes,
evidences of indebtedness and other instruments executed by
the Participant which the Advisory Committee in its discre-
tion requires. To the extent required by the Federal Truth
in Lending Act, the Advisory Committee shall prepare the
required statement of disclosures with respect to a loan from
the Plan.
<PAGE>
ARTICLE xii
Miscellaneous Provisions
xii.1. No Guaranty of Employment. The adoption and
maintenance of the Plan shall not be deeded to constitute a
contract between the Company and any Associate or to be a
consideration for, or an inducement or condition of, the employment
of any person. Nothing herein contained shall be deemed to give
any Associate the right to be retained in the employ of the Company
or to interfere with the right of the Company to discharge any
Associate at any time, nor shall it be deemed to give the Company
the right to require the Associate to remain in its employ, nor
shall it interfere with the Associate's right to terminate his
employment at any time.
xii.2. Limitation of Rights. Except as otherwise required
by law, inclusion under the Plan will not give any Associate any
right or claim to any benefit hereunder except to the extent such
right has specifically become fixed under the terms of the Plan and
there are Trust Funds available. The doctrine of substantial
performance shall have no application to Associates, Participants
or Beneficiaries. Each condition and provision of the Plan,
including numerical items, has been carefully considered and
constitutes the minimum limit on performance which will give rise
to the applicable right.
xii.3. Provision of Benefits. All benefits payable under
the Plan shall be paid or provided for solely from the Trust Fund
and the Company assumes no liability or responsibility therefor.
xii.4. Headings. The headings of Articles and Paragraphs
are included solely for convenience of reference, and if there is
any conflict between such headings and the text of this Plan and
Trust, the text shall control.
xii.5. Governing Law. All legal questions pertaining to
this Agreement shall be determined in accordance with the laws of
the State of North Carolina insofar as the same shall be applicable
and not superseded by ERISA.
xii.6. Alienation of Benefits. The right of any
Participant or his Beneficiary to any benefit or to any payment
hereunder shall not be subject to alienation or assignment, except
as may be expressly permitted herein pursuant to a qualified
domestic relations order, as defined in Section 414(p) of the Code
and described in Article XIV; or pursuant to the engagement by the
Participant in any dishonest or illegal act against the Company,
including, but not limited to, embezzlement of Company funds. If
a Participant should engage in embezzlement of Company funds, or
other illegal act against the Company, his Account Balance under
the Plan shall be offset by the amount of damages incurred by the
<PAGE>
Company, as determined by the Advisory Committee, and the amount
of the offset shall be paid to the Company.
If such Participant or Beneficiary shall attempt to assign,
transfer, or dispose of his right to any benefit or to any payment
hereunder or should such right be subject to attachment, execution,
garnishment, sequestration, or other legal or equitable process
other than as described above and in Article XIV, it shall ipso
facto pass to the Participant's spouse or, if none, or if such
right would also be subject to attachment, execution, garnishment,
sequestration or other legal or equitable process other than as
described above, the right shall pass to such person or persons as
may be appointed by the Advisory Committee from among the
Beneficiaries, if any, theretofore designated by such Participant
or the spouse or lineal ascendants and descendants of the
Participant; provided, however, the Advisory Committee, in its sole
discretion, may reappoint the Participant to receive any
distribution thereafter becoming due either in whole or in part.
Any appointment made by the Advisory Committee hereunder may be
revoked by the Advisory Committee at any time and further
appointment made by it if necessary to comply with the provisions
of the Code, ERISA and the Plan.
xii.7. Severability. If any provisions of this Plan shall
be held illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining provisions of this Plan
but shall be fully severable; and the Plan shall be construed and
enforced as if said illegal and invalid provisions had never been
inserted herein.
xii.8. Claims. A Participant or Beneficiary shall have
the right to file a claim, inquire if he or she has any right to
benefits, or appeal the denial of a claim. A claim will be
considered as having been filed when a written or oral
communication is made by the person (or his authorized
representative) who brings the claim request to the attention of
the Advisory Committee. The Advisory Committee will notify the
claimant in writing within a reasonable period of time after the
claim is filed if the claim is granted or wholly or partially
denied. If the claim is granted, appropriate action shall be taken
and, if appropriate, distribution or payment shall be made from the
Trust Fund. If the claim is wholly or partially denied, the
Advisory Committee shall, within ninety (90) days (or, if special
circumstances require an extension of this ninety (90) day period,
it may be extended by no more than ninety (90) additional days,
provided that the Advisory Committee provides written notice of the
extension to the claimant prior to the end of the initial ninety
(90) day period) provide the claimant with written notice of such
denial, setting forth in a manner calculated to be understood by
the claimant:
(a) The reason or reasons for denial;
<PAGE>
(b) Specific reference to the Plan provisions that apply
to the claim;
(c) A description of any additional material or
information that would be helpful to the Advisory Committee
in further review of the claim and the reason or reasons why
it is necessary; and
(d) An explanation of the Plan's claim appeal procedure.
If a claim is denied, the claimant may file an appeal asking the
Advisory Committee to conduct a full and fair review of his or her
claim. An appeal must be made in writing no more than sixty (60)
days after the claimant receives written notice of the denial. The
claimant may review any documents that apply to the case and may
also submit points of disagreement and other comments in writing
along with the appeal. The decision of the Advisory Committee
regarding the appeal will be given to the claimant in writing no
later than sixty (60) days following receipt of the appeal.
However, if a hearing is held or there are special circumstances
involved, the decision will be given no later than one hundred
twenty (120) days after receiving the appeal.
xii.9. Number and Gender. Masculine pronouns shall include
the feminine gender (and vice versa) and the singular shall include
the plural (and vice versa), unless the context indicates
otherwise. The pronouns "it" and "its" shall refer to a natural
person (and vice versa) if the context so requires.
<PAGE>
ARTICLE xiii
Top-Heavy Rules
xiii.1. Effect of Article XIII on Plan. Notwithstanding
any contrary provisions contained in any other Article of the Plan,
if at any time the Plan shall be a Top-Heavy Plan (as hereinafter
defined), this Article shall control; and any contrary terms of the
Plan shall be deemed replaced by the provisions of this Article.
However, this Article shall not be effective for any subsequent
Plan Year in which the Plan is determined not to be a Top-Heavy
Plan. In addition, the requirements of Paragraphs 13.2(j), 13.3,
and 13.4 shall not apply with respect to any Associate included in
a unit of associates covered by an agreement which the Secretary
of Labor finds to be a collective bargaining agreement between
Associate representatives and one or more Companies if there is
evidence that retirement benefits were the subject of good faith
bargaining between the parties. Furthermore, the Account Balance
of any Associate who has not performed any service for the Company
at any time during the five (5) year period ending on the
Determination Date, shall not be considered in determining whether
the Plan is a Top-Heavy Plan.
xiii.2. Definitions. For purposes of this Article VII the
following words and terms shall have the following meanings:
(a) "Key Associates" shall mean:
(i) Any Associate or former Associate (and
the surviving spouse or other Beneficiary of such Associate) who
at any time during the Determination Period was an officer of the
Company having an annual compensation greater than fifty percent
(50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any Plan Year;
(ii) An Associate who owns (or is considered
to own under Section 318 of the Code) one of the ten (10) largest
interests in the Company provided such interest is greater than
one-half percent (1/2%) and further provided such individual's
compensation exceeds one hundred percent (100%) of the dollar
limitation under Section 415(c)(1)(A) of the Code (if 2 Associates
have the same interest in the Company, the Associate having greater
annual compensation shall be treated as having a larger interest);
or
(iii) A five percent (5%) owner of the Company,
or a one percent (1%) owner of the Company who has an annual
compensation of more than one hundred fifty thousand dollars
($150,000).
Annual compensation means compensation as defined in
Section 415(c)(3) of the Code, but including amounts
<PAGE>
contributed by the Company pursuant to a salary reduction
agreement which are excludable from the Associate's gross
income under Section 125, Section 402(e)(3), Section 402(h)
or Section 403(b) of the Code.
The Determination Period is the Plan Year containing the
Determination Date and the four preceding Plan Years. The
determination of who is a Key Associate will be made in
accordance with Section 416(i)(1) of the Code and the
regulations thereunder.
For purposes of subparagraph (i), no more than fifty (50)
Associates (or, if the Company shall have fewer than fifty
(50) Associates, the greater of three (3) or ten percent (10%)
of the total number of Associates) shall be considered
officers.
(b) The Plan shall be a "Top-Heavy Plan" if it meets
any one of the following conditions:
(i) the Top-Heavy Ratio for this Plan exceeds
sixty percent (60%) and this Plan is not part of any Required
Aggregation Group or Permissive Aggregation Group of plans; or
(ii) the Plan is a part of a Required
Aggregation Group of plans but not part of a Permissive Aggregation
Group and the Top-Heavy Ratio for the group of plans exceeds sixty
percent (60%); or
(iii) the Plan is a part of a Required
Aggregation Group and part of a Permissive Aggregation Group of
plans and the Top-Heavy Ratio for the Permissive Aggregation Group
exceeds sixty percent (60%).
(c) "Top-Heavy Ratio" shall be defined as follows:
(i) If the Company maintains one or more
defined contribution plans (including any Simplified Employee
Pension Plan) and the Company has never maintained any defined
benefit plan which has covered or could cover a Participant in this
Plan, the Top-Heavy Ratio is a fraction, the numerator of which is
the sum of the Account Balances of all Key Associates as of the
Determination Date, and the denominator of which is the sum of all
Account Balances of all Participants as of the Determination Date,
both computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and the denominator of
the Top-Heavy Ratio are increased to reflect any contribution which
is due but unpaid as of the Determination Date but which is
required to be taken into account on that date under Section 416
of the Code and the regulations thereunder. In determining the
above Account Balances, such amount must be increased by the
aggregate distributions made within the five (5) year period ending
on the Determination Date as well as distributions under a
<PAGE>
terminated plan for the same five (5) year period which, if it had
not been terminated, would have been required to be included in an
aggregation group.
(ii) If the Company maintains one or more
defined contribution plans (including any Simplified Employee
Pension Plan) and the Company maintains or has maintained one or
more defined benefit plans which have covered or could cover a
Participant in this Plan, the Top-Heavy Ratio is a fraction, the
numerator of which is the sum of account balances under the defined
contribution plans for all Key Associates and the Present Value of
accrued benefits under the defined benefit plans for all Key
Associates, and the denominator of which is the sum of the account
balances under the defined contribution plans for all Participants
and the Present Value of accrued benefits under the defined benefit
plans for all Participants. Both the numerator and denominator of
the Top-Heavy Ratio are increased for any distribution of an
account balance or an accrued benefit made in the five (5) year
period ending on the Determination Date, as well as any
distributions during the same five (5) year period under a
terminated plan which if it had not been terminated would have been
required to be included in an aggregation group, and any
Contribution due but unpaid as of the Determination Date.
(iii) For purposes of (i) and (ii) above, the
value of account balances and the present value of accrued benefits
will be determined as of the most recent Valuation Date that falls
within or ends with the twelve (12) month period ending on the
Determination Date. The account balances and accrued benefits of
the Participant who is not a Key Associate but who was a Key
Associate in a prior year will be disregarded. The calculation of
the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account shall be made in
accordance with Section 416 of the Code and the regulations
thereunder. Deductible employee contributions will not be taken
into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and the Present
Value of accrued benefits shall be calculated with reference to the
Determination Dates that fall within the same calendar year.
(d) "Permissive Aggregation Group" shall mean the
Required Aggregation Group of plans plus any other plan or
plans of the Company which, when considered as a group with
the Required Aggregation Group, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.
(e) "Required Aggregation Group" shall mean:
(i) each qualified plan of the Company in
which at least one Key Associate participates or participated at
any time during the determination period (regardless of whether the
Plan has terminated) , and
<PAGE>
(ii) any other qualified plan of the Company
which enables a plan described in (i) to meet the requirements of
Sections 401(a)(4) and 410 of the Code.
(f) "Determination Date" shall mean, for any Plan Year
subsequent to the first Plan Year, the last day of the
preceding Plan Year; and for the first Plan Year of the Plan,
the last day of that year.
(g) "Valuation Date" shall mean the Adjustment Date
defined in Paragraph 1.2, which is the date upon which account
balances or accrued benefits are valued for purposes of
calculating the Top-Heavy Ratio.
(h) "Non-Key Associate" shall mean any Associate who is
not a Key Associate.
(i) "Five Percent (5%) Owner and One Percent (1%) Owner"
shall be defined as follows:
(i) "Five Percent (5%) Owner" shall mean any
person who owns (or is considered as owning pursuant to Section 318
of the Code) more than five percent (5%) of the outstanding stock
of the corporation or stock possessing more than five percent (5%)
of the total combined voting power of all stock of the corporation.
(ii) "One Percent (1%) Owner" shall mean any
person who would be described in subparagraph (i) above if "one
percent (1%)" were substituted for "five percent (5%)."
(iii) For purposes of this Paragraph 13.2(i),
the provisions of Section 318(a)(2)(C) of the Code shall be applied
by substituting "five percent (5%)" for "fifty percent (50%)."
(iv) The aggregation rules of subsections (b),
(c), and (m) of Section 414 of the Code shall not apply for
purposes of determining ownership in the Company.
(j) The maximum annual compensation taken into account
under a Top-Heavy Plan shall not exceed the first one hundred
and fifty thousand dollars ($150,000) of any Associate's
annual Compensation (or such greater amount as may be
subsequently allowed as a cost of living adjustment by law or
regulations prescribed thereunder).
xiii.3. Minimum Contribution.
(a) If the Plan shall be a Top-Heavy Plan for any Plan
Year, except as otherwise provided in subparagraphs (c) and
(d) below, the Company Contributions and Forfeitures allocated
on behalf of any Participant who is not a Key Associate shall
<PAGE>
not be less than the lesser of three percent (3%) of such
Participant's compensation or, if the Company has no defined
benefit plan which designates this Plan to satisfy Section 401
of the Code, the largest percentage of Company Contributions
and Forfeitures, as a percentage of the first one hundred and
fifty thousand dollars ($150,000) of the Key Associate's
compensation, allocated on behalf of any Key Associate for
that year. The minimum contribution shall be determined
without regard to any Social Security contribution. Such
minimum contribution shall be made and allocated to the
account of the Participant even though, under other Plan
provisions, the Participant would not otherwise be entitled
to receive an allocation or would have received a smaller
allocation for the year because of (i) the Participant's
failure to complete one thousand (1,000) Hours of Service (or
any equivalent provided in the Plan), or (ii) the
Participant's failure to make mandatory employee contributions
to the Plan, or (iii) the Participant's compensation was less
than a stated amount.
(b) For purposes of computing the minimum contribution,
the term "compensation" shall mean compensation of an
Associate of the Company for the entire Plan Year.
(c) Subparagraph (a) above shall not apply to any
Participant who terminated employment during the year for a
reason other than death or Retirement and who was not employed
by the Company on the last day of the Plan Year.
(d) Subparagraph (a) above shall not apply to any
Participant to the extent he or she is covered under any other
plan or plans of the Company and the Company has provided in
such plan or plans that the minimum contribution or benefit
requirement applicable to Top-Heavy Plans will be met in the
other plan or plans.
(e) The minimum contribution required (to the extent
required to be nonforfeitable under Section 416(b)) may not
be forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D).
xiii.4. Adjustments to Aggregate Limit.
(a) For any Plan Year in which the Plan is a Top-Heavy
Plan, "1.0" shall be substituted for "1.25" in Paragraph
5.8(d)(i)(A) and 5.8(d)(ii)(A).
(b) Even though the Plan shall be a Top-Heavy Plan,
subparagraph (a) above shall not apply for any Plan Year in
which the following requirements are met:
(i) The Plan meets the requirements set forth
in Paragraph 13.3 above as modified by substituting "four percent"
<PAGE>
(4%) for "three percent" (3%) wherever the same shall appear
therein; and
(ii) If the Plan would not be a Top-Heavy Plan
if "ninety percent" (90%) is substituted for "sixty percent" (60%)
wherever the same shall appear in Paragraph 13.2(b).
(c) Even though subparagraph (a) above shall be
applicable to the Plan for any Plan Year, its application
shall be suspended with respect to any individual so long as
there are no:
(i) Company Contributions, Forfeitures or
Voluntary Contributions allocated to such individual Account, or
(ii) Accruals under the defined benefit plan
for such individual.
<PAGE>
ARTICLE xiv
Qualified Domestic Relations Orders
xiv.1. Notice. Should the Plan receive a judgment, decree
or order entered or enforceable pursuant to the domestic relations
law of the state from which the decree or order originated, and
relating to the provision of child support, alimony payments or
marital property rights of a spouse, child or other dependent of
the Participant, then:
(a) The Advisory Committee shall promptly notify the
Participant and any Alternate Payee (as defined below) of the
receipt of such order and the Plan's procedures for
determining its qualified status, and
(b) The Advisory Committee within a reasonable time
shall determine the qualified status of such order as set
forth in Paragraph 14.2, and notify the Participant and each
Alternate Payee upon such determination.
xiv.2. Requirements of Qualified Domestic Relations Order.
Subject to any regulations promulgated by the Treasury Department,
the Advisory Committee shall determine whether a domestic relations
order constitutes a qualified domestic relations order within the
meaning of Section 414(p) of the Code (a "Qualified Domestic
Relations Order") by determining whether the following requirements
prescribed in Section 414(p) of the Code have been met. The order
must:
(a) Create or recognize the existence of, or assign to
any spouse, former spouse, child or other dependent of a
Participant (hereinafter referred to as an "Alternate Payee")
the right to receive all or any portion of the benefits
payable with respect to a Participant under the Plan;
(b) Clearly specify the following facts:
(i) The name and last known mailing address
of the Participant and each Alternate Payee covered by the order,
(ii) The amount or percentage, or the manner
of determining same, of the Participant's benefits to be paid by
the Plan to each Alternate Payee,
(iii) The number of payments or period to which
the order applies, and
(iv) Each plan to which the order applies; and
(c) Not require the Plan to provide any type or form of
benefit not otherwise provided by its terms, or provide an
increased benefit, or be in conflict with the payment
<PAGE>
provisions of any order previously determined to be a
Qualified Domestic Relations Order. An order, however, shall
not be considered to provide any type or form of benefit not
otherwise provided, merely because the order requires payment
be made to an Alternate Payee on or after the date on which
the Participant attains his or her earliest retirement age
within the meaning of Section 414(p)(4)(B) of the Code without
regard to whether the Participant has separated from service.
xiv.3. Segregated Account. During any period in which the
issue of whether a domestic relations order is a Qualified Domestic
Relations Order is being determined pursuant to this Article XIII,
a separate account in the Plan shall be maintained consisting of
the amount which would have been payable to the Alternate Payee
during such period if the order had been determined to be
qualified. If within eighteen (18) months the order is determined
to be a Qualified Domestic Relations Order, the segregated amount
(plus any interest thereon) shall be paid to the Alternate Payee.
If within eighteen (18) months the issue is not resolved, or the
order is determined not be a Qualified Domestic Relations Order,
then the segregated amount (plus any interest thereon) shall be
paid to the person or persons who would have been entitled to such
amounts if there had been no order. Any determination that an
order is a Qualified Domestic Relations Order which is made
subsequent to the eighteen (18) month period shall be applied
prospectively only.
xiv.4. Limitations on Benefits and Distributions. All
rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any
Alternate Payee under a Qualified Domestic Relations Order.
Furthermore, a distribution to an Alternate Payee shall be
permitted if such distribution is authorized by a Qualified
Domestic Relations Order, even if the affected Participant has not
reached the earliest retirement age (within the meaning of
Section 414(p)(4)(B) of the Code) under the Plan. For example, a
Qualified Domestic Relations Order may require a distribution to
an Alternate Payee prior to the time the Participant who is the
spouse or ex-spouse of the Alternate Payee either separates from
service or attains age fifty (50).
<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to
be executed by its duly authorized officers and its corporate seal
to be hereunto affixed, and the Trustee has hereunto affixed its
respective hand and seal, all as of the day and year first above
written.
COMPANY:
ROSE'S STORES, INC.
ATTEST:
____________________________ By: ______________________________
Secretary R. Edward Anderson
President and C.E.O.
[Corporate Seal]
TRUSTEE:
FIRST UNION NATIONAL BANK
ATTEST: OF NORTH CAROLINA
____________________________ By: ______________________________
Office:_____________________ Office:_______________________
[Corporate Seal]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Rose's
Stores, Inc., Form 10-Q for the quarter ended July 29, 1995, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000085149
<NAME> ROSE'S STORES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-END> JUL-29-1995<F1>
<CASH> 641
<SECURITIES> 0
<RECEIVABLES> 13,217
<ALLOWANCES> (2,571)
<INVENTORY> 178,551
<CURRENT-ASSETS> 196,499
<PP&E> 1,575
<DEPRECIATION> (9)
<TOTAL-ASSETS> 198,065
<CURRENT-LIABILITIES> 125,034
<BONDS> 0
<COMMON> 35,000
0
0
<OTHER-SE> (92)
<TOTAL-LIABILITY-AND-EQUITY> 198,065
<SALES> 162,724
<TOTAL-REVENUES> 163,902
<CGS> 122,471
<TOTAL-COSTS> 122,471
<OTHER-EXPENSES> 39,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,718
<INCOME-PRETAX> (92)
<INCOME-TAX> 0
<INCOME-CONTINUING> (92)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
<FN>
<F1>The Company emerged from Chapter 11 on April 28, 1995. The results included
above are for thirteen weeks and represent those of the successor company.
</FN>
</TABLE>
