SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1997
Commission file numbers 1-11432; 1-11436
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 05-0475617
Delaware 22-3182164
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Columbia Avenue
Linwood, PA 19061
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (610) 859-3000
Indicate by check mark whether the registrants (1) have 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) have been subject to such
filing requirements for the past 90 days. YES X NO
Foamex Capital Corporation meets the conditions set forth in General Instruction
H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the
reduced disclosure format.
The number of shares of Foamex Capital Corporation's common stock outstanding as
of November 3, 1997 was 1,000.
Page 1 of 30
Exhibit List on Page 24 of 30
<PAGE>
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Foamex L.P.
Condensed Consolidated Statements of Operations -
Thirteen Week and Thirty-Nine Week Periods Ended
September 28, 1997 and September 29, 1996 3
Condensed Consolidated Balance Sheets as of September 28,
1997 and December 29, 1996 4
Condensed Consolidated Statements of Cash Flows -
Thirty-Nine Week Periods Ended September 28, 1997 and
September 29, 1996 5
Notes to Condensed Consolidated Financial Statements 6
Foamex Capital Corporation
Balance Sheets as of September 28, 1997 and December 29,
1996 15
Notes to Balance Sheets 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Part II. Other Information 24
Exhibit List 24
Signatures 30
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
13 Week Periods Ended 39 Week Periods Ended
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
(thousands)
<S> <C> <C> <C> <C>
NET SALES $ 233,434 $ 236,766 $ 702,441 $ 696,344
COST OF GOODS SOLD 195,395 196,806 576,825 582,186
--------- --------- --------- ---------
GROSS PROFIT 38,039 39,960 125,616 114,158
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 15,562 15,057 46,893 42,184
--------- --------- --------- ---------
INCOME FROM OPERATIONS 22,477 24,903 78,723 71,974
INTEREST AND DEBT ISSUANCE EXPENSE 11,846 11,131 33,355 31,855
OTHER INCOME, NET 281 539 1,403 1,076
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 10,912 14,311 46,771 41,195
PROVISION FOR INCOME TAXES 1,359 2,866 4,618 6,584
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 9,553 11,445 42,153 34,611
LOSS FROM DISCONTINUED OPERATIONS -- (1,989) -- (41,516)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT -- (672) (45,538) (672)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 9,553 $ 8,784 $ (3,385) $ (7,577)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
September 28, December 29,
ASSETS 1997 1996
CURRENT ASSETS: (thousands)
<S> <C> <C>
Cash and cash equivalents $ 1,078 $ 20,968
Accounts receivable, net 141,609 125,847
Inventories 94,301 102,610
Other current assets 48,584 39,495
--------- ---------
Total current assets 285,572 288,920
PROPERTY, PLANT AND EQUIPMENT, NET 195,178 182,427
COST IN EXCESS OF ASSETS ACQUIRED, NET 82,114 83,991
DEBT ISSUANCE COSTS, NET 17,771 14,902
OTHER ASSETS 20,364 15,917
--------- ---------
TOTAL ASSETS $ 600,999 $ 586,157
========= =========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 4,871 $ 3,692
Current portion of long-term debt 8,664 13,735
Accounts payable 71,952 75,621
Accounts payable to related parties 16,556 8,803
Accrued interest 7,220 8,871
Other accrued liabilities 48,590 41,108
--------- ---------
Total current liabilities 157,853 151,830
--------- ---------
LONG-TERM DEBT 519,668 392,617
--------- ---------
OTHER LIABILITIES 27,074 28,878
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT):
Partners' capital accounts (87,670) 58,286
Note receivable from partner -- (33,180)
Other (15,926) (12,274)
--------- ---------
Total partners' equity (deficit) (103,596) 12,832
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) $ 600,999 $ 586,157
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
39 Week Periods Ended
September 28, September 29,
1997 1996
OPERATING ACTIVITIES: (thousands)
<S> <C> <C>
Net income (loss) $ (3,385) $ (7,577)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 15,570 15,945
Amortization of debt issuance costs and debt discount 1,903 2,124
Extraordinary loss on extinguishment of debt 45,538 672
Loss from discontinued operations -- 41,516
Other operating activities (1,696) (4,126)
Changes in operating assets and liabilities (26,200) (14,025)
--------- ---------
Net cash provided by continuing operations 31,730 34,529
Net cash used for discontinued operations -- (486)
--------- ---------
Net cash provided by operating activities 31,730 34,043
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (25,444) (14,536)
Purchase of FJPS senior secured discount debentures (105,829) --
Decrease (increase) in restricted cash 12,143 (33,149)
Loan to partner (5,000) --
Proceeds from sale of discontinued operations -- 45,425
Other investing activities (930) 1,745
Discontinued operations investing activities -- (919)
--------- ---------
Net cash used for investing activities (125,060) (1,434)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 1,179 2,970
Net proceeds from revolving loans 31,000 --
Proceeds from long-term debt 453,500 --
Repayment of long-term debt (363,443) (18,392)
Premiums and payments associated with debt extinguishment (22,921) --
Debt issuance costs (15,617) --
Distributions to partners (10,283) (3,478)
Other financing activities 25 (8)
--------- ---------
Net cash provided by (used for) financing activities 73,440 (18,908)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (19,890) 13,701
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 20,968 638
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,078 $ 14,339
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex L.P.'s condensed consolidated balance sheet as of December 29, 1996
has been condensed from the audited consolidated balance sheet at that date. The
condensed consolidated balance sheet as of September 28, 1997 and the condensed
consolidated statements of operations for the thirteen week and thirty-nine week
periods ended September 28, 1997 and September 29, 1996 and the condensed
consolidated statements of cash flows for the thirty-nine week periods ended
September 28, 1997 and September 29, 1996 have been prepared by Foamex L.P. and
subsidiaries and have not been audited by Foamex L.P.'s independent accountants.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation of the
consolidated financial position, results of operations and cash flows have been
included.
Upon consummation of the Refinancing Plan, as defined, on June 12, 1997
(see Note 4 below for further discussion), Foamex-JPS Automotive L.P. ("FJPS")
was merged into Foamex International Inc. ("Foamex International"), which thus
became a 98% limited partner of Foamex L.P. FMXI, Inc. ("FMXI") is a 1% managing
general partner of Foamex L.P. and Trace Foam Company, Inc. ("Trace Foam") is a
1% non-managing general partner of Foamex L.P. FMXI is a wholly-owned subsidiary
of Foamex International.
Certain information and note disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with the rules and regulations of
the Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with Foamex L.P.'s 1996 consolidated
financial statements and notes thereto as set forth in Foamex L.P.'s Annual
Report on Form 10-K for the fiscal year ended December 29, 1996.
2. DISCONTINUED OPERATIONS
During 1996, Foamex L.P. sold the outstanding common stock of Perfect Fit
Industries, Inc. ("Perfect Fit"), a wholly-owned subsidiary, for an adjusted
sale price of approximately $44.2 million. The sale included the net assets of
Foamex L.P.'s home comfort products business segment.
Foamex L.P.'s condensed consolidated financial statements reflect the
discontinuation of the home comfort products business segment. Interest and debt
issuance expense was allocated to discontinued operations based on the estimated
debt to be retired with the net proceeds from the sale. A summary of the
operating results for the discontinued operations is as follows:
<TABLE>
<CAPTION>
13 Week Period Ended 39 Week Period Ended
September 29, 1996 September 29, 1996
(thousands)
<S> <C> <C>
Net sales $ -- $ 50,097
Gross profit -- 8,065
Income from operations -- 1,123
Interest and debt issuance expense -- 2,384
Other expense - 348
Loss on disposal of discontinued operations (1,989) (41,286)
Loss from discontinued operations
before benefit from income taxes (1,989) (42,895)
Benefit for income taxes -- (1,379)
Loss from discontinued operations, net of income taxes (1,989) (41,516)
</TABLE>
6
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. INVENTORIES
The components of inventories consist of:
<TABLE>
<CAPTION>
September 28, December 29,
1997 1996
(thousands)
<S> <C> <C>
Raw materials and supplies $ 49,067 $ 61,559
Work-in-process 17,568 13,453
Finished goods 27,666 27,598
-------- --------
Total $ 94,301 $102,610
======== ========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
September 28, December 29,
1997 1996
(thousands)
<S> <C> <C>
9 7/8% senior subordinated notes due 2007 (1) $150,000 $ --
Foamex L.P. term loan facilities (7.83% interest rate
at September 28, 1997) (2) 298,000 --
Foamex L.P. revolving loan (7.62% interest rate
at September 28, 1997) (3) 31,000 --
9 1/2% senior secured notes due 2000 (4) 4,523 106,793
11 1/4% senior notes due 2002 (4) 5,825 141,400
11 7/8% senior subordinated debentures due 2004 (net of
unamortized debt discount of $116 and $769) (4) 20,227 125,056
11 7/8% senior subordinated debentures due 2004, Series B (5) 45 7,000
Industrial revenue bonds (6) 7,000 7,000
Foamex L.P. term loan (8.54% interest rate as of
December 29, 1996) (6) -- 11,000
Subordinated note (net of debt discount of $969 and $1,198) (6) 6,046 5,817
Other 5,666 2,286
-------- --------
528,332 406,352
Less current portion 8,664 13,735
-------- --------
Long-term debt $519,668 $392,617
======== ========
</TABLE>
(1) Debt of Foamex L.P. and Foamex Capital Corporation ("FCC") (together the
"Issuers"), guaranteed by General Felt Industries, Inc. ("General Felt"),
Foamex Fibers, Inc. ("Foamex Fibers") and certain future domestic
subsidiaries of the Issuers.
(2) Debt of Foamex L.P., guaranteed by Foamex International, General Felt and
Foamex Fibers.
(3) Debt of Foamex L.P. and General Felt, guaranteed by Foamex International
and Foamex Fibers.
(4) Debt of the Issuers, guaranteed by Foamex International and General Felt.
(5) Debt of the Issuers, guaranteed by General Felt.
(6) Debt of Foamex L.P.
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT (continued)
Refinancing Plan
On June 12, 1997, Foamex International substantially completed a
refinancing plan (the "Refinancing Plan") that included the refinancing of
certain long-term indebtedness to reduce Foamex International's interest expense
and improve financing flexibility. In connection with the Refinancing Plan,
Foamex L.P. purchased approximately $342.3 million of aggregate principal amount
of its public debt and approximately $116.7 million of aggregate principal
amount of FJPS's senior secured discount debentures due 2004 (the "Discount
Debentures") and repaid $5.2 million of term loan borrowings under its old
credit facility. Foamex L.P. incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$44.5 million. The Refinancing Plan was funded by $347.0 million of borrowings
under a new $480.0 million credit facility (the "New Credit Facility") and the
net proceeds from the issuance of $150.0 million of 9 7/8% senior subordinated
notes due 2007.
In addition, on October 1, 1997, Foamex L.P. redeemed all of the
outstanding: (i) 11 1/4% senior notes due 2002, (ii) 11 7/8% senior subordinated
debentures due 2004 and (iii) the 11 7/8% senior subordinated debentures due
2004, Series B, constituting approximately $26.0 million of the approximately
$30.0 million of its outstanding public debt that was not tendered as part of
the Refinancing Plan. The redemption was funded from the New Credit Facility. In
connection with this redemption, Foamex L.P. expects to incur an extraordinary
loss on the early extinguishment of debt of approximately $2.6 million in the
fourth quarter of 1997.
Term Loans and Revolving Loan
On June 12, 1997, Foamex L.P. entered into the New Credit Facility with a
group of banks that provides for term loans of up to $330.0 million which expire
from June 2003 to June 2006 and borrowings of up to $150.0 million under a
revolving line of credit which expires in June 2003. In connection with the
Refinancing Plan, Foamex L.P. entered into term loans of $298.0 million and
borrowed $49.0 million under the revolving line of credit.
The term loans are comprised of a (i) term A loan ("Term A") which provides
up to $120.0 million of borrowings of which Foamex L.P. borrowed $88.0 million
in connection with the Refinancing Plan, (ii) term B loan ("Term B") of $110.0
million and (iii) term C loan ("Term C") of $100.0 million. The remaining $32.0
million available under the Term A is restricted and can only be used by Foamex
L.P. to retire its public debt not tendered in connection with the Refinancing
Plan with such unused availability terminating June 15, 1998. Foamex L.P.
borrowed $29.0 million under the Term A in connection with the October 1, 1997
redemption.
Borrowings under the New Credit Facility are collateralized by
substantially all of the assets of Foamex L.P., General Felt and Foamex Fibers
on a pari passu basis with the 9 1/2% senior secured notes due 2000 and the
industrial revenue bonds (collectively, the "Notes"); however, the rights of the
holders of the applicable issue of Notes to receive payment upon the disposition
of the collateral securing such issue of Notes has been preserved.
Pursuant to the terms of the New Credit Facility, borrowed funds will bear
interest at a floating rate equal to an applicable margin, as defined, plus the
higher of (i) the base rate of The Bank of Nova Scotia, in effect from time to
time, or (ii) a rate that is equal to 0.5% per annum plus the federal funds rate
in effect from time to time. The applicable margin is determined based on the
total net debt to EBDAIT ratio, as defined, and can range from no margin up to
1.125% per annum for Term A and revolving loans, from 0.875% per annum to 1.375%
per annum for Term B and from 1.125% per annum to 1.625% per annum for Term C.
At the option of Foamex L.P., portions of the outstanding loans under the New
Credit Facility are convertible into LIBOR based loans
8
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT (continued)
which bear interest at a floating rate equal to an applicable margin for LIBOR
based loans, as defined, plus the average LIBOR, as defined. The applicable
margin for LIBOR based loans is a rate that will generally equal the applicable
margin (discussed above) plus 1.0% per annum.
9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the Refinancing Plan. The Senior Subordinated
Notes bear interest at the rate of 9 7/8% per annum payable semiannually on each
June 15 and December 15, commencing December 15, 1997. The Senior Subordinated
Notes mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at
the option of Foamex L.P., in whole or in part, at any time on or after June 15,
2002, initially at 104.938% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
June 15, 2000, Foamex L.P. may on one or more occasions redeem up to 35.0% of
the initially outstanding principal amount of the Senior Subordinated Notes at a
redemption price equal to 109.875% of the principal amount, plus accrued
interest and liquidated damages, if any, thereon to the date of redemption with
the cash proceeds of one or more Public Equity Offerings, as defined. Upon the
occurrence of a change of control, as defined, each holder of Senior
Subordinated Notes will have the right to require Foamex L.P. to repurchase the
Senior Subordinated Notes at a price equal to 101.0% of the principal amount,
plus accrued interest and liquidated damages, if any, to the date of repurchase.
The Senior Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to the subordinated note.
The Senior Subordinated Notes contain certain covenants that limit, among other
things, the ability of Foamex L.P. (i) to pay distributions or redeem
partnership interests, (ii) to make certain restrictive payments or investments,
(iii) to incur additional indebtedness or issue Preferred Equity Interest, as
defined, (iv) to merge, consolidate or sell all or substantially all of its
assets, or (vi) to enter into certain transactions with affiliates or related
persons. The Senior Subordinated Notes are guaranteed by General Felt and Foamex
Fibers and certain future domestic subsidiaries of the Issuers.
The Issuers have filed a registration statement relating to an exchange
offer in which the Issuers will offer to exchange the Senior Subordinated Notes
issued in the private placement for new notes. The terms of the new notes will
be substantially identical in all respects (including principal amount, interest
rate, maturity and ranking) to the terms of the Senior Subordinated Notes,
except that the new notes will be transferable by holders thereof without
further registration under the Securities Act of 1933, as amended (except in the
case of Senior Subordinated Notes held by affiliates of the Issuers and for
certain other holders), and are not subject to any covenant regarding
registration under the Securities Act of 1933, as amended. The exchange offer is
expected to be consummated during November 1997.
Principal payments on Foamex L.P.'s long-term debt for the remainder of
1997 and for the next five years are as follows: 1997 - $4.1 million; 1998 -
$11.9 million; 1999 - $20.9 million; 2000 - $31.3 million; 2001 - $31.3 million;
2002 - $32.7 million; and thereafter - $397.2 million.
Early Extinguishment of Debt - Refinancing Plan
In connection with the Refinancing Plan, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $44.5
million. The extraordinary loss is comprised of approximately $20.2 million for
premium and consent fee payments, approximately $12.6 million for the write-off
of debt issuance costs and debt discount, approximately $8.2 million for the
loss associated with the effective termination
9
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT (continued)
and amendment of the interest rate swap agreements and approximately $3.5
million of professional fees and other costs. In connection with the Refinancing
Plan, Foamex L.P. repaid $5.2 million in term loan borrowings under its old
credit facility and purchased approximately $459.0 million of aggregate
principal amount of public debt comprised of:
o $99.8 million of aggregate principal amount of its 9 1/2% senior secured
notes due 2000 for an aggregate consideration of 104.193% of principal plus
accrued interest, comprised of a tender price of 102.193% and a consent fee
of 2.0%;
o $130.1 million of aggregate principal amount of its 11 1/4% senior notes
due 2002 for an aggregate consideration of 105.709% of principal plus
accrued interest, comprised of a tender price of 103.709% and a consent fee
of 2.0%;
o $105.5 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures due 2004 for an aggregate consideration of 107.586%
of principal plus accrued interest, comprised of a tender price of 105.586%
and a consent fee of 2.0%;
o $6.9 million of aggregate principal amount of its 11 7/8% senior
subordinated debentures, series B due 2004 for an aggregate consideration
of 107.586% of principal plus accrued interest, comprised of a tender price
of 105.586% and a consent fee of 2.0%; and
o $116.7 million of aggregate principal amount of the Discount Debentures for
an aggregate consideration of 90.0% of principal amount, which represents
approximately 121.9% of the accreted book value as of June 12, 1997,
comprised of a tender price of 88.0% of principal amount and a consent fee
of 2.0%.
Early Extinguishment of Debt - Other
In addition, during 1997 Foamex L.P. incurred extraordinary losses of
approximately $1.0 million associated with the early extinguishment of
approximately $11.8 million of long-term debt funded with approximately $12.1
million of the remaining net proceeds from the sale of Perfect Fit. The
extraordinary loss is comprised of approximately $0.4 million of premium
payments and approximately $0.6 million for the write-off of debt issuance
costs. The long-term debt was comprised of:
o $2.5 million of aggregate principal amount of its 9 1/2% senior secured
notes due 2000.
o $5.5 million of aggregate principal amount of its 11 1/4% senior notes due
2002.
o Bank term loan borrowings of $3.8 million under Foamex L.P.'s old credit
facility.
Interest Rate Swaps
Foamex L.P. uses derivative financial instruments to manage interest
expense. All derivative financial instruments are classified as "held for
purposes other than trading". Foamex L.P. does not use derivatives for
speculative purposes.
Interest rate swap agreements are used to manage interest expense by
changing the interest rate characteristics of certain debt instruments to
approximate current market conditions. The amended interest rate
10
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. LONG-TERM DEBT (continued)
swap agreement matures in June 2007 which is consistent with the underlying
debt. The differential paid or received on interest rate swap agreements is
recognized on an accrual basis as an adjustment to interest and debt issuance
expense.
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction in interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning of the period or the end of the period for the
remainder of the agreement, in exchange for fixed payments by the swap partner
at 6.44% per annum for the life of the agreement, payable semiannually in
arrears. The amended interest rate swap agreement can be terminated by either
party in June 2002, and annually thereafter, for a cash settlement based on the
fair market value of the amended interest rate swap agreement. Interest and debt
issuance expense is subject to fluctuations in LIBOR during the term of the swap
agreement except during 1997. Foamex L.P. is exposed to credit loss in the event
of nonperformance by the swap partner; however, the occurrence of this event is
not anticipated. The effect of the interest rate swaps described above was a
favorable adjustment to interest and debt issuance expense of $0.5 million and
$0.9 million for the thirteen week periods ended September 28, 1997 and
September 29, 1996, respectively, and $2.2 million and $2.8 million for the
thirty-nine week periods ended September 28, 1997 and September 29, 1996,
respectively.
5. RELATED PARTY TRANSACTIONS
On July 1, 1997, Trace Holdings borrowed $5.0 million pursuant to a
promissory note with an aggregate principal amount of $5.0 million issued to
Foamex L.P. on June 12, 1997. The promissory note is due and payable on demand
or, if no demand is made, on July 7, 2001, and bears interest at 2 3/8% plus
three-month LIBOR, as defined, per annum payable quarterly in arrears commencing
October 1, 1997. The promissory note is included in the other component of
partners' equity (deficit).
In connection with the Refinancing Plan, Foamex L.P. purchased
approximately $116.7 million of aggregate principal amount of Discount
Debentures for approximately $105.8 million including transaction costs of
approximately $0.8 million. Foamex L.P. subsequently distributed the Discount
Debentures to FJPS and FMXI.
On June 12, 1997, Foamex L.P. distributed its $2.0 million aggregate
principal amount promissory note due from Foamex International to FJPS and FMXI.
Also on June 12, 1997, Foamex L.P. distributed its $56.2 million aggregate
principal amount note, as amended, due 2006 (the "FJPS Note") from FJPS with an
accreted value as of June 12, 1997 of $35.6 million to FJPS and FMXI. The
accretion of the original issue discount of $2.4 million and $4.7 million for
the period from December 30, 1996 to June 12, 1997 and for the thirty-nine week
period ended September 29, 1996, respectively,
11
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. RELATED PARTY TRANSACTIONS (continued)
was reflected as a direct increase in the FJPS Note and partners' capital
account, and thereby excluded from the condensed consolidated statements of
operations.
In connection with the Refinancing Plan, Foamex L.P. made a cash
distribution of approximately $1.5 million to Trace Foam as a result of Foamex
L.P.'s distribution to FJPS and FMXI of the Discount Debentures, the FJPS Note
and the $2.0 million aggregate principal amount promissory note due from Foamex
International.
On June 12, 1997, a promissory note issued to Foamex L.P. by Trace
International Holdings, Inc. ("Trace Holdings") was amended. The amended
promissory note is an extension of a promissory note of Trace Holdings that was
due in July 1997. The aggregate principal amount of the amended promissory note
was increased to approximately $4.8 million and the maturity of the promissory
note was extended. The promissory note is due and payable on demand or, if no
demand is made, on July 7, 2001, and bears interest at 2 3/8% plus three-month
LIBOR, as defined, per annum payable quarterly in arrears. The promissory note
is included in the other component of partners' equity (deficit).
During June 1997, Foamex L.P. and Trace Foam amended their management
services agreement to increase the annual fee from $1.75 million to $3.0
million, plus reimbursement of expenses incurred.
Foamex L.P. has a supply agreement (the "Supply Agreement") with Foamex
International pursuant to which, at the option of Foamex L.P., Foamex
International will purchase certain raw materials, which are necessary for the
manufacture of Foamex L.P.'s products, and resell such materials to Foamex L.P.
at a price equal to net cost plus reasonable out of pocket expenses. Management
believes that the terms of the Supply Agreement are no less favorable than those
which Foamex L.P. could have obtained from an unaffiliated third party. During
the thirteen week periods ended September 28, 1997 and September 29, 1996,
Foamex L.P. purchased approximately $31.4 million and $30.2 million,
respectively, of raw materials under the Supply Agreement. During the
thirty-nine week periods ended September 28, 1997 and September 29, 1996, Foamex
L.P. purchased approximately $94.4 million and $84.3 million, respectively, of
raw materials under the Supply Agreement. As of September 28, 1997 and December
29, 1996, Foamex L.P. had accounts payable to Foamex International of
approximately $16.6 million and $8.8 million, respectively, associated with the
Supply Agreement.
Foamex L.P. chartered an aircraft (which is owned by a wholly-owned
subsidiary of Foamex International) through a third party and incurred costs of
approximately $0.3 million and $0.4 million during the thirteen week periods
ended September 28, 1997 and September 29, 1996, respectively, and $0.9 million
for each of the thirty-nine week periods ended September 28, 1997 and September
29, 1996.
6. ENVIRONMENTAL MATTERS
As of September 28, 1997, Foamex L.P. has accruals of approximately $3.8
million for environmental matters. In addition, as of September 28, 1997, Foamex
L.P. has net receivables of approximately $1.0 million relating to
indemnification for environmental liabilities, net of an allowance of
approximately $1.0 million relating to potential disagreements regarding the
scope of the indemnification. Foamex L.P. believes that realization of the net
receivables established for indemnification is probable.
On May 5, 1997, there was an accidental chemical spill at one of Foamex
L.P.'s manufacturing facilities that was contained on site. Foamex L.P. is in
the process of disposing of the contaminated soil which is estimated to cost
approximately $0.6 million. As of September 28, 1997, Foamex L.P. has spent
approximately $0.5
12
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. ENVIRONMENTAL MATTERS (continued)
million for remediation costs related to this chemical spill. The actual cost
and the timetable for the clean-up of the site cannot be predicted with any
degree of certainty at this time; therefore, there can be no assurance that the
clean-up of the site will not result in a more significant environmental
liability in the future.
Foamex L.P. has reported to appropriate state authorities that it has found
soil and groundwater contamination in excess of state standards at four
additional facilities and soil contamination in excess of state standards at
three other facilities. Foamex L.P. has begun remediation and is conducting
further investigations into the extent of the contamination at these facilities
and, accordingly, the extent of the remediation that may ultimately be required.
The actual cost and the timetable of any such remediation cannot be predicted
with any degree of certainty at this time. As of September 28, 1997, Foamex L.P.
has environmental accruals of approximately $2.9 million for the remaining
potential remediation costs for these facilities based on engineering estimates.
Federal regulations require that by 1998 all underground storage tanks
("USTs") be removed or upgraded in most states to meet applicable standards.
Foamex L.P. has six USTs that will require removal or permanent in-place closure
by the end of 1998. Due to the age of these tanks, leakage may have occurred
resulting in soil and possibly groundwater contamination. Foamex L.P. has
accrued approximately $0.3 million for the estimated removal and remediation, if
any, associated with the USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. Foamex L.P. believes that its USTs do not pose
a significant risk of environmental liability because of Foamex L.P.'s
monitoring practices for USTs and conditional approval for permanent in-place
closure for certain USTs. However, there can be no assurance that such USTs will
not result in significant environmental liability in the future.
Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the United States Environmental Protection Agency (the "EPA") with respect to
thirteen sites, with an estimated total liability to Foamex L.P. for the
thirteen sites of less than approximately $0.5 million. Estimates of total
clean-up costs and fractional allocations of liability are generally provided by
the EPA or the committee of PRP's with respect to the specified site. In each
case, the participation of Foamex L.P. is considered to be immaterial.
Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on Foamex L.P.'s operations, financial position,
capital expenditures or competitive position. The possibility exists, however,
that new environmental legislation and/or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated and that may be material.
7. LITIGATION
As of November 3, 1997, Foamex L.P. and Trace Holdings were two of multiple
defendants in actions filed on behalf of approximately 5,500 persons in various
United States federal and state courts and one Canadian provincial court by
recipients of breast implants, some of which allege substantial damages, but
most of which allege unspecified damages for personal injuries of various types.
Three of these cases seek to allege claims on behalf of all breast implant
recipients or other allegedly affected parties, but only one class has been
approved or certified by a court, and that is a class limited to Louisiana
residents or persons who received their implants in Louisiana. In addition,
three cases have been filed alleging claims on behalf of approximately 725
residents of
13
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. LITIGATION (continued)
Australia and New Zealand. During 1995, Foamex L.P. and Trace Holdings were
granted summary judgments and dismissed as defendants from all cases in the
federal courts of the United States and the state courts of California. Appeals
for these decisions were withdrawn and the decisions are final. Although breast
implants do not contain foam, certain silicone gel implants were produced using
a polyurethane foam covering fabricated by independent distributors or
fabricators from bulk foam purchased from Foamex L.P. or Trace Holdings. Neither
Foamex L.P. nor Trace Holdings recommended, authorized or approved the use of
its foam for these purposes. Foamex L.P. believes that the number of suits and
claimants may increase, but not significantly. While it is not feasible to
predict or determine the outcome of these actions, based on management's present
assessment of the merits of pending claims, after consultation with the general
counsel of Trace Holdings, management believes that the disposition of matters
that are pending or that may reasonably be anticipated to be asserted should not
have a material adverse effect on either Foamex L.P.'s or Trace Holdings'
consolidated financial position or results of operations. In addition, Foamex
L.P. is also indemnified by Trace Holdings for any such liabilities relating to
foam manufactured prior to the capitalization of Foamex L.P. in October 1990.
Although Trace Holdings has paid Foamex L.P.'s litigation expenses pursuant to
such indemnification, and management believes Trace Holdings will be in a
position to continue to pay such expenses, there can be no assurance that Trace
Holdings will be able to continue to provide such indemnification. Based on
information available at this time with respect to the potential liability,
Foamex L.P. believes that the proceedings should not ultimately result in any
liability that would have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect, such actions could have a
material adverse effect on Foamex L.P.
Foamex L.P. is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not individually or in
the aggregate, have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect, such actions could have a
material adverse effect on Foamex L.P.'s consolidated financial position.
8. SUBSEQUENT EVENT
On October 6, 1997, Foamex L.P. sold substantially all of the net assets of
its needlepunch carpeting, tufted carpeting and artificial grass products
business located at its facilities in Dalton, Georgia to Bretlin, Inc. for an
aggregate sale price of approximately $41.2 million, subject to post-closing
adjustments. Foamex L.P. expects to realize an immaterial gain on the sale, net
of income taxes, in the fourth quarter of 1997. Foamex L.P. used $38.8 million
of the net sale proceeds to repay outstanding term loan borrowings under the New
Credit Facility. In connection with this repayment, Foamex L.P., expects to
incur an extraordinary loss on the early extinguishment of debt of approximately
$0.9 million during the fourth quarter of 1997.
14
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
September 28, December 29,
1997 1996
ASSETS (thousands)
<S> <C> <C>
CASH $ 1 $ 1
=== ===
LIABILITIES AND STOCKHOLDER'S EQUITY
COMMITMENTS AND CONTINGENCIES $ - $ -
--- ---
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share;
1,000 shares authorized, issued and outstanding - -
Additional paid-in capital 1 1
--- ---
TOTAL STOCKHOLDER'S EQUITY $ 1 $ 1
=== ===
</TABLE>
The accompanying notes are an integral part of the
balance sheets.
15
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
1. ORGANIZATION
Foamex Capital Corporation ("FCC"), a wholly-owned subsidiary of Foamex
L.P., was formed for the sole purpose of obtaining financing from external
sources.
2. COMMITMENTS AND CONTINGENCIES
FCC is a joint obligor on the following borrowings of Foamex L.P.:
9 7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the Refinancing Plan. The Senior Subordinated
Notes bear interest at the rate of 9 7/8% per annum payable semiannually on each
June 15 and December 15, commencing December 15, 1997. The Senior Subordinated
Notes mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at
the option of Foamex L.P., in whole or in part, at any time on or after June 15,
2002, initially at 104.938% of their principal amount, plus accrued interest and
liquidated damages, as defined, if any, thereon to the date of redemption and
declining to 100.0% on or after June 15, 2005. In addition, at any time prior to
June 15, 2000, Foamex L.P. may on one or more occasions redeem up to 35.0% of
the initially outstanding principal amount of the Senior Subordinated Notes at a
redemption price equal to 109.875% of the principal amount, plus accrued
interest and liquidated damages, if any, thereon to the date of redemption with
the cash proceeds of one or more Public Equity Offerings, as defined. Upon the
occurrence of a change of control, as defined, each holder of Senior
Subordinated Notes will have the right to require Foamex L.P. to repurchase the
Senior Subordinated Notes at a price equal to 101.0% of the principal amount,
plus accrued interest and liquidated damages, if any, to the date of repurchase.
The Senior Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to the subordinated note.
The Senior Subordinated Notes contain certain covenants that limit, among other
things, the ability of Foamex L.P. (i) to pay distributions or redeem
partnership interests, (ii) to make certain restrictive payments or investments,
(iii) to incur additional indebtedness or issue Preferred Equity Interest, as
defined, (iv) to merge, consolidate or sell all or substantially all of its
assets, or (vi) to enter into certain transactions with affiliates or related
persons. The Senior Subordinated Notes are guaranteed by General Felt and Foamex
Fibers and certain future domestic subsidiaries of the Issuers.
The Issuers have filed a registration statement relating to an exchange
offer in which the Issuers will offer to exchange the Senior Subordinated Notes
issued in the private placement for new notes. The terms of the new notes will
be substantially identical in all respects (including principal amount, interest
rate, maturity and ranking) to the terms of the Senior Subordinated Notes,
except that the new notes will be transferable by holders thereof without
further registration under the Securities Act of 1933, as amended (except in the
case of Senior Subordinated Notes held by affiliates of the Issuers and for
certain other holders), and are not subject to any covenant regarding
registration under the Securities Act of 1933, as amended. The exchange offer is
expected to be consummated during November 1997.
9 1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")
The Senior Secured Notes were issued on June 3, 1993 and bear interest at
the rate of 9 1/2% per annum payable semiannually on each June 1 and December 1.
The Senior Secured Notes mature on June 1, 2000. The
16
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
2. COMMITMENTS AND CONTINGENCIES (continued)
Senior Secured Notes are collateralized by a first-priority lien on
substantially all of the assets of Foamex L.P. except for receivables, real
estate and fixtures. The Senior Secured Notes may be redeemed at the option of
Foamex L.P., in whole or in part, at any time on or after June 1, 1998,
initially at 101.583% of their principal amount, plus accrued interest, and
declining to 100.0% on or after June 1, 1999. The Senior Secured Notes have been
guaranteed, on a senior secured basis by General Felt and on a senior unsecured
basis by Foamex International. During 1997 and 1996, Foamex L.P. repurchased
$102.3 million and $9.9 million, respectively, aggregate principal amount of
Senior Secured Notes.
11 1/4% Senior Notes due 2002 ("Senior Notes")
The Senior Notes bear interest at the rate of 11 1/4% per annum payable
semiannually on each April 1 and October 1. The Senior Notes mature on October
1, 2002. The Senior Notes may be redeemed at the option of Foamex L.P., in whole
or in part, at any time on or after October 1, 1997, initially at 104.219% of
their principal amount, plus accrued interest, and declining to 100.0% on or
after October 1, 2000. In October 1994, Foamex L.P. provided certain real
property as collateral for the Senior Notes, with a net book value of $37.8
million at December 29, 1996. The Senior Notes have been guaranteed, on a senior
basis, by General Felt. During 1997 and 1996, Foamex L.P. repurchased $135.6
million and $8.6 million, respectively, aggregate principal amount of Senior
Notes. Foamex L.P. redeemed all of the outstanding Senior Notes on October 1,
1997.
11 7/8% Senior Subordinated Debentures ("Subordinated Debentures")
The Subordinated Debentures bear interest at the rate of 11 7/8% per annum
payable semiannually on each April 1 and October 1. The Subordinated Debentures
mature on October 1, 2004. The Subordinated Debentures may be redeemed at the
option of Foamex L.P., in whole or in part, at any time on or after October 1,
1997, initially at 105.938% of their principal amount, plus accrued interest,
and declining to 100.0% on or after October 1, 2002. The Subordinated Debentures
are subordinated in right of payment to all senior indebtedness, including the
Senior Secured Notes and the Senior Notes. The Subordinated Debentures have been
guaranteed, on a senior subordinated basis, by General Felt and rank pari passu
in right of payment to the Senior Subordinated Notes. During 1997 and 1996,
Foamex L.P. repurchased $104.9 million and $0.1 million, respectively, aggregate
principal amount of Subordinated Debentures. Foamex L.P. redeemed all of the
outstanding Subordinated Debentures on October 1, 1997.
11 7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")
The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in connection
with the acquisition of General Felt on March 23, 1993. The Series B Debentures
have terms substantially similar to the Subordinated Debentures, except that
holders of the Series B Debentures are entitled to receive proceeds from an
asset sale only if any proceeds remain after an offer to repurchase has been
made to the holders of the Subordinated Debentures. The Series B Debentures have
been guaranteed on a senior subordinated basis by General Felt. During 1997,
Foamex L.P. repurchased $6.9 million of Series B Debentures. Foamex L.P.
redeemed all of the outstanding Series B Debentures on October 1, 1997.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Foamex L.P. operates in the flexible polyurethane and advanced polymer foam
products industry, together with its wholly-owned subsidiaries, General Felt,
Foamex Fibers, Foamex Canada Inc., Foamex Latin America, Inc., and Foamex Asia,
Inc. The following discussion should be read in conjunction with the condensed
consolidated financial statements and related notes thereto of Foamex L.P.
included in this report. Certain information in this report contains
forward-looking statements and should be read in conjunction with the discussion
regarding forward-looking statements set forth on pages 3 and 4 of Foamex L.P.'s
1996 Annual Report on Form 10-K.
On June 12, 1997, Foamex International substantially completed the
Refinancing Plan which included the repurchase of $342.3 million of aggregate
principal amount of Foamex L.P.'s public debt and $116.7 million of aggregate
principal amount of the Discount Debentures and the payment of $5.2 million of
Foamex L.P. term loan borrowings under its old credit facility. Foamex L.P.
incurred an extraordinary loss on the early extinguishment of debt associated
with the Refinancing Plan of approximately $44.5 million. The Refinancing Plan
was funded by $347.0 million of borrowings under the New Credit Facility and the
net proceeds from the issuance of the Senior Subordinated Notes. See Note 4 to
the condensed consolidated financial statements for further discussion. As a
result of the Refinancing Plan, Foamex L.P.'s total long-term debt increased
$150.1 million to $546.3 million. Foamex L.P. expects the Refinancing Plan to
result in increased interest expense of approximately $2.5 million in the second
half of 1997 as compared to the first half of 1997, and annualized increased
interest expense of approximately $5.0 million, as compared to the debt
structure prior to the Refinancing Plan, assuming no material changes in
interest rates. Foamex L.P.'s future interest expense will vary based on a
variety of factors, including fluctuation in interest rates in general. As a
result of the Refinancing Plan, variable rate debt comprises a larger percentage
of Foamex L.P.'s overall indebtedness than in the past, and as a result, future
fluctuations in interest rates will have a greater impact on Foamex L.P.'s
interest expense than in the past.
In addition, on October 1, 1997, Foamex L.P. redeemed all of the
outstanding: (i) 11 1/4% senior notes due 2002, (ii) 11 7/8% senior subordinated
debentures due 2004 and (iii) the 11 7/8% senior subordinated debentures due
2004, Series B, constituting approximately $26.0 million of the approximately
$30.0 million of its outstanding public debt that was not tendered as part of
the Refinancing Plan. The redemption was funded from the New Credit Facility. In
connection with this redemption, Foamex L.P. expects to incur an extraordinary
loss on the early extinguishment of debt of approximately $2.6 million in the
fourth quarter of 1997.
Also, on October 6, 1997, Foamex L.P. sold substantially all of the net
assets of its needlepunch carpeting, tufted carpeting and artificial grass
products business located at its facilities in Dalton, Georgia ("Dalton") to
Bretlin, Inc. for an aggregate sale price of approximately $41.2 million,
subject to post-closing adjustments. Foamex L.P. expects to realize an
immaterial gain on the sale, net of income taxes, in the fourth quarter of 1997.
Dalton's revenues were $10.7 million and $9.3 million for the thirteen week
periods ended September 28, 1997 and September 29, 1996, respectively, and $35.1
million and $32.1 million for the thirty-nine week periods ended September 28,
1997 and September 29,1996, respectively. As of September 28, 1997, Dalton had
$7.5 million, $14.8 million, $12.3 million and $2.0 million of inventories, net
plant, property and equipment, net goodwill and other assets, respectively.
Foamex L.P. used $38.8 million of the net sale proceeds to repay outstanding
term loan borrowings under the New Credit Facility. In connection with this
repayment, Foamex L.P. expects to incur an extraordinary loss on the early
extinguishment of debt of approximately $0.9 million in the fourth quarter of
1997.
During July 1997, Foamex International announced the creation of a new
senior management operating committee to simplify Foamex L.P.'s management and
reporting structure and to position Foamex L.P. to achieve its strategic goals
which include: (i) to focus on its core flexible polyurethane operations in the
automotive, carpet cushion, technical, cushioning and furniture markets
(furniture sales were previously combined with cushioning
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
sales), (ii) to maximize revenue growth by increasing market share in existing
markets, introducing new and enhanced foam products with higher margins and
pursuing international opportunities and (iii) to continue to lower its cost
structure.
The principal suppliers to the foam industry announced raw material cost
increases effective April 1997. The impact of the raw material cost increases
were not significant during the second quarter of 1997. However, Foamex L.P.
estimates the raw material cost increases, net of sale price increases to
customers, had an unfavorable impact of approximately $2.0 million during the
third quarter of 1997. There can be no assurance that chemical suppliers will
not increase raw material costs in the future or that Foamex L.P. will be able
to implement selling price increases to offset any such raw material cost
increases.
During 1996, Foamex L.P. sold Perfect Fit which comprised the home comfort
products business segment of Foamex L.P. Accordingly, the accompanying condensed
consolidated statements of operations for the thirteen week and thirty-nine week
periods ended September 29, 1996 and the condensed consolidated statement of
cash flows for the thirty-nine week period ended September 29, 1996 reflect the
home comfort products business segment as discontinued operations. See Note 2 to
the condensed consolidated financial statements for further discussion.
Operating results for 1997 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
continued implementation of the continuous improvement program to improve Foamex
L.P.'s profitability, (ii) additional raw material cost increases, if any, by
Foamex L.P.'s chemical suppliers, (iii) Foamex L.P.'s success in passing on to
its customers selling price increases to recover such raw material cost
increases and (iv) fluctuations in interest rates.
13 Week Period Ended September 28, 1997 Compared to 13 Week Period Ended
September 29, 1996
Results of Operations
Net sales for the third quarter of 1997 were $233.4 million as compared to
$236.8 million in the third quarter of 1996, a decrease of $3.4 million or 1.4%.
Carpet cushion products net sales for the third quarter of 1997 decreased 6.4%
to $72.0 million from $77.0 million in the third quarter of 1996 primarily due
to a change in product mix and competitive pricing pressure resulting from an
excess supply of foam trim, the primary component of rebond carpet cushion.
Cushioning products net sales for the third quarter of 1997 increased 5.7% to
$60.2 million from $57.0 million in the third quarter of 1996 primarily due to
an increase in net sales from both new and existing customers of bedding related
products. Furniture products net sales for the third quarter of 1997 of $29.6
million were consistent as compared to net sales of $29.0 million for the third
quarter of 1996. Automotive products net sales for the third quarter of 1997
decreased 6.4% to $52.3 million from $55.9 million in the third quarter of 1996
primarily due to decreased net sales volume resulting from reduced car and light
truck builds due to temporary production shut-downs at several Chrysler and Ford
facilities for new model conversions and slower than expected start-up of
several new platforms during the third quarter of 1997. Technical products net
sales for the third quarter of 1997 increased 8.0% to $19.3 million from $17.9
million in the third quarter of 1996 primarily due to increased net sales
volume.
Gross profit as a percentage of net sales decreased to 16.3% for the third
quarter of 1997 from 16.9% in the third quarter of 1996 primarily due to the
unfavorable impact of the unrecovered raw material cost increases of
approximately $2.0 million during the third quarter of 1997 offset by improved
material and production
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
efficiencies and manufacturing cost containment which includes favorable raw
material efficiencies and an increased impact of the 1995 restructuring and
operational plan in 1997 as compared to 1996.
Income from operations decreased to $22.5 million for the third quarter of
1997 from $24.9 million in the third quarter of 1996 primarily due to the
reasons discussed above and an increase in selling, general and administrative
expenses of $0.5 million for the third quarter of 1997 as compared to the third
quarter of 1996. The increase in selling, general and administrative expenses is
primarily due to increases in research and development costs, and travel and
promotion costs associated with the launching of new products and international
expansion offset by a decrease in employee compensation and incentives.
Income from continuing operations decreased to $9.6 million for the third
quarter of 1997 as compared to $11.4 million for the third quarter of 1996. The
decrease is primarily due to the reasons cited above and an increase in interest
and debt issuance expense of $0.7 million. The increase in interest and debt
issuance expense is primarily due to a decrease in the favorable impact from the
interest rate swap agreements in the third quarter of 1997 as compared to the
third quarter of 1996 and due to the higher level of outstanding indebtedness in
the third quarter of 1997 as compared to the third quarter of 1996 as a result
of the Refinancing Plan. Loss from discontinued operations in the third quarter
of 1996 represents the loss on disposal and the operating loss of Perfect Fit
which was sold during 1996. See Note 2 to the condensed consolidated financial
statements for further discussion. The decrease in the effective income tax rate
for continuing operations for the third quarter of 1997 as compared to the third
quarter of 1996 is primarily due to a decrease in pre-tax earnings and the
related tax provision of a subsidiary that files federal income tax returns.
The extraordinary loss on early extinguishment of debt of approximately
$0.7 million during the third quarter of 1996 primarily relates to the write-off
of debt issuance costs associated with the early extinguishment of $12.0 million
of bank term loan borrowings.
39 Week Period Ended September 28, 1997 Compared to 39 Week Period Ended
September 29, 1996
Results of Operations
Net sales for 1997 were $702.4 million as compared to $696.3 million in
1996, an increase of $6.1 million or 0.9%. Carpet cushion products net sales for
1997 decreased 1.0% to $214.9 million from $217.2 million in 1996 primarily due
to a change in product mix and competitive pricing pressure resulting from an
excess supply of foam trim, the primary component of rebond carpet cushion.
Cushioning products net sales for 1997 increased 4.4% to $167.6 million from
$160.5 million in 1996 primarily due to an increase in net sales from both new
and existing customers of bedding related products. Furniture products net sales
for 1997 of $92.1 million were consistent as compared to net sales of $91.5
million for 1996. Automotive products net sales for 1997 decreased 2.2% to
$171.4 million for 1997 from $175.2 million for 1996 primarily due to increased
selling prices implemented during the first quarter of 1996 offset by reduced
net sales volume in 1997 as compared to 1996 resulting from reduced car and
light truck builds due to temporary production shut-downs at several Chrysler
and Ford facilities, slower than expected start-up of several new platforms and
labor strikes at both Chrysler and General Motors plants during the second
quarter of 1997. Technical products net sales for 1997 increased 8.8% to $56.4
million from $51.9 million in 1996 primarily due to increased net sales volume.
Gross profit as a percentage of net sales increased to 17.9% for 1997 from
16.4% in 1996 primarily due to selling price increases, improved material and
production efficiencies and manufacturing cost containment which include (i) the
impact during 1997 of the selling prices initiated in 1996 to offset previous
raw material cost increases, (ii) favorable raw material efficiencies and (iii)
an increased favorable impact of the 1995 restructuring
20
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
and operational plan in 1997 as compared to 1996. These increases were offset by
approximately $2.0 million of unrecovered raw material costs during the third
quarter of 1997.
Income from operations increased to $78.7 million for 1997 from $72.0
million in 1996 primarily due to improved gross profit margins as discussed
above, offset by a $4.7 million increase in selling, general and administrative
expenses during 1997 as compared to the comparable period for 1996. The increase
in selling, general and administrative expenses is primarily due to increases in
employee compensation and incentives, research and development costs, and travel
and promotion costs associated with the launching of new products and
international expansion.
Income from continuing operations increased to $42.2 million for 1997 as
compared to $34.6 million in 1996. The increase is primarily due to the reasons
cited above offset by an increase in interest and debt issuance expense of $1.5
million. The increase in interest and debt issuance expense is primarily due to
a decrease in the favorable impact from the interest rate swap agreements in the
third quarter of 1997 as compared to the third quarter of 1996 and is also due
to the higher level of outstanding indebtedness in 1997 as compared to 1996 as a
result of the Refinancing Plan. Loss from discontinued operations for 1996
represents the loss on disposal and the operating loss of Perfect Fit which was
sold during 1996. See Note 2 to the condensed consolidated financial statements
for further discussion. The decrease in the effective income tax rate for
continuing operations for 1997 as compared to 1996 is primarily due to a
decrease in pre-tax earnings and the related tax provision of a subsidiary that
files federal income tax returns.
The extraordinary loss on early extinguishment of debt of approximately
$45.5 million during 1997 relates to premium and consent fee payments, the
write-off of debt issuance costs and other charges associated with the early
extinguishment of approximately $359.3 million of aggregate principal amount of
debt in connection with the Refinancing Plan and other debt extinguishment
during 1997. See Note 4 to the condensed consolidated financial statements for
further discussion. The extraordinary loss on early extinguishment of debt of
approximately $0.7 million during 1996 primarily relates to the write-off of
debt issuance costs associated with the early extinguishment of $12.0 million of
bank term loan borrowings.
Foamex Capital Corporation ("FCC")
FCC is solely a co-issuer of certain indebtedness of Foamex L.P. has no
other material operations.
Liquidity and Capital Resources
Foamex L.P.'s operating cash requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. Foamex L.P. believes that
cash flow from operating activities, cash on hand and periodic borrowings under
revolving credit agreements, if necessary, will be adequate to meet its
operating cash requirements. The ability to meet operating cash requirements
could be impaired if Foamex L.P. were to fail to comply with any of the
covenants contained in its credit agreements or indentures and such
noncompliance was not cured or waived by the lenders or bondholders. Foamex L.P.
was in compliance with such covenants as of September 28, 1997 and expects to be
in compliance with such covenants for the foreseeable future.
Cash and cash equivalents decreased $19.9 million during 1997 to $1.1
million at September 28, 1997 from $21.0 million at December 29, 1996. The
decrease in cash and cash equivalents was primarily due to: (i) $25.4 million of
cash used for capital expenditures, (ii) $15.3 million of cash used for
distributions and a loan to partners, (iii) $9.9 million of cash used for
financing activities after considering the decrease in restricted cash and the
purchase of the Discount Debentures offset by (iv) $31.7 million of cash
provided from operating activities.
21
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The $9.9 million of cash used for financing activities reflects the: (a) $363.4
million repayment of long-term debt, (b) $105.8 million of cash used for the
purchase of the Discount Debentures, (c) $15.6 million of cash used for debt
issuance costs, (d) $22.9 million of cash used for premium and consent fee
payments and other cash charges associated with the Refinancing Plan and other
debt extinguishment offset by (e) $485.7 million of cash proceeds from long-term
debt, revolving loans and short-term borrowings and (f) the decrease of
restricted cash of $12.1 million. Cash flow from continuing operations decreased
$2.8 million to $31.7 million for 1997 as compared to $34.5 million for 1996.
Cash flow from continuing operations decreased for 1997 as compared to 1996
primarily due to an increase in the use of cash for operating assets offset by
an increase in income from continuing operations.
Working capital decreased $9.4 million for 1997 to $127.7 million at
September 28, 1997 from $137.1 million at December 29, 1996. The decrease in
working capital is primarily due to the $19.9 million decrease in cash, as
previously discussed, offset by a $3.4 million increase in net operating assets
and liabilities, as discussed below, a $3.3 million net increase in other
current assets, and a $3.9 million decrease in short-term borrowings and current
portion of long-term debt. The net operating assets and liabilities (comprised
of accounts receivable, inventories and accounts payable) increased $3.4 million
to $147.4 million at September 28, 1997 from $144.0 million at December 29, 1996
primarily due to an increase in accounts receivable offset by an increase in
accounts payable and a decrease in inventories. The increase in accounts
receivable is primarily due to an increase in net sales for September 1997 as
compared to December 1996. The increase in accounts payable is primarily due to
the timing of payments. The decrease in inventories is due to reduced levels of
major chemicals and foam trim inventories offset by increased work-in-process
inventories which is the result of increased production in September 1997 as
compared to December 1996.
During 1997, Foamex L.P. spent approximately $25.4 million on capital
expenditures and expects to maintain or reduce spending for capital expenditures
for the foreseeable future since significant capital projects (e.g. the new
Mexico City facility) are expected to be completed during 1997.
As of September 28, 1997, there was approximately $31.0 million of
outstanding revolving credit borrowings under the New Credit Facility with
unused availability of approximately $102.6 million. Borrowings by Foamex Canada
Inc. as of September 28, 1997 were approximately $2.9 million under a revolving
credit agreement with unused availability of approximately $1.4 million.
Borrowings by Foamex Latin America, Inc. as of September 28, 1997 were
approximately $2.0 million under a revolving credit agreement with no
availability.
Interest Rate Swaps
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered to
be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction in interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning of the period or the end of the period for the
remainder of the agreement, in exchange for fixed payments by the swap partner
at 6.44% per annum for the life of the agreement, payable semiannually in
arrears. The amended interest rate swap agreement can be terminated by either
party in June 2002, and annually thereafter, for a cash settlement based on the
fair market
22
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
value of the amended interest rate swap agreement. Interest and debt issuance
expense is subject to fluctuations in LIBOR during the term of the swap
agreement except during 1997. Foamex L.P. is exposed to credit loss in the event
of nonperformance by the swap partner; however, the occurrence of this event is
not anticipated. The effect of the interest rate swaps described above was a
favorable adjustment to interest and debt issuance expense of $0.5 million and
$0.9 million for the thirteen week periods ended September 28, 1997 and
September 29, 1996, respectively, and $2.2 million and $2.8 million for the
thirty-nine week periods ended September 28, 1997 and September 29, 1996,
respectively.
Environmental Matters
Foamex L.P. is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with Foamex L.P.'s compliance
with such laws and regulations have not had a material adverse effect on its
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by Foamex L.P. in connection with
environmental matters as of September 28, 1997 was approximately $3.8 million.
In addition, as of September 28, 1997, Foamex L.P. has net receivables of
approximately $1.0 million for indemnification of environmental liabilities from
former owners, net of a $1.0 million allowance relating to potential
disagreements regarding the scope of the indemnification. Although it is
possible that new information or future developments could require Foamex L.P.
to reassess its potential exposure to all pending environmental matters,
including those described in the footnotes to Foamex L.P.'s condensed
consolidated financial statements, management believes that, based upon all
currently available information, the resolution of all such pending
environmental matters will not have a material adverse effect on Foamex L.P.'s
operations, financial position, capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be material.
Inflation and Other Matters
There was no significant impact on Foamex L.P.'s operations as a result of
inflation for the periods presented. In some circumstances, market conditions or
customer expectations may prevent Foamex L.P. from increasing the price of its
products to offset the inflationary pressures that may increase its costs in the
future. Effective in January 1997, Foamex L.P.'s operations in Mexico became
subject to highly inflationary accounting for financial reporting purposes.
Translation adjustments resulting from fluctuations in the exchange rate between
the Mexican Peso and the U.S. dollar are included in Foamex L.P.'s consolidated
statement of operations as compared to partners' equity (deficit). The effect of
translation adjustments on the 1997 results of operations have not been
material.
Foamex L.P.'s automotive products customers are predominantly automotive
original equipment manufacturers or other automotive suppliers. As such, the
sales of these product lines are directly related to the overall level of
passenger car and light truck production in North America. Also, Foamex L.P.'s
sales are sensitive to sales of new and existing homes, changes in personal
disposable income and seasonality. Foamex L.P. typically experiences two
seasonally slow periods during each year, in early July and in late December,
due to scheduled plant shutdowns and holidays.
23
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the description of the legal proceedings
contained in the Foamex L.P. Annual Report on Form 10-K for the fiscal
year ended December 29, 1996 and in Foamex L.P.'s Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 30, 1997 and June 29,
1997.
The information from Notes 6 and 7 of the condensed consolidated
financial statements of Foamex L.P. and subsidiaries as of September
28, 1997 (unaudited) is incorporated herein by reference.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Financial Statement Schedules.
(a) Exhibits
3.1(a) - Certificate of Limited Partnership of Foamex L.P.
3.2.1(a) - Fourth Amended and Restated Agreement of Limited Partnership of
Foamex L.P., dated as of December 14, 1993, by and among FMXI,
Inc. ("FMXI") and Trace Foam Company, Inc. ("Trace Foam"), as
general partners, and Foamex International Inc. ("Foamex
International"), as a limited partner (the "Partnership
Agreement").
3.2.2(b) - First Amendment to the Partnership Agreement, dated June 28,
1994.
3.2.3(c) - Second Amendment to the Partnership Agreement, dated June 12,
1997.
3.3(a) - Certificate of Incorporation of FMXI.
3.4(a) - By-laws of FMXI.
3.5(k) - Certificate of Incorporation of Foamex Capital Corporation
("FCC").
3.6(k) - By-laws of FCC.
3.7(g) - Certificate of Incorporation of General Felt Industries, Inc.
("General Felt").
3.8(g) - By-laws of General Felt.
3.9(p) - Certificate of Incorporation of Foamex Fibers, Inc. ("Foamex
Fibers")
3.10(p) - By-laws of Foamex Fibers.
4.1.1(d) - Indenture, dated as of June 12, 1997, by and among Foamex L.P.,
FCC, the Subsidiary Guarantors and The Bank of New York, as
Trustee, relating to $150,000,000 principal amount of 9 7/8%
Senior Subordinated Notes due 2007, including the form of Senior
Subordinated Note and Subsidiary Guarantee.
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4.1.2(d) - Registration Rights Agreement, dated as of June 12, 1997, by and
among Foamex L.P., FCC, General Felt, Foamex Fibers, and all
future direct or indirect domestic subsidiaries of Foamex L.P. or
FCC, and Donaldson, Lufkin & Jenrette Securities Corporation,
Salomon Brothers Inc. and Scotia Capital Markets, as Initial
Purchasers.
4.2.1(e) - Indenture, dated as of June 3, 1993, among Foamex L.P. and FCC,
as joint and several obligors, General Felt, as Guarantor, and
Shawmut Bank, National Association ("Shawmut"), as trustee,
relating to $160,000,000 principal amount of 9 1/2% Senior Secured
Notes due 2000, including the form of Senior Secured Note.
4.2.2(a) - First Supplemental Indenture, dated as of November 18, 1993,
among Foamex L.P. and FCC, as Issuers, General Felt and Perfect
Fit Industries, Inc. ("Perfect Fit"), as Guarantors and Shawmut,
as trustee, relating to the Senior Secured Notes.
4.2.3(a) - Second Supplemental Indenture, dated as of December 14, 1993,
among Foamex L.P. and FCC, as Issuers, Foamex L.P., General Felt
and Perfect Fit, as Guarantors and Shawmut, as trustee, relating
to the Senior Secured Notes.
4.2.4(f) - Third Supplemental Indenture, dated as of August 1, 1996, by and
among Foamex L.P. and FCC, as Issuers, Foamex L.P., as parent
guarantor, General Felt, as guarantor, Perfect Fit, as withdrawing
guarantor, and Fleet National Bank ("Fleet"), as trustee relating
to the Senior Secured Notes.
4.2.5(c) - Fourth Supplemental Indenture, dated as of May 28, 1997, by and
among Foamex L.P. and FCC, as Issuers, Foamex L.P., as Parent
Guarantor, General Felt, as Guarantor, and Fleet, as Trustee.
4.2.6(e) - Company Pledge Agreement, dated as of June 3, 1993, by Foamex
L.P. in favor of Shawmut, as trustee for the holders of the Senior
Secured Notes.
4.2.7(p) - Amendment No. 1 to Company (Foamex L.P.) Pledge Agreement, dated
June 12, 1997.
4.2.8(e) - Company Pledge Agreement, dated as of June 3, 1993, by FCC in
favor of Shawmut, as trustee for the holders of the Senior Secured
Notes.
4.2.9(p) - Amendment No. 1 to Company (FCC) Pledge Agreement, dated June
12, 1997.
4.2.10(e) - Subsidiary Pledge Agreement, dated as of June 3, 1993, by
General Felt in favor of Shawmut, as trustee for the holders of
the Senior Secured Notes.
4.2.11(p) - Amendment No. 1 to Subsidiary (General Felt) Pledge Agreement,
dated June 12, 1997.
4.2.12(e) - Company Security Agreement, dated as of June 3, 1993, by Foamex
L.P. and FCC in favor of Shawmut, as trustee for the holders of
the Senior Secured Notes.
4.2.13(p) - Amendment No. 1 to Company, Foamex L.P. and FCC Security
Agreement, dated June 12, 1997.
4.2.14(e) - Subsidiary Security Agreement, dated as of June 3, 1993, by
General Felt in favor of Shawmut, as trustee for the holders of
the Senior Secured Notes.
4.2.15(p) - Amendment No. 1 to Subsidiary Security Agreement (General Felt),
dated June 12, 1997.
4.2.16(e) - Collateral Assignment of Patents and Trademarks, dated as of
June 3, 1993, by Foamex L.P. in favor of Shawmut, as trustee for
the holders of the Senior Secured Notes.
4.2.17(p) - Amendment No. 1 to Collateral Assignment of Patents and
Trademarks (Foamex L.P.), dated June 12, 1997.
4.2.18(e) - Collateral Assignment of Patents and Trademarks, dated as of
June 3, 1993, by FCC in favor of Shawmut, as trustee for the
holders of the Senior Secured Notes.
4.2.19(p) - Amendment No. 1 to Collateral Assignment of Patents and
Trademarks (FCC), dated June 12, 1997.
4.2.20(e) - Collateral Assignment of Patents and Trademarks, dated as of
June 3, 1993, by General Felt in favor of Shawmut, as trustee for
the holders of the Senior Secured Notes.
4.2.21(p) - Amendment No.1 to Collateral Assignment of Patents and
Trademarks (General Felt), dated June 12, 1997.
4.2.22(p) - Amended and Restated Receivables Security Agreement, by and
among Fleet National Bank, Citicorp USA, Inc. and The Bank of Nova
Scotia, dated as of June 12, 1997.
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4.2.23(p) - Intercreditor Agreement by and among Fleet, Citicorp USA, Inc.,
and The Bank of Nova Scotia, dated as of June 12, 1997 (re: Senior
Secured Notes).
4.3 - Intentionally omitted.
4.4 - Intentionally omitted.
4.5.1(d) - Credit Agreement, dated as of June 12, 1997, by and among Foamex
L.P., General Felt, Trace Foam, FMXI, the institutions from time
to time party thereto as lenders, the institutions from time to
time party thereto as issuing banks, and Citicorp USA, Inc. and
The Bank of Nova Scotia, as Administrative Agents.
4.5.2(p) - Foamex International Guaranty, dated as of June 12, 1997, in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.3(p) - Partnership Guaranty, dated as of June 12, 1997, made by Trace
Foam and FMXI in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.4(p) - Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.5(p) - GFI Guaranty, dated as of June 12, 1997, made by General Felt in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.6(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Fibers in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.7(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Latin America, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.5.8(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.9(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by FCC in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.10(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.5.11(p) - Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex
Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.12(p) - Partnership Pledge Agreement, dated as of June 12, 1997, made by
Trace Foam Company, Inc., FMXI, and Foamex International in favor
of Citicorp USA, Inc., as Collateral Agent.
4.5.13(p) - Foamex Pledge Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.14(p) - GFI Pledge Agreement, dated as of June 12, 1997, made by General
Felt in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.15(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.16(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Fibers in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.17(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5.18(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.5.19(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.5.20(p) - Subsidiary Pledge Agreement, dated as of June 12, 1997, made by
Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5.21(p) - Foamex Security Agreement, dated as of June 12, 1997, made by
Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.22(p) - GFI Security Agreement, dated as of June 12, 1997, made by
General Felt in favor of Citicorp USA, Inc., as Collateral Agent.
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<PAGE>
4.5.23(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by Foamex Fibers in favor of Citicorp USA, Inc., as Collateral
Agent.
4.5.24(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by Foamex Latin America, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5.25(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by Foamex Mexico, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5.26(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5.27(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by Foamex Asia, Inc. in favor of Citicorp USA, Inc., as Collateral
Agent.
4.5.28(p) - Subsidiary Security Agreement, dated as of June 12, 1997, made
by FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.6 - Commitment letter, dated July 17, 1997, from The Bank of Nova
Scotia to Foamex Canada Inc.
4.7(a) - Subordinated Promissory Note, dated as of May 6, 1993, in the
original principal amount of $7,014,864 executed by Foamex L.P. to
John Rallis ("Rallis").
4.8(a) - Marely Loan Commitment Agreement, dated as of December 14, 1993,
by and between Foamex L.P. and Marely s.a. ("Marely").
4.9(a) - DLJ Loan Commitment Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").
4.10.1(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $5,000,000, executed by Trace Holdings to Foamex L.P.
4.10.2(p) - Promissory Note, dated June 12, 1997, in the aggregate principal
amount of $4,794,828, executed by Trace Holdings to Foamex L.P.
10.1.1(p) - Amendment to Master Agreement, dated as of June 5, 1997, between
Citibank, N.A. and Foamex L.P.
10.1.2(p) - Amended confirmation, dated as of June 13, 1997, between
Citibank, N.A. and Foamex L.P.
10.2(h) - Reimbursement Agreement, dated as of March 23, 1993, between
Trace Holdings and General Felt.
10.3(h) - Shareholder Agreement, dated December 31, 1992, among Recticel,
s.a. ("Recticel"), Recticel Holding Noord B.V., Foamex L.P.,
Beamech Group Limited, LME-Beamech, Inc., James Brian Blackwell,
and Prefoam AG relating to foam technology sharing arrangement.
10.4.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Trace Holdings and Foamex L.P. (the "Trace Holdings Asset Transfer
Agreement").
10.4.2(k) - First Amendment, dated as of December 19, 1991, to the Trace
Holdings Asset Transfer Agreement.
10.4.3(k) - Amended and Restated Guaranty, dated as of December 19, 1991,
made by Trace Foam in favor of Foamex L.P.
10.5.1(k) - Asset Transfer Agreement, dated as of October 2, 1990, between
Recticel Foam Corporation ("RFC") and Foamex L.P. (the "RFC Asset
Transfer Agreement").
10.5.2(k) - First Amendment, dated as of December 19, 1991, to the RFC Asset
Transfer Agreement.
10.5.3(k) - Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03
Protocol").
10.5.4(h) - The 5.03 Protocol Assumption Agreement, dated as of October 13,
1992, between RFC and Foamex L.P.
10.5.5(h) - Letter Agreement between Trace Holdings and Recticel regarding
the Recticel Guaranty, dated as of July 22, 1992.
10.6(l) - Supply Agreement, dated June 28, 1994, between Foamex L.P. and
Foamex International.
10.7.1(l) - First Amended and Restated Tax Sharing Agreement, dated as of
December 14, 1993, among Foamex L.P., Trace Foam, FMXI and Foamex
International.
10.7.2(d) - First Amendment to Amended and Restated Tax Sharing Agreement of
Foamex L.P., dated as of June 12, 1997, by and among Foamex L.P.,
Foamex International, FMXI and Trace Foam.
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10.8.1(m) - Tax Distribution Advance Agreement, dated as of December 11,
1996, by and between Foamex L.P. and Foamex-JPS Automotive.
10.8.2(d) - Amendment No. 1 to Tax Distribution Advance Agreement, dated as
of June 12, 1997, by and between Foamex L.P. and Foamex
International.
10.9.1(h) - Trace Foam Management Agreement between Foamex L.P. and Trace
Foam, dated as of October 13, 1992.
10.9.2(l) - Affirmation Agreement re: Management Agreement, dated as of
December 14, 1993, between Foamex L.P. and Trace Foam.
10.9.3(d) - First Amendment to Management Agreement, dated as of June 12,
1997, by and between Foamex L.P. and Trace Foam.
10.10.1(k) - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.10.2(k) - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k) - Equity Growth Participation Program.
10.10.4(o) - The Foamex L.P. Salaried Pension Plan (formerly the General Felt
Industries, Inc. Retirement Plan for Salaried Employees),
effective as of January 1, 1995.
10.10.5 - The Foamex L.P. Hourly Pension Plan (formerly "The Foamex
Products Inc. Hourly Employee Retirement Plan), as amended
December 31, 1995.
10.10.6 - Foamex L.P. 401(k) Savings Plan effective October 1, 1997.
10.10.7(a) - Foamex L.P.'s 1993 Stock Option Plan.
10.10.8(a) - Foamex L.P.'s Non-Employee Director Compensation Plan.
10.11.1(o) - Employment Agreement, dated as of February 1, 1994, by and
between Foamex L.P. and William H. Bundy.
10.11.2(q) - Employment Agreement, dated as of July 26, 1995, by and between
Foamex L.P. and Salvatore J. Bonanno.
10.12(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and Marely.
10.13(a) - Warrant Exchange Agreement, dated as of December 14, 1993, by
and between Foamex L.P. and DLJ Funding.
10.14(o) - Stock Purchase Agreement, dated as of December 23, 1993, by and
between Transformacion de Espumas u Fieltros, S.A., the
stockholders which are parties thereto, and Foamex L.P.
10.15(r) - Asset Purchase Agreement, dated as of August 29, 1997, by and
among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie
Group.
10.15.1(s) - Addendum to Asset Purchase Agreement, dated as of October 1,
1997, by and among General Felt, Foamex L.P., Bretlin, Inc. and
The Dixie Group.
27 - Financial Data Schedule.
- ----------------------------
(a) Incorporated herein by reference to the Exhibit to Foamex L.P.'s
Registration Statement on Form S-1, Registration No. 33-69606.
(b) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
for the fiscal year ended January 1, 1995.
(c) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex reporting an event that occurred May 28, 1997.
(d) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex reporting an event that occurred June 12, 1997.
(e) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-4, Registration No. 33-65158.
28
<PAGE>
(f) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended June 30, 1996.
(g) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex, FCC and General Felt on Form S-1, Registration Nos.
33-60888, 33-60888-01, and 33-60888-02.
(h) Incorporated herein by reference to the Exhibit to the Form 10-K Statement
of Foamex and FCC for fiscal 1992.
(i) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1994.
(j) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended September 30, 1996.
(k) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex and FCC on Form S-1, Registration Nos. 33-49976 and
33-49976-01.
(l) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC and Foamex L.P. on Form S-4, Registration No.
33-82028.
(m) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex for the fiscal year ended December 29, 1996.
(n) Incorporated herein by reference to the Exhibit to the Form 10-Q of Foamex
for the quarterly period ended July 2, 1995.
(o) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for fiscal 1993.
(p) Incorporated herein by reference to the Exhibit in the Registration
Statement of Foamex on Form S-4, Registration No. 333-30291.
(q) Incorporated herein by reference to the Exhibit to the Form 10-K of Foamex
L.P. for the fiscal year ended December 31, 1995.
(r) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on August 29, 1997.
(s) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred on October 6, 1997.
Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation S-K. The
registrant hereby agrees to furnish a copy of any such instrument to the
Commission upon request.
(b) Foamex L.P. filed the following Current Reports on Form 8-K:
Form 8-K reporting an event that occurred on August 29, 1997.
Form 8-K reporting an event that occurred on October 6, 1997.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FOAMEX L.P.
By: FMXI, INC.
General Partner
Date: November 12, 1997 By: /s/ Kenneth R. Fuette
Kenneth R. Fuette
Chief Financial Officer
FOAMEX CAPITAL CORPORATION
Date: November 12, 1997 By: /s/ Kenneth R. Fuette
Kenneth R. Fuette
Chief Financial Officer
30
July 17, 1997
Foamex Canada Inc.
415 Evans Avenue
Etobicoke, Ontario
M8W 2T2
Attention: Mr. Al Zinn, General Manager
Dear Sirs:
We are pleased to confirm that subject to acceptance by you, The Bank of Nova
Scotia (the "Bank"), will make available to Foamex Canada Inc. (the "Borrower"),
credit facilities on the terms and conditions set out in the attached Terms and
Conditions Sheet and Schedule "A".
The Bank has agreed to the repayment of funds amounting to $1,000,000 due by the
Borrower to Foamex L.P. providing all terms and conditions of the credits are
met, both before and after repayment of the funds.
If the arrangements set out in this letter, and in the attached Terms and
Conditions Sheet and Schedule "A" (collectively the "Commitment Letter") are
acceptable to you, please sign the enclosed copy of this letter in the space
indicated below and return the letter to us by the close of business on July 30,
1997.
This Commitment Letter replaces all previous commitments issued by the Bank to
the Borrower.
Yours very truly,
/s/ F. J. Myers /s/ R. M. Reynolds
F. J. Myers R. M. Reynolds
Account Manager Vice President and Manager
The arrangements set out above and in the attached Terms and Conditions and
Schedule "A" (collectively the "Commitment Letter") are hereby acknowledged and
accepted by:
FOAMEX CANADA INC.
By: John M. Gaw
Title: Controller
By: Tony DaCosta
Title: Plant Manager
Date: July 24, 1997
<PAGE>
Page 1
TERMS AND CONDITIONS
CREDIT NUMBER: 1 AUTHORIZED AMOUNT: $8,000,000
TYPE
Operating
PURPOSE
General operating requirements
CURRENCY
Canadian dollars
AVAILMENT
The Borrower may avail the credit by way of Direct advances evidenced
by a Grid Note and/or Bankers' Acceptances in Canadian dollars (in
multiples of $100,000 and having terms of maturity of 30 to 360 days
without grace).
INTEREST RATE
The Bank's Prime Lending Rate from time to time, plus 1/2% per annum,
payable monthly.
BANKERS' ACCEPTANCE FEE
The Bank's Commercial Bankers' Acceptance Fee, (subject to revision at
any time), plus 1/2% per annum, subject to a minimum fee of $100 per
transaction, payable at the time of each acceptance.
REPAYMENT
Advances are repayable on demand.
CREDIT NUMBER: 2 AUTHORIZED AMOUNT: $15,000
TYPE
Standby Letters of Credit
PURPOSE
To facilitate requirements of Etobicoke Hydro - expires June 3, 1998
CURRENCY
Canadian dollars
<PAGE>
Page 2
AVAILMENT
The Borrower may avail the credit by way of Standby Letter of Credit.
COMMISSION
1/2% per annum, calculated on the issue amount, based on increments of
30 days or multiples thereto, from date of issuance to expiry date.
Periods of less than 30 days will be counted as a thirty day increment.
The amount is subject to the Bank's minimum fee as well as revision at
any time and is payable upon issuance.
SPECIFIC SECURITY
Reimbursement Agreement for Standby Letter of Credit.
GENERAL SECURITY, FEE, TERMS, AND CONDITIONS APPLICABLE TO ALL CREDITS
FEE
Annual Renewal Fee $1,000.
GENERAL SECURITY
The following security, evidenced by documents in form satisfactory to
the Bank and registered or recorded as required by the Bank, is to be
provided prior to any advances or availment being made under the
Credits:
Bankers' Acceptance Agreement.
General Assignment of Book Debts.
Security Agreement over all inventories.
Security under Section 427 of the Bank Act with appropriate
insurance coverage assigned to the Bank.
General Security Agreement over all present and future
personal property with appropriate insurance coverage, loss if
any, payable to the Bank.
GENERAL CONDITIONS
Until all debts and liabilities under the Credits have been discharged
in full, the following conditions will apply in respect of the Credits:
Combined Operating loans, Bankers' Acceptances and Standby
Letters of Credit are not to exceed 75% of good quality
accounts receivable (excluding accounts over 90 days, offsets
and intercompany accounts) plus 75% of finished goods
inventory and 50% of work-in-process inventory. Advances
against inventory are limited to $1,000,000.
The ratio of current assets to current liabilities is to be
maintained at all times at 1.25:1 or better.
<PAGE>
Page 3
The ratio of Debt (including deferred taxes) to Tangible Net
Work (TNW) is not to exceed 2:1.
Tangible Net Worth (TNW) is to be maintained in excess of
$8,500,000 at all times.
TNW is defined as the sum of share capital, earned and
contributed surplus and postponed funds less (i) amounts due
from officers/affiliates, excluding those amounts classified
as current trade receivables under Generally Accepted
Accounting Principles, (ii) investments in affiliates, and
(iii) intangible assets as defined by the Bank.
Without the Bank's prior written consent which shall not be
unreasonably withheld:
Guarantees or other contingent liabilities in excess
of $1,000,000 in the aggregate are not to be entered
into and assets are not be to further encumbered.
No change in ownership is permitted.
No mergers, acquisitions or change in the Borrower's
line of business are permitted.
The Bank acknowledges that mergers and
reorganizations in conjunction with any company or
companies controlled directly or indirectly by Foamex
L.P. shall be permitted without the Bank's consent
provided that any such merger or reorganization shall
not adversely affect the Bank's security position
and/or the financial condition of the Borrower. The
Borrower shall give the Bank at least 21 business
days advance notice in writing of any such merger or
reorganization.
No redemption of preferred shares is permitted.
Substantially all banking business is to be conducted
with the Bank.
GENERAL BORROWER REPORTING CONDITIONS
Until all debts and liabilities under the Credits have been discharged
in full, the Borrower will provide the Bank with the following:
Annual Audited Financial Statements within 120 days of the
Borrower's fiscal year end, duly signed.
Annual Audited Financial Statements of Foamex L.P. within 120
days of the Company's fiscal year end, duly signed.
Quarterly Interim Financial Statements of the Borrower,
prepared in accordance with Canadian G.A.A.P., within 45 days
of period end, duly signed.
A Statement of Security monthly, to include information on
inventory, accounts receivable, accounts payable and
outstanding cheques, within 20 days of period end, duly
signed.
Aged Listing of Accounts Receivable upon request.
<PAGE>
Page 4
SCHEDULE A
ADDITIONAL TERMS AND CONDITIONS APPLICABLE
TO ALL CREDITS
Calculation and Payment of Interest
1. Interest on loans/advances made in Canadian dollars will be calculated
on a daily basis and payable monthly on the 22nd day of each month
(unless otherwise stipulated by the Bank). Interest shall be payable
not in advance on the basis of a calendar year for the actual number of
days elapsed both before and after demand of payment or default and/or
judgment.
Interest on Overdue Interest
2. Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue,
but shall be compounded monthly and be payable on demand, both before
and after demand and judgment.
Calculation and Payment of Bankers' Acceptance Fee
3. The fee for the acceptance of each Bankers' Acceptance will be payable
on the face amount of each Bankers' Acceptance at the time of
acceptance of each draft calculated on the basis of a calendar year for
the actual number of days elapsed from and including the date of
acceptance to the due date of the draft.
Environment
4. The Borrower agrees:
(a) to comply with all applicable laws and requirements of any
federal, provincial, or any other governmental authority
relating to the environment and the operation of the business
activities of the Borrower;
(b) to allow the Bank access during normal business hours to the
business premises of the Borrower to monitor and inspect all
property and business activities of the Borrower with respect
to the Borrower's compliance with all applicable environmental
laws and regulations;
(c) to notify the Bank of any change in current, normal business
activity conducted by the Borrower which involves the use or
handling of hazardous materials or wastes which increases the
environmental liability of the Borrower in any material
manner;
(d) to notify the Bank of any proposed material change in the use
or occupation of the property of the Borrower prior to any
change occurring;
(e) to provide the Bank with written notice within ten (10)
business days of the Borrower having knowledge of any
environmental problem and any hazardous materials or
substances which may have a material adverse effect on the
property, equipment, or business activities of the Borrower
and with any other environmental information requested by the
Bank;
(f) to conduct all environmental remedial activities in compliance
with applicable requirements of any federal, provincial, or
any other governmental authority relating to the environment
which a commercially reasonable person would perform in
similar circumstances to meet its environmental
responsibilities and if the Borrower receives from the Bank a
written notification of the Borrower's failure to conduct such
environmental remedial activities for thirty (30) days
<PAGE>
Page 5
after receipt of such written notification from the Bank, then
the Bank may perform such activities; and
(g) to pay for any environmental investigations, assessments or
remedial activities with respect to any property of the
Borrower that may be performed for or by the Bank.
If the Borrower notifies the Bank of any specified activity or change
or provides the Bank with any information pursuant to subsections (c),
(d), or (e), or if the Bank receives any environmental information from
other sources, the Bank, in its sole discretion, may decide that an
adverse change in the environmental condition of the Borrower or any of
the property, equipment, or business activities of the Borrower has
occurred which decision will constitute, in the absence of manifest
error, conclusive evidence of the adverse change. Following this
decision being made by the Bank, the Bank shall give written
notification to the Borrower of the Bank's decision concerning the
adverse change, which shall take effect thirty (30) days after the
Borrower's receipt of such written notification, if the Borrower has
not initiated the activities necessary to correct the adverse change
condition.
If the Bank is required to incur expenses for compliance or to verify
the Borrower's compliance with applicable environmental or other
regulations, the Borrower shall indemnify the Bank in respect of such
expenses, which will constitute further advances by the Bank to the
Borrower under this Agreement.
Periodic Review
5. The obligation of the Bank to make further advances or other
accommodation available under any Credits of the Borrower under which
the indebtedness or liability of the Borrower is payable on demand, is
subject to periodic review and to no adverse change occurring in the
financial condition of the Borrower or any guarantor.
Evidence of Indebtedness
6. The Bank's accounts, books and records constitute, in the absence of
manifest error, conclusive evidence of the advances made under this
Credit, repayments on account thereof and the indebtedness of the
Borrower to the Bank.
Acceleration
7. (a) All indebtedness and liability of the Borrower to the Bank
payable on demand, is repayable by the Borrower to the Bank at
any time on demand;
(b) All indebtedness and liability of the Borrower to the Bank not
payable on demand, shall, at the option of the Bank, become
immediately due and payable, the security held by the Bank
shall immediately become enforceable, and the obligation of
the Bank to make further advances or other accommodation
available under the Credits shall terminate, if any one of the
following Events of Default occurs:
(i) the Borrower or any guarantor fails to make when due,
whether on demand or at a fixed payment date, by
acceleration or otherwise, any payment of interest,
principal, fees, commissions or other amounts payable
to the Bank;
(ii) there is a breach by the Borrower of any other terms
or condition contained in this Commitment Letter or
in any other agreement to which the Borrower and the
Bank are parties;
<PAGE>
Page 6
(iii) any default occurs under any security listed in this
Commitment Letter under the headings "Specific
Security" or "General Security" or under any other
credit, loan or security agreement to which the
Borrower is a party;
(iv) any bankruptcy, reorganization, compromise,
arrangement, insolvency or liquidation proceedings or
other proceedings for the relief of debtors are
instituted by or against the Borrower and, if
instituted against the Borrower, are allowed against
or consented to by the Borrower or are not dismissed
or stayed within 60 days after such institution;
(v) a receiver is appointed over any property of the
Borrower or any judgement or order or any process of
any court becomes enforceable against the Borrower or
any property of the Borrower or any creditor takes
possession of any property of the Borrower;
(vi) any adverse change occurs in the financial condition
of the Borrower or any guarantor of the Borrower.
Costs
8. All costs, including legal and appraisal fees incurred by the Bank
relative to security and other documentation, shall be for the account
of the Borrower and may be charged to the Borrower's deposit account
when submitted.
<PAGE>
1327218 (3/81)
GRID DEMAND NOTE
(Canadian Funds)
CDN. $8,000,000
DATE JULY 24 1997
For value received the undersigned promises to pay on demand to the order
of THE BANK OF NOVA SCOTIA (the "Bank") at its Scotia Plaza Branch in lawful
money of Canada the lesser of:
(i) The principal sum of
EIGHT MILLION__________________________________________________Dollars, and
(ii) The unpaid principal balance of all advances made by the Bank as recorded
on the grid on the reverse hereof and on any attachment hereto,
together with interest on the principal amount as well after as before demand of
payment and interest on overdue interest at a rate of 0.5% per annum over the
Bank's prime lending rate from time to time. Interest shall be calculated and
payable monthly. The Bank is hereby authorized and directed to record on the
reverse hereof and on any attachment hereto all advances to and payments by the
undersigned in respect of the operating credits granted to the undersigned by
the Bank and the total unpaid principal balance thereof from time to time.
FOAMEX CANADA INC.
By /s/ John M. Gaw
Title Controller
By /s/ Tony Da Costa
Title Plant Manager
FOAMEX L.P.
HOURLY PENSION PLAN
As Amended and Restated
Effective December 31, 1995
<PAGE>
FOAMEX L.P.
HOURLY PENSION PLAN
TABLE OF CONTENTS
Page
PREAMBLE
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 PARTICIPATION
2.01 Initial Participation 6
2.02 Participation After a Termination
of Employment 7
2.03 Change in Eligible Status 7
ARTICLE 3 RETIREMENT BENEFITS
3.01 Retirement Dates 9
3.02 Normal Retirement Benefit 9
3.03 Early Retirement 9
3.04 Deferred Retirement 9
3.05 Disability Retirement 10
3.06 Termination of Employment
Before Retirement 10
3.07 Zero Cash Out 10
3.08 Suspension of Benefits 10
3.09 Notice of Benefit Suspension 11
3.10 Non-duplication of Benefits 11
ARTICLE 4 PAYMENT OF RETIREMENT INCOME
4.01 Automatic Form - Unmarried Participant 13
4.02 Automatic Form - Married Participant 13
4.03 Election of Optional Forms of Payment 13
4.04 Payment of Small Benefits 15
4.05 Distribution Requirements 15
4.06 Distribution to Five-Percent (5%) Owner 16
4.07 Direct Rollover 16
4.08 Withholding of Income Tax 17
<PAGE>
Page
ARTICLE 5 DISABILITY
5.01 Disability 19
ARTICLE 6 PRE-RETIREMENT DEATH BENEFITS
6.01 Entitlement 20
6.02 Married Participant 20
6.03 Commencement of Death Benefits 21
6.04 Pre-REA Terminations 21
ARTICLE 7 MAXIMUM AND MINIMUM BENEFIT
7.01 Maximum Benefit 22
7.02 Limitation on Distributions 25
7.03 Top-Heavy Provisions 26
ARTICLE 8 CONTRIBUTIONS
8.01 Participant Contributions 30
8.02 Employer Contributions 30
8.03 Basis of Contributions 30
8.04 Payment of Contributions 30
8.05 Return of Contributions 31
8.06 Employer's Contribution Irrevocable 31
8.07 Absence of Responsibility 31
8.08 Employer's Right to Discontinue
Contributions 31
8.09 Employer's Right to Reduce or Suspend
Contributions 31
8.10 Forfeitures 32
ARTICLE 9 ADMINISTRATION
9.01 Establishment of the Benefits Committee 33
9.02 Organization of the Committee 33
9.03 Powers of the Committee 33
9.04 Expenses 34
9.05 Reliance on Professionals 34
9.06 Liability and Indemnification 34
9.07 Fiduciary Insurance 35
9.08 Claims Procedures 35
ARTICLE 10 MANAGEMENT OF ASSETS
10.01 Plan Assets Held in Trust or Annuity
Contract 36
10.02 Trustee 36
<PAGE>
Page
10.03 Investment Manager 37
10.04 Group Annuity Contract 37
10.05 Liability for Benefits 38
10.06 Exclusive Benefit 39
10.07 Forfeitures 39
10.08 Funding Policy 39
ARTICLE 11 AMENDMENT AND TERMINATION
11.01 Amendment 40
11.02 Termination 40
11.03 Allocation of Assets Upon Termination
of the Plan 40
11.04 Partial Termination of the Plan 43
11.05 Pension Benefit Guaranty Corporation 43
11.06 Merger 43
ARTICLE 12 MISCELLANEOUS
12.01 Non-Alienation of Benefits 44
12.02 Incapacity 44
12.03 Not a Guarantee of Employment 44
12.04 Uniformed Services Employment and Reemployment
Rights Act of 1994 44
12.05 State Law 45
12.06 Pronouns 45
APPENDICES:
A Appendix for Former Recticel Employees 46
B Appendix for Tupelo Employees 60
C Appendix for Bargaining Unit Employees
Pico Rivera, California Unit 65
D Appendix for Former Scotfoam Employees 73
E Appendix for Hourly Curon Employees 86
F Appendix for Foamex Products, Inc.
Employees 95
<PAGE>
PREAMBLE
The Foamex L.P. Hourly Retirement Plan for Former Recticel Employees, the
Foamex Products, Inc. Tupelo Hourly Employees Retirement Plan, the General
Felt Industries Pension Plan for Bargaining Unit Employees, Pico Rivera
California Plant, the Foamex Hourly Retirement Plan for Former Scotfoam
Employees and the Knoll International Holdings Inc. Pension Plan for Hourly
Curon Employees (collectively, the "Predecessor Plans") were merged, effective
as of December 31, 1995 into the Foamex Products, Inc. Hourly Employees
Retirement Plan which was renamed the Foamex L. P. Hourly Pension Plan (the
"Hourly Plan"). The Hourly Plan, as the successor plan to the six merged plans
combines, merges and continues such six plans as a single plan. Effective
December 31, 1995 all benefits payable to or funded for participants under
such six plans shall be included and shall be a part of the benefit provided
by this Plan and all assets of such six plans shall be assets of the Hourly
Plan. The rights and benefits, if any, of an Employee who retired or
terminated employment prior to December 31, 1995 shall be determined in
accordance with the provisions of the Predecessor Plan applicable to that
Employee as in effect on the date the Employee retired or terminated
employment, except as otherwise explicitly provided in the Hourly Plan.
The Hourly Plan is hereby amended and restated effective as of December 31,
1995, as set forth in this instrument. The provisions of this Plan, including
any applicable Appendixes, shall govern the rights and benefits of each
Employee who terminates on or after December 31, 1995 except as explicitly
provided in this Plan. The rights and benefits of each Employee shall be those
provided in the Plan generally, except as may be otherwise provided in an
Appendix.
The Plan is intended to constitute a qualified plan under section 401(a) of
the Internal Revenue Code of 1986, as amended.
<PAGE>
ARTICLE 1
DEFINITIONS
1.01 "Accrued Benefit" means the amount payable to a Participant at Normal
Retirement Age determined in accordance with the formula set forth in
the Appendix applicable to the Participant as of the date of
determination.
1.02 "Actuarial Equivalent" means a form of benefit differing in time,
period or manner of payment from a specific benefit provided under
the Plan, but having the same value, using the rates set forth in the
Appendix applicable to the Participant, except as provided in the
second paragraph of this Section 1.02.
Notwithstanding the foregoing, for purposes of determining the
present value of an Accrued Benefit under the Plan and for purposes
of determining the amount of any single sum distribution, the
interest rate used shall be that set forth in Section 417(e)(3) of
the Code, effective as of the second month immediately preceding the
first day of the Plan Year for which such valuation or distribution
occurs and the applicable mortality table shall be that prescribed by
the Secretary of the Treasury as specified in Section 417(e)(3) of
the Code.
1.03 "Affiliated Company" means any Employer or any company which is a
member of the controlled group of such Employer. The controlled group
includes (i) any corporation included with the Employer in a
controlled group of corporations under Section 414(b) of the Code,
(ii) any trade or business under common control with the Employer
under Section 414(c) of the Code, (iii) any member of an affiliated
service group with the Employer under Section 414(m) of the Code, and
(iv) any trade or business which is otherwise aggregated with the
Employer under Section 414(o) of the Code; but only during the period
of control, common control, affiliation or other aggregation. For
purposes of Section 7.01, "more than 50 percent" shall be substituted
for "at least 80 percent" where it appears in Section 1563(a)(1) of
the Code.
1.04 "Beneficiary" means such person or persons as may be designated by a
Participant or as may otherwise be entitled, upon his death, to
receive any benefits or payments under the terms of the Plan.
1.05 "Code" means the Internal Revenue Code of 1986, as amended from time
to time and any regulations or rulings as may be promulgated pursuant
to its provisions.
1.06 "Committee" means the committee described in Article 9.
1.07 "Company" means Foamex L.P., and any successor to all or a major
portion of its business. Any action by the Company pursuant to the
provisions of the Plan shall be evidenced by appropriate resolution
of the Executive Committee of the Company or by
1
<PAGE>
written instrument executed by any person authorized by the Company
to take such action.
1.08 "Deferred Retirement Date" means the first day of the month
coincident with or next following a Participant's actual retirement
after his Normal Retirement Date.
1.09 "Disabled" means, with respect to a Participant, having terminated
employment as a result of a disability that is found by the Social
Security Administration to entitle the Participant to Social Security
disability benefits, when such disability shall have continued for a
period of at least five months measured from the Participant's last
day of active employment with an Employer. Disability, for purposes
of this Plan, shall not include (i) a physical or mental condition
incurred in, or directly attributable to, the military service of any
Participant which prevents him from returning to employment with an
Employer, and for which he is eligible to receive a pension from the
United States; or (ii) any injury or sickness which arose during a
period while he was absent without leave or absent with leave for
other than for injury or sickness.
1.10 "Disability Retirement Date" means the date, if any, on which a
Participant may begin to receive Disability Retirement Income, as set
forth in the Appendix applicable to such Participant.
1.11 "Early Retirement Date" means the date set forth in the Appendix
applicable to the Participant.
1.12 "Effective Date" of the Plan means December 31, 1995.
1.13 "Employee" means a common-law employee of an Employer at a location
described in an Appendix who receives regular compensation from an
Employer, computed on an hourly basis, other than a pension,
severance pay, retainer fee under contract or consulting fee, but
excluding any individual in a group covered under any other
retirement or pension plan, including any such plan established or
maintained pursuant to a collective bargaining agreement, to which an
Employer contributes directly or indirectly. The term "Employee"
shall not include any individuals classified by the Employer as
independent contractors even if such individuals would be classified
as employees of the Employer under common law.
1.14 "Employer" means the Company and any Affiliated Company which adopts
the Plan with the consent of the Company.
The following entities participate as Employers in the Plan: Foamex
L.P. and General Felt Industries, Inc.
1.15 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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1.16 "Hour of Service" means
(A) each hour for which an Employee is paid or entitled to
payment for the performance of duties for an Employer,
(B) each hour for which an Employee is paid or entitled to
payment by an Employer on account of a period curing which
no duties are performed such as vacation, holidays, and sick
pay (irrespective of whether the employment relationship has
terminated), but not in excess of 501 hours for any such
single continuous period, and
(C) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer,
excluding any hour credited under (A) or (B).
These hours shall be credited to the Employee for the computation
period or periods to which the award, agreement or payment pertains
rather than the computation period or periods in which the award,
agreement or payment is made.
No hours shall be credited on account of any period during which the
Employee performs no duties and receives payment solely for the
purpose of complying with worker's compensation, unemployment
compensation or disability insurance laws. Any Hours of Service
required to be credited shall be determined pursuant to 29 Code of
Federal Regulations, Section 2530.200(b) and (c), as promulgated by
the United States Department of Labor, which are incorporated herein
by reference.
In determining Hours of Service for purposes of determining Years of
Eligibility Service or Years of Vesting Service, but not for purposes
of calculating Years of Benefit Service, the term "Employer" shall
include any Affiliated Company, and the term "Employee" shall include
any Employee of such Employer and any Leased Employee.
1.17 "Investment Manager" means any investment advisor registered under
the Investment Advisors Act of 1940, a bank (other than the Trustee)
as defined in that Act, or an insurance company qualified to perform
investment management services under the laws of more than one State,
which shall have acknowledged in writing that it is a fiduciary with
respect to the Plan.
1.18 "Leased Employee" means any person who is a leased employee within
the meaning of Section 414(n)(2) of the Code, unless such leased
employee is covered by a plan that meets the requirements of Section
414(n)(5)(B) off the Code and leased employees do not constitute more
than twenty percent (20%) of the Employer's non-highly compensated
work force (as defined in Section 414(n)(5)(C) of the Code).
1.19 "Normal Retirement Age" means age 65.
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1.20 "Normal Retirement Date" means the first day of the month coincident
with or next following a Participant's attainment of Normal
Retirement Age.
1.21 "Participant" means an Employee who has become a Participant in
accordance with the provisions of Section 2.01.
1.22 "Plan" means the Foamex L.P. Hourly Pension Plan.
1.23 "Plan Year" means the calendar year.
1.24 "Predecessor Plan" means the Foamex L.P. Hourly Plan for Former
Recticel Employees, the Foamex Products, Inc. Tupelo Hourly Employees
Retirement Plan, the General Felt Industries Pension Plan for
Bargaining Unit Employees, Pico Rivera California Unit, the Foamex
Hourly Retirement Plan for Former Scotfoam Employees, the Knoll
International Holding Inc. Pension Plan for Hourly Curon Employees,
or the Foamex Products, Inc. Hourly Employee's Retirement Plan.
1.25 "Retirement Date" means a Participant's Early, Normal, Deferred or
Disability Retirement Date.
1.26 "Retirement Income" means the retirement benefits provided to
Participants and their spouses in accordance with Article 4.
1.27 "Spouse" means an individual to whom a Participant has been legally
married for a year as of a specified date, except as may be specified
in the Appendix applicable to a Participant.
1.28 "Termination of Employment" means the date an Employee terminates
employment with each Employer and Affiliated Company.
1.29 "Trust Agreement" means the agreement between the Company and the
Trustee that establishes the Trust Fund.
1.30 "Trust Fund" means the fund established by the Company as provided in
Article 10.
1.31 "Trustee" means the trustee or trustees by whom the funds of the Plan
are held as provided in Article 10.
1.32 "Year of Benefit Service" means the period of service granted to an
Employee for the accrual of benefits, as defined in the Appendix
applicable to a Participant. Notwithstanding any provision in the
Plan to the contrary, Years of Benefit Service shall not include
years with respect to which a Participant has received a distribution
of his entire Accrued Benefit, unless the Participant is re-employed
before incurring 5 consecutive Breaks in Service commencing after
distribution of his Accrued Benefit
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(or, if applicable, a five year period of Severance) and repays the
amount of the distribution with interest (determined in accordance
with Section 411(c)(2)(C) of the Code) not later than five (5) years
after his date of re-employment.
1.33 "Year of Eligibility Service" means the period of service for
purposes of determining an Employee's eligibility to participate in
the Plan, as defined in the Appendix applicable to a Participant.
1.34 "Year of Vesting Service" means the period of service for purposes of
determining a Participant's nonforfeitable right to Retirement
Income, as defined in the Appendix applicable to a Participant.
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ARTICLE 2
PARTICIPATION
2.01 Initial Participation
Each Employee who was a Participant in one of the Predecessor Plans
on the day before the Effective Date shall continue in the Plan as a
Participant as of the Effective Date. Each Employee who was a
Participant in the Plan on the day before the Restatement Effective
Date shall continue in the Plan as a Participant as of the
Restatement Effective Date.
Each other Employee who is not excluded from participation in the
Plan shall become a Participant as of date set forth in the Appendix
applicable to such Employee.
The following Employees shall be excluded from participation in the
Plan:
(A) Employees who are covered by a collective bargaining
agreement, unless such agreement provides for coverage under
the Plan;
(B) Employees who are non-resident aliens and who receive no
earned income (within the meanings of Section 911(b) of the
Code) from an Employer which constitutes income from sources
within the United States;
(C) Leased Employees;
(D) Employees at the CDC Warehouse, California, Dallas, Texas,
Dalton, Georgia, Denver, Colorado, Fairless Hills,
Pennsylvania, Hayward, California (all Buildings), Kent,
Washington, LaMirada, California, Newton, North Carolina,
Ontario, California, Ontario OSP, California, Orange,
California, Phoenix, Arizona, Ponotoc, Mississippi (Division
#7), Ponotoc, Mississippi (Division #8), Salt Lake City,
Utah, Santa Teresa, New Mexico, Tigard, Oregon, West
Sacramento, California, Fulton, Mississippi, MW CDC
Warehouse, Indiana, Philadelphia, Pennsylvania, Eddystone
(Administration), Pennsylvania, Chicago (Sales Office),
Illinois, Southfield (Sales Office), Michigan, Linwood
(Corporate Office), Pennsylvania and New Albany, Mississippi
locations and Employees at Trace International Holdings,
Inc. (New York, New York and Saddle Brook, New Jersey
locations);
(E) Employees hired on a temporary and part-time basis, as
determined by the Company on a uniform and
non-discriminatory basis; provided, however, that if any
such Employee who would otherwise be eligible to participate
in the Plan is credited with at least 1,000 Hours of Service
in the twelve consecutive month period beginning with such
Employee's date of hire or is credited with 1,000
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Hours of Service in any twelve consecutive month period
beginning on the anniversary thereof, or any lesser number
of Hours of Service as set forth in the Appendix applicable
to an Employee, such Employee shall be eligible to become a
Participant in the Plan as of the date set forth in the
Appendix applicable to such Employee; and
(F) Employees who are paid on a salaried basis.
2.02 Participation After a Termination of Employment
An Employee who is re-employed after a Termination of Employment and
who had been a Participant prior to the Termination of Employment
shall be eligible to become a Participant as of the date as of the
date he is again credited with an Hour of Service for the Employer.
An Employee who is re-employed after a Termination of Employment, and
who had not yet become a Participant, shall become a Participant
after satisfying the requirements set forth in the Appendix
applicable to him.
An Employee's Years of Eligibility Service, Years of Vesting Service
and Years of Benefit Service shall be credited to him upon his
re-employment in accordance with the provisions of the Appendix
applicable to him
2.03 Change in Eligible Status.
(A) If a Participant becomes a member of a collective
bargaining unit covered by a collective bargaining
agreement which does not expressly provide for coverage of
bargaining unit members in this Plan, or otherwise ceases
to be an eligible Employee but continues in the employment
of the Company or an Affiliated Company, he shall continue
to earn Years of Vesting Service under the provisions of
the Plan, but shall cease to earn Years of Benefit
Service. Anything herein to the contrary notwithstanding
other than subsection (B) below, the amount of benefit
payable to such Participant, or with respect to such
Participant, under any provision of this Plan shall be
equal to the Participant's Accrued Benefit as of the date
of the change in his eligible status. If, however, the
Participant ceases to be a member of such a collective
bargaining unit or re-qualifies as an eligible Employee,
he shall begin to earn Years of Benefit Service again, and
the amount of his benefit shall be calculated without
regard to the restriction of the preceding sentence.
(B) Notwithstanding the provisions of subsection (A) above,
and subject to the provisions, if any, of the Appendix
applicable to a Participant, if a Participant at any time
ceases to be an eligible Employee but continues in the
employment of the Employer or an Affiliated Company, and
as a result thereof becomes eligible for participation in
the Foamex Group Salaried Retirement Plan or any
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successor plan, the amount of monthly retirement benefit
payable to such Participant, or with respect to such
Participant, under any provisions of this Plan shall be
calculated by taking into account the Participant's Years
of Benefit Service as of the date of the change in his
eligible status and the rate or rates of monthly
retirement benefit specified in the benefit formula of the
Plan as in effect as of the date of the Participant's
change in eligible status.
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ARTICLE 3
RETIREMENT BENEFITS
3.01 Retirement Dates
A Participant may retire on a Normal Retirement Date, an Early
Retirement Date, Deferred Retirement Date, or Disability Retirement
Date. A Participant shall have a nonforfeitable interest in his
Accrued Benefit upon attainment of Normal Retirement Age while an
Employee of the Employer or any Affiliated Company.
3.02 Normal Retirement Benefit
Subject to the provisions of Section 7.01, a Participant's monthly
Retirement Income, in the form provided in Section 4.01, shall be
equal to the amount set forth in the Appendix applicable to the
Participant.
3.03 Early Retirement
A Participant who retires on an Early Retirement Date may elect to
receive one of the following:
(A) commencing on his Normal Retirement Date, his Accrued
Benefit, determined as of his Early Retirement Date; or
(B) commencing on his Early Retirement Date, or on the first day
of any month thereafter, as selected by the Participant, his
Accrued Benefit as described in the foregoing paragraph
reduced by the amount set forth in the Appendix applicable
to the Participant.
3.04 Deferred Retirement
(A) A Participant who continues in employment after his Normal
Retirement Date shall be entitled to receive his Accrued
Benefit determined as if his Deferred Retirement Date were
his Normal Retirement Date.
(B) Notwithstanding the foregoing, payment of a Participant's
Accrued Benefit shall begin in accordance with Section 4.06
of Article 4.
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3.05 Disability Retirement Date
A Participant who becomes Disabled on or before his Normal Retirement
Date may elect to receive his Accrued Benefit as of his Disability
Retirement Date, if permitted by the terms of the Appendix applicable
to him, and subject to the terms and conditions of such Appendix.
3.06 Termination of Employment Before Retirement
A Participant who has completed five Years of Vesting Service shall
have a nonforfeitable right to his Accrued Benefit.
If such a Participant has a Termination of Employment before his
earliest Retirement Date for reasons other than death, he shall be
entitled to receive either:
(A) commencing on his Normal Retirement Date, his Accrued
Benefit, determined as of his termination of employment,
or
(B) if the Participant has completed the service requirements
for retirement at his Early Retirement Date as set forth
in the Appendix applicable to him, commencing on the first
day of any month coincident with or following his Early
Retirement Date, his Accrued Benefit as determined under
the foregoing paragraph (A), reduced in accordance with
the provisions of the Appendix applicable to him.
3.07 Zero Cash Out
Upon a Participant's Termination of Employment with an Employer and
all Affiliated Companies prior to the time that his Accrued Benefit
becomes vested, the Participant shall forfeit his Accrued Benefit.
For the purposes of this Plan, any such Participant shall be
considered to have a vested Accrued Benefit with a present value of
zero and shall be deemed to have received a distribution of such
vested Accrued Benefit upon such Termination of Employment with an
Employer and all Affiliated Companies. If the Participant is
re-employed by an Employer or an Affiliated Company and his Years of
Vesting Service and Benefit Service attributable to his prior period
of employment are not disregarded, his Accrued Benefit shall be
restored.
3.08 Suspension of Benefits
If a Participant receiving Retirement Income is re-employed by an
Employer or an Affiliated Company prior to his Normal Retirement
Date, his Retirement Income shall cease, and any election of an
optional benefit in effect thereunder shall become void. Any Years of
Vesting Service and Years of Benefit Service to which he was entitled
when he retired shall be restored to him, and, upon subsequent
retirement,
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<PAGE>
his Retirement Income shall be based on his Years of Benefit Service
before and after the period of prior retirement, reduced by the
Actuarial Equivalent of the benefits, if any, received prior to his
restoration to service.
If a Participant receiving Retirement Income is re-employed by an
Employer or an Affiliated Company on or after his Normal Retirement
Date, his Retirement Income shall be suspended for each month during
the period of restoration which constitutes a month of "suspension
service". A month of "suspension service" is a month in which an
Employee completes at least 40 Hours of Service with the Employer.
Upon subsequent retirement, payment of Retirement Income shall resume
no later than the first day of the third month after the month in
which the Participant ceases to be employed in such suspension
service, and shall be payable in the same form as the original
Retirement Income payments. The amount of Retirement Income shall be
based on Years of Benefit Service and the benefit Multipliers before
and after the period of prior retirement, reduced by the Actuarial
Equivalent of the benefits, if any, received prior to his restoration
to service. In the event of the Participant's death during such
suspension period, any benefit that would have been payable to his
surviving spouse, had he not been restored to service, shall be
payable, and any payments under an optional benefit, if one has been
elected and has become effective, shall commence.
Nothing in this Section shall preclude the payment of Retirement
Income to a Participant in accordance with Section 3.04(B).
3.09 Notice of Benefit Suspension
The Committee shall prepare and deliver, to each Participant whose
Retirement Income is deferred pursuant to Section 3.04 or suspended
pursuant to Section 3.08, a notice containing (A) a description of
the Plan provisions relating to the deferral or suspension; (B) a
copy of such provisions; (C) a statement to the effect that
applicable Department of Labor regulations may be found in Section
2530.203-3 of the Code of Federal Regulations; and (D) a description
of the Plan's claims procedures. Such notice shall be furnished to
the Participant by personal delivery or first class mail: (i) during
the calendar month in which occurs his Normal Retirement Date if
benefits are being deferred pursuant to Section 3.04 or (ii) during
the first calendar month in which his benefits are suspended pursuant
to Section 3.08, whichever is applicable.
3.10 Non-duplication of Benefits
Anything herein to the contrary notwithstanding, if a Participant is
entitled to receive, or upon application would be entitled to
receive, any pension or retirement benefits from any other qualified
defined benefit plan to which the Employer or any Affiliated Company
contributes (other than a pension, retirement, welfare or social
benefit program maintained by any governmental jurisdiction on a
compulsory basis, such as the Social Security Act of the United
States) then, to the extent such benefits are based on periods of
employment included Years of Credited Service under this Plan, the
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amount thereof shall be deducted from the amount of retirement income
otherwise payable under this Plan with respect to such Years of
Credited Service.
However, if the Participant contributed toward such other benefit,
the portion attributable to his own contributions shall not be so
deducted. In the event that such other benefit is not paid at the
same time and manner as the benefits payable under this Plan, such
deduction shall be made on an equitable basis as determined by the
Committee.
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ARTICLE 4
PAYMENT OF RETIREMENT INCOME
4.01 Automatic Form - Unmarried Participant
The Retirement Income of a Participant who is not married on his
annuity starting date shall be paid monthly commencing with the month
of his annuity starting date and ending with the monthly payment
prior to his death unless he elects otherwise in accordance with
Section 4.03.
4.02 Automatic Form - Married Participant
The Retirement Income of a Participant who has a Spouse on his
annuity starting date shall be paid monthly for his life commencing
with the month of his annuity starting date and after his death to
his Spouse for so long as such Spouse lives, in monthly amounts equal
to 50% of the monthly amounts paid to the Participant, unless the
Participant elects otherwise in accordance with Section 4.03. This
form shall be the qualified joint and survivor annuity. The amounts
payable to a Participant and his Spouse shall be the Actuarial
Equivalent of the amount which would have been payable to the
Participant under Section 4.01 if he were unmarried.
The Retirement Income payable to a Participant who has been married
for less than one (1) year as of the date payments of Retirement
Income commence shall be in the qualified joint and survivor annuity
form described in the preceding paragraph, unless the Participant
elects otherwise in accordance with Section 4.03. If the Participant
and such spouse do not stay married for one (1) year, the Participant
and his spouse will be treated as not having been married on the
Participant's annuity starting date. In such event, the Participant
will receive Retirement Income in the form described in Section 4.01,
the spouse will not be entitled to the survivor benefit, and no
retroactive payments will be made to the Participant.
4.03 Election of Optional Forms of Payment
(A) A Participant to whom Section 4.01 applies may elect not to
receive his Retirement Income in the form specified therein
but rather in one of the optional forms of payment provided
for in the Appendix applicable to such Participant. Any such
election may be revoked and a new election substituted as
provided in this Section.
Such an election shall be filed with the Committee, on a
form provided by it, during the 90-day period ending on the
date on which payment of the Participant's Retirement Income
is to commence (the "annuity starting date"), and shall
become effective on the annuity starting date.
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(B) A Participant to whom Section 4.02 applies may elect, with
the written consent of his Spouse, to receive his Retirement
Income in the form specified in Section 4.01 or one of the
optional forms provided for in the Appendix applicable to
such Participant. The Spouse's written consent, once made
with respect to a Participant's election, shall be
irrevocable. Such an election shall be filed with the
Committee, on a form provided by it, during the 90-day
period ending on the annuity starting date and shall become
effective on the annuity starting date. The Committee shall
forward the required election form to the Participant not
less than 30 days nor more than 90 days before the annuity
starting date, together with a written explanation in
nontechnical language of the terms and conditions of the
form of payment provided under Section 4.02; the
Participant's right to elect an optional form of benefit;
the rights of the Participant's Spouse; the right to revoke
a previous election of an optional form; and the financial
effect of a Participant's electing to receive his Retirement
Income in another form.
The Spouse's written consent to an election under this
Section shall be witnessed by a notary public.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Committee that such
written consent cannot be obtained because there is no
Spouse or the Spouse cannot be located, then the Spouse's
consent will be deemed to have been given. Any consent
necessary under this Section shall be valid only with
respect to the Spouse who signs the consent or, in the case
of a deemed consent, the Spouse who has deemed to have
consented. In addition, a revocation of an election under
this Section may be made by a Participant without the
consent of his Spouse at any time before the commencement of
benefits. The number of such revocations shall not be
limited.
(C) The written explanation described in paragraph (B) above may
be provided after the annuity starting date if the
distribution commences at least 30 days after such
explanation is provided. A Participant may also elect (with
any applicable spousal consent) to waive the requirement
that the written explanation be provided at least 30 days
prior to the annuity starting date (or waive the 30 day
requirement described in the first sentence of this
paragraph (C)), as long as the distribution commences no
more than 7 days after the explanation is provided.
(D) If a Participant dies before his annuity starting date, any
election shall have no effect.
(E) Notwithstanding paragraph (B) hereof, a Participant may
elect to receive an optional form of payment which is an
actuarially reduced Retirement Income commencing on his
Retirement Date and payable during his lifetime, with a
percentage of such payments that is greater than 50% to be
paid after his death to his Spouse for her lifetime, without
the consent of his Spouse.
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4.04 Payment of Small Benefits
If the single sum Actuarial Equivalent of the Accrued Benefit payable
to any payee is $3,500 or less (or beginning January 1, 1998, $5,000
or less), such Accrued Benefit shall be paid to such payee in a
single sum.
4.05 Distribution Requirements
Notwithstanding any provision of this Plan to the contrary, a
Participant's Accrued Benefits shall be distributed to him not later
than April 1 of the calendar year following the later of (i) the
calendar year in which he attains age seventy and one-half (70-1/2)
or (ii) in the case of a Participant other than a "five year (5%)
owner" (as defined in Section 416(i) of the Code) who did not make
the election described in subsection (c) hereof, the calendar year in
which he retires. Alternatively, distributions to a Participant must
begin no later than the April 1 following such calendar year and must
be made over the life of the Participant (or the lives of the
Participant and the Participant's designated Beneficiary) or the life
expectancy of the Participant (or the life expectancies of the
Participant and his designated Beneficiary).
(A) If the distribution of a Participant's interest has begun in
accordance with a method selected in this Article, and the
Participant dies before his entire interest has been
distributed to him, the remaining portion of such interest
shall be distributed at least as rapidly as under the method
of distribution selected pursuant to such Article as of his
date of death.
(B) If a Participant dies before he has begun to receive any
distributions of his interest under the Plan, his entire
interest shall be distributed to his Beneficiaries within
five (5) years after his death.
(C) The 5-year distribution requirement of Subsection (B) hereof
shall not apply to any portion of the deceased Participant's
interest which is payable to or for the benefit of a
designated Beneficiary. In such event, such portion may be
distributed over the life of such designated Beneficiary (or
over a period not extending beyond the life expectancy of
such designated Beneficiary) provided such distribution
begins not later than one (1) year after the date of the
Participant's death (or such later date as may be prescribed
by Treasury regulations). Except, however, in the event the
Participant's spouse is his designated Beneficiary, the
requirement that distributions commence within one year of a
Participant's death shall not apply. In lieu thereof, such
distribution must commence no later than the date on which
the deceased Participant would have attained age seventy and
one-half (70-1/2). If the surviving spouse dies before the
distributions to such spouse begin, then the 5-year
distribution requirement of Subsection (B) shall apply as if
the spouse were the Participant.
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<PAGE>
(D) For the purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the
case of a life annuity or joint and survivor life annuity)
may be redetermined, but not more frequently than annually
in accordance with such rules as may be prescribed by
Treasury regulations.
(E) The restrictions imposed by this Section shall not apply if
a Participant has, prior to January 1, 1984, made a written
designation to have his death benefits paid in an
alternative method acceptable under Code Section 401(a) as
in effect prior to the enactment of the Tax Equity and
Fiscal Responsibility Act of 1982. Any such written
designation made by a Participant shall be binding upon the
Plan Administrator notwithstanding the provisions of this
Article.
4.06 Distributions to Five-Percent (5%) Owner
For a Plan Year in which the Plan has a Participant who is a
5-percent owner (as defined under Section 416(i) of the Code), the
distribution of any interest to which a Participant who is such a
5-percent owner is entitled shall commence not later than the April 1
following the Participant's taxable year in which he attains age
seventy and one-half (70-1/2), whether or not his employment has
terminated in such year, provided such Employee did not make the Tax
Equity and Fiscal Responsibility Act Section 242(b)(2) election.
4.07 Direct Rollover
(A) With respect to any distribution of $200 or more described
in this Article IV which constitutes an eligible rollover
distribution within the meaning of Code Section
401(a)(31)(C), the distributee thereof shall, in
accordance with procedures established by the Committee,
be afforded the opportunity to direct that such
distribution be transferred directly to the trustee of an
eligible retirement plan (a "direct rollover"). For
purposes of the foregoing sentence, an "eligible
retirement plan" is (1) a qualified trust within the
meaning of Code Section 402 which is a defined
contribution plan the terms of which permit the acceptance
of rollover distributions, (2) an individual retirement
account or annuity within the meaning of Code Section 408
(other than an endowment contract), or (3) an annuity plan
within the meaning of Code section 403(a), which is
specified by the distributee in such form and at such time
as the Committee may prescribe.
(B) Notwithstanding the foregoing, if the distributee elects
to have his eligible rollover distribution paid in part to
him and part as a direct rollover:
(1) the direct rollover must be in an amount of
$500 or more; and
(2) a direct rollover to two or more eligible
retirement plans shall not be permitted.
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(C) The Committee shall, within a reasonable period of time
prior to making an eligible rollover distribution from this
Plan, provide a written explanation to the distributee of
the direct rollover option described above, as well as the
provisions under which such distribution will not be subject
to tax if transferred to an eligible retirement plan within
60 days after the date on which the distributee received the
distribution.
4.08 Withholding of Income Tax
(A) Notification of Withholding of Federal Income Tax. All
Participants and Beneficiaries entitled to receive benefits
under the Plan shall be notified of the Plan's obligation to
withhold federal income tax from any benefits payable
pursuant to the terms of the Plan. Such notice shall be in
writing, be given at the time set forth in Subsection (B)
and contain the information set forth in Subsection (C) of
this Section.
(B) Time of Notice. The notice described in Subsection (A) shall
be provided not earlier than 90 days before such payment is
to be made and not later than the time the Participant or
beneficiary is furnished with him claim for benefits
application.
(C) Content of the Notice. The notice required by Subsection (A)
shall contain, at a minimum:
(1) with respect to any distribution which is an
eligible rollover distribution within the meaning
of Code Section 3405(c)(3) (other than an eligible
rollover distribution of less than $200 which is
exempt from withholding under regulations
prescribed by the Secretary of the Treasury),
advise the payee that there shall be withheld from
such distribution an amount equal to 20% thereof
(or such other amount as may from time to time be
prescribed by the Code, or the Secretary of the
Treasury or his delegate), unless the payee directs
the Committee to transfer such distributions as a
direct rollover to an eligible retirement plan,
within the meaning of Section 4.07 thereof, in
accordance with such procedures as the Committee
may prescribe (a "transfer direction"),
(2) with respect to any distribution which is not an
eligible rollover distribution within the meaning
of Code Section 3405(c)(3):
(i) advise the payee of his right to elect not
to have withholding apply to any payment or
distribution and explain the manner in which
such election may be made, and include or
indicate the source of any forms necessary
to make the election;
(ii) advise the payee of his right to revoke such
an election at any time;
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(iii) advise the payee that any election remains
effective until revoked;
(iv) advise the payee that penalties may be
incurred under the estimated tax payment
rules if the payee's payments of estimated
tax are not adequate and sufficient tax is
not withheld from payments under this Plan;
and
(v) advise the payee that the election not to
have federal income tax withheld from
benefits is prospective only and that any
election made after a payment or
distribution to the payee is not an election
with respect to such payment or
distribution.
(D) Effective Date of Election. Any transfer direction, election
or revocation of any election by a payee shall become
effective immediately upon receipt by the Committee of the
transfer direction, election or revocation. Thereafter, the
Committee shall, unless otherwise provided by applicable
law, regulation or other guidance by the Secretary of the
Treasury or his delegate, withhold federal income tax in
accordance or consistent with the instructions filed by the
payee.
(E) Failure to Make Election.
(1) In the case of an eligible rollover distribution,
if the payee fails to provide the Committee with a
transfer direction, the Committee shall withhold an
amount equal to 20% of the amount of the
distribution (or such other amount as may be from
time to time prescribed by the Code, or the
Secretary of the Treasury or his delegate).
(2) In the case of a distribution which is not an
eligible rollover distribution, if the payee fails
to provide the Committee with a withholding
certificate, the Committee shall withhold, in the
case of a periodic distribution, the amount which
would be required to be withheld from such payment
if such payment were a payment of wages by an
employer to an employee for the appropriate payroll
period, determined as if the payee were a married
person claiming three withholding allowances. In
the case of a nonperiodic distribution, 10% of the
amount of the distribution shall be withheld.
(F) Coordination with Internal Revenue Code and Regulations.
Notwithstanding the foregoing, the Committee shall discharge
its withholding and notice obligations in accordance with
the Code and regulations and such other guidance with
respect thereto as may be promulgated from time to time by
the Secretary of the Treasury or his delegate.
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ARTICLE 5
DISABILITY
5.01 Disability Benefits
A Participant who becomes Disabled while actively employed before his
Normal Retirement Date shall be eligible to receive such disability
benefits, if any, as are described in the Appendix applicable to the
Participant.
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ARTICLE 6
PRE-RETIREMENT DEATH BENEFITS
6.01 Entitlement
If a Participant dies before the date the payment of Retirement
Income begins, a death benefit shall automatically be paid in
accordance with this Article, unless otherwise provided by the terms
of the Appendix applicable to the Participant.
6.02 Married Participant
Upon the death of a Participant who has a Spouse, such Spouse shall
receive monthly payments for life equal to those the Spouse would
have received:
(A) in the case of a Participant who dies after his Early
Retirement Date, if the Participant had retired on the day
before his death and had designated the Spouse as the joint
annuitant to receive payments at the rate of 50% of the
payments paid to him under the form of payment described in
Section 4.02;
(B) in the case of a Participant who dies prior to his Early
Retirement Date, who has terminated employment prior to his
death,
(i) if the Participant survived to his Early
Retirement Date,
(ii) retired on the Early Retirement Date and
designated the Spouse as the joint annuitant to
receive payments at the rate of 50% of the
payments paid to him under the form of payment
described in Section 4.02, and
(iii) died on the day after his Early Retirement
Date;
(C) in the case of a Participant who dies prior to his Early
Retirement Date while employed by the Employer and the
Affiliated Companies if the Participant:
(i) had separated from service on the date of his
death,
(ii) survived to his Early Retirement Date,
(iii) retired on the Early Retirement Date and
designated the Spouse as the joint annuitant to
receive payments at the rate of 50% of the
payments paid to him under the form of payment
described in Section 4.02, and
(iv) died on the day after his Early Retirement
Date.
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Death benefits described in Section 6.02(A) shall commence as of the
first day of the month following the Participant's death. Death
benefits described in Section 6.02(B) or (C) shall commence on the
date the Participant would have attained Early Retirement Date.
Notwithstanding the foregoing, a Spouse entitled to a monthly benefit
under Section 6.02 may elect to postpone commencement of such benefit
and receive monthly amounts commencing at any specified date not
later than the first day of the month following the date on which the
Participant would have attained age 70-1/2. In the event of such a
deferral, the monthly amounts payable to the Spouse shall be equal to
the amount that would have been payable to the Spouse if the
Participant had elected to have his Retirement Income commence at the
deferred commencement date and died on the day after such date,
having designated the Spouse as the joint annuitant to receive
payments at the rate of 50% of the payments paid to him under the
form of payment described in Section 4.02.
6.03 Commencement of Death Benefits
If a Participant dies before the distribution of his benefit has
begun, distributions of the Spouse's benefit must commence not later
than the date the Participant would have attained age 70-1/2. If the
surviving Spouse dies before the distributions to such Spouse begin,
this Section shall be applied as if the Spouse were the Participant.
A distribution to a Beneficiary other than the Participant's Spouse
shall be made (A) within five years after the death of the
Participant or (B) over the life of the Beneficiary (or over a period
not extending beyond the life expectancy of such Beneficiary)
commencing within one year after the death of the Participant.
6.04 Pre-REA Terminations
Any Participant who was alive as of August 23, 1984 and had not yet
begun to receive benefits under the Plan shall have the right to
elect to have Section 205 of ERISA and Section 401(a)(11) of the
Code, as in effect on August 22, 1984 (which provide for the payment
of a qualified joint and survivor annuity) apply to his benefits
under the Plan, provided that he is credited with at least one Hour
of Service under the Plan or the Prior Plan on or after September 1,
1974, and is not credited with any service in a Plan Year beginning
on or after January 1, 1976. This Section is applicable to such
Participant for whom such sections of ERISA and the Code do not apply
and for whom, but for this Section, the amendments made by Sections
103 and 203 of the Retirement Equity Act of 1984 do not apply. Any
Participant who was alive on August 23, 1984 and had not yet begun to
receive benefits under the Plan shall have the right to elect to be
covered under Section 6.02 provided he was credited with at least one
Hour of Service on or after January 1, 1976, had completed at least
10 years of Service under the Plan and was vested in all or a portion
of his Accrued Benefit derived from Employer contributions upon
termination of Employment, and if Section 6.02 would not, but for
this Section, apply to such Participant.
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ARTICLE 7
MAXIMUM AND MINIMUM BENEFIT
7.01 Maximum Benefit
(A) The maximum annual Retirement Income payable to a
Participant, when added to any retirement income
attributable to contributions of an Employer or an
Affiliated Company provided to the Participant under any
other qualified defined benefit plan, shall be equal to the
lesser of (1) $90,000 or (2) the Participant's average
annual remuneration during the three consecutive calendar
years of his participation in the Plan affording the highest
such average, or during all of the years in which he was a
Participant in the Plan if less than three years, subject to
the following adjustments:
(i) If the Participant has not been a Participant in the
Plan for at least ten years, the maximum annual
Retirement Income in clause (1) above shall be
multiplied by the ratio which the number of years of
his participation in the Plan bears to ten.
(ii) If the Participant has not completed ten Years of
Vesting Service, the maximum annual Retirement Income
in clause (2) above shall be multiplied by the ratio
which the number of Years of Vesting Service bears to
ten.
(iii) If the Retirement Income begins before the
Participant's Social Security retirement age but on or
after his 62nd birthday, the maximum retirement
allowance in clause (1) above shall be reduced by 5/9
of one percent for each of the first 36 months plus
5/12 of one percent for each additional month by which
the Participant is younger than the Social Security
retirement age at the date his Retirement Income
begins. If the Retirement Income begins before the
Participant's 62nd birthday, the maximum Retirement
Income in clause (1) above shall be the Actuarial
Equivalent to the maximum benefit payable to age 62, as
determined in accordance with the preceding sentence.
(iv) If the Retirement Income begins after the Participant's
Social Security retirement age, the maximum Retirement
Income in clause (1) above shall be the Actuarial
Equivalent, based on an interest rate of five percent
per year in lieu of the interest rate otherwise used in
the determination of Actuarial Equivalent, to the
maximum benefit payable at the Social Security
retirement age.
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<PAGE>
(v) If the Participant's Retirement Income is payable as a
joint and survivor annuity with his Spouse as the
beneficiary, the modification of the Retirement Income
for that form of payment shall be made before the
application of the maximum limitation and, as so
modified, shall be subject to the limitation.
(vi) For the purpose of applying this Section to any other
form of Retirement Income other than those specified in
Sections 4.01 and 4.02, the annual benefit shall be
adjusted on the basis of Actuarial Equivalence to an
equivalent benefit in the form of a straight life
annuity.
(vii) For the purpose of establishing Actuarial Equivalence
under paragraphs (iii) and (vi), the interest rate
assumption shall not be less than the greater of (I)
5%, or (II) the rate specified in Section 1.3 hereof;
provided, however, that the applicable interest rate
(as defined in Section 417 of the Code) shall be
substituted for "5%" hereinabove for purposes of
adjusting the benefit or limitation of any form of
benefit subject to Section 417(e)(3) of the Code.
(viii) For purposes of adjusting any benefit or limitation
under this Section 7.01, the mortality table shall be
that described in Section 415(b)(2)(E)(v) of the Code.
(ix) As of January 1 of each calendar year, the dollar
limitation as determined by the Commissioner of
Internal Revenue for that calendar year shall become
effective as the maximum permissible dollar amount of
retirement allowance payable under the Plan during the
limitation year ending within that calendar year in
lieu of the dollar amount in clause (1) above.
(B) In the case of a Participant who is also a participant in a
defined contribution plan of an Employer or an Affiliated
Company, his maximum benefit limitation shall not exceed an
adjusted limitation computed as follows:
(i) Determine the defined contribution fraction, as defined
in Section 7.01(C)(i).
(ii) Subtract the result of (i) from one (1.0).
(iii) Multiply the dollar amount in clause (1) of paragraph
(A) above by 1.25.
(iv) Multiply the amount described in clause (2) of
paragraph (A) above by 1.4.
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<PAGE>
(v) Multiply the lesser of the result of (iii) or the
result of (iv) by the result of (ii) to determine the
adjusted maximum benefit limitation applicable to the
Participant.
(C) For purposes of this Section:
(i) the defined contribution fraction for a Participant who
is a participant in one or more defined contribution
plans of an Employer or an Affiliated Company shall be
a fraction, the numerator of which is the sum of the
following:
(a) the Employer's and Affiliated Company's
contributions credited to the Participant's
accounts under the defined contribution plan
or plans;
(b) with respect to limitation years beginning
before 1987, the lesser of the part of the
Participant's contributions in excess of 6
percent of his compensation or one-half of
his total contributions to such plan or
plans, and with respect to limitation years
beginning after 1986, all of the
Participant's contributions to such plan or
plans; and
(c) any forfeitures allocated to his accounts
under such plan or plans, but reduced by any
amount permitted by regulations promulgated
by the Commissioner of Internal Revenue;
and the denominator of which is the lesser of the
following amounts determined for each of the
Participant's Years of Vesting Service:
(d) 1.25 multiplied by the maximum dollar amount
allowed by law for that year; or
(e) 1.4 multiplied by 25% of the Participant's
remuneration for that year.
(ii) a defined contribution plan means a pension plan
which provides for an individual account for each
participant and for benefits based solely upon the
amount contributed to the participant's account,
and any income, expenses, gains and losses, and any
forfeitures of accounts of other members which may
be allocated to that participant's accounts,
subject to (iii) below;
(iii) a defined benefit plan means any pension plan which
is not a defined contribution plan; however, in the
case of a defined benefit plan which provides a
benefit which is based partly on the balance of the
separate account of a participant, that plan shall
be treated as a defined
24
<PAGE>
contribution plan to the extent benefits are based
on the separate account of the participant and as a
defined benefit plan with respect to the remaining
portion of the benefits under the plan;
(iv) the term "remuneration" with respect to any
Participant shall mean the wages, salaries and
other amounts paid in respect of such Participant
by the Company or an Affiliated Company for
personal services actually rendered, determined
after any pre-tax contributions under a "qualified
cash or deferred arrangement" (as defined under
Section 401(k) of the Code) or under a "cafeteria
plan" (as defined under Section 125 of the Code),
and shall include, but not by way of limitation,
bonuses, overtime payments and commissions; and
shall exclude deferred compensation, stock options
and other distributions which receive special tax
benefits under the Code;
(v) the term "Social Security retirement age" means age
65 with respect to a Participant who was born
before January 1, 1938, age 66 with respect to a
Participant who was born after December 31, 1937
and before January 1, 1955, and age 67 with respect
to a Participant who was born after December 31,
1954;
(vi) the term "limitation year" means the Plan Year;
(vii) for purposes of this Article 7 only, the term
"Retirement Income" shall mean the Participant's
Accrued Benefit to the extent it exceeds the
Actuarial Equivalent of the Participant's Employee
Contributions plus Interest. Employee Contributions
plus Interest for a limitation year shall be
treated as a separate defined contributions plan to
the extent required by Section 415 of the Code and
the regulations thereunder.
(D) In no event shall the limitations set forth above reduce the
benefit accrued by a Participant as of the end of the Plan
Year beginning in 1986, with no changes in the terms and
conditions of the Plan on or after May 5, 1986, taken into
account in determining that benefit.
7.02 Limitations on Distributions
Distributions shall instead be limited as provided in this
subsection.
In the event of Plan termination, the benefit of any highly
compensated Employee (and any highly compensated former Employee)
shall be limited to a benefit that is nondiscriminatory under Section
401(a)(4) of the Code.
Annual payments to any "restricted employee" shall not exceed an
amount equal to the payments that would be made on behalf of the
Employee under a single life annuity that
25
<PAGE>
is the actuarial equivalent of the sum of the Employee's accrued
benefit and the Employee's other benefits under the Plan. This
limitation shall not apply if (i) after payment to a "restricted
employee" of all Plan benefits, the value of Plan assets equals or
exceeds 110% of the value of current liabilities, as defined in
Section 412(1)(7) of the Code, or (ii) the value of all Plan benefits
of the "restricted employee" is less than one percent of the value of
current liabilities before distribution, or (iii) the value of
benefits payable under the Plan to the "restricted employee" does not
exceed the amount described in Section 411(a)(11)(A) of the Code.
For purposes of this subsection, a "restricted employee" is any
highly compensated Employee or highly compensated former Employee, as
defined in Section 414(q) of the Code; provided, however that if
there are more than 25 such Employees and former Employees, only the
25 most highly paid of such Employees and former Employees shall be
taken into account.
7.03 Top-Heavy Provisions
(A) Notwithstanding anything herein to the contrary, this
Section shall apply if the Plan is determined to be a
top-heavy plan, as defined below.
(B) The Plan will be considered a top-heavy plan for the Plan
Year if, as of the last day of the immediately preceding
Plan Year or, in the case of the first Plan Year, the last
day of such Plan Year (hereinafter referred to as the
"determination date"):
(i) the present value of the accrued benefits of
Participants who are key employees exceeds 60% of
the present value of the accrued benefits of all
Participants covered under the Plan; or
(ii) if the Plan is part of a required aggregation group
and the required aggregation group is a top-heavy
group.
Notwithstanding the provisions of paragraph (i), the Plan
shall not be considered a top-heavy plan for any Plan Year
in which it is a part of a required or permissive
aggregation group which is not a top-heavy group.
For purposes of paragraph (i), the accrued benefits of
Participants who are not key employees but who were key
employees in a prior year, or of Participants who have not
performed any services for an Employer maintaining the Plan
at any time during the five-year period ending on the
determination date will be disregarded. The determination of
the top-heavy ratio and the extent to which distributions,
rollovers, and transfers are taken into account will be made
in accordance with Section 416 of the Code and the
regulations thereunder.
(C) The following definitions shall apply for purposes of this
Section:
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<PAGE>
(i) "Key employee" means an employee or former employee
of the Employer or an Affiliated Company (including
a beneficiary of such employee) who at any time
during the determination period is:
(a) an officer of the Employer or an Affiliated
Company whose annual compensation exceeds
50% of the maximum Section 415(b)(1)(A)
limitations of the Code;
(b) one of the ten employees owning (or
considered as owning under Code Section 318)
both more than 1/2% interest and the largest
interest in the Employer. Such employee will
not be counted if his annual compensation
does not exceed the Code Section
415(c)(1)(A) limitation;
(c) an owner of 5% or more of the Employer or an
Affiliated Company; or
(d) an owner of 1% or more of the Employer or an
Affiliated Company whose annual compensation
exceeds $150,000.
A determination of who is a key employee will be
made in accordance with Code Section 416(i)(1) and
the regulations thereunder. A non-key employee is
an employee or former employee who is not a key
employee.
For purposes of this subsection, "compensation"
means compensation as defined in Section 414(q)(4)
of the Code.
(ii) "Accrued benefit" means a Participant's accrued
benefit determined as of the most recent valuation
date which occurs within the twelve-month period
ending on the determination date, as if the
Participant had a separation from service on such
valuation date, plus any distributions which are
made within the Plan Year which includes the
determination date, or within the four (4)
preceding plan years.
(iii) "Required aggregation group" means:
(a) each plan of an Employer and any Affiliated
Company in which a key employee is a
participant; and
(b) each plan of an Employer and any Affiliated
Company which enables any plan described in
subsection (a) above to meet the
requirements of Sections 401(a)(4) or 410 of
the Code.
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<PAGE>
(iv) "Permissive aggregation group" means a required
aggregation group, plus one or more plans of an
Employer or any Affiliated Company that are not
part of the required aggregation group but which
satisfy the requirements of Sections 401(a)(4) and
410 of the Code when considered together within the
required aggregation group.
(v) "Top-heavy group" means any aggregation group if,
as of the determination date, the sum of (1) the
present value of the accrued benefits or
participants who are key employees under all
defined benefit plans included in such group, and
(2) the aggregate of the accounts of participants
who are key employees under all defined
contribution plans included in such group, exceeds
50% of a similar sum determined for all
participants.
(D) The following provisions shall be applicable to Participants
who are not covered by a collective bargaining agreement for
any Plan Year with respect to which the Plan is top-heavy.
(i) In lieu of the service requirement for eligibility
for a vested Retirement Income specified in Section
3.05, any Participant who has completed three Years
of Vesting Service shall be entitled, upon
termination of service with the Employer, to a
vested Retirement Income equal to such
Participant's accrued benefit, determined in
accordance with the provisions of Article 4 and
subparagraph (ii) below.
(ii) The accrued benefit of a Participant who is a
non-key employee shall not be less than two percent
of such Participant's "average remuneration"
multiplied by the Participant's of his Years of
Benefit Service, not in excess of 10, during the
Plan Years for which the Plan is top-heavy. For
purposes of this paragraph, "average remuneration"
means the Participant's average remuneration from
the Employer for the five consecutive years in
which such remuneration is the highest, excluding
any remuneration after the last Plan Year with
respect to which the Plan is top-heavy.
(iii) The multiplier 1.25 in Subsections (B)(iii) and
(C)(i)(d) of Section 7.01 shall be reduced to 1.0.
The reduction shall not apply if additional minimum
benefits are provided in accordance with Section
416(h)(2) of the Code.
(E) If the Plan is top-heavy with respect to a Plan Year and
ceases to be top-heavy for a subsequent Plan Year, the
following provisions shall be applicable:
(i) The accrued benefit in any such subsequent Plan
Year shall not be less than the minimum accrued
benefit provided in paragraph (D)(ii) above,
28
<PAGE>
computed as of the end of the most recent Plan Year
for which the Plan was top-heavy.
(ii) A Participant who has completed three Years of
Vesting Service on or before the last day of the
most recent Plan Year for which the Plan was
top-heavy shall have a nonforfeitable right to his
accrued benefit, computed as of any subsequent
date, and deferred to commence on his Normal
Retirement Date.
In the event that it should subsequently be determined by
statute, court decision acquiesced in by the Commissioner of
Internal Revenue, regulation or ruling by the Commissioner
of Internal Revenue that the provisions of this Section are
no longer necessary to quality the Plan under the Code, this
Section shall be ineffective without the necessity of
further amendment of the Plan.
29
<PAGE>
ARTICLE 8
CONTRIBUTIONS
8.01 Participant Contributions
Participants shall make no contributions to the Plan.
8.02 Employer Contributions
The Employer shall make contributions to the Plan in accordance with
the minimum funding requirements of ERISA and such additional
payments that in its discretion, after consultation with the Plan's
actuary, it deems necessary. The Employer shall not be required to
meet the minimum funding requirements of ERISA and may extend the
amortization period thereunder, upon the approval of the Internal
Revenue Service and Secretary of Labor, respectively.
8.03 Basis of Contributions
Subject to the return of contributions, as provided in Section 8.05
hereof, and subject to their respective rights to discontinue or to
reduce or suspend contributions, as provided in Sections 8.08 and
8.09, respectively, and subject to the right to amend or terminate
the Plan as provided in Sections 11.01 and 11.02, respectively, the
Employers' contributions are expected to maintain the Trust Fund in
accordance with the funding method and policies established by the
Committee consistent with Plan objectives.
Each Employer's contributions paid to the Trustee shall be recorded
separately by the Trustee, and, for accounting purposes only, the
Trust Fund held by the Trustee shall be considered as separate funds
attributable to each Employer.
Each Employer shall have the obligations, as herein provided, to make
contributions for its own Participants, and no Employer shall have
the obligation to make contributions for the Participants of any
other Employer; provided, however, that contributions may be made for
another Employer to the extent permitted under the Code and the
regulations and rulings promulgated thereunder. Any failure by an
Employer to fulfill its own obligations under this Plan shall have no
effect upon any other Employer.
8.04 Payment of Contributions
Payments for a particular Plan Year shall be paid to the Trustee no
later than 2-1/2 months after the close of the Plan Year, or within
such longer period as may be permitted under regulations of the
Secretary of the Treasury. However, if, under regulations of the
Secretary of the Treasury, a waiver of a particular year's
contribution
30
<PAGE>
shall have been granted for substantial business hardship, the time
limits of this Section shall be disregarded.
8.05 Return of Contributions
In the event that the Commissioner of Internal Revenue, on initial
application for a determination letter within the remedial amendment
period under Section 401(b) of the Code, determines that the
implementing trust does not constitute an exempt trust, or refuses,
in writing, to issue a determination as to whether the trust is an
exempt trust, the Employer's contributions on which such
determination or refusal is applicable shall be returned to the
Employer.
In the event that all or part of the Employer's deductions under
Section 404 of the Code for contributions to the Plan (including any
quarterly estimated minimum contributions) are disallowed by the
Internal Revenue Service or are otherwise not deductible under
Section 404 of the Code, the portion of the contributions to which
such disallowance applies (or the current value, if less) shall be
returned to the Employer without interest.
Either such return shall be made within one year after the denial of
qualification or disallowance of deduction, as the case may be.
8.06 Employer's Contribution Irrevocable
Subject to Sections 8.05 and 11.02, an Employer shall have no right,
title or interest in the Trust Fund or in any part thereof, and no
contributions made thereto shall revert to the Employer.
8.07 Absence of Responsibility
Neither the Company, any Employer, or any officers, employees,
directors, or agents of the Company or any Employer, nor the
Committee, or any of the members thereof, nor the Trustees, guarantee
in any manner the payment of benefits hereunder.
8.08 Employer's Right to Discontinue Contributions
Nothing contained in this Plan or in the Trust shall ever be
construed as imposing any obligation on an Employer to continue its
contributions hereunder or, following a suspension of contributions,
to resume or thereafter continue its contributions in whole or in
part.
8.09 Employer's Right to Reduce or Suspend Contributions
Each Employer reserves the right to exercise its option at any time
to discontinue or reduce its contributions hereunder during any
period and from time to time without
31
<PAGE>
either amending or terminating the Plan or the Trust or incurring any
obligation to resume its contributions in whole or in part.
8.10 Forfeitures
Forfeitures arising under this Plan because of severance of
employment before a Participant becomes eligible for a Pension, or
for any other reason, shall be applied to reduce the cost of the Plan
(with respect to the particular Employer of the Participant), not to
increase the benefits otherwise payable to Participants.
32
<PAGE>
ARTICLE 9
ADMINISTRATION
9.01 Establishment of the Benefits Committee
The complete authority to control and manage the operation and
administration of the Plan shall be placed in the Foamex L.P.
Benefits Committee (the "Committee"). The Committee shall also have
sole responsibility for determining (A) the allocation of Plan assets
among the Trustees and any insurers, and (B) the extent to which Plan
assets held by the Trustees shall be invested in any separate
investment.
The Committee shall consist of at least three members, appointed from
time to time by the Company to serve at the pleasure thereof. The
Company shall designate one member of the Committee as its Chairman.
Any member of the Committee may resign at any time by delivering his
written resignation to the Chairman.
9.02 Organization of the Committee
The Chairman, when present, shall preside at meetings of the
Committee. In his absence, those present shall choose one of their
number to act as Chairman. The Committee shall appoint a Secretary,
who shall keep the minutes of the meetings and perform such other
duties as may be assigned to him by the Committee, together with such
other officers as it shall deem necessary. Neither the Secretary nor
any other officer appointed by the Committee need by a member of the
Committee or a Participant in the Plan. The Committee shall act by
the majority of members then in office at all meetings, but it may
act upon matters by unanimous vote in writing without a meeting. The
Committee may authorize one or more of its members and/or its
Secretary to sign directives and communications and to execute
documents on behalf of the Committee.
9.03 Powers of the Committee
For purposes of ERISA, the Committee shall be the "Named Fiduciary"
for operation and administration of the Plan, and the "Plan
Administrator". The Committee is designated as agent for service of
legal process against the Plan.
The Committee shall have all powers and duties necessary or
appropriate to operate and administer the Plan, including, but not
limited to, the following specific functions:
(A) to act on applications for benefits;
(B) to determine eligibility, service and other questions;
33
<PAGE>
(C) to establish rules for the administration of the Plan;
(D) to submit an annual report to the Company;
(E) to file all reports and make all disclosures required under
ERISA; and
(F) to designate other fiduciaries to carry on various specific
fiduciary responsibilities in the administration of the
Plan.
The Committee shall have discretionary authority to interpret the
Plan and to resolve ambiguities, inconsistencies and omissions, which
findings shall be binding, final and conclusive.
The Committee shall also receive and review all reports of the
Trustees, the insurers under any group annuity contracts, and the
collective trustees of any separate investment, and shall report
thereon to the Company. Benefits payable under the Plan shall be
paid, at the direction of the Committee (subject to the provisions of
any group annuity contract), from the assets held by a Trustee or the
assets held under a group annuity Contract.
9.04 Expenses
No member of the Committee who is an Employee shall receive any
compensation for his services as such. All expenses of the Committee
in administering the Plan and the Trust Fund, including, but not
limited to, attorney's fees, actuary's fees, audit fees, PBGC
premiums, accounting and clerical charges, and Trustee and investment
manager fees, shall be paid out of the Trust Fund, except to the
extent paid by the Company.
9.05 Reliance on Professionals
The members of the Committee shall be entitled to rely upon all
tables, valuations, certificates and reports furnished by any duly
appointed actuary (who shall be an "enrolled actuary" as defined in
section 7701(a)(35) of the Code), upon all certificates and reports
made by any duly appointed accountant, and upon all opinions given by
any duly appointed legal counsel. The members of the Committee shall
be fully protected against any action or inaction taken or omitted in
good faith in reliance upon such tables, valuations, certificates,
reports or opinions and any such action or inaction shall be
conclusive upon each of them and upon all persons having any interest
under the Plan.
9.06 Liability and Indemnification
The Committee shall operate and administer the Plan for the exclusive
purpose of providing the benefits under the Plan (and for determining
the reasonable expenses of the Plan) with the care, skill, prudence
and diligence under the circumstances then
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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. No member of the Committee shall be
personally liable for any action or inaction with respect to any duty
or responsibility imposed upon such person by the terms of the Plan
unless such action or inaction is finally determined by a court, and
all time for appeal has lapsed, to be a breach of the standard of
conduct expressed in this Section. The Company shall indemnify each
member of the Committee against any expenses which are reasonably
incurred in connection with any legal action to which such person is
a party by reason of his duties and responsibilities with respect to
the Plan, excepting only expenses and liabilities arising from his
own gross negligence or willful misconduct, as finally determined by
a court, and all time for appeal has lapsed.
9.07 Fiduciary Insurance
Subject to the approval of the Company, the Committee shall have the
right to purchase such insurance as it deems necessary to protect the
Plan and the Trust Fund from loss due to any breach of fiduciary
responsibility by any person. Any premiums due on such insurance
shall be paid by the Employer. Nothing in this Section shall prevent
the Company, at its own expense, from providing insurance to any
person to cover potential liability of that person as a result of a
breach of fiduciary responsibility.
9.08 Claims Procedures
If any person claims entitlement to benefits under the Plan and the
Committee determines such person is not so entitled, the Committee
shall notify the claimant in writing of its decision within 90 days
of the claim; provided, however, that if special circumstances
require an extension of time for processing the claim, an additional
90 days from the end of the initial period shall be allowed for
processing the claim, in which event the claimant shall be furnished
with a written notice of the extension prior to the end of the
initial 90 day period indicating the special circumstances requiring
an extension.
Notice of denial of a claim shall set forth, in a manner calculated
to be understood by the claimant, the specific reason or reasons for
the denial (including reference to specific Plan provisions) and an
explanation of the Plan's claims procedure. A claimant may review all
pertinent documents and may request an opportunity to appeal such
denial to the Committee for a full and fair review. Such request
shall be made in writing and filed with the Committee within 60 days
after delivery to the claimant of the written notice of the decision.
The claimant or his duly authorized representative may request in
writing all pertinent documents and may submit issues and comments in
writing. Written notice of the decision on review shall be furnished
to the claimant within 60 days after receipt of the request for
review, unless special circumstances require an extension of time for
processing, in which event an additional 60 days shall be allowed for
review and the claimant shall be so notified in writing. Written
notice of the decision on review shall include specific reasons for
such decision.
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ARTICLE 10
MANAGEMENT OF ASSETS
10.01 Plan Assets Held in Trust or Annuity Contract
For purposes of funding the Plan, the Company has entered into Trust
Agreements with the Trustees, and the Company may in its discretion
enter into additional Trust Agreements from time to time, including a
master trust agreement. In addition, the Company may, in its
discretion, enter into one or more group annuity contracts from time
to time as a funding method under the Plan.
If the Trust Agreement shall so provide, the Company or the Committee
may direct the Trustee to enter into a group annuity contract with an
insurer selected by the Company or the Committee and/or to enter into
an agreement to participate in a collective trust, with a collective
trustee selected by the Company or the Committee, maintained under a
collective trust agreement. Such collective trusts are sometimes
hereinafter referred to as "separate investment(s)".
The Company or the Committee may direct a Trustee that has entered
into a group annuity contract or collective trust agreement to
transfer all or a portion of the Plan assets held by such Trustee
under a Trust Agreement to the applicable insurer or separate
investment, as the case may be, in accordance with the provisions of
this Article.
To the extent of the equitable share of a Trust in any such
collective trust, such collective trust shall be considered part of
the Plan. Fiduciary responsibility for the management and investment
of Plan assets held in any such collective trust shall reside in the
person or persons to whom such responsibility is allocated under the
applicable collective trust agreement.
10.02 Trustee
The Trustee under any Trust Agreement shall take and keep custody of
all Plan assets held under such Trust Agreement and shall have
exclusive fiduciary responsibility for the investment of such Plan
assets (except to the extent that it shall be directed to invest such
Plan assets under a group annuity contract or in a separate
investment, in accordance with the provisions of this Article);
provided, however, that the Company or the Committee shall have the
power to restrict the Trustee to investment in one or more specified
types of assets. Subject to the foregoing, if any such Trust
Agreement shall so provide, the Trustee may in its discretion
transfer from time to time all or any part of the Plan assets held
under such Trust Agreement to a common or collective trust fund or
pooled investment fund maintained by such Trustee for the investment
of assets of qualified retirement plans. Each Trustee shall exercise
its fiduciary responsibilities
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with respect to Plan assets allocated to it, including, without
limitation, any responsibility of diversification imposed by Section
404(a)(1)(C) of ERISA, as if the assets allocated to it constituted
the entirety of the Plan assets; provided, however, that if the
Company or the Committee shall restrict the Trustee to investments in
one or more specified types of assets, the Company or the Committee
shall have the fiduciary responsibility for ensuring that the
diversification requirements of ERISA are not violated by any such
restriction.
The Trustee under each Trust Agreement may be removed at any time by
the Company or the Committee, in accordance with the provisions of
such Agreement, and a new Trustee appointed.
10.03 Investment Manager
If a Trust Agreement shall so provide, the Company or the Committee
may appoint an Investment Manager for all or a portion of the assets
held by the Trustee under such Trust Agreement.
Notwithstanding the foregoing provisions of this Article, if any
Investment Manager is appointed hereunder with respect to assets held
by a Trustee under any such Trust Agreement, such Investment Manager
shall have the exclusive responsibility for the investment and
management of such portion of the assets held under such Trust
Agreement as shall be determined from time to time by the Company or
the Committee (including the power to acquire or dispose of such
assets), except that the Company or the Committee shall have the
power to restrict the Investment Manager to investments in one or
more specified types of assets. No Trustee shall have any
discretionary responsibility for the investment and management of
such assets.
Each Investment Manager shall exercise its fiduciary responsibilities
with respect to Plan assets allocated to it as an Investment Manager,
including without limitation any responsibility of diversification
imposed by Section 404(a)(1)(C) of ERISA, as if the assets allocated
to it as Investment Manager constituted the entirety of the Plan
assets; provided, however, that if the Company or the Committee shall
restrict an Investment Manager to investments in one or more
specified types of assets, the Company or the Committee shall have
the fiduciary responsibility for ensuring that the diversification
requirements of ERISA are not violated by any such restriction.
The Company or the Committee may at any time remove any person
serving as an Investment Manager upon written notice to such person.
10.04 Group Annuity Contract
Any group annuity contract entered into by the Company or a Trustee
in accordance with the provisions of the Plan may provide for the
allocation of amounts received by the insurer thereunder solely to
the insurer's general account or solely to one or more of its
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separate accounts (including separate accounts maintained for the
collective investment of assets of qualified retirement plans) or to
the insurer's general account and/or one or more of such separate
accounts. If any group annuity contract shall thus provide for the
allocation of amounts to the insurer's general account and/or one or
more of such separate accounts, the Company or the Committee shall
have the sole responsibility for determining the portion of the
amounts thus paid to the insurer which shall be allocated to the
insurer's general account, and the insurer shall have the sole
responsibility for determining the allocation of the remainder of the
amounts thus paid to it among the various such separate accounts
maintained by it; provided, however, that the Company or the
Committee may in its discretion (A) direct the insurer to hold in a
particular separate account a specified minimum portion of the
amounts held under the group annuity contract and/or (B) limit or
preclude the use of one or more such separate accounts. The insurer
under any group annuity contract shall have custody of, and exclusive
responsibility for the investment and management of, any amounts held
under such group annuity contract, subject to the power of the
Company or the Committee to determine the portion of such amounts to
be held in the insurer's general account and/or to specify the
minimum portion of such amounts to be held in a particular separate
account maintained by the insurer and/or to limit or preclude the use
of one or more such separate accounts as described above. To the
extent that the responsibilities of the insurer under any group
annuity contract shall involve the management of (including the power
to acquire and dispose of) any assets of the Plan within the meaning
of the provisions of ERISA, it shall be appointed an Investment
Manager by the Company or the Committee.
Notwithstanding anything herein to the contrary, any such insurer
shall, in exercising any responsibility of diversification imposed by
section 404(a)(1)(C) of ERISA, take into account all amounts held
under the applicable group annuity contract, including amounts held
in the insurer's general account; and to the extent that the Company
or the Committee shall (i) direct the insurer to hold in a particular
separate account a minimum portion of the amounts held under the
group annuity contract and/or (ii) limit or preclude the use of one
or more such separate accounts, the Company or the Committee shall
have the fiduciary responsibility for ensuring that the
diversification requirements of ERISA are not violated by any such
direction. Any such insurer which is an Investment Manager of Plan
assets not held by a Trustee under a Trust Agreement shall not be
bound or in any way restricted by any of the provisions of any Trust
Agreement dealing with the obligations of an Investment Manager of
assets held by the Trustee under such Trust Agreement.
10.05 Liability for Benefits
Neither the Employer nor any Trustee shall be liable in any manner
for the payment of benefits under any group annuity contract or the
Plan. Such benefits are to be payable under and only under such group
annuity contract and from funds held under the Plan, respectively,
and only to the extent that the annuities purchased under the group
annuity contract and the Plan assets shall suffice therefor.
Notwithstanding the foregoing, the
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Company reserves the right at any time or times to change the method
and medium of funding benefits under the Plan and to take procedures
appropriate to such ends, subject to the provisions of Article 11 and
of applicable law.
10.06 Exclusive Benefit
Prior to the satisfaction of all liabilities under the Plan, no part
of the corpus or income of the Trust Fund may be used for, or
diverted to, purposes other than the exclusive benefit of
Participants and their joint annuitants, beneficiaries, Spouses and
children under the Plan and for the payment of the expenses of the
Plan. No person shall have any interest in, or right to, any part of
the corpus or income of the Trust Fund except to the extent expressly
provided in the Plan or the Trust Agreement.
10.07 Forfeitures
Subject to the provisions of ERISA, any forfeitures arising under the
Plan shall not be applied to increase the benefits of any Participant
or Beneficiary, but shall be used to reduce future Employer
contributions under the Plan.
10.08 Funding Policy
The Company or the Committee shall establish a procedure for
determining and reviewing the short and long-term financial needs of
the Plan and for communicating these needs to the Trustee. Such
procedure shall provide for review of the short- and long-term
financial needs of the Plan by the Company or the Committee at
reasonable intervals, but not less often than once every twelve
months.
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ARTICLE 11
AMENDMENT AND TERMINATION
11.01 Amendment
The Company or the Committee may at any time, and from time to time,
modify or amend, in whole or in part, any or all of the provisions of
the Plan, subject to the conditions that:
(A) no modifications or amendment may be made which shall
deprive any Participant or other person of any benefits
already accrued to the extent such benefits have been
funded, except to the extent allowable by any applicable law
and except that any modification or amendment may be made
retroactively to the extent necessary to bring the Plan into
conformity with the requirements of Section 401(a) or other
applicable provisions of the Code; and
(B) prior to the satisfaction of all liabilities hereunder, no
part of the funds of the Plan shall, by reason of any
modification or amendment, be used for, or diverted to,
purposes other than the exclusive benefit of Participants
and their joint annuitants, Beneficiaries, Spouses and
children, and the payment of expenses under the Plan.
11.02 Termination
The Company may terminate the Plan at any time, subject to the
condition that, at any time prior to the satisfaction of all
liabilities with respect to Participants and their joint annuitants,
Beneficiaries, Spouses and children, no part of the Plan shall, by
reason of such termination, be at any time used for, or diverted to,
purposes other than the exclusive benefit of such persons. Upon
termination or partial termination of the Plan, the rights of all
affected Participants to benefits accrued under the Plan as of the
date of its termination shall, except as provided in Section 7.02,
become nonforfeitable to the extent then funded, and the assets of
the Plan shall be allocated in accordance with Section 11.03 to all
active and retired Participants and to all other persons already
receiving, or entitled to receive, benefits under the Plan.
11.03 Allocation of Assets Upon Termination of the Plan
Upon termination of the Plan, the assets shall be allocated as
follows:
(A) First, to that portion of each Participant's Accrued Benefit
which is attributable to his contributions to the Plan.
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(B) Second, (i) to provide retirement and survivors' benefits,
if applicable, to all persons for whom payment of such
benefits commenced at least three years prior to the date of
such termination; and (ii) to provide those retirement
benefits that would have been payable to Participants who
could have retired three years prior to the date of
termination of the Plan if they had retired at such time and
if such retirement benefits commenced immediately in the
normal form payable under the Plan. For determining the
amount of any retirement or survivors' benefits to be
provided under this allocation category, the terms of the
Plan as in effect during any part of the five-year period
ending on the date of termination of the Plan which produce
the lowest amount of benefit shall be used, and no increases
in the amounts of retirement or survivors' benefits becoming
effective after the later of commencement of benefits and
the beginning of the three-year period ending on the date of
termination of the Plan shall be taken into account.
(C) Third, to the extent not already provided for in (A) and (B)
above, to provide retirement and survivors' benefits up to
the amounts guaranteed by the Pension Benefit Guaranty
Corporation under Title IV of ERISA. In determining the
retirement and survivors' benefits guaranteed by the Pension
Benefit Guaranty Corporation, the limitations imposed by
Sections 4022(b)(5) and 4022B(a) of ERISA (referring to
benefits guaranteed under prior plan terminations and the
"phase in" of guarantee coverage for substantial owners)
shall not be taken into account.
(D) Fourth, to the extent not already provided for in (A), (B)
and (C) above, to provide all other nonforfeitable
retirement and survivors' benefits under the Plan. (For the
purposes of this subsection, the term "nonforfeitable"
refers to benefits which are either in pay status or which
would not be forfeited by a Participant upon termination of
his employment with the Employer, and does not include
benefits made nonforfeitable merely by reason of termination
of the Plan.)
(E) Fifth, to the extent not already provided for in (A) through
(D) above, to provide all other retirement and survivors'
benefits under the Plan.
If the assets of the Plan available for any of the above-described
allocation categories, after making provision in full for each of the
preceding categories, are insufficient to make full provision for the
members of such category, then, except as otherwise provided with
respect to allocation category (C), such assets shall be allocated
pro rata among the members of such category on the basis of the
present value, as of the date of termination of the Plan, of the
retirement and survivors' benefits of each member of the category. If
the assets of the Plan, after making full provision for allocation
categories (A) and (B), are insufficient to provide in full the
benefits specified in category (C), the assets shall first be applied
to provide in full the benefits determined under the Plan as in
effect at the beginning of the five-year period ending on the date of
termination of
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the Plan and shall then be applied, successively, to provide in full
the benefits determined under the Plan, as modified by each
subsequent amendment to the Plan during such five-year period. If any
such application of assets is insufficient to provide in full the
benefits so determined, the remaining assets shall be allocated pro
rata among the persons entitled to receive such assets, on the basis
of the present value, as of the date of termination of the Plan, of
the benefits to be paid to each such person.
Retirement benefits for which assets are allocated under this
Section, but which would not become payable under the terms of the
Plan until some later date, may be provided by means of a trust or
annuity contract which provides for deferral of payment. Any benefits
for which assets are allocated under this Section may be provided by
distribution in cash of the present value of the benefits to be
provided, by distribution or purchase of annuity contracts or
policies or by establishment of a trust, or by any combination of the
above, as determined by the Committee; provided that any method of
distribution of the assets allocated to provide benefits shall be
subject to approval of the Pension Benefit Guaranty Corporation and
compliance with any directions or instructions issued by it.
In the event that any assets of the Plan remain after all benefits
under the Plan have been provided for in full, such remaining assets
shall be allocated between assets attributable to Employee
contributions, and assets attributable to Employer contributions, as
follows:
(1) Assets attributable to Employee contributions shall be an
amount equal to the product derived by multiplying the
market value of the total remaining assets by a fraction,
the numerator of which is the Employee contributions plus
interest of all Participants, and the denominator of which
is the present value of the benefits with respect to which
assets are allocated under paragraphs (A) through (E) above.
For purposes of the preceding sentence, the term
"Participant" shall include any individual who has received,
during the three-year period ending with the termination
date, a distribution from the Plan of such individual's
entire nonforfeitable benefit in the form of a single-sum
distribution or in the form of an irrevocable commitment
from an insurer to provide such benefit.
Such assets attributable to Employee contributions shall be
distributed to Participants in the proportion that
Participant's Employee contributions plus interest bears to
the total Employee contributions plus interest of all
Participants.
(2) Assets attributable to Employer contributions shall be the
excess of the total remaining assets over the assets over
the assets attributable to Employee contributions, as
determined under the preceding subsection. The assets
attributable to Employer contributions shall be returned to
the Employer.
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11.04 Partial Termination of the Plan
In the even that the Plan is partially terminated by:
(A) a determination by the Company or the Committee,
(B) a determination made by the Internal Revenue Service or the
Pension Benefit Guaranty Corporation at the request of the
Company, the Committee or otherwise, or
(C) a finding made by a court of law having jurisdiction,
the Committee shall direct that the assets held by the Trustee as of
the date the partial termination is deemed to occur shall be
allocated between those Participants or their Beneficiaries, joint
annuitants, Spouses or children who continue to participate in the
Plan and those Participants or their Beneficiaries, joint annuitants,
Spouses or children who are excluded from participation in the Plan
by reason of the partial termination.
The assets held by the Trustee shall be allocated between the two
groups of such persons by determining the amount applicable with
respect to each Participant in the Plan as of the date of the partial
termination of the Plan as provided in Section 11.03. The amount of
retirement income benefit to be used in making such allocation in the
case of a Participant who has not retired shall be the amount that
would be payable if the Participant had retired on such date or, if
he is not then eligible for retirement, the amount that would be
payable if he had terminated employment with the Employer and had
been credited with all benefits under the Plan with respect to his
Service to such date.
11.05 Pension Benefit Guaranty Corporation
Upon partial or complete termination of the Plan, the Committee shall
take all steps necessary to comply with the requirements imposed upon
plan administrators by Title IV of ERISA, and the terms of this
Article shall be subordinated to any directions and instructions
given or any actions taken by the Pension Benefit Guaranty
Corporation pursuant to its authority under Title IV and to any other
decree issued in accordance with the procedures set forth in Title
IV.
11.06 Merger
The Plan may not be merged or consolidated with, nor may its assets
or liabilities be transferred to, any other plan unless each
Participant, joint annuitant, Spouse, child or Beneficiary under the
Plan would, if the resulting plan were then terminated, receive a
benefit immediately after the merger, consolidation, or transfer
which would be equal to or greater than the benefit he would have
been entitled to receive immediately before the merger,
consolidation, or transfer, if the Plan had then terminated.
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ARTICLE 12
MISCELLANEOUS
12.01 Nonalienation of Benefits
No benefit payable under this Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
garnishment, encumbrance or charge. Notwithstanding the foregoing,
(i) in the event that a "qualified domestic relations order" (as
defined in Section 414(p) of the Code and Section 206(d) of ERISA) is
received by the Plan Administrator, benefits shall be payable in
accordance with such order and with Section 414(p) of the Code and
Section 206(d) of ERISA, and (ii) a Participant's benefit may be
reduced as provided by Section 401(a)(13)(C) of the Code. Payments
may be made prior to the Participant's "earliest retirement age" (as
defined in Section 414(p) of the Code and Section 206(d) of ERISA)
pursuant to the terms of a "qualified domestic relations order". The
amount payable to the Participant and to any other person other than
the alternate payee named in the order shall be adjusted accordingly.
The Committee is authorized to issue procedures to effectuate the
requirements for administering "qualified domestic relations orders".
12.02 Incapacity
In the event that the Committee shall find that a Participant or
other person entitled to a benefit is unable to care for his affairs
because of illness or accident, or is a minor, the Committee may
direct that any benefit payment due him, unless a claim shall have
been made therefor by a duly appointed legal representative, be paid
to a spouse, a child, a parent or other blood relative, or to a
person with whom he resides, and any such payment so made shall be a
complete discharge of the liabilities of the Plan therefor.
12.03 Not a Guarantee of Employment
The establishment of the Plan shall not be construed as conferring
any legal rights upon any employee or other person for a continuation
of employment, nor shall it interfere with the rights of the Employer
to discharge any employee and to treat him without regard to the
effect which such treatment might have upon him as a Participant in
the Plan.
12.04 Uniformed Services Employment and Reemployment Rights Act of 1994
Notwithstanding any provisions of this Plan to the contrary,
contributions, benefits, and service credit with respect to qualified
military service will be provided in accordance with Section 414(u)
of the Code.
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12.05 State Law
The Plan shall be construed, regulated and administered under the
laws of the State of Delaware.
12.06 Pronouns
The masculine pronoun shall mean the feminine wherever appropriate.
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APPENDIX A
APPENDIX FOR
FORMER RECTICEL EMPLOYEES
Appendix for Employees at the Cape Girardeau, Missouri; Morristown, Tennessee (
Main, Blended, and Molded facilities); Conover, North Carolina (Division #60);
Cookeville, Tennessee; Arcade, New York; Omaha, Nebraska; and Tazewell,
Tennessee locations who participated in the Foamex L.P. Hourly Retirement Plan
for Former Recticel Employees or who participate in the Plan following the
Effective Date. The following provisions override any of the provisions of the
Plan which conflict with them.
Section 1. Definitions
1.1 "Actuarial Equivalent" means, for purposes of
converting a benefit payable in the form of a life
annuity to benefit payable in the form of a Qualified
Joint and Survivor Annuity or an optional form of
payment set forth in subsection (a) or (b) of Section
4.1 of this Appendix, or offsets from Retirement
Income in connection with benefits previously paid
under the Plan, the Actuarial Equivalent of the
benefit otherwise payable as a life annuity shall be
determined on the basis of the following assumptions:
(1) an interest rate of 7% per annum, compounded
annually; and
(2) the UP-1984 mortality table, with no
adjustment for Participants and with ages
rated down three years for Spouses and Joint
Annuitants.
For the purposes of Section 7.03 of the Plan, the
present value of a Participant's Accrued Benefit
shall be determined on the basis of an interest rate
of 5% per annum, compounded annually, and the UP-1984
mortality table.
1.2 "Break in Service" means the period of time
commencing on an Employee's Severance Date and ending
on the first day on which the Employee again
completes an Hour of Service described in Section
1.16 of the Plan.
1.3 "Break in Service Year" means a twelve consecutive
month period measured from an Employee's Severance
Date during which the Employee fails to complete an
Hour of Service described in Section 1.16 of the
Plan.
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1.4 "Benefit Service" means the period of service of a
Participant taken into account under the Plan for the
purpose of calculating the amount of benefit payable
to the Participant, as determined under the rules set
forth in Section 2.3 of this Appendix.
1.5 "Cape Girardeau Employee" means an employee who is
employed by the Employer at its Cape Girardeau,
Missouri facility on or after January 1, 1987 and who
is included in the bargaining unit covered by the
collective bargaining agreement between the Employer
and Teamsters Local Union No. 574.
1.6 "Conover Employee" means an employee who is employed
by the Employer at its Conover, North Carolina
(Division #60) facility.
1.7 "Disability Retirement Date" means the date specified
in Section 3.3 of this Appendix.
1.8 "Early Retirement Date" means the first day of the
month following the Participant's 55th birthday after
he has completed 10 Years of Vesting Service.
1.9 "Eligibility Service" means the period of service
taken into account for the purpose of determining the
eligibility of an Employee for participation in the
Plan, as determined under the rules set forth in
Section 2.1 of this Appendix.
1.10 "Eligible Class" means the class of Employees
eligible for participation in the Plan, as described
in Section 2.2 of this Appendix.
1.11 "Northern Division Plan" means the
Recticel Foam Corporation Retirement Income Plan as
in effect from time to time prior to January 1, 1990.
1.12 "Predecessor Employer" means Recticel
Foam Corporation. Service with Recticel Foam
Corporation prior to October 2, 1990 is deemed
service with the Employer for purposes of determining
an Employee's Benefit Service and Vesting Service.
Predecessor Employer also means Morristown Foam
Corporation, a Tennessee corporation which was merged
into Recticel Foam Corporation on February 1, 1980.
Service with Morristown Foam Corporation prior to
February 1, 1980 is deemed service with the Employer
for purposes of determining an Employee's Benefit
Service and Vesting Service.
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Predecessor Employer also means Ludlow Corporation, a
Massachusetts corporation which sold certain assets
of its Carpet Cushion Division related to its
manufacturing facility at Cape Girardeau, Missouri to
Recticel on July 20, 1981. In the case of a Cape
Girardeau Employee who was employed by Ludlow
Corporation at its Cape Girardeau facility on July
20, 1981 and became employed by Recticel on that
date, service with Ludlow Corporation prior to July
20, 1981 shall be deemed service with the Employer
for purposes of determining an Employee's Vesting
Service and Benefit Service.
Predecessor Employer also means Clark Foam Products
Corporation, an Illinois corporation which was merged
into Recticel on December 15, 1989. Service of an
Employee with Clark Foam Products Corporation prior
to December 15, 1989 shall be deemed service with the
Employer solely for purposes of determining the
Employee's Eligibility Service and Vesting Service.
1.13 "Re-employment Date" means the date on which an
Employee first completes an Hour of Service described
in Section 1.16 of the Plan after a Break in Service.
1.14 "Severance Date" means the earlier of the dates
specified in paragraphs (a) and (b) set forth below,
except as otherwise provided below:
(a) the date on which an Employee ceases to be
employed by the Employer and each Affiliated
Company by reason of resignation, discharge,
retirement, or death;
(b) the first anniversary of the first day of a
period during which an Employee is
continuously absent from service with the
Employer and each Affiliated Company (with
or without pay) for any reason other than
resignation, discharge, retirement, or
death, such as vacation, holiday, sickness,
disability, layoff, or Leave of Absence.
In the case of an Employee who is absent from service
beyond the first anniversary of the first day of a
continuous period of absence on account of the
Employee's pregnancy, the birth of a child of the
Employee, the placement of a child with the Employee
in connection with the Employee's adoption of such
child, or the care of a child of the Employee during
a period immediately following such birth or
placement, the Employee's Severance Date shall be
deemed to be the second anniversary of the first day
of such absence, rather than the date specified
above, solely for the purpose of determining whether
the Employee has incurred a Break in Service and the
length of the Employee's Break in Service. For all
other purposes of this Plan, the Employee's Severance
Date shall be determined
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under the first paragraph of this Section 1.14, and
notwithstanding any other provision of this Plan to
the contrary, the period of the Employee's absence
after the first anniversary of the first day of such
absence shall not be credited as Vesting Service or
as service for any other purpose under this Plan. The
provisions of this paragraph shall apply to an
Employee only if the Employee furnishes evidence
satisfactory to the Committee on request to establish
that the Employee's absence, and the continuation
thereof beyond its first anniversary, was due to one
or more reasons specified herein. The provisions of
this paragraph shall not apply to an Employee whose
period of absence for one or more reasons specified
herein began prior to January 1, 1985.
1.15 "Southern Division Plan" means the Recticel Foam
Corporation Hourly Employees' Pension Plan, as in
effect from time to time prior to January 1, 1990.
1.16 "Spouse" means "Spouse" as defined in Section 1.27 of
the Plan, except with respect to Participants who
receive Retirement Income under Article 4 of the Plan
on or prior to December 31, 1997 "Spouse" means the
individual to whom a Participant is legally married
on his annuity starting date.
1.17 "Vesting Service" means the period of service of an
Employee taken into account for determining whether
the Employee's Accrued Benefit is non-forfeitable,
and for other purposes under the Plan, as determined
under the rules set forth in Section 2.2 of this
Appendix.
Section 2. Service Rules
2.1 Eligibility Service. An Employee shall be credited
with Eligibility Service in accordance with the rules
set forth in subsections (a) and (b) below.
(a) General Rule. An Employee shall be credited
with one Year of Eligibility Service if the
Employee completes at least 1000 Hours of
Service during an eligibility computation
period (as defined in subsection (b) below).
A Year of Eligibility Service shall be
credited to the Employee only upon the
expiration of the entire eligibility
computation period during which the Employee
completes 1000 or more Hours of Service.
(b) "Eligibility Computation Period" Defined.
For the purposes of this Section, the term
"eligibility computation period" shall mean:
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(1) the 12-consecutive month period
beginning when an Employee first
performs an Hour of Service (the
"Employee's Employment Date");
(2) each calendar year which begins after
the Employee's Employment Date.
2.2 Vesting Service. An Employee shall be credited with Vesting
Service under the general rules set forth in subsection (a)
below, except as otherwise provided in subsections (b), (c), and
(d) below.
(a) General Rules. An Employee shall be credited with Vesting
Service for the number of years and days within the period
commencing on his Employment Date and ending on the first
Severance Date thereafter. If an Employee is re-employed by
the Employer or any Affiliated Company after he incurs a
Break in Service, he shall be credited with Vesting Service
for the number of years and days within the first Severance
Date thereafter. An Employee who is re-employed by the
Employer or any Affiliated Company before incurring a Break
in Service Year shall also be credited with Vesting Service
for the number of days within the period of his absence,
except as otherwise provided in Section 1.14 of this
Appendix.
All Vesting Service credited under the preceding paragraphs
of this subsection (a) shall be aggregated of the basis that
365 days of Vesting Service equal a full Year of Vesting
Service, provided, however, that an Employee shall be
credited with a full month for each calendar month ending
prior to November 1, 1985 in which he had a least one day of
Vesting Service.
(b) Exclusions. The following periods of Vesting Service shall
be disregarded under the Plan:
(1) any period of Vesting Service completed before January
1, 1976, if such period would not have been included in
the Employee's "Period of Continuous Employment" as
determined under the provisions of the Southern
Division Plan in effect as of January 1, 1976;
(2) if an Employee who has not become vested in his Accrued
Benefit incurs a Break in Service, any period of
Vesting Service prior to such Break in Service if the
period of the Employee's Break in Service equals or
exceeds five years;
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(3) any period of Vesting Service disregarded as of
December 31, 1988 under the break in service provisions
of the Southern Division Plan corresponding to the rule
of parity of section 411(a)(6)(D) of the Code, as in
effect from time to time prior to January 1, 1989, if
not otherwise disregarded under (2) above.
(c) Special Provisions for Cape Girardeau Employees.
Notwithstanding the foregoing provisions of this Section
2.2, the following special provisions shall apply in
determining the Vesting Service of Cape Girardeau Employees:
(1) A Cape Girardeau Employee who was employed by Recticel
on February 1, 1985 shall be credited with Vesting
Service in accordance with subsections (a) and (b)
above commencing from the Cape Girardeau Employee's
most recent date of hire prior to February 1, 1985.
(2) A Cape Girardeau Employee who was not employed by
Recticel on February 1, 1985 shall be credited with
Vesting Service in accordance with subsections (a) and
(b) above beginning on the later of his Employment Date
or January 1, 1987.
(d) Special Provisions for Participants in the Northern Division
Plan. Notwithstanding the foregoing provisions of this
Section 2.2, the Vesting Service of an Employee who was a
participant in the Northern Division Plan on December 31,
1989 and became a Participant in the Foamex L.P. Hourly
Retirement Plan for Former Recticel Employees on January 1,
1990 shall be determined in accordance with the provisions
of paragraphs (1) and (2) below, subject to the provisions
of paragraph (3) below.
(1) Service Prior to January 1, 1990. For service prior to
January 1, 1990, the Employee shall be credited with a
period of Vesting Service hereunder equal to the period
of "Vesting Service" (as defined in the Northern
Division Plan) to which the Employee was entitled as of
December 31, 1989 under the provisions of the Northern
Division Plan as in effect on such date.
(2) Service After December 31, 1989. For service after
December 31, 1989, the Employee shall be credited with
the period of Vesting Service completed after such date
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as determined under the provisions of subsection (a) of
this Section 2.2.
(3) Break in Service Rules. The aggregate period of Vesting
Service credited to the Employee under paragraphs (1)
and (2) above shall be disregarded under the
circumstances described in paragraph (2) of subsection
(b) above.
2.3 Benefit Service. A Participant shall be credited with Benefit
Service in accordance with the provisions of subsections (a) and
(b) below, subject to the provisions of subsections (c) below.
(a) Service Prior to January 1, 1990. For service prior to
January 1, 1990, Benefit Service shall be credited only as
provided in paragraphs (1), (2) and (3) below:
(1) Participants in Southern Division Plan. A Participant
who was a participant in the Southern Division Plan on
December 31, 1989 shall be credited with the period of
"Credited Service" (as defined in the Southern Division
Plan) to which the Participant was entitled as of
December 31, 1989 under the provisions of the Southern
Division Plan as in effect on such date.
(2) Participants in Northern Division Plan. A Participant
who was a participant in the Northern Division Plan on
December 31, 1989 shall be credited with the period of
"Credited Service" (as defined in the Northern Division
Plan) to which the Participant was entitled as of
December 31, 1989 under the provisions of the Northern
Division Plan as in effect on such date.
(3) Benefit Service prior to July 2, 1984. Notwithstanding
any other provision of this Plan, periods of service by
Participants prior to July 2, 1984 at the Cookeville,
Tennessee facility shall not be taken into account for
purposes of calculating a Participant's Benefit
Service.
(b) Service After December 31, 1989. With respect to the period
after December 31, 1989, a Participant shall be credited
with one month of Benefit Service for each calendar month
after he becomes a Participant in the Plan during which the
Participant completes at least one Benefit Accrual Hour
while an Employee in the Eligible Class.
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For purposes of this subsection (b), the term "Benefit
Accrual Hour" shall mean:
(1) an Hour of Service credited to a Participant pursuant
to paragraph (a) of Section 1.16 of the Plan;
(2) an Hour of Service credited to the Participant pursuant
to paragraph (b) of Section 1.16 of the Plan
attributable to a vacation, or a period of illness or
incapacity not to exceed 90 consecutive days during
which the Participant is paid sick pay directly by the
Employer; and
(3) an Hour of Service credited to the Participant which is
required to be credited as Benefit Service under any
federal law other than ERISA or the Code, as determined
by the Committee under such rules, uniformly applicable
to all Participants similarly situated, as the
Committee may promulgate from time to time.
(c) Exclusion. If a Participant who has not become vested in his
Accrued Benefit incurs a Break in Service, any period of
Benefit Service prior to such Break in Service shall be
disregarded thereafter under the Plan if the period of his
Break in Service equals or exceeds five years.
2.4 Participation. In order to become a Participant, an Employee
must: (a) be employed in an Eligible Class; (b) have completed
one Year of Eligibility Service, and (c) have attained age 21.
For purposes of this Appendix, the Eligible Class shall include
all Employees of the Employer compensated on an hourly basis who
are employed at the following Recticel locations:
(A) Recticel North: Arcade, New York; Omaha, Nebraska; and
(B) Recticel South: Cape Girardeau, Missouri; Conover, North
Carolina (Division #60); Morristown, Tennessee (Main,
Blended and Molded facilities); Cookeville, Tennessee; and
Tazewell, Tennessee. Notwithstanding the foregoing,
effective January 1, 1998, the Eligible Class shall not
include Employees at the Conover, North Carolina (Division
#60) location.
The determination of whether an Employee is included in the
Eligible Class shall be made by the Employer and shall be
conclusive and binding on the Employee unless such
determination is arbitrary and capricious.
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2.5 Termination of Participant - Re-Employment. An Employee who
becomes a Participant in the Plan shall cease to be a Participant
on the termination of his employment with the Company and all
Affiliated Companies and the distribution of the entire amount of
any benefit to which he is then entitled under the terms of this
Plan.
A former Participant who is re-employed by the Employer as an
Employee in the Eligible Class shall become a Participant again
on his Re-employment Date.
2.6 Change In Eligible Status. Notwithstanding the provisions of
Section 2.03(B) of the Plan, if , prior to January 1, 1998, a
Participant who ceases to be an eligible Employee but continues
in the employment of the Employer or an Affiliated Company, and
as a result thereof becomes eligible for participation in the
Foamex L.P. Salaried Pension Plan or any successor plan, the
amount of monthly retirement benefit payable to such Participant,
or with respect to such Participant, under any provisions of this
Plan shall be calculated by taking into account the Participant's
Benefit Service as of the date of the change in his eligible
status and the rate or rates of monthly retirement benefit
specified in the benefit formula of the Plan as in effect as of
the date of the termination of such Participant's employment with
the Employer and all Affiliated Companies.
Section 3. Retirement Benefits
3.1 Normal Retirement Benefit.
The monthly Retirement Income payable to a Participant who
retires on or after his Normal Retirement Date, calculated as a
life annuity, shall be equal to the sum of the amount of the
Participant's Past Service Benefit, if any, determined under
paragraph (1) below and the amount of the Participant's Future
Service Benefit, if any, determined under paragraph (2) below,
subject to the provisions of paragraph (3) below.
(1) Past Service Benefit:
(A) Participants in Southern Division Plan. In the case of a
Participant who was a participant in the Southern Division
Plan on December 31, 1989, the Participant's Past Service
Benefit shall be equal to $5.00 multiplied by the number of
the Participant's Years of Benefit Service (and fractions
thereof) completed prior to January 1, 1990.
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(B) Participants in Northern Division Plan. In the case of a
Participant who was a participant in the Northern Division
Plan on December 31, 1989, the Participant's Past Service
Benefit shall be equal to the sum of:
(i) $2.00 multiplied by the number of the Participant's
Years of Benefit Service (and fractions thereof)
completed prior to January 1, 1966; and
(ii) $5.75 multiplied by the number of the Participant's
Years of Benefit Service (and fractions thereof)
completed after December 31, 1965 and prior to January
1, 1990.
(2) Future Service Benefit:
(A) Participants other than Cape Girardeau or Conover Employees.
In the case of a Participant who is not a Cape Girardeau or
Conover Employee, the Participant's Future Service Benefit
shall be equal to $6.75 multiplied by the number of the
Participant's Years of Benefit Service (and fractions
thereof) completed after December 31, 1989 and prior to
January 1, 1998, plus $7.75 multiplied by the number of the
Participant's Years of Benefit Service (and fractions
thereof) completed after December 31, 1997, excluding any
Benefit Service completed as a Cape Girardeau or Conover
Employee.
(B) Participants who are Cape Girardeau Employees. In the case
of a Participant who is a Cape Girardeau Employee, the
Participant's Future Service Benefit shall be equal to: (i)
$5.00 multiplied by the number of the Participant's Years of
Benefit Service (and fractions thereof) completed after
December 31, 1989 as a Cape Girardeau Employee, (ii) $6.50
multiplied by the number of the Participant's Years of
Benefit Service (and fractions thereof) completed after
February 1, 1997 as a Cape Girardeau Employee, (iii) $8.00
multiplied by the number of the Participant's Years of
Benefit Service (and fractions thereof) completed after
February 1, 1998 as a Cape Girardeau Employee, and (iv)
$9.50 multiplied by the number of the Participant's Years of
Benefit Service (and fractions thereof) completed after
February 1, 1999 as a Cape Girardeau Employee.
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<PAGE>
(C) Participants who are Conover Employees. In the case of a
Participant who is a Conover Employee, the Participant's
Future Service Benefit shall be equal to: (i) $6.75
multiplied by the number of the Participant's Years of
Benefit Service (and fractions thereof) completed after
December 31, 1989 and before July 1, 1992 as a Conover
Employee, and (ii) $10.00 multiplied by the number of the
Participant's Years of Benefit Service (and fractions
thereof) completed after June 30, 1992 as a Conover
Employee. Notwithstanding the foregoing, Participants who
are Conover Employees shall cease to accrue Years of Benefit
Service for periods of service after December 31, 1997.
(3) Limitation on Benefit Service. In no event shall the aggregate
number of Years of Benefit Service taken into account under
paragraphs (1) and (2) above with respect to a Participant exceed
40. In the case of a Participant who has completed more than 40
Years of Benefit Service, only those 40 consecutive Years of
Benefit Service which result in the calculation of the greatest
monthly retirement benefit for the Participant shall be taken
into account.
3.2 Early Retirement
The monthly Retirement Income payable to a Participant commencing
on his Early Retirement Date, or on the first day of any month
thereafter shall be equal to the Participant's Accrued Benefit,
reduced by one-half of one percent (0.5%) for each month by which
the commencement date of the benefit precedes his Normal
Retirement Date. A Participant shall not be eligible for an Early
Retirement Income for any period during which he is eligible for
a Disability Retirement Income.
3.3 Disability Retirement
(a) A Participant shall be eligible for a Disability Retirement
Income if he meets the following requirements:
(1) he has attained age 40 (age 45 for a Cape Girardeau
Employee) but not age 65;
(2) he has at least ten Years of Vesting Service; and
(3) he becomes Disabled while employed by the Employer.
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(b) The amount of the monthly Disability Retirement Income payable to
a Participant eligible therefor shall be equal to his Accrued
Benefit determined as of the last day of the month preceding the
commencement of monthly disability payments to the Participant
under subsection (c) below, or if earlier, the Participant's
Severance Date.
(c) Monthly disability payments shall commence as of the first day of
the sixth month after the date on which the Participant becomes
Disabled and shall continue thereafter through the first day of
the month preceding the earliest of the following dates:
(1) the Participant's death;
(2) his Normal Retirement Date;
(3) the effective date of termination of the Plan;
(4) the date on which the Participant ceases to be Disabled.
The Committee may require a Participant receiving Disability
Retirement Income to furnish evidence of his status as Disabled
from time to time and at any time as the Committee deems
appropriate. In the event that a Participant fails to submit such
evidence when requested by the Committee, the Committee may
suspend monthly disability payments until such evidence is
furnished.
(d) A Participant who continues receiving a Disability Retirement
Income until his Normal Retirement Date shall be entitled to
receive a monthly Retirement Income in the form of a life annuity
commencing at Normal Retirement Date equal to the amount
determined under subsection (b) above. If a Participant ceases to
be eligible for a Disability Retirement Income before his Normal
Retirement Date and does not return to active employment with the
Employer within one month thereafter, the Participant shall be
considered for the purposes of this Plan to have terminated
employment with the Employer as of the date on which he became
Disabled, and the entitlement of the Participant to further
benefits under the Plan shall be determined in accordance with
the provisions of Section 3.4.
In the event that a Participant dies while receiving a Disability
Retirement Income under this Section 3.3, the Participant shall
not be considered to be employed by the Employer or an Affiliated
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Company and the Spouse of the Participant shall be entitled to
the Pre-Retirement Death Benefit described in Section 6.02(B) of
the Plan.
3.4 Termination of Employment Before Retirement.
The monthly Retirement Income payable to a Participant who has a
Termination of Employment before his earliest Retirement Date
shall be equal to the Participant's Accrued Benefit as of the
termination of his employment, reduced by one-half of one percent
(0.5%) for each month by which the commencement date of the
Retirement Income precedes his Normal Retirement Date.
Section 4. Optional Forms of Payments
4.1 Life Annuity with 60, 120 or 180 Monthly Payments Guaranteed Option.
(a) Under the Life Annuity with 60, 120 or 180 Monthly Payments
Guaranteed Option, a Participant may elect to receive an
actuarially reduced retirement benefit commencing on his
Retirement Date and payable during his lifetime, provided,
however, that if the Participant dies before receiving 60, 120,
or 180 monthly payments (as designated by the Participant) of
such reduced retirement benefit, the balance of such monthly
payments shall be made to the Participant's Beneficiary.
(b) The election of the Life Annuity with 60, 120, or 180 Monthly
Payments Guaranteed Option shall be made in accordance with the
provisions of Section 4.03 of the Plan; provided, however, that a
Participant who is age 90 or older on his Retirement Date may not
elect the Life Annuity with 60 or 120 Monthly Payments Guaranteed
Option, and a Participant who is age 83 or older on his
Retirement Date may not elect the Life Annuity with 180 Monthly
Payments Guaranteed Option. Neither the election of this Option
nor the guaranteed period may be changed unless the request for
such change is filed with the Committee prior to the
Participant's Retirement Date. The consent of the Participant's
Beneficiary is not required where any such change is made.
Notwithstanding the foregoing, any election made under this
subsection (b) by a Participant who is legally married on his
Retirement Date shall be automatically revoked unless such
Participant elects not to receive his benefit in the form of a
Qualified Joint and Survivor Annuity pursuant to Section 4.03.
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(c) In the event of the death of a Participant who has elected the
Life Annuity with 60, 120, or 180 Monthly Payments Guaranteed
Option after the Participant's Retirement Date, any amount
payable under this Option to the Participant's Beneficiary shall
be commuted and paid in a lump sum if the present value of the
benefit payable to the Beneficiary under this Option does not
exceed $3,500 (or beginning January 1, 1998, does not exceed
$5,000).
4.2 Joint and Survivor Annuity Option
(a) Under the Joint and Survivor Annuity Option, a
Participant may elect to receive an actuarially
reduced monthly benefit commencing on his Retirement
Date and payable during his lifetime, with 50% or
100% of such reduced payments (as elected by the
Participant) continued to be paid after his death to
a Beneficiary designated by the Participant at the
time of such election, commencing, if such
Beneficiary survives the Participant, on the first
day of the month next following the Participant's
death and terminating with the last monthly payment
preceding such Beneficiary's death.
(b) If the Beneficiary is not the Participant's Spouse, a
Participant may not elect a survivor annuity
percentage of greater than 50% unless the election
percentage is permitted under the incidental death
benefit requirements of Section 401(a)(9) of the Code
and Treasury Regulations thereunder.
(c) In the event the Beneficiary dies before the
Participant's Retirement Date, the election of this
Option shall not be operative, and the Participant
shall receive his benefit in the form of payment
prescribed by Article 4 of the Plan, unless the
Participant elects otherwise in accordance with
Section 4.03 of the Plan.
Section 5 . Offsets After Commencement of Distributions Under Section 4.05 of
the Plan
A Participant who has begun to receive distributions
in accordance with Section 4.05 of the Plan shall
continue to accrue Years of Benefit Service. The
amount of additional Retirement Income accrued by a
Participant after such date shall be reduced,
however, by the Actuarial Equivalent of the total
amount of Retirement Income paid to the Participant
after such date in accordance with, and to the full
extent permitted by, Treasury Regulation issued under
section 411(b)(1)(H)(iii)(I) of the Code.
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APPENDIX B
APPENDIX FOR
TUPELO EMPLOYEES
Appendix for Employees at the Tupelo, Mississippi location who participated in
the Foamex Products, Inc. Tupelo Hourly Employees Retirement Plan or who
participate in the Plan following the Effective Date. The following provisions
override any provisions of the Plan which conflict with them.
Section 1. Definitions
1.1 "Actuarial Equivalent" means equality in value of the aggregate
amounts expected to be received under different forms of payment,
based on the 1983 Group Annuity Mortality Table Without Margin
Projected to 1988 with Scale H, with interest at 5-1/2%. Application
of such assumptions to the computations of benefits payable under the
Appendix shall be made uniformly and consistently with respect to all
Employees in similar circumstances.
1.2 "Break in Service" means any twelve (12) consecutive month period
commencing on the date of Employee's employment with the Employer and
any Affiliated Company, or any anniversary thereof ("computation
period"), in which the Employee has not completed more than 500 Hours
of Service.
Solely for purposes of determining whether a Break in Service for
eligibility and vesting purposes has occurred in a computation period,
an Employee who is on an approved leave of absence from work for
maternity or paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such individual
but for the absence, or in any case in which such hours cannot be
determined, eight Hours of Service per normal work day of such
absence. Total hours credited shall not exceed 501 hours in a
computation period. For purposes of this paragraph, absence from work
for maternity or paternity reasons means an absence (a) by reason of
the pregnancy of the individual, (b) by reason of a birth of a child
of the individual, (c) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (d) for purposes of caring for such child for a period
beginning immediately following such birth or placement. The Hours of
Service credited under this paragraph shall be credited (i) in the
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computation period in which the absence begins if crediting is
necessary to prevent a Break in Service in that period, or (ii) in all
other cases, in the following computation period.
1.3 "Benefit Service" means the period of service benefit to an Employee
in accordance with the following rules:
(a) Service prior to January 1, 1979, with the Predecessor Employer
shall be benefit on the basis of the Employee's length of
continuous service with the Predecessor Employer, as established
for seniority purposes.
(b) Service on and after January 1, 1979, and before October 2, 1988
with the Predecessor Employer and service on and after October 2,
1988 with the Employer shall be benefit for purposes of accrual
of benefits at the rate of one (1) year for each calendar year in
which the Employee receives pay for 1,800 or more hours worked.
Where the total hours worked for which he is compensated during
the calendar year are less than 1,800 hours, credit shall be
given on the basis of the following:
Fraction of Year of
Hours Worked in Year Benefit Service
Less than 180 0
180 through 359 1/10
360 through 539 2/10
540 through 719 3/10
720 through 899 4/10
900 through 1079 5/10
1080 through 1259 6/10
1260 through 1439 7/10
1440 through 1619 8/10
1620 through 1799 9/10
1800 or more 1
1.4 "Early Retirement Date" means the first day of the month following the
Participant's 55th birthday after he has completed ten Years of
Benefit Service.
1.5 "Employee" means any person who is in the appropriate collective
bargaining unit represented by the Union and who is regularly employed
by the Employer at its Tupelo, Mississippi facility on the Effective
Date or
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who shall regularly be employed by the Employer in said unit and at
such facility after said date.
1.6 "Predecessor Employer" means Sheller-Globe Corporation, an Ohio
corporation.
1.7 "Spouse" means "Spouse" as defined in Section 1.27 of the Plan, except
with respect to Participants who receive Retirement Income under
Article 4 of the Plan or with respect to whom death benefits are paid
under Article 6 of the Plan on or prior to December 31, 1997, "Spouse"
means the individual to whom a Participant is legally married on his
annuity starting date, or his date of death, if earlier.
1.8 "Union" means United Food & Commercial Workers, Local 670.
1.9 "Year of Benefit Service" means any calendar year in which the
Employee has at least 1,800 hours of Benefit Service with the
Employer; provided, that in the event the Employee renders less than
1,800 hours of Benefit Service in any calendar year, he may be
entitled to a fractional Year of Benefit Service in accordance with
the Schedule set forth in Section 1.3 of this Appendix.
1.10 "Year of Vesting Service" means any twelve (12) month consecutive
period commencing on the date of an Employee's employment with the
Employer or any Affiliated Company, or any anniversary date thereof,
in which such Employee has at least 1,000 Hours of Service.
Section 2. Participation
2.1 All Employees shall immediately participate in the Plan as of the date
which is seventy five days after the date they are first credited with
an Hour of Service.
2.2 In the event an Employee shall incur a Break in Service he shall cease
active participation in the Plan and no further Years of Vesting
Service or Years of Benefit Service shall accrue except to the extent
set forth below:
(a) An Employee who has accrued five (5) or more Years of Vesting
Service prior to his Break in Service and loss of seniority shall have
reinstated his pre-break Years of Vesting Service and Years of Benefit
Service upon his completion of one (1) Year of Vesting Service after
his re-employment; provided that the Employee has not previously
received the present value of his vested Accrued Benefit in respect of
that pre-break service, or, if he has received that value, that he has
repaid to the Plan the
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amounts to have his pre-break service restored as provided at Section
1.32 of the Plan.
(b) For any employee who incurs a Break in Service and has accrued
less than five (5) Years of Vesting Service prior to his Break in
Service and loss of seniority shall not have his pre-Break Years of
Vesting Service or Years of Benefit Service reinstated if the number
of consecutive 1-Year Breaks in Service equals or exceeds five (5)
years. Such aggregate number of Years of Vesting Service before such
break shall be deemed not to include any Years of Vesting Service not
be taken into account by reason of any prior Break in Service.
Section 3. Retirement Benefits
3.1 Normal Retirement Benefit.
There shall be payable on Retirement, on or after an Employee's Normal
Retirement Date, a Retirement Income equal to the monthly unit of
benefit in effect on the date of the Employee's Retirement as follows,
multiplied by the number of Years of Benefit Service accrued by the
Employee at the time of the Employee's Retirement:
Date of Retirement/Termination Monthly Unit of Benefit
Effective:
January 1, 1986 through December 31, 1986 $4.50
January 1, 1987 through December 31, 1987 $5.00
January 1, 1988 through December 31, 1988 $5.50
January 1, 1989 through December 31, 1989 $5.75
January 1, 1990 through December 31, 1990 $6.00
January 1, 1991 through January 12, 1992 $6.25
January 13, 1992 through January 12, 1993 $6.50
January 13, 1993 through January 12, 1994 $6.75
January 13, 1994 through January 12, 1995 $7.00
January 13, 1995 onwards $7.75
3.2 Early Retirement.
The monthly Retirement Income payable to a Participant who retires on
his Early Retirement Date, or the first day of any month thereafter,
as selected by the Participant, shall be equal to the Participant's
Accrued Benefit, reduced by 6/10ths of one percent (.006) for each
month such Retirement Date occurs prior to age sixty-five (65).
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3.3 Termination of Employment Before Retirement.
An Employee whose employment shall be terminated and who at the time
of such termination shall have earned five (5) or more Years of
Vesting Service shall be eligible to receive his Accrued Benefit
commencing at the age of fifty-five (55) years, as reduced in Section
3.2 of this Appendix, but based upon his Years of Benefit Service and
the unit of benefit in effect at the time of his termination as set
forth in Section 3.1 hereof.
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APPENDIX C
APPENDIX FOR BARGAINING UNIT
EMPLOYEES PICO RIVERA, CALIFORNIA UNIT
Appendix for bargaining unit employees at Pico Rivera, California who
participated in the General Felt Industries Pension Plan for Bargaining Unit
Employees Pico Rivera, California Unit or who participate in the Plan following
the Effective Date. The following provisions override any provisions of the Plan
which conflict with them.
Section 1. Definitions
1.1 "Break in Service" means any twelve (12) consecutive month period
commencing on the date an Employee is first credited with an Hour of
Service, or any anniversary thereof, and any full Plan Year, including
the Plan Year during the first anniversary of his Employment
Commencement Date ("computation period"), in which the Employee has
not completed more than 500 Hours of Service.
Solely for purposes of determining whether a Break in Service for
vesting purposes has occurred in a computation period, an Employee who
is on an approved leave of absence from work for maternity or
paternity reasons shall receive credit for the Hours of Service which
would otherwise have been credited to such individual but for the
absence, or in any case in which such hours cannot be determined,
eight Hours of Service per normal work day of such absence. Total
hours credited shall not exceed 501 hours in a computation period. For
purposes of this paragraph, absence from work for maternity or
paternity reasons means an absence (a) by reason of the pregnancy of
the individual, (b) by reason of a birth of a child of the individual,
(c) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or (d)
for purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of Service
credited under this paragraph shall be credited (i) in the computation
period in which the absence begins if crediting is necessary to
prevent a Break in Service in that period, or (ii) in all other cases,
in the following computation period.
1.2 "Deferred Retirement Date" means the first day of the month coincident
with or next following a Participant's actual retirement after his
Normal Retirement Date.
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1.3 "Disability Retirement Date" means, in the case of a Participant who
becomes Disabled, the first day of any month prior to his Normal
Retirement Date provided he has completed 15 Years of Vesting Service.
1.4 "Early Retirement Date" means the first day of any month coincident
with or following the Participant's attainment of age 60 and
completion of 10 Years of Vesting Service.
1.5 "Eligibility Computation Period" means
A. the twelve consecutive month period beginning on an Employee's
Employment Commencement Date, or
B. any full Plan Year, including the Plan Year during which the
first anniversary of his Employment Commencement Date occurs.
1.6 "Employee" means any person who is in the collective bargaining unit
covered by the collective bargaining agreement between the United
Steelworkers of American and the Employer and who is regularly
employed by the Employer at its Pico Rivera, California plant on the
Effective Date or who shall regularly be employed by the Employer in
said unit and at such facility after said date.
1.7 "Employment Commencement Date" means the date on which a person
becomes an Employee.
1.8 "Spouse" means "Spouse" as defined in Section 1.27 of the Plan, except
with respect to Participants who receive Retirement Income under
Article 4 of the Plan or with respect to whom death benefits are paid
under Article 6 of the Plan on or prior to December 31, 1997, "Spouse"
means the individual to whom a Participant is legally married on his
annuity starting date, or his date of death, if earlier.
1.9 "Vesting Service" means the period of service credited to an Employee
for vesting purposes in accordance with the following rules: An
Employee shall be credited with a Year of Vesting Service for each
vesting computation period in which he completes at least 1,000 Hours
of Service; provided, however, that the following years shall be
disregarded:
(i) prior Years of Vesting Service that were disregarded under the
terms of the Predecessor Plan as in effect on December 31, 1989;
and
(ii) in the case of an Employee who does not have a nonforfeitable
right to Retirement Income, Years of Vesting Service before a
Break in
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Service if the number of consecutive Breaks in Service equals or
exceeds five (5).
A vesting computation period is the twelve consecutive month period
beginning on the date an Employee is first credited with an Hour of
Service, and any full Plan Year, including the Plan Year during which
the first anniversary of his Employment Commencement Date occurs.
1.10 "Benefit Service" means the period of service credited to an Employee
for benefit accrual purposes in accordance with the following rules: a
Participant's Years of Benefit Service shall include:
A. Full and partial years of Benefit Service as of December 31, 1989
under the terms of the Plan in effect on such date, and
B. Full and partial Years of Benefit Service credited after the
Restatement Date. A Year of Benefit Service shall be granted for
each Year of Vesting Service benefit while an Employee, but shall
not include any service while the Participant was employed on a
noncompensated basis. If a Participant, whose annualized rate of
employment is at least 1,000 Hours of Service, fails to complete
at least 1,000 Hours of Service in his first or final year of
employment, such Participant shall receive 1/12 of a Year of
Benefit Service for each month during which he is employed on a
compensated basis.
Section 2. Participation
2.1 Each Employee shall become a Participant in the Plan as of the first
day of the month coincident with or following (A) the date he first
becomes an Employee employed at a rate of 1,000 Hours of Service per
year or (B) the first day of an Eligibility Computation Period during
which he is credited with 1,000 Hours of Service.
2.2 In the event an Employee shall incur a Break in Service he shall cease
active participation in the Plan and no further Years of Vesting
Service or Years of Benefit Service shall accrue except to the extent
set forth below:
(a) An Employee who has accrued five (5) or more Years of Vesting
Service prior to his Break in Service and loss of seniority shall
have reinstated his pre-break Years of Vesting Service and Years
of Benefit Service upon his completion of one (1) Year of Service
after his re-employment; provided that the Employee has not
previously received the present value of his vested Accrued
Benefit in respect of
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that pre-break service, or, if he has received that value, that
he has repaid to the Plan the amounts to have his pre-break
service restored.
(b) For any employee who incurs a Break in Service and has accrued
less than five (5) Years of Vesting Service prior to his Break in
Service and loss of seniority shall not have his pre-Break Years
of Vesting Service or Years of Benefit Service reinstated if the
number of consecutive 1-Year Breaks in Service equals or exceeds
five (5) years. Such aggregate number of Years of Vesting Service
before such break shall be deemed not to include any Years of
Vesting Service not be taken into account by reason of any prior
Break in Service.
Section 3. Retirement Benefits
3.1 Normal Retirement Benefit.
A Participant's monthly rate of Retirement Income shall be equal
to the benefit multiplier in effect at his Retirement Date
multiplied by his Years of Benefit Service. For Retirement Dates
on or after January 1, 1989 through July 1, 1990, the benefit
multiplier is $8.00 for all Years of Benefit Service; for
Retirement Dates on or after July 2, 1990 through June 30, 1993,
the benefit multiplier is $9.00 for all Years of Benefit Service;
for Retirement Dates on or after July 1, 1993 through July 7,
1996, the benefit multiplier is $9.50 for all Years of Benefit
Service; for Retirement Dates on or after July 8, 1996 through
June 30, 1997, the benefit multiplier is $9.75 for all Years of
Benefit Service; for Retirement Dates on or after July 1, 1997
through June 30, 1998, the benefit multiplier is $10.00 for all
Years of Benefit Service; for Retirement Dates on or after July
1, 1998, the benefit multiplier is $10.25 for all Years of
Benefit Service.
3.2. Early Retirement.
A Participant who retires on an Early Retirement Date may elect
to receive his Accrued Benefit, determined as of his Early
Retirement Date, commencing on his Early Retirement Date, or on
the first day of any month thereafter, as selected by the
Participant, reduced 1/2 of 1% for each month that commencement
of Retirement Income precedes his Normal Retirement Date.
3.3 Disability Retirement.
A Participant who has completed at least 15 Years of Vesting
Service, who becomes Disabled while an Employee shall be entitled
to retire at a Disability Retirement Date, which shall be the
first day of any month prior
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to his Normal Retirement Date and shall be entitled to receive a
benefit determined in accordance with this Section 3.3.
The benefit payable to a Participant who meets the requirements
of this Section 3.3 shall commence as of the sixth month
following the date that the Disability began or, if later, the
month in which application for disability benefits is made, and
shall be determined as follows:
A. Until such Participant attains age sixty-five (65) or until
he becomes eligible for either a disability benefit or old
age benefit at age sixty-five (65) under the Federal Social
Security Act from time to time in effect, a monthly benefit
equal to twice the current benefit multiplier multiplied by
the Participant's Years of Benefit Service.
B. When such Participant becomes eligible for either a
disability benefit or old age benefit at age sixty-five
(65), under the Federal Social Security Act from time to
time in effect, the monthly amount of Retirement Income
payable to him from this Plan shall be determined in
accordance with Section 3.2, based on the Participant's
Years of Benefit Service and the applicable dollar amount as
of the date of the Disability.
If prior to his Normal Retirement Date, a Participant is no
longer Disabled, his disability benefit payments shall cease. The
Employee shall be rehired consistent with the current seniority
provisions of the collective bargaining agreement with the Union,
and shall be entitled to receive his full Retirement Income upon
any subsequent Retirement Date. If the Participant is not
rehired, he shall be deemed to have terminated his employment, or
to have retired at an Early Retirement Date, as of the first of
the month following his last disability benefit payment.
The disability benefit payable for any month shall be reduced by
the amount of any Workers' Compensation benefits (except fixed
statutory payment for loss of bodily member) payable to him for
the month that his disability benefit is payable to him with
respect to his disability by reason of injury or disease
sustained during employment with the Employer; provided that any
excess for any month during which a disability benefit is payable
shall not reduce such disability benefit in any succeeding month.
No disability benefit shall be payable with respect to any period
in which the Participant is in receipt of temporary disability
benefits under any group sickness and accident insurance plan to
which the Employer contributes.
The disability benefit payments shall cease if the Participant
should die prior to the date benefits become payable. Upon the
death of such a Participant, the Participant's Spouse, if any,
shall be entitled to the
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pre-retirement death benefit under Article 6, determined as if
the Participant terminated employment on the date he became
Disabled.
3.5 Termination of Employment Before Retirement.
A Participant who has completed five (5) Years of Vesting Service
shall have a nonforfeitable right to his Accrued Benefit.
If such a Participant terminates employment with the Employer
before his earliest Retirement Date for reasons other than death
or Disability, he shall be entitled to receive, if he has
completed ten (10) Years of Vesting Service, his Accrued Benefit
commencing on the first day of any month coincident with or
following his 60th birthday, but reduced for early commencement
in accordance with Section 3.2.
Section 4. Optional Forms of Payment
4.1 Optional Forms of Payment
A. A Participant may elect in accordance with the provisions of
Section 4.03 of the Plan to receive his Retirement Income in one
of the following optional forms of payment, in which event the
amount to be paid will be the Actuarial Equivalent of the amount
of annual Retirement Income to which he is entitled under Section
3.
(1) Joint and Survivor Annuity Option
Reduced monthly benefits, which shall commence on the
Participant's Retirement Date and terminate with the last
monthly payment before his death. Following the death of the
Participant, if the person named as joint annuitant in his
election of this option is then living, all or a portion of
such reduced pension, as specified by the Participant in
such election, shall be continued for the remaining lifetime
of the joint annuitant. Such joint annuitant need not
necessarily be a surviving Spouse. The percentage of reduced
pension which may be specified by the Participant to be
continued to the joint annuitant may be 100%, 66 2/3%, or
50%.
(2) Ten Year Certain and Life Annuity Option
Reduced monthly benefits, which shall commence on the
Participant's Retirement Date and continue thereafter for
life, with the last payment payable on the first day of the
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month in which his death occurs. If the death of the
Participant occurs before he has received 120 monthly
payments, payments will continue to the beneficiary until a
total of 120 monthly payments have been made to the
Participant or his beneficiary.
4.2 Actuarial Equivalent
For purposes of determining the Actuarially Equivalent amount of
monthly payments under a joint and survivor annuity, the monthly
rate of Retirement Income payable under Section 4.2 shall be
multiplied by the factor shown below, unless the Spouse or
Beneficiary is more than 5 years younger or older than the
Participant. If the Spouse or Beneficiary is more than 5 years
older than the Participant, the applicable factor shall be
adjusted by adding 0.5% times the number of years in excess of 5
by which the Spouse's or Beneficiary's age exceeds the age of the
Participant. If the Spouse or Beneficiary is more than 5 years or
younger than the Participant, the applicable factor shall be
adjusted by subtracting 0.5% times the number of years in excess
of 5 by which the Spouse's or Beneficiary's age is less than the
Participant's age. The number of years from the Participant's
date of birth to the Spouse's or Beneficiary's date of birth
shall be computed by counting partial years as whole years.
Percentage of Percentage of Participant's
Participant's Reduced Single Life Annuity to be
Annuity to be Payable to Payable to Participant Under
Spouse or Beneficiary Option
100% 82%
66-2/3% 87.2%
50% 90%
For purposes of determining the amount of payments under a life
annuity with 120 months certain, the monthly rate of Retirement
Income payable under Section 4.01 shall be multiplied by the
factor shown below:
Age* Factor
63 or over 0.940
62 0.945
61 0.950
60 0.955
59 0.960
58 0.965
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57 or under 0.970
*Age of Participant at benefit commencement date, counting only
completed years.
For all other forms of actuarially equivalent benefits under the
Plan, Actuarial Equivalent shall be determined using a factor
which is the sum of 50% of the factor calculated as if the
Participant were male, and 50% of the factor calculated as if the
Participant were female, using the mortality and interest rates
below:
1. Mortality Table - The 1951 Group Annuity Mortality
Table, projected to 1967 with Scale C for males, and
such table set back 5 years in age for females.
2. Interest - 6% per year, compounded annually.
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APPENDIX D
APPENDIX FOR
FORMER SCOTFOAM EMPLOYEES
Appendix for hourly employees at the Eddystone, Pennsylvania, Fort Wayne,
Indiana and San Bernandino, California locations who participated in the Foamex
Hourly Retirement Plan for Former Scotfoam Employees or who participate in the
Plan following the Effective Date. The following provisions override any of the
provisions of the Plan which conflict with them.
Section 1. Definitions
1.1 "Actuarial Equivalent" means equality in the value of
aggregate amounts expected to be received under
different forms of payment computed on the basis of 7%
interest and the UP-1984 Mortality Table.
1.2 "Break In Service" means a period of one or more
consecutive Plan Years in each of which the
Participant is credited with 500 or fewer Hours of
Service. Further, solely for the purpose of
determining whether a Participant has incurred a
one-year Break In Service, Hours of Service shall be
recognized for "authorized leaves of absence" and
"maternity and paternity leaves of absence."
"Authorized leave of absence" means an unpaid,
temporary cessation from active employment with the
Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military
service, or any other reason.
A "maternity or paternity leave of absence" means, for
Plan Years beginning after December 31, 1984, an
absence from work for any period by reason of the
Employee's pregnancy, birth of the Employee's child,
placement of a child with the Employee in connection
with the adoption of such child, or any absence for
the purpose of caring for such child for a period
immediately following such birth or placement. For
this purpose, Hours of Service shall be credited for
the Plan Year in which the absence from work begins,
only if credit therefore is necessary to prevent the
Employee from incurring a one-year Break In Service,
or, in any other case, in the immediately following
Plan Year. The Hours of Service credited for a
"maternity or paternity leave of absence" shall be
those which would normally have been credited for such
absence, or, in any case in which the Committee is
unable to determine such hours normally credited,
eight (8)
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Hours of Service per day. The total Hours of Service
required to be credited for a "maternity or paternity
leave of absence" shall not exceed 501.
If a Break In Service occurs, and later if the
Participant earns one or more Years of Vesting
Service, his Years of Vesting Service prior to such
Break in Service shall be included in any subsequent
determination of benefits hereunder, but only if:
A. The Participant had a nonforfeitable right to his
Accrued Benefit under Section 3.06 of the Plan at the
commencement of such Break, or
B. The number of one-year Breaks In Service do not equal
or exceed five consecutive one-year Breaks In Service.
1.3 "Combined Employment" of an Employee means the length of
continuous period that includes his Foamex Employment and his
employment immediately prior thereto with any other Affiliated
Company. With respect to any Employee as of October 31, 1983, who
was a participant under the Scott Plan on October 30, 1983, or
any employee employed by Scott Paper Company on October 30, 1983,
and who became an Employee on October 31, 1983, but who was not a
participant under the Scott Plan on October 30, 1983. Combined
Employment shall also include the employment with an employer
pursuant to the provisions of the Scott Plan.
1.4 "Benefit Employment" means that portion of a Participant's Foamex
Employment that is taken into account in calculating the
Retirement Income to which he is entitled under the Plan, which
shall be determined as follows:
A. The Benefit Employment of a Participant who is a
Full-Time Employee shall be determined by his period of
Foamex Employment and subtracting therefrom the
duration of (i) any Break In Service and (ii) any other
period of absence from active employment occurring
during such Scotfoam Employment which exceeds 12
months, unless it was deemed at the time of its
occurrence or upon such Participant's later admission
to participation to be included in Benefit Employment
under Committee rules of uniform application to all
Employees.
B. The Benefit Employment of a Participant who is a
Part-Time Employee shall be determined as follows for
service during any Plan Year:
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(i) if he accumulates at least 1,740 Hours Worked, he shall
accrue 12 months of Benefit Employment
(ii) if he accumulates at least 870 but less than 1,740
Hours Worked, he shall accrued that number of months of
Benefit Employment that is equivalent to the product
obtained by multiplying 12 by a fraction of which the
numerator is such Participant's Hours Worked during
such year and the denominator is 1,740.
(iii) if he accumulates less than 870 Hours Worked, he shall
accrue no Benefit Employment.
With respect to any Employee as of October 31, 1983, who was
a Participant under the Scott Plan on October 30, 1983, or
any employee employed by Scott Paper Company on October 30,
1983, and who became an Employee on October 31, 1983, but
who was not a participant under the Scott Plan on October
30, 1983, the above determination of Benefit Employment of a
Participant who is a Part-Time Employee shall be made
considering service under the Scott Plan from January 1,
1983 through October 30, 1983, as service for the Employer
or Affiliated Company, and this amount shall be added to the
period of service with the Employer or Affiliated Company
from the October 31, 1983, effective date of the Plan
through December 31, 1983, to determine total service for
the 1983 Plan Year; provided, however, that inasmuch as
certain service under the Scott Plan is recognized elsewhere
hereunder for purposes of determining benefits under this
Plan, there shall be no double-crediting of Benefit
Employment or other service for a Participant as a result of
this provision.
C. With respect to the Plan Year in which any such Participant
became an Employee, transfers from the status of a Part-Time
to a Full-Time Employee, retires, or his employment
terminates for any other reason, the number of months
Benefit Employment that he shall accrued and the number of
Hours Worked required for such accrual, as set forth in
Subparagraphs (b)(i), (ii), and (iii) above, shall each be
adjusted to that number that is obtained by multiplying it
by a fraction of which the numerator is the number of months
of his actual employment during such year and the
denominator is 12.
D. Notwithstanding the foregoing provisions of this Section
1.4, a Participant's Benefit Employment shall not include
any period of his Foamex Employment with respect to which a
retirement benefit is payable under any other Affiliated
Company retirement plan.
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1.5 "Early Retirement Date" means in the case of each Participant for
the first day of the month on or following the date he attains
his 55th birthday and completes 15 Years of Benefit Service but
before his Normal Retirement Date.
1.6 "Employee" means a person employed by an Employer on an hourly
basis at the Fort Wayne, Indiana and San Bernadino, California
locations, and persons employed by an Employer on an hourly basis
and represented by the United Paperworkers International Union,
Local 714 at Eddystone, Pennsylvania.
1.7 "Employment Commencement Date" means that date on which a person
first performs an Hour of Service for the Employer or its
predecessor, Scotfoam Corporation.
1.8 "Hours Worked" means Hours of Service described in Sections
1.16(A) and (B) of the Plan to the extent that the award or
agreement is intended to compensate an Employee for periods
during which he would have been engaged in the performance of
duties for the Employer or Affiliated Company.
1.9 "One-Year Break In Service" means any Plan Year during which a
Part-Time Employee does not accumulate more than 435 Hours
Worked; provided, however, for the 1983 Plan Year, the rule
stated in the last sentence of Section 1.4(B) shall apply to
determine service for and the period to apply as the Plan Year.
1.10 "Period of Severance" means the period between the Employee's
Severance from Service Date and his next Employment Commencement
Date.
1.11 "Restored Employment" of an Employee means the length of any
prior period of employment with the Employer at the end of which
his status as an Employee (as defined in this Plan or any other
Affiliated Company retirement plan) was terminated, and which is
restored to such Employee's Foamex Employment, for the purposes
of the Plan, upon the completion by such Employee of:
(i) one additional year as an Employee (but such period,
together with the Period of Severance that follows it, shall
be so restored upon his next Employment Commencement date if
such date occurs within 12 months of his Severance from
Service Date for such period), if he is a Full-Time
Employee, or
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(ii) the first subsequent Plan Year during which accumulates 870
Hours Worked, if he is a Part-Time Employee; provided,
however for the 1983 Plan Year, the rule stated in the last
sentence of Section 1.4(B) shall apply to determine service
for and the period to apply as the Plan Year.
1.12 "Foamex Employment" of an Employee means the length of the
continuous period which begins on his most recent Employment
Commencement Date and ends on his next ensuring Severance from
Service Date, plus the length of any period of Restored
Employment, less for a Part-Time Employee, each One-Year Break In
Service. With respect to any Employee as of October 31, 1983, who
was a participant under the Scott Plan on October 30, 1983, or
any employee employed by Scott Paper Company on October 30, 1983,
and who became an Employee on October 31, 1983, but who was not a
participant under the Scott Plan on October 30, 1983, "Foamex
Employment" shall also include the employment with an employer
pursuant to the provisions of the Scott Plan.
1.13 "Scott Plan" means the Scott Paper Company Retirement Plan for
Hourly Employees (Non-Contributory), as of September 1, 1983.
1.14 "Severance from Service Date" means that date which is the
earlier of (i) the date on which a person's employment with the
Employer and each Affiliated Company terminates because he quits,
retires, is discharged or dies, or (ii) the first anniversary of
the first day of a period in which, for any other reason, an
Employee remains absent from service or active employment with
the Employer and each Affiliated Company.
1.15 "Year of Benefit Service" means, with an Employee, a twelve month
period of Benefit Employment.
1.16 "Year of Vesting Service" means a Plan Year in which the Employee
earns at least 1,000 Hours of Service but excluding Years of
Vesting Service prior to a Break In Service as provided in
Section 1.2.
Section 2. Participation
2.1 Eligibility Requirements.
Except as provided in Section 2.2, every Employee shall become a
Participant on the first day of the month next following:
(a) if he is a Full-Time Employee, the first day on which his
Foamex Employment and his employment with the Employer and
any Affiliated Company equals one year; or
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(b) if he is a Part-Time Employee, the end of:
(i) the 12-month period beginning on his Employment
Commencement Date, or
(ii) the Plan Year which includes an anniversary of his
Employment Commencement Date,
during which he first accumulates 870 Hours Worked; or
(c) the first day on which the eligibility requirement of
paragraph (a) or (b) above, whichever is applicable, would
be satisfied if prior periods which have been restored to
his Foamex Employment pursuant to Section 1.11 are deemed to
have occurred immediately prior to his most recent
Employment Commencement Date to form a single uninterrupted
period of Foamex Employment.
2.2 Employment With More Than One Employer and Coverage Under Other
Affiliated Company Retirement Plans:
If a Participant is or has been employed by any two or more Employers
or Affiliated Companies, his Foamex Employment, Combined Employment
and Benefit Employment shall be computed under the applicable
provisions of the Plan by applying the appropriate definitions as if
all the Employers and Affiliated Companies were a single entity, and
if a Participant is or has been employed by two or more Employers, his
Benefit Employment and Retirement Income shall be computed under the
applicable provisions of the Plan by applying the appropriate
definitions and benefit formulas as if all the Employers were a single
Employer; provided, however, that there shall be a proper allocation
(taking into account the period of time Foamex Employment and Benefit
Employment applicable to each Employer) of the costs and resulting
benefits among the Employers by which such Participant is or was
employed. A Participant's Foamex Employment, Combined Employment and
Benefit Employment shall not be increased on account of concurrent
service with more than one Employer or Affiliated Company.
Section 3. Disability Retirement Date
A Participant who becomes Disabled while an Employee shall be entitled
to retire at a Disability Retirement Date (which shall be the first
day of any month prior to his Normal Retirement Date provided he has
completed ten (10) years or more of Foamex Employment or Combined
Employment and his Disability shall have
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continued for at least six consecutive months) and shall be entitled
to Disability Retirement Income as determined in accordance with
Section 4.3; provided, however, such other number of years of Foamex
Employment or Combined Employment may be established from time to time
by agreement between the Employer and such Participant's collective
bargaining representative, if such Participant is included in a
collective bargaining unit, or by the Company, if such Participant is
not included in any such unit, as a requirement for a Disability
Retirement Income in accordance with Section 4.3 and, if so
established, shall be set forth in a Schedule attached to and made a
part of this Plan.
Section 4. Retirement Benefit
4.1 Normal Retirement Benefit
(a) Except as otherwise specifically provided herein, and
subject to the adjustments provided for in Paragraphs (b)
and (c) of this Section 4.1, the amount of Retirement Income
for a Participant retiring at his Normal Retirement Date
shall be equal to the product of such amount as may be in
effect at the time such Participant attains age 65 pursuant
to agreement between the Employer and such Participant's
collective bargaining representative, if he is included in a
collective bargaining unit, or action by the Company, if he
is not included in any such unit, multiplied by the number
of the Participant's Years of Benefit Service, including
fractional years. The amount or date so established shall be
set forth in a Schedule of Benefits Multipliers contained in
Section 4.4 of this Appendix.
The monthly benefit shall be equal to one-twelfth of the
annual benefit as calculated above.
Notwithstanding the preceding paragraph, any Employee as of
October 31, 1983, who was a participant under the Scott Plan
on October 30, 1983, or any employee employed by Scott Paper
Company on October 30, 1983, and who became an Employee on
October 31, 1983, but who was not a participant under the
Scott Plan on October 30, 1983, shall have all employment
which was credited for benefit accrual and computation
purposes under the Scott Plan identically credited for
purposes of determining the amount of his normal Retirement
Income hereunder and, furthermore, each such Employee who
was a participant in the Scott plan on October 30, 1983,
shall be entitled to a normal Retirement Income in an amount
which is not less than the normal Retirement Income
determined under the provisions of the Scott Plan, assuming
his employment with an adopting employer thereunder had
continued until the
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Participant's retirement under the provisions of Section
3.02 of the Plan and this Section 4.1.
(b) If the Participant's Benefit Employment includes any period
of Restored Employment, the normal Retirement Income payable
to him under this Section 4.1 shall (i) be computed, for any
such period during which he was an employee as defined in
any other retirement plan of an Affiliated Company, in
accordance with and subject to the provisions of such other
plan, and (ii) in no event be less than that to which he
would be entitled if his Years of Benefit Service did not
include any such period.
(c) If the normal Retirement Income payable to a Participant
under this Section 4.1 is less than the maximum early
Retirement Income which such Participant would at any time
have been entitled to receive under Section 4.2 had he taken
early retirement pursuant to Section 4.2 on the appropriate
date, his normal Retirement Income shall be an amount equal
to such maximum early Retirement Income.
4.2 Early Retirement
Except as otherwise specifically provided herein, the Early
Retirement Income payable upon retirement of a Participant
in accordance with Section 3.03 of the Plan shall consist of
either:
(a) a deferred Retirement Income commencing in the month of such
Participant's attainment of age 65, or such other age as may
be agreed to between the Employer and such Participant's
collective bargaining representative, if he is included in a
collective bargaining unit, or by action of the Company, if
he is not included in any such unit, and computed as a
normal Retirement Income in accordance with Section 4.1
hereof on the basis of the amount in effect at, and such
Participant's Years of Benefit Service, including fractional
years, the time of his early retirement; or
(b) if such Participant shall so elect by filing written notice
with the Committee within the period 90 days immediately
preceding his retirement, either
(i) a Retirement Income commencing in the month of his
retirement, or commencing in any subsequent month
specified in such notice which falls between the
Participant's Early Retirement Date and the date on
which he attains age 65, or such other age as may be
agreed to between the Employer and
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such Participant's collective bargaining
representative, if he is included in a collective
bargaining unit, or by action of the Company, if he is
not included in any such unit, which allowance shall be
the Actuarial Equivalent of the deferred Retirement
Income (without actuarial reduction) in accordance with
Section 4.1 hereof on the basis of the amount in effect
at, and his Benefit Employment to, the time of his
retirement; provided, further, that such Participant
may, by written notice filed with the Committee prior
to the month specified for the commencement of the
payment of any such income to him, revoke any prior
election hereunder and elect to postpone further the
commencement of the payment of any such allowance to
any subsequent month not later than the month
immediately following his attainment of age 65, or such
other age as may be agreed to between the Employer and
such Participant's collective bargaining
representative, if he is included in a collective
bargaining unit, or by action of the Company, if he is
not included in any such unit, in which event such
allowance shall be recalculated to reflect such
postponement; or
(ii) subject to the approval of the Committee, a Retirement
Income commencing at a time and computed in a manner
determined in accordance with either paragraph (a) or
item (i) of this paragraph (b), whichever is
applicable, and arranged so that, with his payment for
life under any Government-sponsored pension plan, he
will receive, so far as possible, the same total amount
each year before and after he first becomes eligible to
receive an early retirement benefit under such
Government-sponsored pension plan
Notwithstanding any other provision of this Section 4.2, any
Employee as of October 31, 1983, who was a participant under
the Scott Plan on October 30, 1983, and who became an
Employee on October 31, 1983, but who was not a participant
under the Scott Plan on October 30, 1983, shall have all
employment which was credited for benefit accrual and
computation purposes under the Scott Plan identically
credited for purposes of determining the amount of his Early
Retirement Income hereunder and, furthermore, each such
Employee who was a participant in the Scott Plan on October
30, 1983, shall be entitled to an early Retirement Income in
an amount which is not less than the early Retirement Income
determined under the provisions of the Scott Plan, assuming
his employment with an adopting employer thereunder had
continued until the Participant's retirement under Section
3.03 of the Plan and this Section 4.2.
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Any Participant who chooses an early Retirement Income under
this Section 4.2 will have the normal Retirement Income
reduced by 5/12% for each month by which the Early
Retirement Date precedes the first of the month coincident
with or following the Participant's 62nd birthday.
4.3 Disability Retirement Income
(a) Except as otherwise specifically provided herein, the
Disability Retirement Income payable upon the retirement of
a Participant in accordance with the provisions of Section
4.3 shall consist of a Retirement Income which shall
commence in the month of such Participant's Disability
Retirement Date and shall be calculated using the normal
retirement benefit, actuarially reduced from age 62 to the
date of benefit commencement.
Notwithstanding any other provisions of this Section 4.3,
any Employee as of October 31, 1983, who was a participant
under the Scott Plan on October 30, 1983, or any employee
employed by Scott Paper Company on October 30, 1983, and who
became an Employee on October 31, 1983, but who was not a
participant under the Scott Plan on October 30, 1983, shall
have all employment which was credited for benefit accrual
and computation purposes under the Scott Plan identically
credited for purposes of determining the amount of his
Disability Retirement Income hereunder and, furthermore,
each such Employee who was a participant in the Scott Plan
on October 30, 1983, shall be entitled to a Disability
Retirement Income in an amount not less than the disability
retirement allowance determined under the provisions of the
Scott Plan, assuming his employment with an adopting
employer thereunder had continued until the Participant's
retirement under the provisions of this Section 4.3.
(b) Notwithstanding the acceptance by the Committee of proof of
a Participant's being Disabled and its approval of his
disability retirement, such Participant, upon request of the
Committee made from time to time after the Participant has
been retired for at least one full year, but not more
frequently than once in any period of six consecutive months
and not after having reached his Normal Retirement Date,
shall furnish due and reasonable proof that he actually
continues into be Disabled. Should the Participant fail to
furnish such proof or should he regain his capability of
engaging in any occupation or performing any work for any
kind of compensation of financial value, his disability
retirement may be
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terminated and the payment to him of a Disability Retirement
Income may be discontinued by the Committee.
(c) Upon discontinuance of a Participant's Disability Retirement
Income in accordance with the provisions of Paragraph (b)
above:
(i) if the Participant on his Disability Retirement Date
had fulfilled the age and employment requirements for
Early Retirement in accordance with the provisions of
Section 4.2, he shall be retired on an Early Retirement
Income on the date of discontinuance of his Disability
Retirement Income, such Early Retirement Income to be
calculated on the basis of the amount in effect at, and
his Benefit Employment to, the date of his disability
retirement as provided in Section 3.2, and reduced by
an amount which is the Actuarial Equivalent of the
payments he received as his Disability Retirement
Income; or
(ii) if the Participant on his Disability Retirement Date
had not fulfilled the age and employment requirements
for Early Retirement, but had fulfilled the eligibility
requirements for payment of a nonforfeitable Accrued
Benefit under Section 3.05 of the Plan, he shall on the
date of discontinuance of his Disability Retirement
Income become eligible for such a payment of his
Nonforfeitable Accrued Benefit, calculated on the basis
of the amount in effect at, and his Benefit Employment
to, his Disability Retirement Date and reduced by an
amount which is the Actuarial Equivalent of the
payments he received as his Disability Retirement
Income.
4.4. Schedule of Benefit Multipliers
Location Benefit Multiplier
Eddystone $24 per month
Fort Wayne $16 per month for service prior to January 1, 1981;
$17 per month for service after December 31, 1980
and prior to July 2, 1996;
$19 per month for service after July 1, 1996
San Bernardino $12 per month
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Section 5. Optional Forms of Payment
5.1 Optional Forms of Retirement Income
Subject to the requirements of Article IV of the Plan, a
Participant may elect one of the following optional forms of
benefit:
Option 1 A reduced Retirement Income payable during the retired
Participant's life, and a survivor's Retirement Income in the
same amount payable, after his death, during the life of, and to,
the person nominated by him by written designation duly
acknowledged and filed with the Committee at the time of his
retirement, if such person survives him; or
Option 2 A reduced Retirement Income payable during the retired
Participant's life, and a survivor's Retirement Income, in
one-half the amount of such reduced Retirement Income payable,
after his death, during the life of, and to, the person nominated
by him by written designation duly acknowledged and filed with
the Committee at the time of his retirement, if such person
survives him; or
Option 3 A reduced Retirement Income payable during the retired
Participant's life; provided, however, that if the Participant
dies before receiving 60, 120 or 180 monthly payments (as
designated by the Participant) of such reduced benefit, the
balance of such monthly payments shall be made to the
Participant's Beneficiary. Notwithstanding the foregoing, a
Participant may elect a reduced Retirement Income payable during
the retired Participant's life, and any other allowance payable
after his death; provided, however, that, if the option elected
is a period certain and continuous option, the survivor's
Retirement Income shall not exceed the Actuarial Equivalent of
the allowance payable under a 20-year period certain and
continuous option; and provided, further, that, if the option
elected is a joint and survivor option, the survivor's Retirement
Income shall not exceed that which would be payable under Option
1, had it been elected.
Section 6 Death Benefits
6.1 Retirement Income for Participants Under Scott Plan and Certain
Other Employees:
Notwithstanding any other provision of the Plan, any Employee as
of October 31, 1983, who was a participant under the Scott Plan
on October 30, 1983, or any employee employed by Scott Paper
Company on October 30, 1983, and who became an Employee on
October 31, 1983, shall have
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all employment which was credited for benefit accrual and
computation purposes under the Scott Plan identically credited
for purposes of determining the surviving spouse's Retirement
benefit hereunder and, furthermore, such surviving spouse of each
Employee who was a participant in the Scott Plan on October 30,
1983, shall be entitled to a Retirement Income in an amount not
less than the surviving spouse's retirement benefit determined
under the provisions of Section 5.9 of the Scott Plan, assuming
the Participant of the surviving spouse had continued his
employment with an adopting employer under the Scott Plan until
the Participant's death under the provisions of this Section 6.1.
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APPENDIX E
APPENDIX FOR HOURLY
CURON EMPLOYEES
Appendix for employees at the Auburn, Indiana, Conover, North Carolina (Division
#28), Orlando, Florida locations and employees at the Cornelius, North Carolina
location who are covered by a collective bargaining agreement between
Amalgamated Clothing and Textile Workers Union, Local 2500 and the Employer and
who participated in the Knoll International Holdings, Inc. Pension Plan for
Hourly Employees or who participate in the Plan following the Effective Date.
The following provisions override any provisions of the Plan which conflict with
them.
Section 1. Definitions
1.1 "Actuarial Equivalent" means a benefit of a value equal to that
of the benefit to which it is being compared when computed in
accordance with the bases set forth below.
(a) In the case of alternative forms of payment described in
Section 4.02 of the Plan and Section 4.1 of this Appendix,
Actuarial Equivalent amounts shall be determined directly or
by interpolation from tables prepared on the basis of the
following formulas:
(1) Section 4.1, Option 1, conversion from life annuity to
10-year certain and life annuity: 93% plus 4/10% for
each year that commencement of benefits precedes age 65
or minus 6/10% for each year that commencement of
benefits follows age 65.
(2) Section 4.1, Option 2, and Section 4.02 of the Plan,
conversion from life annuity to joint and survivor
annuity:
(A) 100% survivor benefit: 83%
(B) 75% survivor benefit: 87%
(C) 66-2/3% survivor benefit: 88%
(D) 50% survivor benefit: 90%
plus 4/10% for each year that Spouse's age is greater
than Employee's age and each year that commencement of
benefits precedes age 65 and minus 4/10% for each year
that Spouse's
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age is less than Employee's age and 6/10% for each year
that commencement of benefits follows age 65; provided,
however, that the maximum percentage shall not exceed
99%.
1.2 "Break in Service" means a period beginning on an Employee's Date
of Separation and ending on any subsequent Date of Employment
which equals or exceeds the applicable number of consecutive
months set forth below:
(a) in the case of an Employee having credit for any Service
under the Plan as of June 29, 1985, or any date thereafter,
60 consecutive months;
(b) in the case of an Employee whose period of absence from work
commences by reason of pregnancy, birth or adoption of a
child, or caring for a child immediately following birth or
adoption, 72 consecutive months;
(c) in other cases, 12 consecutive months.
1.3 "Curon Group" means the Auburn, Indiana, Cornelius, North
Carolina, Conover, North Carolina (Division #28), and Orlando,
Florida facilities.
1.4 "Date of Employment" means any date on which an Employee enters
upon a status entitling him to be compensated directly or
indirectly by the Employer for the performance of duties or
otherwise.
1.5 "Date of Separation" means the earlier of:
(a) any date on which an Employee's employment with the Employer
terminates by reason of a quit, discharge, retirement or
death, or
(b) the first anniversary of the first date of a period in which
the Employee remains absent from active employment with the
Employer, for some reason other than a quit, discharge,
retirement, death or approved leave of absence.
1.6 "Disability Retirement Date" means the date set forth in Section
3.4 hereof on which a Participant is entitled to begin receiving
Disability Retirement Income.
1.7 "Early Retirement Date" of a Participant means the actual date
upon which such Employee leaves the service of the Employer
before Normal Retirement Date and on or after his 55th birthday
and completion of ten Years of Vesting Service.
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1.8 "Employee" means any person (other than a nonresident alien or a
Leased Employee) who is employed by the Employer in the Curon
Group.
1.9 "Hourly Employee" means an Employee who is not a Salaried
Employee.
1.10 "Participant" means an Hourly Employee who has met the
participation requirements of Section 2.1.
1.11 "Period of Employment" means any period beginning on a Date of
Employment and ending on a Date of Separation.
1.12 "Reeves" means Reeves Brothers, Inc.
1.13 "Salaried Employee" means an Employee who receives each pay
period a predetermined amount constituting all or a basic part of
his compensation, which amount is not subject to reduction
because of variation in the number of hours worked or in the
quality or quantity of worked performed.
1.14 "Service" prior to January 4, 1989 with respect to Transferred
Employees and Former Reeves Employees shall be determined in
accordance with the terms of the Reeves Brothers, Inc. Pension
Plan for Hourly Employees, as amended and restated effective July
1, 1987. Service on or after January 4, 1989 shall mean the
aggregate of an Employee's Periods of Employment, provided that
(a) Periods of Employment prior to a Break in Service shall not
be counted unless:
(1) the Employee had completed 5 or more years of Service
before such Break in Service, or
(2) the length of the Break in Service is less than 60
consecutive months and the Employee returns to
employment with the Employer or an Affiliated Company.
(b) Employment with a company other than the Employer shall be
counted if it meets the requirements of each of the other
subsections of this Section and is described in any of the
following subdivisions of this subsection:
(1) employment with any Affiliated Company;
(2) any other employment with a predecessor business of the
Employer, a business merged, consolidated or liquidated
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into the Employer or its predecessor, or a business
substantially all of the assets of which were acquired
by the Employer or its predecessor, but only if and to
the extent the Committee by resolution specifically
determines consistent with regulations adopted pursuant
to the Code.
(c) If an Employee is re-employed within the 12 consecutive
month period following any Date of Separation, Service shall
be credited under this Section as if there had been no
interruption of employment, and credit shall be given for
the period of absence from employment between his Date of
Separation and his date of reemployment.
(d) Service shall include periods of approved leaves of absence
granted in accordance with a nondiscriminatory leave policy
and, to the extent required by federal law, periods of
active service in the Armed Forces of the United States
giving rise to reemployment rights provided the Employee
complied with the requirements of such federal law and was
in fact re-employed by the Employer or a former Employer.
(e) For purposes of the Plan and with respect to Transferred
Employees and Former Reeves Employees, Service and Years of
Benefit Service earned under the Reeves Plan are counted
under this Plan. Service earned with the Reeves Affiliated
Group as an hourly employee who is not a Transferred
Employee or Former Reeves Employee will be credited under
the Plan to such individual in accordance with the rules of
the Plan.
1.15 "Spouse" means "Spouse" as defined in Section 1.27 of the Plan,
except with respect to Participants who receive Retirement Income
under Article 4 of the Plan or with respect to whom death
benefits are paid under Article 6 of the Plan on or prior to
December 31, 1997, "Spouse" means the individual to whom a
Participant is legally married on his annuity starting date or
date of death.
1.16 "Transferred Employees" means hourly employees of the Curon Group
who were employed by Reeves Brothers, Inc. ("Reeves") on January
3, 1989. "Former Reeves Employees" means former hourly employees
of the Curon Group who were not employed by Reeves on January
3,1989, but who had retired under the Reeves Brothers, Inc.
Pension Plan for Hourly Employees, as amended and restated
effective July 1, 1987 (the "Reeves Plan"), or were entitled to
deferred vested or disability benefits under the Reeves Plan or
who retained any Service under the Reeves Plan.
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1.17 "Year of Benefit Service" means an Employee's total Service with
the Employer, including Service with Reeves in accordance with
the Reeves Plan, except the following Service is not considered:
(1) Service in excess of 35 years; (2) Service as a Salaried
Employee; and (3) Service credited under Section 1.14(b)(1) and
(2) or 1.14(c) or (d). Years of Benefit Service are calculated by
dividing a Participant's total days of Service credited under the
preceding sentence by 365.
1.18 "Year of Vesting Service" means a year of Service. Years of
Vesting Service are calculated by dividing a Participant's total
days of Service by 365.
Section 2. Participation in the Plan
2.1 Any Employee in the Curon Group shall become a Participant in the
Plan on the first day on which he is actually employed as an
Hourly Employee on or after the first anniversary of his initial
Date of Employment, provided that:
(a) if an Employee is covered by a collective bargaining
agreement which does not specifically provide for
participation in this Plan such Employee shall not be
eligible to participate at any time;
(b) if an Employee has a Break in Service of a length whereby
credit for prior Service is not retained under the rules of
Section 1.14, for purposes of this Section his first Date of
Employment after the Break in Service shall be deemed to be
his initial Date of Employment.
Section 3. Retirement Benefits
3.1 Normal Retirement Benefit.
Unless an optional form of payment is applicable as described in
Section 4, the amount of monthly Retirement Income payable to a
Participant who retires on or after his Normal Retirement Date
shall be the sum of (a), (b), and (c) below, and increased by
subsections (f) and (g) only for Auburn Employees, and increased
by subsections (e), (h), (i), (j) and (k) only for Cornelius
Employees and increased by subsection (d) only for all other
Employees. Such sum shall be rounded to the next whole dollar.
(a) $3.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, prior to January 1,
1977;
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(b) $4.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after December 31, 1976
and prior to July 1, 1981;
(c) $6.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after June 30, 1981 and
before July 1, 1987;
(d) $10.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after June 30, 1987;
(e) $10.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after June 30, 1987 and
before September 6, 1993;
(f) $10.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after June 30, 1987 and
before August 1, 1996;
(g) $12.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after July 31, 1996;
(h) $11.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after September 5, 1993
and before September 5, 1994;
(i) $12.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after September 4, 1994
and before September 2, 1997;
(j) $13.00 multiplied by the Participant's Years of Benefit
Service, including fractional years, after September 1, 1997
and before September 1, 1998;
(k) $13.50 multiplied by the Participant's Years of Benefit
Service, including fractional years, after August 31, 1998.
3.3 Early Retirement.
A Participant who retires on or after his Early Retirement Date
may elect to receive his Accrued Benefit, commencing on his Early
Retirement Date, or on the first day of any month thereafter, as
selected by the Participant, based on his Years of Benefit
Service up to his termination date, but reduced by .5% for each
month that commencement of the pension precedes his Normal
Retirement Date.
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3.4 Disability Retirement Income.
A Participant who is retired by reason of being Disabled after
completing five or more Years of Vesting Service shall be
entitled to receive Disability Retirement Income. The Disability
Retirement Income of a Participant becoming eligible therefor
shall be his Accrued Benefit as of the date of termination of
employment. A Disability Retirement Income shall commence on the
first day of the month coincident with or next following the
Committee's determination of eligibility therefor.
3.5 Termination of Employment Before Retirement.
A Participant with five Years of Vesting Service shall be
entitled to receive his Accrued Benefit, as of the date of his
Termination of Employment, commencing on the first day of any
month following the Participant's 55th birthday, reduced by .5%
for each month that commencement of his Retirement Income
precedes his Normal Retirement Date.
Section 4. Optional Forms of Payment
4.1 Elective Options.
A Participant entitled to receive Retirement Income under Section
3.02, 3.03, 3.04, or Article 5 of the Plan (but not, except as
otherwise provided in this Appendix, a Participant entitled to
receive a benefit under Section 3.06) shall have the right to
elect, in accordance with procedures prescribed by the Committee,
to convert such pension into a benefit which is the Actuarial
Equivalent of the benefit described in Section 3.1, in accordance
with any of the following options:
Option 1. The 10 Year Certain Option. A reduced pension payable
monthly for life with monthly payments guaranteed for a period of
120 months in order that if the Participant dies prior to receipt
of the guaranteed number of monthly payment checks, the
Beneficiary designated by the Participant will continue to
receive monthly pension checks until the total guaranteed number
have been paid either to the Participant or to his Beneficiary.
Option 2. The Joint and Survivor Option. A reduced pension
payable monthly for the life of the Participant with the
provision that after his death
(a) such reduced pension,
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(b) three-fourths (75%) of such reduced pension,
(c) two-thirds (66-2/3%) of such reduced pension, or
(d) one-half (50%) of such reduced pension.
thereof shall continue during the life of, and shall be paid to
his surviving Spouse.
Section 5. Death Benefits
A death benefit shall be payable to the surviving Spouse (or if
there is no Spouse, such other Beneficiary designated by the
Participant) of a Participant who dies before commencement of
pension benefits if the following conditions are met:
(a) in the case of an unmarried Participant, death occurs after
retirement under Section 3.02 or 3.03 of the Plan, but
before commencement of a pension or while an active
Participant after attainment of age 55 and completion of 5
or more Years of Vesting Service or after Normal Retirement
Date. The Beneficiary shall receive the benefit which would
have been paid had the Participant retired (or, if
applicable, elected commencement of pension payments) on the
date of his death having elected the form described in
Section 4.1 of this Appendix, Option 1 and his Retirement
Income had thereupon commenced.
(b) in the case of a married Participant, death occurs after
completion of 5 or more Years of Vesting Service or after
Normal Retirement Date. The Spouse shall receive the benefit
described in Article 6 of the Plan, unless he or she elects
to receive the benefit described in paragraph (a), above.
In the event that the Beneficiary or Beneficiaries so
designated predecease the Participant, or in the event that
no Beneficiary is properly designated for any reason, the
amounts due under the Plan shall be paid to those persons in
those proportions as is determined under a valid will of the
Participant, or in default of a valid will, to those persons
in those proportions as are entitled to the Participant's
intestate estate under the laws of intestate succession of
the jurisdiction in which the Participant was residing at
the time of his death.
Section 6. Other Provisions Affecting Benefits
6.1 Change of Classification. An Employee who changes his
classification shall be treated as follows:
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(a) An Hourly Employee who becomes such by reason of change of
classification from that of Salaried Employee shall be
entitled to participate in this Plan and to determine
eligibility for benefits under Section 2 on the basis of his
combined Years of Vesting Service in both salaried and
hourly status, provided that Years of Benefit Service as a
Salaried Employee shall not be counted in computing the
amount of his Retirement Income under Section 3 hereof. Upon
retirement or other termination of employment he shall, if
all other requirements are met, receive a combination
benefit under this Plan and the Foamex L.P. Salaried
Retirement Plan.
(b) An Hourly Employee who ceases to be such by reason of change
of classification to that of Salaried Employee shall be
entitled to no benefits under this Plan but shall receive
full credit for Years of Benefit Service as an Hourly
Employee in determining benefits under the Foamex L.P.
Salaried Retirement Plan.
(c) The Plan will take into account changes in classification
that occurred prior to the Company's acquisition of the
Curon Group.
Section 7. Reeves Acquisition
7.1 As part of its acquisition of the assets of the Curon Group from
Reeves, the Company adopted the Predecessor Plan for the purpose
of providing retirement benefits for the hourly employees of its
Curon Group, including hourly Curon Group employees who were
employed by Reeves on January 3, 1989, the day prior to the date
of the acquisition of the assets of the Curon Group (the
"Transferred Employees"). In addition, the Company assumed
responsibility for former hourly Curon Group employees who were
not employed by Reeves on January 3, 1989, the day prior to the
acquisition of the assets of the Curon Group but who had retired
under the Reeves Brothers, Inc. Pension Plan for Hourly
Employees, as amended and restated effective July 1, 1987 (the
"Reeves Plan") or were entitled to deferred vested or disability
benefits under the Reeves Plan, or who retained any Service under
the Reeves Plan as of the January 4, 1989 (the "Former Reeves
Employees").
7.2 This Plan has assumed the liabilities for any benefits due to
Former Reeves Employees and will pay pensions earned by Former
Reeves Employees that had accrued and vested under the Reeves
Plan and were still due as of January 4, 1989, including pensions
due to retirees, deferred vesteds and disabled participants,
whether or not in pay status as of January 4, 1989, even though
such individuals have never been employed by the Company or any
Affiliated Company.
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APPENDIX F
APPENDIX FOR FORMER
FOAMEX PRODUCTS, INC. EMPLOYEES
Appendix for employees at the Corry, Pennsylvania, Elkhart, Indiana,
Williamsport, Pennsylvania and Milan, Tennessee locations who participated in
the Foamex Products, Inc. Hourly Employees Retirement Plan or who participate in
the Plan following the Effective Date. The following provisions override any
provision of the Plan which conflict with them.
Section 1. Definitions
1.1 "Actuarial Equivalent" means a form of benefit differing in time,
period or manner of payment from a specific benefit provided
under the Plan, but having the same value, using the 1971 Group
Annuity Table for Males with a 5-year setback and an interest
rate of 10%.
1.2 "Break in Service" shall mean a period of one or more consecutive
Plan Years in each of which the Participant earns not more than
500 Hours of Service. An Employee shall not incur a one-year
Break in Service for the Plan Year in which he becomes a
Participant, dies, retires or becomes Disabled. Further, solely
for the purpose of determining whether a Participant has incurred
a one-year Break in Service, Hours of Service shall be recognized
for "authorized leaves of absence" and "maternity and paternity
leaves of absence."
"Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an
established nondiscriminatory policy, whether occasioned by
illness, military service, or any other reason.
A "maternity or paternity leave of absence" shall mean an absence
from work for any period by reason of the Employee's pregnancy,
birth of the Employee's child, placement of a child with the
Employee in connection with the adoption of such child, or any
absence for the purpose of caring for such child for a period
immediately following such birth of placement. For this purpose,
Hours of Service shall be credited for the Plan Year in which the
absence from work begins, only if credit therefore is necessary
to prevent the Employee from incurring a one-year Break in
Service, or, in any other case, in the immediately following Plan
Year.
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The Hours of Service credited for a "maternity or paternity leave
of absence" shall be those which would normally have been
credited for such absence, or, in any case in which the Committee
is unable to determine such hours normally credited, eight (8)
Hours of Service per day. The total Hours of Service required to
be credited for a "maternity or paternity leave of absence" shall
not exceed 501.
1.3 "Disability Retirement Date" means the date set forth in Section
5.2 hereof on which a Participant is entitled to begin receiving
Disability Retirement Income.
1.4 "Early Retirement Date" means the first day of any month
coincident with or following:
(A) the Participant's attainment of age 55 and completion of 10
Years of Vesting Service or,
(B) the Participant's completion of 25 Years of Vesting Service
1.5 "Employee" means an Employee of the Employer at the Corry,
Pennsylvania, Elkhart, Indiana, Williamsport, Pennsylvania or
Milan, Tennessee location who receives hourly compensation from
the Employer, excluding any individual in a group covered under
any other retirement or pension plan, including any such plan
maintained pursuant to a collective bargaining agreement, to
which an Employer contributes directly or indirectly.
1.6 "Employment Commencement Date" means the date on which an
Employee first performs an Hour of Service.
1.7 "Predecessor Plan" means the Foamex Products, Inc. Hourly
Employees Retirement Plan, as amended and restated effective as
of January 1, 1989.
1.8 "Spouse" means "Spouse" as defined in Section 1.27 of the Plan,
except with respect to Participants who receive Retirement Income
under Article 4 of the Plan or with respect to whom death
benefits are paid under Article 6 of the Plan on or prior to
December 31, 1997, "Spouse" means the individual to whom a
Participant is legally married on his annuity starting date or
date of death.
1.9 "Year of Eligibility Service" means the period of service for
determining a Participant's eligibility to participate in the
Plan. An Employee shall have completed a Year of Eligibility
Service if such Employee has either
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(A) completed a twelve consecutive month period beginning on his
Employment Commencement Date in which he is credited with
1,000 or more Hours of Service, or
(B) completed any full Plan Year (including the Plan Year during
which the first anniversary of his Employment Commencement
Date occurs) in which he is credited with 1,000 or more
Hours of Service.
1.10 "Year of Vesting Service" means the period of service for
purposes of determining a Participant's nonforfeitable right to
Retirement Income. A Participant shall be credited with Vesting
Service equal to the sum of the Vesting Service credited under
the terms of the Predecessor Plan as in effect on December 31,
1995, plus Vesting Service credited on or after January 1, 1996
in accordance with this Section.
For periods on or after January 1, 1996, a Participant shall be
credited with Vesting Service for each calendar month in which
the Participant completes an Hour of Service. Twelve months of
Vesting Service shall constitute a Year of Vesting Service.
Vesting Service shall include a period of absence:
(A) for any reason which has been approved by the Employer
pursuant to a uniform and nondiscriminatory policy, or
(B) of one year of less for any other reason.
A Participant who does not return to active employment with the
Employer by the end of the period of absence described in
subsection (A) above or by the first anniversary of the
commencement of absence, whichever is later, shall be deemed to
have terminated his employment as of such date, unless his
employment has terminated in the interim by reason of death,
discharge, quit or retirement.
In the event that a Participant terminates employment and is
re-employed by the Employer within the succeeding period of
twelve consecutive months, the intervening period shall
constitute Service.
Notwithstanding the foregoing, the following periods of service
shall be disregarded in determining a Participant's Years of
Vesting Service:
(1) Years of Vesting Service that were disregarded under the
terms of the Predecessor Plan as in effect on December 31,
1995;
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(2) in the case of an Employee who has not been credited with
five Years of Vesting Service, Years of Vesting Service
before a Break in Service if the number of consecutive
Breaks in Service equals or exceeds five; and
For purposes of this Section, a Break in Service shall mean a
twelve consecutive month period, measured from the Employee's
separation from service, during which the Participant failed to
complete at least one Hour of Service. An Employee's separation
from service is the earlier of the date on which the Participant
quits, retires, is discharged or dies, or the first anniversary
of the first day of absence by reason of a maternity or paternity
absence is the second anniversary of the first day of such
absence. The period between the first and second anniversaries of
the first day of absence is neither a period of service nor a
Break in Service. A maternity or paternity absence is an absence
(A) by reason of the pregnancy of the individual, (B) by reason
of the birth of the child of the individual, (C) by reason of the
placement of a child with the individual in connection with the
adoption of such child by such individual, or (D) for purposes of
caring for such child for a period beginning immediately
following such birth or placement.
1.10 "Year of Benefit Service" means the period of service granted to
an Employee for the accrual of benefits. A Participant's Benefit
Service shall be the sum of the Participant's benefit service
credited under the Predecessor Plan as of December 31, 1995, plus
Years of Benefit Service earned on or after January 1, 1996 in
accordance with the second paragraph of this Section 1.10. Under
the terms of the Predecessor Plan, no benefit service was
credited prior to July 1, 1984, and one full Year of Benefit
Service was credited to Participants who participated in the Plan
from July 1, 1984 through November 1, 1984.
A Participant shall earn a Year of Benefit Service for each Plan
Year in which he is credited with 1,000 Hours of Service. For
this purpose, Hours of Service shall not include any period of
employment in a class not eligible to participate in the Plan.
Section 2.1 Participation
Each Employee shall become a Participant as of the January 1 or July 1
coincident or next following his completion of one Year of Eligibility
Service.
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Section 3.1 Retirement Benefits
3.1 Normal Retirement Benefit
A Participant's monthly Retirement Income, payable on or after
his Normal Retirement Date, in the form provided in Section 4.01,
shall be equal to the sum of the products of the respective
Benefit Multipliers times the respective Years of Benefit
Service, as described below:
Years of Benefit Service. Benefit Multiplier
a. Corry:
Years Before January 1, 1997 $15.00
Years After December 31, 1996 $17.00
b. Elkhart
Years Before August 1, 1996 $13.00
Years After July 31, 1996 $15.00
c. Williamsport and Milan
All Years of Benefit Service $13.00
3.2 Early Retirement
A Participant who retires on an Early Retirement Date may elect
to receive his Accrued Benefit, determined as of his Early
Retirement Date, commencing on his Early Retirement Date, or on
the first day of any month thereafter, as selected by the
Participant, reduced by 0.4% for each full month that the annuity
starting date precedes the Participant's attainment of age 62.
3.3 Termination of Employment Before Retirement
If a Participant with vested Accrued Benefit who has completed at
least ten Years of Vesting Service has a Termination of
Employment before his earliest Retirement Date for reasons other
than death, he shall be entitled to receive his Accrued Benefit,
determined as of his Termination of Employment, commencing on the
first day of any month coincident or following his Early
Retirement Date, reduced in accordance with Section 3.2 of this
Appendix.
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Section 4. Optional Forms of Payment
A Participant may elect in accordance with Section 4.03 of the
Plan to receive his Retirement Income in one of the following
optional forms of payment, in which event, the amount to be paid
will be the Actuarial Equivalent of the amount of monthly
Retirement Income to which he is entitled under Article 4:
(i) By payment of the Actuarial Equivalent of his benefit in a
lump sum
(ii) Joint and Survivor Annuity Option
Reduced monthly benefits, which shall commence on the
Participant's Retirement Date and terminate with the last
monthly payment before his death. Following the death of the
Participant, if the person named as joint annuitant in his
election of this option is then living, all or a portion of
such reduced pension, as specified by the Participant in
such election, shall be continued for the remaining lifetime
of the joint annuitant. Such joint annuitant need not
necessarily be a surviving Spouse. The percentage of reduced
pension which may be specified by the Participant to be
continued to the joint annuitant may be 100% or 50%.
(iii) By payment of the Actuarial Equivalent of his benefit in
substantially equal monthly, quarterly or annual
installments over a fixed reasonable period of time that
satisfies one or more of the requirements of Section
401(a)(9) of the Code with payments made not less frequently
than annually.
(iv) Period Certain Option
Reduced monthly benefits, which shall commence on the
Participant's Retirement Date and continue thereafter for
life, with the last payment payable on the first day of the
month in which his death occurs, with the provision that if
the Participant's death occurs within a period of 10 or 20
years (as elected by the Participant) after his benefit
commenced, payments shall be continued to the Participant's
Beneficiary for the balance of the 10 or 20 year period.
(v) By purchase and distribution of a single premium,
non-transferable annuity contract whose distribution terms
satisfy the distribution requirements of the Plan.
(vi) By a combination of (i), (ii), (iii), (iv) and (v) or any of
them.
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Section 5. Disability
5.1 Disability.
A Participant who becomes Disabled while actively employed before
his Normal Retirement Date and who has completed 10 Years of
Vesting Service, shall be entitled to receive a benefit at his
Normal Retirement Date in an amount determined under Section 5.2
of this Appendix.
5.2 Disability Benefits.
The benefit payable to a Disabled Participant shall be equal to
his Accrued Benefit calculated in accordance with Section 3.1 of
this Appendix, but with Years of Benefit Service granted for the
period the Participant is Disabled in addition to the Years of
Benefit Service granted through Termination of Employment.
If a Participant ceases to be Disabled before his Normal
Retirement Date, and if he thereupon does not resume employment
with an Employer or other Affiliated Company, his Accrued Benefit
shall be payable to him in accordance with Section 3.2 of this
Appendix as if he had then attained his Early Retirement Date. If
he has not attained his Early Retirement Date, his rights to his
Accrued Benefit shall be determined in accordance with Section
3.05 of the Plan on the basis of Years of Benefit Service and
Years of Vesting Service as of the date he became Disabled.
If a Participant resumes employment with an Employer or other
Affiliated Company, his rights to future benefits shall be
determined under Article 3 of the Plan.
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FOAMEX L. P. 401(k) SAVINGS PLAN
Effective Date: October 1, 1997
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FOAMEX L.P. 401(k) SAVINGS PLAN
Preamble
This FOAMEX L.P. 401(k) SAVINGS PLAN constitutes an amendment, restatement and
continuation of the Foamex/GFI 401(k) Savings Plan, which was originally
established effective January 1, 1986, and was most recently amended and
restated effective as of July 1, 1995.
The provisions of the Plan, as amended and restated, are effective October 1,
1997, except as otherwise specifically provided.
The purpose of the Plan is to provide employees of Foamex L.P. and certain of
its affiliates with an opportunity to accumulate retirement savings.
The Plan is intended to qualify under Sections 401(a), 401(k) and 401(a)(27) of
the Internal Revenue Code of 1986, as amended.
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Table of Contents
Section Contents Page
1 DEFINITIONS............................................................... 1
2 MEMBERSHIP IN THE PLAN.................................................... 11
2.1 Current Members........................................... 11
2.2 New or Re-employed Members................................ 11
2.3 Changes in Category ...................................... 11
3 CONTRIBUTIONS ............................................................ 12
3.1 Pre-Tax Contributions .................................... 12
3.2 Employer Matching Contributions .......................... 12
3.3 Adjustments to Contribution Limits ....................... 14
3.4 Adjustments to Contributions.............................. 15
3.5 Distribution of "Excess Deferral Amounts" ................ 16
3.6 Overall Limits on Contributions........................... 17
3.7 Permitted Employer Refunds................................ 20
3.8 Timing of Deposits ....................................... 21
4 MEMBER ACCOUNTS .......................................................... 22
4.1 Establishment of Accounts................................. 22
4.2 Valuation of Accounts .................................... 22
4.3 Adjustment to Accounts.................................... 23
4.4 Directed Investments ..................................... 23
4.5 Administration of Investments ............................ 23
4.6 Investments For Terminated Members ....................... 24
4.7 Special Rules Applicable to
Foamex Stock Fund......................................... 24
4.8 Special Rules Applicable to Investment in
Foamex Stock Fund......................................... 25
5 VESTING .................................................................. 26
5.1 Vesting................................................... 26
5.2 Forfeitures............................................... 27
5.3 Change in Vesting Schedule................................ 27
6 DISTRIBUTIONS ............................................................ 28
6.1 Distribution of Benefit................................... 28
6.2 Election of Benefits ..................................... 28
6.3 Rehire Prior To Incurring Five (5)
Consecutive Breaks in Service ............................ 29
6.4 Death Prior to Total Distribution......................... 29
6.5 Distribution Limitation................................... 29
6.6 Mandatory Distributions................................... 30
6.7 Earnings on Undistributed Benefits........................ 30
6.8 Rollovers Into the Plan................................... 30
6.9 Transfers Into the Plan .................................. 30
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6.10 Evidence in Writing ...................................... 34
6.11 Hardship Withdrawal ...................................... 34
6.12 Withdrawals Permitted After Age 59 1/2.................... 36
6.13 Withdrawal of After-Tax Contributions..................... 36
6.14 Conditions For Withdrawals ............................... 36
6.15 Direct Rollover .......................................... 37
6.16 Withholding of Income Tax ................................ 38
6.17 Manner of Payment of Benefits............................. 39
6.18 Distributions to Employees on Disposition
of Assets or Subsidiary................................... 40
7 ACTUAL DEFERRAL AND ACTUAL CONTRIBUTION
PERCENTAGE TESTING........................................................ 41
7.1 Actual Deferral Percentage Tests.......................... 41
7.2 ADP Formula .............................................. 41
7.3 Calculations of Excess Contributions...................... 42
7.4 Failure to Correct Excess Contributions .................. 42
7.5 Additional Pre-Tax and
Matching Contributions.................................... 43
7.6 Distribution of Excess Contributions ..................... 43
7.7 Actual Contribution Percentage Test ...................... 44
7.8 Distribution of Excess Aggregate
Contribution ........................................... 46
7.9 Calculation of Excess Aggregate
Contributions ........................................... 46
7.10 Adjustment for Gain or Loss .............................. 46
7.11 Forfeitures Treated as Annual Additions................... 46
7.12 Special Rules ......................................... 47
8 TOP-HEAVY PROVISIONS ..................................................... 48
8.1 Top-Heavy Pre-emption..................................... 48
8.2 Top-Heavy Definitions .................................... 48
8.3 Aggregation of Plans...................................... 50
8.4 Minimum Contribution Rate ................................ 50
8.5 Deposit of Minimum Contribution .......................... 51
8.6 Top-Heavy Vesting Schedule ............................... 51
8.7 Combined Defined Benefit and
Defined Contribution Plans................................ 51
9 DESIGNATION OF BENEFICIARY................................................ 52
9.1 Named Beneficiary ........................................ 52
9.2 No Named Beneficiary ..................................... 52
10 MANAGEMENT OF THE FUND .................................................. 53
10.1 Contributions Deposited To Trust.......................... 53
10.2 No Reversion to Employer ................................. 53
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11 DISCONTINUANCE AND LIABILITIES .......................................... 54
11.1 Termination ......................................... 54
11.2 No Liability For Employer................................. 54
11.3 Administrative Expenses................................... 54
11.4 Non-forfeitability Due to Termination(s).................. 54
11.5 Exclusive Benefit Rule ................................... 54
11.6 Mergers ......................................... 55
11.7 Non-allocated Trust Assets ............................... 55
12 ADMINISTRATION .......................................................... 56
12.1 Establishment of the Benefits Committee................... 56
12.2 Organization of the Committee ............................ 56
12.3 Powers of the Committee .................................. 56
12.4 Reliance on Professionals................................. 57
12.5 Liability and Indemnification............................. 57
12.6 Fiduciary Insurance....................................... 57
12.7 Claims Procedure ......................................... 57
12.8 Trustee Has Authority to Invest........................... 58
12.9 Removal For Personal Involvement.......................... 58
13 AMENDMENTS .............................................................. 59
13.1 Amendment Restrictions.................................... 59
13.2 Amending the Plan ........................................ 59
13.3 Retroactive Amendments ................................... 59
14 LOANS ................................................................... 60
14.1 Permitted Loans ......................................... 60
14.2 Collateral Required ...................................... 60
14.3 Repayment ......................................... 60
14.4 Interest Charges ......................................... 61
14.5 Failure to Make Timely Payment............................ 61
14.6 Termination of Employment ................................ 61
14.7 Loans to Non-Employees ................................... 61
14.8 Order of Accounts Reduced ................................ 61
14.9 Segregated Investment .................................... 62
14.10 General Administration ................................... 62
15 MISCELLANEOUS ........................................................... 63
15.1 "Spendthrift" Provision .................................. 63
15.2 QDRO Exception ......................................... 63
15.3 No Guarantee of Employment ............................... 63
15.4 Uniformed Services Employment and Reemployment
Rights Act of 1994 ....................................... 63
15.5 Controlling Law ......................................... 64
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SECTION 1
Definitions
The following words and phrases as used herein shall have the following
meanings, unless a different meaning is plainly required by the context; and the
following rules of interpretation shall apply in reading this instrument.
Pronouns shall be interpreted so that the masculine pronoun shall include the
feminine and the singular shall include the plural. The words "hereof," "herein"
and other singular compounds shall refer to the Plan in its entirety and not to
any particular provision or section, unless so limited by the text. All
references herein to specific sections shall mean sections of this document
unless otherwise qualified.
1.1 Accrued Benefit means the sum of the balance in the Member's Pre-Tax
Contribution Account, Top-Heavy Contribution Account, Employer
Matching Contribution Account, After-Tax Contribution Account,
Transfer Account and Rollover Account.
1.2 Actual Contribution Ratio (ACR), with respect to any Member for a Plan
Year, means a fraction of which the numerator equals the Employer
Matching Contributions paid to the Trust for a Plan Year on behalf of
such Member and of which the denominator equals the Member's
Compensation for the Plan Year. To the extent permitted by the
Secretary of the Treasury through rulings or other promulgations,
Compensation may be limited to Compensation earned while an Employee
is a Member in the Plan.
1.3 Actual Deferral Ratio (ADR), with respect to any Member for a Plan
Year, means a fraction of which the numerator equals the Pre-Tax
Contributions paid to the Trust for the Plan Year on behalf of such
Member and of which the denominator equals the Member's Compensation
for the Plan Year. To the extent permitted by the Secretary of the
Treasury through rulings or other promulgations, Compensation may be
limited to Compensation earned while an Employee is a Member in the
Plan.
1.4 Additional Pre-Tax Contribution means a Qualified Nonelective
Contribution as defined in Treasury Regulation 1.401(k)-1(g)(13)(ii).
1.5 Adjustment Factor means the dollar limitation under section 402(g) of
the Code in effect at the beginning of the taxable year.
1.6 Affiliated Company means:
A. any corporation which is a member of a controlled group of
corporations including those within the meaning of section
1563(a) of the Code, determined without regard to sections
1563(a)(4) and (e)(3)(C), including the Employer;
B. any organization under common control with the Employer within
the meaning of section 414(c) of the Code;
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C. any organization which is included with the Employer in an
affiliated service group within the meaning of section 414(m) of
the Code; or
D. any other entity required to be aggregated with the Employer
pursuant to regulations under section 414(o) of the Code.
1.7 After-Tax Contribution Account means an account established and
maintained by the Employer on behalf of a Member to which his
After-Tax Contributions made under the Prior Plan are held.
1.8 Annual Addition means the total for the Limitation Year of the items
listed below allocated to the account of an Employee under all defined
contribution plans sponsored by an Affiliated Company (except that,
for the purposes of this Section, "more than 50%" shall be substituted
for "at least 80%" each place it appears in section 1563(a)(1) of the
Code):
A. Affiliated Company contributions and forfeitures allocated to a
Member's accounts;
B. the total amount of a Member's nondeductible Employee
contributions for the Limitation Year (but not including Rollover
Contributions);
C. amounts described in 415(1)(1) and 419A(d)(2) of the Code; and
D. except that, the Annual Addition for any Limitation Year
beginning before January 1, 1987, shall not be recomputed to
treat nondeductible Employee contributions as an Annual Addition.
1.9 Beneficiary means the person, persons, or trust designated by written,
revocable designation filed with the Plan Administrator by the Member
to receive payments in the event of such Member's death.
1.10 Break in Service means a Plan Year during which an Employee has not
completed more than 500 Hours of Service with the Employer or an
Affiliated Company.
1.11 Business Day means each day the New York Stock Exchange is open for
business; provided, however, that for purposes of Section 1.52 only,
the term "Business Day" shall not include any Business Day on which
The Kwasha Lipton Group of Coopers & Lybrand L.L.P. is closed.
1.12 Code means the Internal Revenue Code of 1986, and the same as may be
amended from time to time.
1.13 Compensation, except as hereafter specified, means W-2 earnings,
including the Pre-Tax Contributions made hereunder during the Plan
Year and contributions made by an Employee to a Code section 125 plan,
but excluding any payments in the nature of severance pay and any
reimbursed moving expenses. Compensation taken into account for all
purposes under the Plan for each
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Member shall not exceed $150,000, adjusted for increases in the cost
of living in accordance with Section 401(a)(17) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to the
Plan Year beginning in such calendar year. If the foregoing limitation
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.
A. For purposes of the nondiscrimination tests set forth in Section
7, and except as provided in Code section 414(s), Compensation
means any income received by the Employee from the Employer in
accordance with Code section 415(c)(3), including deferrals made
pursuant to section 414(s)(2) of the Code, for the Plan Year for
which compliance with the tests is being measured; and to the
extent permitted in guidance issued by the Internal Revenue
Service, Compensation shall mean only that portion of income
received by an Employee from the Employer for the portion of the
Plan Year during which the Employee was a Member of the Plan.
B. For purposes of measuring the limits set forth in Code section
415, Compensation shall mean earned income, wages, salaries,
fees, commissions, percentage of profits, tips, and all other
earnings of a Member reportable on Form W-2 for the Plan Year,
but specifically excluding the following:
(1) for limitation years beginning prior to January 1, 1998,
contributions made by the Employer to a deferred
compensation plan which are not includible in the Employee's
gross income for the taxable year in which contributed
(i.e., Pre-Tax Contributions made hereunder);
(2) Employer contributions made on behalf of an Employee to a
SEP to the extent they are deductible by the Employee under
section 219(b)(2) of the Code;
(3) distributions from a deferred compensation plan (except from
an unfunded non-qualified plan when includible in gross
income);
(4) amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(5) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(6) other amounts which receive special tax benefits, such as
premiums for group term life insurance (to the extent
excludable from gross income); Employer contributions
towards the purchase of an annuity contract described in
section 403(b) of the Code; or,
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for limitation years beginning prior to January 1, 1998, any
amount which is contributed by the Employer pursuant to a
salary reduction agreement and which is not includible in
the gross income of the Employee pursuant to Code section
125.
1.14 Disability means that the Member has applied and qualifies for
disability benefits under the Social Security Act of 1935, as amended.
1.15 Effective Date of this restated Plan means October 1, 1997.
1.16 Eligible Employee means any Employee of the Employer who satisfies the
following conditions:
A. he is not a leased employee within the meaning of Section
414(n)(2) of the Code; and
B. he is not a union employee, other than a union employee for whom
benefits under this Plan are specifically provided for as a
result of good faith bargaining; and
C. he is not an hourly employee at the Pico Rivera, California
location; and
D. he is not employed by the Employer on a part-time or temporary
basis. A part-time employee is an employee who is not regularly
scheduled to complete 1,000 Hours of Service in a Plan Year.
The above notwithstanding, any part-time or temporary Employee who
would otherwise be eligible to participate in the Plan shall become
eligible to participate in the Plan if he is credited with at least
1,000 Hours of Service in the twelve (12) consecutive month period
beginning with such Employee's date of hire, or is credited with at
least 1,000 Hours of Service in any twelve (12) consecutive month
period beginning on the anniversary thereof, as of the first Entry
Date following the end of such twelve (12) consecutive month period.
1.17 Employee means an individual who is a common-law employee of the
Employer and shall include leased employees within the meaning of
section 414(n)(2) of the Code, except as provided below. With respect
to Plan Years beginning on and after January 1, 1997, the term "leased
employee" means any person (other than an Employee of the Employer)
who pursuant to an agreement between the Employer and any other person
("leasing organization") has performed services for the Employer (or
for the Employer and related persons determined in accordance with
section 414(n)(6) of the Code) on a substantially full time basis for
a period of at least one year, and such services are under the primary
direction and control of the Employer. Contributions or benefits
provided a leased employee by the leasing organization which are
attributable to services performed for the Employer shall be treated
as provided by the Employer. The term "Employee" shall not include any
individuals classified by the Employer as
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independent contractors even if such individuals would be classified
as employees of the Employer under common law. A leased employee shall
not be considered an Employee of the Employer if: (i) such individual
is covered by a money purchase pension plan providing: (1) a
non-integrated employer contribution rate of at least 10 percent of
compensation, as defined in section 415(c)(3) of the Code, but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the leased employee's
gross income under Code sections 125, 402(a)(8), 402(h) or 403(b); (2)
immediate participation; and (3) full and immediate vesting; and (ii)
leased employees do not constitute more than 20% of the Employer's
Non-Highly Compensated workforce.
1.18 Employer means Foamex L.P. and any other business organization which
succeeds to its business and elects to continue this Plan, and any
Affiliated Company which adopts this Plan with the consent of the Plan
Sponsor. The Employer prior to October 2, 1990 was Knoll International
Holdings, Inc. Effective April 1, 1995, General Felt Industries, Inc.
adopted this Plan and merged the GFI Employees Savings and Protection
Plan into the Plan.
The following entities participate in this Plan:
A. Foamex L.P.
B. Foamex International Inc.
C. General Felt Industries, Inc.
D. Foamex Fibers, Inc.
1.19 Employer Matching Contribution means a contribution made on behalf of
a Member pursuant to Section 3.2 of the Plan.
1.20 Employer Matching Contribution Account means an account established
and maintained on behalf of a Member to which his Employer Matching
Contributions are allocated.
1.21 Entry Date means the first Business Day of each month.
1.22 ERISA means the Employee Retirement Income Security Act of 1974, and
the same as may be amended from time to time.
1.23 Fiscal Year means the period from January 1 through December 31.
1.24 Fund means all assets of the Trust.
1.25 GFI means General Felt Industries, Inc.
1.26 GFI Plan means the GFI Employee Savings and Protection Plan that was
in effect on March 31, 1995.
1.27 Highly Compensated Employee means, for Plan Years beginning on and
after January 1, 1997, any active or former Employee, who performs
service during the determination year and is described in one or more
of the following groups:
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A. an Employee who is a 5% owner, as defined in section
416(i)(1)(B)(i) of the Code, at any time during the determination
year or the look-back year; or
B. an Employee who receives Compensation in excess of $80,000 during
the look-back year and is a member of the top-paid group, as
defined in Code section 414(q)(3), for the look-back year;
C. The terms "determination year" and "look-back year" shall mean,
respectively, the Plan Year and the twelve-month period
immediately preceding the determination year.
D. The $80,000 amount set forth in paragraph B. shall be indexed for
changes in the cost of living in accordance with section 415(d)
of the Code.
E. A Highly Compensated Former Employee includes any Employee who
separated or was deemed to have separated from service prior to
the determination year, performs no service for the Employer
during the determination year, and was a Highly Compensated
active Employee for either the separation year or any
determination year ending on or after the Employee's 55th
birthday.
F. The determination of who is a Highly Compensated Employee shall
be made in accordance with Code section 414(q) and the
regulations thereunder.
G. "Compensation" shall mean, for the purpose of this Section, Code
section 415(c)(3) compensation.
1.28 Hour of Service means each hour for which an Employee is directly or
indirectly paid or entitled to be paid by the Employer or an
Affiliated Company regardless of whether employment duties are
performed, and each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by the
Employer or Affiliated Company. These hours shall be credited to an
Employee for the computation period during which his employment duties
were performed; but in the event a payment is made or due for a reason
other than the performance of duties, hours shall be credited for the
computation period during which the absence from work occurred or to
which a back pay agreement or award pertains. However, no Employee
shall be credited with duplicate Hours of Service as a result of a
back pay agreement or award. Hours of Service shall also include each
hour (credited on the basis of the Employee's customary workday)
during which an Employee is on an uncompensated excused Leave of
Absence, provided that such Employee shall be credited with no more
than an Hour of Service for each complete Plan Year during which the
uncompensated Leave of Absence is in effect.
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A. For purposes of determining the number of Hours of Service
completed in any applicable computation period, the Employer may
maintain accurate records of actual hours completed for all
Employees. The number of Hours of Service to be credited to an
Employee for periods during which no employment duties are
performed shall be determined in accordance with sections
2530.200b-2(b) and 2530.200b-2(c) of the Department of Labor
regulations in Title 29 of the Code of Federal Regulations.
B. In instances where actual Hours of Service are not maintained, an
Employee shall be credited with 45 Hours of Service for each week
in which such Employee would otherwise be credited with at least
one Hour of Service.
C. Notwithstanding A. and B. above and solely for the purpose of
preventing a Break in Service, an Employee shall be credited with
Hours of Service during an absence by reason of:
(1) the pregnancy of the Employee;
(2) the birth of a child of the Employee;
(3) the placement of the child with the Employee in connection
with the adoption of such child by the Employee; or
(4) for purposes of caring for the child beginning immediately
after such birth or placement;
provided the Employee shall, during the period of his absence, be
credited with the number of Hours of Service which would have
been credited to him at his normal work rate but for such
absence, or, if the number of Hours of Service based on a normal
rate is indeterminable, the Employee shall be credited with 8
Hours of Service per day of such absence. The "Severance from
Service" date of an Employee/Member who is absent from work due
to "maternity or paternity leave" reasons for more than one year
is the second anniversary of the first date of such absence. The
period between the first and second anniversary of the first date
of such absence is neither a Period of Service nor a period of
severance.
D. In instances where actual Hours of Service are maintained, the
maternity/paternity leave described in C. above shall be credited
to the computation period in which the absence began if necessary
to avoid a Break in Service or, if not necessary, then to the
following computation period.
1.29 Leave of Absence means any temporary absence from employment
authorized by the Employer based on its normal practices. An
Employee's Period of Service shall continue uninterrupted during such
leave.
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1.30 Limitation Year shall be the Plan Year.
1.31 Member means any Eligible Employee included in the membership of the
Plan as provided in Section 2 hereof. A Member shall continue to be a
Member as long as he has an Accrued Benefit hereunder.
1.32 Non-Highly Compensated Employee means, for Plan Years beginning on and
after January 1, 1997, any Employee who is not a Highly Compensated
Employee.
1.33 Normal Retirement Date means the Member's 65th birthday.
1.34 Period of Service means the period between an Employee's date of hire
or rehire, as applicable, and the date on which he ceases to be an
Employee.
1.35 Plan means Foamex L.P. 401(k) Savings Plan, as set forth herein.
1.36 Plan Administrator is the individual or entity provided for in Section
12 hereof.
1.37 Plan Sponsor means Foamex L.P. or its successor.
1.38 Plan Year means the period from January 1 through December 31.
1.39 Pre-Tax Contribution means an elective deferral made by a Member
pursuant to Section 3.1 of the Plan.
1.40 Pre-Tax Contribution Account means an account established and
maintained on behalf of a Member to which his Pre-Tax Contributions
are allocated.
1.41 Prior Plan means this Plan as in effect through December 31, 1988 and
the Scotfoam Corporation 401(k) Savings and Investment Plan as in
effect through May 31, 1990.
1.42 Retirement means the termination of a Member's employment with the
Employer on or after his Normal Retirement Date.
1.43 Rollover Contribution means the amount contributed to the Plan
pursuant to Section 6.8.
1.44 Rollover Account means the account established and maintained pursuant
to Section 6.8 of the Plan.
1.45 Spouse means the husband or wife of a Member on the date benefits
under the Plan commence. However, if the Member should die prior to
the date benefits under the Plan would have commenced to him, then the
Spouse shall be the husband or wife to whom the Member had been
married throughout the one-year period preceding the date of his
death.
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1.46 Top-Heavy Contribution means a contribution made by an Employer
pursuant to Section 8 of the Plan.
1.47 Top-Heavy Contribution Account means an account established and
maintained on behalf of a Member to which Top-Heavy Contributions, if
any, are allocated.
1.48 Transfer Account means the account established and maintained pursuant
to Section 6.9 of the Plan.
1.49 Trust means a trust, intended to qualify under Section 501(a) of the
Code, constituting the legal agreement between the Plan Sponsor and
the Trustee, fixing the rights and liabilities with respect to
managing and controlling the Fund for the purposes of the Plan.
1.50 Trustee means the individual or entity designated by the Plan Sponsor
as trustee(s) or any successor trustee(s) of the Trust.
1.51 Union Employees means Employees subject to collective bargaining
agreements entered into with the following unions:
A. Unions for whom the special provisions of Section 3.2(B) do not
apply:
I. United Steelworkers of America, Local No. 64 (all buildings
at Hayward Location)
II. United Food & Commercial Workers Union, Local No. 670
(Tupelo Location)
III. Teamsters Local Union No. 574 (Cape Girardeau Location)
IV. United Paperworkers International Union, Local No. 714
(Eddystone Location)
V. Amalgamated Clothing & Textile Workers Union, Local No. 2500
(Cornelius Location)
B. Unions for whom the special provisions of Section 3.2(B) apply
are the following unions:
I. Teamsters International Union Local No. 929 (Philadelphia
Location)
II. S.E.I.U. Local No. 399 (Central Distribution Center
Location)
III. S.E.I.U. Local No. 36 (Fairless Hills Location)
IV. General Truck Drivers, Office, Food & Warehouse Union Local
No. 952 (Orange Location)
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V. International Association of Machinists & Aerospace Workers,
Local Lodge #2551 (Dallas Location)
VI. Plastic Workers Union, Local No. 18 (Ontario Location)
VII. Plastic Workers Union, Local No. 18 (Ontario OSP Location)
VIII. Plastic Workers Union, Local No. 18 (La Mirada location)
1.52 Valuation Date means the dates as may be selected by the Plan
Administrator for the valuation of Plan assets. Effective October 1,
1997, Plan assets shall be valued every Business Day.
1.53 Year of Service means a Plan Year during which the Employee completes
1,000 Hours of Service.
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SECTION 2
MEMBERSHIP IN THE PLAN
2.1 Current Members. Each Employee who was participating in the Plan on
September 30, 1997 shall automatically continue as a Member hereunder.
Each other Employee who is an Eligible Employee as of the Effective
Date shall become a Member of the Plan on such date.
2.2 New or Reemployed Members. Each other Employee shall become a Member
on the Entry Date coincident with or next following the date he
qualifies as an Eligible Employee and completes a 30-day Period of
Service. A reemployed Eligible Employee shall become a Member on his
date of reemployment if he had been a Member of the Plan during his
prior period of employment. Otherwise, a reemployed Eligible Employee
shall become a Member of the Plan as of the Entry Date following his
completion of a 30-day Period of Service (including any Period of
Service prior to his reemployment).
2.3 Changes in Category. If an Employee's status changes either from a
category of ineligibility to a category of eligibility, or from a
category of eligibility to a category of ineligibility, his Years of
Service during the period of ineligibility shall be considered as
Years of Service for vesting purposes hereunder. For purposes of
Section 3, only Compensation earned from the Employer during a period
in which the Employee is both an Eligible Employee and a Member shall
be considered in determining the amount of the contribution made to
the Trust on behalf of the Employee.
If a Member's status changes to a category of ineligibility, he shall
become a Member immediately upon returning to an eligible class of
Employees. If an ineligible Employee's status changes to an Eligible
Employee, he shall become a Member immediately if he has otherwise
satisfied the requirements of Section 2.2.
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SECTION 3
CONTRIBUTIONS
3.1 Pre-Tax Contributions. Each Member may authorize the Employer to
reduce his Compensation through regular payroll deductions and to have
the Employer make Pre-Tax Contributions to the Plan in the amount of
such payroll deduction. The Pre-tax Contribution may be any whole
percentage between 0% and 20% of such Compensation, but in no event to
exceed the appropriate Adjustment Factor. Compensation, for purposes
of this Section, shall mean only the Compensation earned by an
Employee while he is a Member of the Plan.
Such amount shall be deposited as Pre-Tax Contributions hereunder to
the Member's Pre-Tax Contribution Account. Prior to the date that he
becomes a Member, each Eligible Employee shall, by following the
administrative procedures established by the Plan Administrator,
consent and agree to payroll deductions, authorize the Employer to
make such deductions and designate the percentage of such
contributions to be allocated to the available investment funds. The
election of the Member shall remain in effect until the Member makes a
new election.
3.2 Employer Matching Contributions.
A. Non-Union and Certain Union Employees: This Section 3.2(A) shall
apply to all Eligible Employees except for certain Union
Employees listed in Section 3.2(B). The Employer shall make
Employer Matching Contributions in an amount equal to twenty-five
percent (25%) of each Eligible Member's Pre-Tax Contribution. The
Employer shall make additional Employer Matching Contributions
for the Plan Year in an amount equal to twenty-five percent (25%)
of each Eligible Member's Pre-Tax Contribution for such Plan Year
quarter that is invested in Employer stock, which additional
contributions shall be invested exclusively in the Foamex Stock
Fund. Notwithstanding the preceding, no Matching Contribution
shall be made with respect to an Eligible Member's Pre-Tax
Contributions in excess of four percent (4%) of such Eligible
Member's Compensation for the Plan Year quarter. All Employer
Matching Contributions shall be credited to the Eligible Member's
Employer Matching Contribution Account on a quarterly basis. For
purposes of this Section, Eligible Member means each Member who
makes any Pre-Tax Contributions during a calendar quarter and is
employed by the Employer on the last day of the calendar quarter
except as otherwise provided, in the case of any particular group
of Union Employees, under the terms of the relevant collective
bargaining agreement.
Compensation, for purposes of this Section, shall mean only the
Compensation earned by an Employee while he is a Member of the
Plan.
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<PAGE>
B. Special Provisions for Certain Union Employees: The Employer
shall make Employer Matching Contributions to Union Employees
according to the following schedule:
I. Teamsters International Local No. 929 (Philadelphia
Location) - The Employer shall make no Employer Matching
Contributions.
II. S.E.I.U. Local No. 399 (Central Distribution Center ) - The
Employer shall make Employer Matching Contributions equal to
twenty-five percent (25%) of the Member's Pre-Tax
Contributions up to a maximum of $500 per Plan Year.
III. S.E.I.U. Local No. 36 - (Fairless Hills Location) - The
Employer shall make Employer Matching Contributions for each
Member covered under the collective bargaining agreement
between the Employer and the Service Employees International
Union Local 36 with respect to the Employer's Fairless Hills
location which shall equal $0.20 for each $1.00 allocated to
the Member's Pre-tax Contribution Account, subject to a
maximum of $450 per Plan Year regardless of the length of
time the Member is eligible during the Plan Year.
IV. General Truck Drivers, Office, Food & Warehouse Union Local
952 (Orange Location) - The Employer shall match fifty
percent (50%) of the Pre-Tax Contributions made by Members
up to $300 per Plan Year.
V. International Association of Machinists & Aerospace Workers
Local Lodge # 2551 (Dallas Location) - Effective March 1,
1997, the Employer shall make Employer Matching
Contributions for each Member covered under the collective
bargaining agreement between the Employer and the
International Association of Machinists & Aerospace Workers,
Local Lodge # 2551 with respect to the Employer's Dallas
location which shall equal $0.20 for each $1.00 allocated to
the Member's Pre-tax Contribution Account, subject to a
maximum of $400 per Plan Year regardless of the length of
time the Member is eligible during the Plan Year. Effective
for Employer Matching Contributions made on or after
February 23, 1998, Employer Matching Contributions are
subject to a maximum of $450 per Plan Year regardless of the
length of time the Member is eligible during the Plan Year.
Notwithstanding the foregoing, each such Member who makes
Pre-tax Contributions on a continuous basis during the
twelve consecutive month period ending on February 23, 1998
shall receive an additional Employer Matching Contribution
of $100.
VI. Plastic Workers Union Local No. 18 (Ontario Location) -
Effective March 1, 1997, the Employer shall make Employer
Matching Contributions for each Member covered under the
collective
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<PAGE>
bargaining agreement between the Employer and the Plastic
Workers Union Local No. 18 with respect to the Employer's
Ontario location which shall equal $0.10 for each $1.00
allocated to the Member's Pre-tax Contribution Account,
subject to a maximum of $200 per Plan Year regardless of the
length of time the Member is eligible during the Plan Year.
Notwithstanding the foregoing, each such Member who makes
Pre-tax Contributions on a continuous basis during the
twelve consecutive month period ending on April 1, 1998
shall receive an additional Employer Matching Contribution
of $50.
VII. Plastic Workers Union Local No. 18 (Ontario OSP Location) -
Effective March 1, 1997, the Employer shall make Employer
Matching Contributions for each Member covered under the
collective bargaining agreement between the Employer and the
Plastic Workers Union Local No. 18 with respect to the
Employer's Ontario OSP location which shall equal $0.10 for
each $1.00 allocated to the Member's Pre-tax Contribution
Account, subject to a maximum of $200 per Plan Year
regardless of the length of time the Member is eligible
during the Plan Year. Notwithstanding the foregoing, each
such Member who makes Pre-tax Contributions on a continuous
basis during the twelve consecutive month period ending on
April 1, 1998 shall receive an additional Employer Matching
Contribution of $50.
VIII. Plastic Workers Union Local No. 18 (La Mirada Location) -
Effective July 1, 1997, the Employer shall make Employer
Matching Contributions for each Member covered under the
collective bargaining agreement between the Employer and the
Plastic Workers Union Local No. 18 with respect to the
Employer's LaMirada location which shall equal $0.10 for
each $1.00 allocated to the Member's Pre-tax Contribution
Account, subject to a maximum of $200 per Plan Year
regardless of the length of time the Member is eligible
during the Plan Year. Notwithstanding the foregoing, each
such Member who makes Pre-tax Contributions on a continuous
basis during the twelve consecutive month period ending on
September 1, 1998 shall receive an additional Employer
Matching Contribution of $50.
IX. The Employer shall make Employer Matching Contributions to
all other Union Employees participating in the Plan as
provided under Section 3.2(A).
3.3 Adjustments to Contribution Limits.
A. Notwithstanding Section 3.1, if the amount of the Pre-Tax
Contributions made or to be made (as the case may be) on behalf
of all Members for
14
<PAGE>
any Plan Year is such that the Plan Administrator determines that
the amount of such contributions may not satisfy the requirements
of Section 7.1, then the Plan Administrator shall have the
authority to cause the reduction of Pre-Tax Contributions to be
made on behalf of all or a group of Highly Compensated Employees
who elect to make Pre-Tax Contributions in such manner as it
shall determine in order to ensure that the Plan will satisfy the
requirements of Section 7.1 for such Plan Year and the amount of
such reductions shall not be contributed to the Plan. Such action
by the Plan Administrator need not be in accordance with the
requirements of Federal Income Tax Regulations Section
1.401(k)-1(f)(2); provided, however, that (a) any action to not
act in accordance with such Regulation shall be evidenced by
written action of the Plan Administrator and (b) such reduction
shall only be effective with respect to Pre-Tax Contributions
which would otherwise be made after the date that the Plan
Administrator so acts.
B. Notwithstanding Section 3.2, if the amount of the Employer
Matching Contributions to be made on behalf of all Members for
any Plan Year is such that the Plan Administrator determines that
the amount of such contributions may not satisfy the requirements
of Section 7.7, then the Plan Administrator shall have the
authority to cause the reduction of Employer Matching
Contributions to be made on behalf of all or a group of Highly
Compensated Employees who elect to make Pre-Tax Contributions in
such manner as it shall determine in order to ensure that the
Plan will satisfy the requirements of Section 7.7 for such Plan
Year, and the amount of such reductions shall not be contributed
to the Plan. Such action by the Plan Administrator need not be in
accordance with the requirements of Federal Income Tax
Regulations Section 1.401(m) - 1(e)(2); provided, however, that
(a) any action to not act in accordance with such Regulation
shall be evidenced by written action of the Plan Administrator,
(b) such reduction shall only be effective with respect to
Employer Matching Contributions which would otherwise be made
after the date that the Plan Administrator so acts and (c) the
Plan Administrator shall evidence in writing the order in which
the various categories of Employer Matching Contributions
otherwise to be made with respect to such Highly Compensated
Employees shall be so reduced.
C. Anything in the foregoing to the contrary, no such reductions
shall be made with respect to any Highly Compensated Employee
without at least thirty (30) days written notice to such person.
3.4 Adjustments to Contributions. A Member may increase or decrease the
rate of Pre-Tax Contributions effective as of any payroll period by
notifying the Plan Administrator in accordance with the administrative
procedures established by the Plan Administrator. A Member may suspend
Pre-Tax Contributions at any time by notifying the Plan Administrator
in accordance with the administrative procedures established by the
Plan Administrator. Suspensions during the Plan Year shall be
effective as soon as practicable after notification of the Plan
15
<PAGE>
Administrator in accordance with the administrative procedures
established by the Plan Administrator. A Member may recommence Pre-Tax
Contributions to the Plan effective as of any payroll period by
submitting a new election to the Plan Administrator in accordance with
administrative procedures established by the Plan Administrator, prior
to such payroll period. Notwithstanding the foregoing, an individual
who is on lay off status and returns to the employ of the Employer,
may recommence Pre-Tax Contributions to the Plan effective as of the
next payroll period.
3.5 Distribution of "Excess Deferral Amounts". Notwithstanding any other
provision of the Plan, Excess Deferral Amounts as adjusted for income
or losses thereon shall be distributed to Members who claim such
Excess Deferral Amounts for the preceding calendar year.
A. For purposes of this Section, the following definitions shall
have the following meanings:
(1) "Elective Deferrals" shall mean any Employer contributions
made to the Plan at the election of the Member, in lieu of
cash compensation, and shall include contributions made
pursuant to a salary reduction agreement or other deferral
mechanism. With respect to any taxable year, a Member's
Elective Deferral is the sum of all Employer contributions
made on behalf of such Member pursuant to an election to
defer under any qualified CODA as described in section
401(k) of the Code, any simplified employee pension cash or
deferred arrangement as described in Code section
402(h)(1)(B), any eligible deferred compensation plan under
Code section 457, any plan as described under Code section
501(c)(18), and any Employer contributions made on the
behalf of a Member for the purchase of an annuity contract
under Code section 403(b) pursuant to a salary reduction
agreement.
(2) "Excess Deferral Amounts" shall mean those Elective
Deferrals that are includible in a Member's gross income
under Code section 402(g), to the extent such Member's
Elective Deferrals for a taxable year exceed the Adjustment
Factor. Excess Deferral Amounts shall be treated as Annual
Additions under the Plan except to the extent distributed
pursuant to this Section 3.4.
B. A Member may assign to this Plan any Excess Deferral Amounts made
during the taxable year of the Member by filing a claim in
writing with the Plan Administrator no later than March 1
following the year in which the Excess Deferral Amounts were
made. Said claim shall specify the Member's Excess Deferral
Amount for the preceding calendar year; and shall be accompanied
by the Member's written statement that if such amounts are not
distributed, such Excess Deferral Amount, when added to amounts
deferred under other plans or arrangements described in section
401(k), 408(k), 457, 501(c)(18) or 403(b) of the Code shall
16
<PAGE>
exceed the appropriate Adjustment Factor for the year in which
the deferral occurred.
C. A Member who has an Excess Deferral Amount during a taxable year
may receive a corrective distribution during the same year. Such
a corrective distribution shall be made if:
(1) the Member designates the distribution as an Excess Deferral
Amount;
(2) the corrective distribution is made after the date on which
the Plan received the Excess Deferral Amount; and
(3) the Plan Administrator designates the distribution as a
distribution of an Excess Deferral Amount.
D. The Excess Deferral Amount distributed to a Member with respect
to a calendar year shall be calculated after giving effect to
income and losses pertaining to the Member's Pre-Tax Contribution
Account allocable to the Excess Deferral Amount.
The income or loss allocable to such Excess Deferral Amount shall
be determined by multiplying the income or loss allocable to the
Member's Pre-Tax Contribution Account for the calendar year by a
fraction, the numerator of which is the Excess Deferral Amount on
behalf of the Member for the preceding calendar year and the
denominator of which is the Member's Pre-Tax Contribution Account
balance on the last day of the calendar year, minus the income or
plus the loss allocable to the Member's Pre-Tax Contribution
Account for the calendar year.
E. In the alternative, any other methods of allocating income or
loss on the Excess Deferral Amount may be utilized in the manner
provided by the Internal Revenue Service.
F. Excess Deferral Amounts, as adjusted for income and losses, shall
be distributed to a Member no later than April 15 of the year
following the calendar year in which such Excess Deferral was
made.
G. Excess Deferral Amounts are includible in a Member's gross income
under Section 402(g) of the Code to the extent that the Member's
Pre-Tax Contributions exceed the dollar limitation under this
Code Section. Excess Deferral Amounts shall be treated as Annual
Additions under this Plan except to the extent distributed
pursuant to this Section 3.4.
3.6 Overall Limits on Contributions. Contributions made on behalf of any
Member during any Limitation Year shall be subject to the following:
A. In no event shall the Annual Addition for a Member exceed the
lesser of:
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(1) 25% of the Member's Compensation under Section 1.13(B), for
the Limitation Year; or
(2) the "defined contribution dollar limitation", which shall
mean $30,000, or, effective for Limitation Years beginning
on or after January 1, 1993, the limitation as in effect for
the Limitation Year pursuant to Code section 415(d).
B. For purposes of the Annual Addition hereunder, Pre-Tax
Contributions made on behalf of a Member during a payroll period
which begins in one Plan Year but ends in the next succeeding
Plan Year shall be deemed an Annual Addition for the next
succeeding Plan Year, pursuant to Treasury Regulation
1.415-6(b)(7).
C. If the Annual Addition to this Plan must be limited for any
Member in order to comply with Code section 415, the Plan shall
first distribute Pre-Tax Contributions to the extent an excess
amount exists. Pre-Tax Contributions which are distributed
pursuant to this Section 3.6(C) shall not be counted in
determining whether the limit in Section 402(g) has been exceeded
or in performing the nondiscrimination tests under Section 7. If
excess Annual Additions still exist in a Member's Account and
such excess Annual Additions are the result of the allocation of
forfeitures, a reasonable error in estimating a Member's
Compensation or a reasonable error in determining the amount of a
Member's Pre-Tax Contributions, the excess amounts in the
Member's account will be used to reduce Employer contributions
for the next Limitation Year (and succeeding Limitation Years, as
necessary) for that Member if that Member is covered by the Plan
as of the end of the Limitation Year. However, if that Member is
not covered by the Plan as of the end of the Limitation Year,
then the excess amounts will be held unallocated in a suspense
account for the Limitation Year and allocated and reallocated in
the next Limitation Year to all of the remaining Members in the
Plan. Furthermore, the excess amounts will be used to reduce
Employer contributions for the next Limitation Year (and
succeeding Limitation Years, as necessary) for all of the
remaining Members in the Plan.
D. (1) If an Employee is or was a Member in one or more defined
benefit plans and one or more defined contribution plans
maintained or ever maintained by the Employer, the sum of
the defined benefit plan fraction and the defined
contribution plan fraction for any year may not exceed 1.0.
The "defined benefit plan fraction" for any year is a
fraction the numerator of which is the projected annual
benefit of the Member under the defined benefit plan
(determined as of the close of the Limitation Year), and the
denominator of which is the lesser of:
(a) the product of 1.25 multiplied by $90,000 or the
applicable dollar limit which is in effect for such
year; or
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(b) the product of 1.4 multiplied by 100% of the Member's
average Compensation for his high 3 consecutive
calendar years of active participation.
Notwithstanding the above, if the Employee was a Member
as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer in
existence on May 6, 1986, the denominator of this
fraction shall not be less than 125 percent of the sum
of the annual benefits under such plans which the
Member 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 Code
section 415 for all Limitation Years beginning before
January 1, 1987.
(2) The defined contribution plan fraction for any year is a fraction
the numerator of which is the sum of the Annual Addition to the
Member's accounts as of the close of the Limitation Year, and the
denominator of which is the sum of the lesser of the following
amounts determined for such year and for each prior year of
service with the Employer:
(a) the product of 1.25 multiplied by $30,000 or the
applicable limit which is in effect for such year; or
(b) the product of 1.4 multiplied by 25% of the Member's
Compensation.
Notwithstanding the above, if the Employee was a Member
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 Employer
which were in existence on May 6, 1986, the numerator
of this fraction shall 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
(i) the excess of the sum of the fractions over 1.0
times (ii) 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 6, 1986, but
using
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the section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning
before January 1, 1987, shall not be recomputed to
treat all Employee contributions as Annual Additions.
For purposes of the defined contribution plan fraction
denominator above, the amount taken into account with
respect to each Member for all Limitation Years ending
before January 1, 1983 may be an amount equal to the
product of the defined contribution plan denominator
for the 1982 Limitation Year as determined under
Section 415(e)(3)(B) of the Code, multiplied by the
following fraction:
(3) the numerator of which is the lesser of $51,875 or 1.4 multiplied
by 25% of the Member's Compensation for the year ending in 1981;
and
(4) the denominator of which is the lesser of $41,500 or 25% of the
Member's Compensation for the year ending in 1981.
E. The contributions to this Plan made by the Employer on behalf of an
Employee shall be reduced by the amount of any Annual Addition in
excess of the limitation under Section 415 of the Code for any
Limitation Year.
F. This Section 3.6 shall be satisfied prior to satisfying the ADP test.
G. If the Plan satisfied the applicable requirements of Section 415 of
the Code as in effect for all Limitation Years beginning before
January 1, 1987, an amount shall be subtracted from the numerator of
the defined contribution plan fraction (not exceeding such numerator)
as prescribed by the Secretary of the Treasury so that the sum of the
defined benefit plan fraction and defined contribution plan fraction
computed under Section 415(e)(1) of the Code (as revised by this
Section) does not exceed 1.0 for such Limitation Year.
H. In addition to any other limitations contained in this Section, if the
Employer or an Affiliated Company maintains or maintained a defined
benefit plan and the amount contributed to the Trust in respect of any
Limitation Year would cause the amount allocated to any Member under
all defined contribution plans maintained by the Employer or an
Affiliated Company to exceed the maximum allocation as determined in
subsection D., then the allocation with respect to such Member shall
be reduced by the amount of such excess. To the extent
administratively feasible, the limitation of this subsection shall be
applied to the Member's benefit payable from the defined benefit plan
prior to reduction of the Member's
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Annual Additions under the defined contribution plans. The excess
allocation shall be reallocated or held in a suspense account in
accordance with subsection C.
3.7 Permitted Employer Refunds. Employer contributions hereunder are made with
the understanding that this Plan shall initially qualify under Section 401
of the Code, and that such contributions shall be deductible under Section
404 of the Code.
A. If approval of the Plan as originally adopted is denied by the
Internal Revenue Service, Employer contributions affected by such
denial shall be returned to the Employer within one year after the
denial occurs. Any contribution that is disallowed as a deduction
shall be refunded to the Employer within one year of such disallowance
if the Employer has filed the application for the determination or
qualification of this Plan with the IRS by the time prescribed by law
for filing the Employer's return for the taxable year in which this
Plan was adopted, or by such later date as the Secretary of the
Treasury may prescribe.
B. Any contribution made by the Employer due to a mistake of fact shall
be refunded to the Employer within one year of such contribution.
C. Refunds of contributions due to a disallowance of deduction or mistake
of fact shall be governed by the following requirements:
(1) earnings attributable to the amount being refunded shall remain
in the Plan, but losses thereto must reduce the amount to be
refunded; and
(2) in no event may a refund be made that would cause the Accrued
Benefit of any Member to be reduced to less than that which the
Member's Accrued Benefit would have been had the mistaken amount
not been contributed.
3.8 Timing of Deposits. Employer shall make payment of the Pre-Tax Contribution
to the Trust under the terms hereof no later than the time period permitted
by applicable law and regulations. All other Employer contributions under
the Plan shall be deposited to the Trust prior to the due date for filing
the Employer's Federal Income Tax Return for the Fiscal Year in which the
Plan Year ends, including any extension thereto. In no event shall the
Employer Contributions be made in excess of the amount deductible under
applicable Federal law now or hereafter in effect limiting the allowable
deduction for contributions to profit sharing plans. The contributions to
this Plan when taken together with all other contributions made by the
Employer to other qualified retirement plans shall not exceed the maximum
amount deductible under Section 404(a) of the Code.
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SECTION 4
MEMBER ACCOUNTS
4.1 Establishment of Accounts. A Pre-Tax Contribution Account, Top-Heavy
Contribution Account, Employer Matching Contribution Account, After-Tax
Contribution Account, Transfer Account and Rollover Account shall be
established for each Member in accordance with Sections 3, 6, 8, and under
the Prior Plan as applicable. All contributions by or on behalf of a Member
shall be deposited to the appropriate account.
4.2 Valuation of Accounts. As of each Valuation Date, the accounts of each
Member shall be adjusted to reflect any realized and unrealized gains or
losses and income or expenses of the Fund which shall be allocated pro rata
to each Member's account based on the value thereof as of the preceding
Valuation Date, adjusted in accordance with Section 4.3. The fair market
value of the Fund shall be determined by the Trustee and communicated to
the Plan Administrator as of the end of each calendar month in accordance
with procedures established by the Plan Administrator. Each Member shall be
furnished with a statement as soon as practicable after the end of each
calendar quarter, setting forth the value of his Accrued Benefit as of the
last Valuation Date in such calendar quarter. It shall represent the fair
market value of all securities or other property held for each respective
fund, plus cash and accrued earnings, less accrued expenses and proper
charges against the fund as of such Valuation Date. The Trustee's
determination shall be final and conclusive for all purposes of this Plan.
The valuation process shall be performed separately for each investment
fund.
To the extent it is necessary to determine the fair market value, as of any
particular date, of any shares of Common Stock held under the Foamex Stock
Fund for purposes of the foregoing paragraph, or for purposes of any other
provision of the Plan, such fair market value shall be the average of the
high bid and low asking price for the Common Stock of Foamex International
Inc. as quoted on the National Market System of the National Association of
Securities Dealers Automated Quotation System on the day as of which such
value must be determined or, if there are no such quotes on such date, the
most recent prior business day on which high bid and low asking prices are
quoted. If no such high bid and low asking prices are quoted within such
last five business days, fair market value will be determined by the
Trustee, based upon a good faith attempt to value, accurately and in
accordance with the requirements of the Code and ERISA, the shares of
Common Stock of Foamex International Inc. Notwithstanding the foregoing,
the foregoing provisions of this paragraph shall not apply in the case
where any such shares to be valued have either been purchased or sold (as
the case may be) on the open market on the date as of which such fair
market value is to be determined and such purchase or sale price (as the
case may be) shall be used to value such shares.
4.3 Adjustment to Accounts. When determining the value of Member accounts, any
deposits due which have not been deposited to the fund on behalf of the
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Member shall be added to his accounts; and any withdrawals or distributions
made which have not been paid out shall be subtracted from the accounts.
Similarly, adjustment of accounts for appreciation or depreciation of an
investment fund shall be deemed to have been made as of the Valuation Date
on which the adjustment relates, notwithstanding that they are actually
made as of a later date.
4.4 Directed Investments. A Member's Accrued Benefit, shall be invested as
directed by each Member in one or more of the following investment funds:
A. Morley Capital Fund
B. Fidelity Puritan Fund
C. Vanguard/Windsor Fund
D. Neuberger & Berman Guardian Fund
E. Vanguard Index Trust 500 Fund
F. Janus Worldwide Fund
G. Foamex Stock Fund - A non-diversified stock fund that invests solely
in the Common Stock of Foamex International Inc. All such shares of
Common Stock to be held under such fund shall be acquired exclusively
through purchases on the open market. Dividends, if any, shall be
used, as soon as practicable, to purchase additional such shares of
Common Stock.
A Member shall submit his investment selection to the Plan Administrator in
accordance with the administrative procedures established by the Plan
Administrator. The Member may select one or more investment funds in
multiples of 1%. The investment selection of a Member shall apply uniformly
to all of his accounts other than that portion of the Employer Matching
Contribution attributable to Pre-tax Contributions made to the Foamex Stock
Fund.
The special 25% additional Employer Matching Contribution for Member
Pre-Tax Contributions invested in the Foamex Stock Fund (but excluding any
earnings and/or unrealized gains, if any, thereon) may not be transferred
to another fund.
4.5 Administration of Investments. Contributions made by or on behalf of a
Member shall be invested in the investment fund or funds selected by the
Member until the effective date of a new designation which has been
properly submitted to the Plan Administrator. Notwithstanding the
foregoing, that portion of the Employer Matching Contribution account
attributable to the additional 25% matching contribution to the Foamex
Stock Fund shall be invested exclusively in the Foamex Stock Fund.
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If any Member fails to make an initial designation, he shall be deemed to
have designated the Morley Capital Fund; provided he agrees in writing to
such investment. A designation submitted by a Member changing his
investment option shall apply to investment of future deposits and/or to
amounts already accumulated in his accounts. A Member may change his
investment option with respect to the investment of future deposits
effective as of the first Valuation Date in the next succeeding payroll
period by submitting his investment changes in accordance with the
procedures established by the Plan Administrator. A Member may change his
investment option with respect to the investment of amounts already
accumulated in his accounts effective as of the next Valuation Date by
submitting his investment changes in accordance with the procedures
established by the Plan Administrator. The Plan Administrator may change or
add Investment Funds from time to time. Each Member shall be notified of a
change in Investment Funds at least thirty (30) days prior to the Valuation
Date on which the change is to occur.
4.6 Investments For Terminated Members. Any Member who ceases to be an Employee
shall continue to have the authority to direct the investment of his
accounts in accordance with the provisions of Sections 4.4 and 4.5.
4.7 Special Rules Applicable to Foamex Stock Fund. Members that have any
portion of their accounts invested in the Foamex Stock Fund shall have the
rights to decide tender offers and vote proxies as provided in subsections
A and B of this Section 4.7.
A. Proxy Voting
The Trustee is responsible for voting all shares of Common Stock of
Foamex International Inc. held under the Foamex Stock Fund. When a
decision to vote shares is required, Members who have any portion of
their accounts allocated to the Foamex Stock Fund as of the relevant
record date will receive copies of all proxy statements otherwise
distributed to holders of the Common Stock of Foamex International
Inc. Member's proxy votes shall direct the Trustee's vote. All shares
for which proxies are not received will be voted in the same
proportion as shares for which proxies are returned. Members shall be
considered a fiduciary for purposes of voting shares of common stock
allocated to their account and a portion of shares for which no proxy
instructions are received by the Trustee. Members' votes shall be kept
confidential by the Trustee to the extent permitted by law.
B. Tender Offers
The Trustee is responsible for responding to any tender offer with
respect to all shares of Common Stock of Foamex International Inc.
held under the Foamex Stock Fund. When a decision to tender shares is
required, Members who have any portion of their accounts allocated to
the Foamex Stock Fund as of the relevant record date will receive
copies of all tender materials otherwise distributed to holders of the
Common Stock of
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Foamex International Inc. Member's tender instructions shall direct
the Trustee's decision as to whether or not to tender. All shares for
which tender instructions are not received will be tendered or not, as
the case may be, in the same proportion as shares for which tender
instructions are returned . Members shall be considered a fiduciary
for purposes of deciding whether to tender shares of Common Stock
allocated to their account and a portion of the shares for which no
tender instructions are received by the Trustee. Members' tender
instructions shall be kept confidential by the Trustee to the extent
permitted by law.
4.8 Special Rules Applicable to Investment in Foamex Stock Fund.
A. Notwithstanding any other provision of the Plan to the contrary,
during any period of time when (a) a registration statement covering
the Plan, pursuant to the Securities Act of 1933, as amended, is not
then in effect, (b) although in effect, information in the prospectus
forming part of such registration statement does not, in the judgment
of the Plan Administrator, meet the requirements of the Securities Act
of 1933, as amended, or is not available for delivery, or (c) in the
judgment of the Plan Administrator, a proceeding by the Securities and
Exchange Commission for the issuance of a stop order suspending the
effectiveness of such registration statement is threatened or
contemplated, no future Pre-Tax Contributions or Employer Matching
Contributions may be invested in, and no such prior contributions, or
income earned thereon, may be transferred for investment in the Foamex
Stock Fund. In lieu thereof, the Trustee shall, upon written
notification from the Plan Administrator, invest such amounts in such
investment fund which shall be so specified by the Plan Administrator.
At such time as (a) such a registration statement covering the Plan
shall become effective, (b) the prospectus forming part of such a
registration statement shall have been amended to meet the
requirements of the Securities Act of 1933, as amended, or shall be
available for delivery, or (c) no stop order proceedings shall be
threatened or contemplated, such amounts shall be invested as
previously directed or otherwise required under the terms of the Plan.
B. Each Member who is an officer, director or greater than 10%
shareholder of Foamex International Inc. may elect to be subject to
such optional limitations and restrictions as may be imposed by the
Plan Administrator regarding the extent to which such person may (a)
direct the investment under the Foamex Stock Fund of any portion of
his future Pre-Tax Contributions and Employer Matching Contributions
to be made on his behalf, (b) transfer any portion of his existing
accounts under the Plan into or out of the Foamex Stock Fund, (c)
receive a distribution or withdrawal from any portion of his accounts
invested under the Foamex Stock Fund or (d) receive a loan from the
Plan with respect to any portion of his accounts invested under the
Foamex Stock Fund. Any such limitations and restrictions which are so
elected by such a person shall apply notwithstanding any other
provision of the Plan to the contrary.
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<PAGE>
SECTION 5
VESTING
5.1 Vesting.
A. Each Member who is not a Union Employee listed in Section 3.2(B) shall
have a fully vested, nonforfeitable right to his Pre-Tax Contribution
Account, Employer Matching Contribution Account, After-Tax
Contribution Account, Transfer Account and Rollover Account at all
times. Each Member who is a Union Employee listed in Section 3.2(B)
shall have a fully vested, nonforfeitable right to his Pre-Tax
Contribution Account, After-Tax Contribution Account, Transfer Account
and Rollover Account at all times.
B. Union Employees listed in Section 3.2(B) shall vest in their Employer
Matching Contribution Accounts according to the following schedule:
Years of Service Vesting Percentage
Less than 5 0%
5 or more 100%
Notwithstanding the foregoing schedule, a Member who attains his
Normal Retirement Date, dies or becomes disabled shall become 100%
vested in his Employer Matching Contribution Account.
I. One-Year Breaks in Service for Vesting Purposes. If a Member
incurs one or more consecutive One-Year Breaks in Service, then:
(a) Years of Service before such One-Year Breaks in Service
shall not be taken into account until the Member completes
one Year of Service after his return;
(b) Years of Service prior to the One-Year Breaks in Service
shall not be taken into account if the Member has no vested
right under the Plan and the number of consecutive One-Year
Breaks in Service is greater than one and equals or exceeds
the greater of (1) the aggregate number of his Years of
Service (excluding Years of Service not required to be taken
into account by reason of any prior One-Year Breaks in
Service), or (2) five: and
(c) If a Member incurs five or more consecutive One-Year Breaks
in Service, Years of Service after such One-Year Breaks in
Service shall not be taken into account in determining the
nonforfeitable percentage of such
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<PAGE>
Member's benefit derived from Employer contributions which
accrued before such One-Year Breaks in Service.
5.2 Forfeitures. A Member's vested Accrued Benefit shall be determined in
accordance with Section 5.1 as of the date he terminates employment. The
nonvested portion shall be forfeited on the earlier of the date on which
the Member:
A. receives a distribution of his vested Accrued Benefit, if any,
provided that such distribution is made no later than the close of the
second Plan Year following the year in which the Member terminates
participation in the Plan; or
B. has five consecutive one-year Breaks in Service measured from the Plan
Year in which the Member's date of termination occurs.
Said forfeiture shall be applied to reduce future Employer Matching
Contributions.
For purposes of this Section 5.2, if the value of a Member's vested Accrued
Benefit is zero, the Member shall be deemed to have received a distribution
of such vested Accrued Benefit on termination of employment.
5.3 Change in Vesting Schedule. A Member with at least three Years of Service
as of the expiration date of the election period (as set forth below) may
elect to have his nonforfeitable percentage computed under the Plan without
regard to an amendment or restatement of the Plan that changes the Plan's
vesting schedule. If a Member fails to make such election, then such Member
shall be subject to the new vesting schedule unless the prior schedule
resulted in more rapid vesting. The Member's election period shall commence
on the adoption date of the amendment and shall end 60 days after the
latest of:
A. the adoption date of the amendment;
B. the effective date of the amendment; or
C. the date the Member receives written notice of the amendment from the
Employer or Administrator.
Except, however, that any Employee who was a Member as of the later of the
Effective Date or adoption date of an amendment and restatement and who
completed three Years of Service shall be subject to the pre-amendment
vesting schedule, provided such schedule is more liberal than the new
vesting schedule.
For purposes of this Section 5.3, a Member shall be considered to have
completed three (3) Years of Service whether or not consecutive, without
regard to the exceptions of section 411(a)(4) of the Code.
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SECTION 6
DISTRIBUTIONS
6.1 Distribution of Benefit. A Member who ceases to be employed by the Employer
and all Affiliated Companies for any reason other than death shall be
entitled to receive his vested Accrued Benefit. A Member's Beneficiary
shall be entitled to receive the Member's vested Accrued Benefit in the
event of the Member's death. A Member or Beneficiary who is entitled to
payment under this Section may elect the following option:
Option A. A lump sum payment as soon as administratively feasible following
the date he ceases to be employed by the Employer and all
Affiliated Companies as the Member (or his Beneficiary) requests,
but no later than the later of the Member's Retirement or age
70-1/2. The amount payable shall be equal to the Member's vested
Accrued Benefit determined as of the Valuation Date coincident
with the date payment is made.
In addition to Option A, Members who had been Members of the GFI Plan who
are entitled to payment under this Section may elect Option B :
Option B. Substantially equal monthly installments over a period not to
exceed the joint and last survivor life expectancy of the Member
and his Beneficiary. Such payments to a Member must commence as
provided in Sections 6.5 and 6.6 of this Plan, and shall continue
to the Member's Beneficiary after the Member's death until the
entire vested Accrued Benefit has been distributed. A Member (or
in the case of a deceased Member, the Beneficiary) may elect to
receive the unpaid portion of his vested Accrued Benefit in a
lump sum payment as of any Valuation Date by submitting a request
to the Plan Administrator in accordance with the administrative
procedures established by the Plan Administrator.
All distributions required under this Section 6 shall be
determined and made in accordance with the regulations under Code
section 401(a)(9), including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the regulations.
6.2 Election of Benefits. The Member shall notify the Plan Administrator in
accordance with administrative procedures established by the Plan
Administrator, of the form and timing of benefit payments. An election may
be revoked and a new election may be submitted to the Plan Administrator
any time prior to the commencement of benefits. Payment of benefits shall
commence as soon as practicable under the option the Member has designated;
but in no event later than as provided under Section 6.6 hereof.
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<PAGE>
Notwithstanding the foregoing as well as the provisions of Section 6.1, if
an Employee separates from service with the Employer and all Affiliated
Companies for reasons other than death and the value of his vested Accrued
Benefit determined as of the Valuation Date coincident with or next
following such separation from service does not exceed $3,500 ($5,000,
effective for Plan Years beginning on or after January 1, 1998), a lump sum
payment shall be made to such person as soon as practicable following such
Valuation Date. The amount payable shall be equal to the Member's vested
Accrued Benefit determined as of the Valuation Date coincident with the
date payment is made.
6.3 Rehire Prior To Incurring Five (5) Consecutive Breaks in Service. If the
Member terminates his employment and is rehired by the Employer prior to
the date that he would incur his fifth consecutive Break in Service, any
amounts previously forfeited shall be restored by the Employer if the
Member repays the entire amount which was distributed on or before the
earlier of five years after the first date on which the Member is
subsequently reemployed by the Employer, or the close of the first period
of five consecutive one year Breaks in Service after the withdrawal. The
Member's vested interest in such an instance shall be determined thereafter
as if he did not have a break in employment. The Employer shall make
sufficient contributions equal to the amount forfeited at the time
distribution occurred. If the Member does not repay the amount which was
distributed to him, new accounts shall be opened upon his reentry into the
Plan and the amount forfeited during the Member's prior employment may not
be recovered. If a Member receives or is deemed to receive a distribution
pursuant to this Section 6 and the Member resumes employment covered under
this Plan, the Member's Employer-derived Accrued Benefit will be restored
to the amount on the date of distribution if the Member repays to the Plan
the full amount of the distribution attributable to Employer contributions
before the earlier of 5 years after the first date on which the Member is
subsequently re-employed by the Employer, or the date the Member incurs 5
consecutive one-year Breaks in Service following the date of the
distribution. To the extent that the Member had received a distribution in
shares of Common Stock of Foamex International Inc. in accordance with
Section 6.17, the amount deemed distributed, for purposes of this Section
6.3 shall be the amount of the cash distribution which such person would
have received had such prior distribution instead been entirely in cash.
6.4 Death Prior to Total Distribution. If a Member dies before the distribution
of his interest has begun, the entire interest shall be distributed in a
lump sum as soon as practicable following his death, and in no event later
than five (5) years after the Member's date of death.
6.5 Distribution Limitation. In accordance with Section 401(a) of the Code and
unless he elects otherwise, a Member shall commence distribution hereunder
no later than 60 days after the close of the Plan Year in which occurs the
later of his Normal Retirement Date, the tenth anniversary of the year in
which a Member has commenced participation in the Plan or the date of the
Member's termination of employment. Notwithstanding the foregoing, the
failure of a Member to consent to a distribution while a benefit is
immediately distributable within the
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meaning of this Section shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy this Section.
6.6 Mandatory Distributions. Effective January 1, 1997, the benefits of a
Member who is a "five (5) percent owner" shall be distributed to him not
later than April 1 of the calendar year following the calendar year in
which the Member attains age 70-1/2. The restrictions imposed by this
Section shall not apply if a Member has, prior to January 1, 1984, made a
written designation to have his retirement benefit paid in an alternative
method acceptable under Code Section 401(a) as in effect prior to the
enactment of the Tax Equity and Fiscal Responsibility Act of 1982. Any such
written designation made by a Member shall be binding upon the Plan
Administrator. The Member shall be required to withdraw during any Plan
Year only the minimum amount required to satisfy the Code.
6.7 Earnings on Undistributed Benefits. A Member's Accrued Benefit shall share
in investment experience in accordance with the provisions of Section 4
until the Valuation Date coincident with distribution.
6.8 Rollovers Into the Plan. Subject to approval of the Plan Administrator, an
Employee may roll over to the Trust amounts accumulated for the Employee
under any other qualified retirement plan or plans. The amount rolled over
shall become subject to all of the terms and conditions of this Plan and
Trust Agreement after it is rolled over, except that it shall be fully
vested and nonforfeitable at all times. The amounts rolled over shall be
deposited in a separate account herein referred to as an Employee's
Rollover Account and shall be invested as other accounts. An Employee who
makes a rollover contribution to this Plan shall not otherwise participate
in the Plan until he qualifies as an Eligible Employee hereunder.
6.9 Transfers Into the Plan. Subject to approval of the Plan Administrator, the
Trustee shall accept the transfer to the Trust of amounts accumulated for
an Employee under the Scotfoam Corporation 401(k) Savings and Investment
Plan. This shall be accomplished by a Trustee-to-Trustee transfer. The
amount transferred shall become subject to all of the terms and conditions
of this Plan and Trust Agreement after it is transferred. The amounts
transferred shall be deposited in a separate account herein referred to as
an Employee's Transfer Account and shall be invested as other accounts.
A. If the Trust accepts transfers from a plan which provides for
distributions in the form of a life annuity, then as to such transfers
and notwithstanding Sections 6.1 and 6.2, unless an optional form of
benefit is selected pursuant to a Qualified Election, an unmarried
Member's Transfer Account balance attributable to such plan shall be
paid in the form of a life annuity. In addition to the optional forms
of benefits listed in Section 6.1, for purposes of this Section only,
a Member may elect to receive payment of his Transfer Account to be
made in the Installment Option if such option was permitted under the
transferor plan. A married Member shall receive his Transfer Account
in the form of a Qualified Joint and
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Survivor Annuity (QJSA) if such option was permitted under transferor
plan. Such annuities shall be payable as follows:
(1) in the event of the death of a Member prior to attaining the
Annuity Starting Date, his Beneficiary shall receive a death
benefit equal to the balance in his Transfer Account as of his
date of death. If the Member is married, such benefit shall be
paid in the form of a Qualified Pre-Retirement Survivor Annuity
(QPSA) unless a different form of payment is elected within an
Election Period;
(2) unless a Qualified Election is made, upon a Member's death,
occurring before the Annuity Starting Date above, a Member's
Transfer Account shall be applied to purchase an annuity for the
life of that Member's Surviving Spouse;
(3) a Surviving Spouse may commence receipt of payments at any time
after the Member's death as such Spouse elects; and
(4) if a Member makes a Qualified Election to waive the QJSA option,
the benefits payable as a result of death after the commencement
of benefits shall be governed by the payment option selected by
the Member.
B. The following definitions shall apply to the provisions included under
Subsection A., above:
(1) "Election Period" for a QJSA means the 90-day period ending on
the Annuity Starting Date, and for QPSA means the period which
begins on the first day of the Plan Year in which the Member
attains age 35 and ends on the date of the Member's death. If a
Member separates from service prior to the first day of the Plan
Year in which age 35 is attained, with respect to benefits
accrued prior to separation, the Election Period shall begin on
the date of separation.
(2) "Pre-Age Waiver" means the waiver available to a Member who will
not yet attain age 35 as of the end of any current Plan Year, to
waive the QPSA for the period beginning on the date of such
Member's election to waive, and ending on the first day of the
Plan Year in which such Member will attain age 35. Such election
shall not be valid unless the Member receives a written
explanation of the QPSA. QPSA coverage will be automatically
reinstated as of the first day of the Plan Year in which the
Member attains age 35. Any subsequent waiver shall be fully
subject to this provision.
(3) "Earliest Retirement Age" means the earliest date on which, under
the Plan, the Member could elect to receive retirement benefits.
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(4) "Qualified Election" means a waiver may be made of a QJSA or a
QPSA during the relevant Election Period. The waiver must be in
writing and must be consented to by the Member's Spouse. The
waiver shall designate a Beneficiary (or a form of benefits if
applicable) and such designation shall not be changed without
spousal consent (unless the spousal consent expressly permits
designations by the Member without any further consents by the
Spouse). The Spouse's consent shall acknowledge the effect of
such election and must be witnessed by the Plan Administrator or
a notary public. Notwithstanding this consent requirement, if the
Member establishes to the satisfaction of a Plan representative
that such written consent may not be obtained because there is no
Spouse or the Spouse cannot be located, a waiver shall be deemed
a Qualified Election. Any consent necessary under this provision
shall be valid only with respect to the Spouse who signs the
consent, or in the event of a deemed Qualified Election, the
designated Spouse. Additionally, a revocation of a prior waiver
may be made by a Member without the consent of the Spouse at any
time before the commencement of benefits. The number of
revocations shall not be limited.
(5) "Qualified Joint and Survivor Annuity" (QJSA) means an immediate
annuity for the life of the Member with a survivor annuity for
the life of the Spouse which is not less than 50% of the amount
of the annuity which is payable during the joint lives of the
Member and the Spouse and which is the actuarial equivalent of
the normal form of benefit, or if greater, any optional form of
benefit.
(6) "Spouse" (Surviving Spouse) means the Spouse or Surviving Spouse
of the Member, provided that a former Spouse shall be treated as
the Spouse or a Surviving Spouse to the extent provided under a
qualified domestic relations order as described in Section 414(p)
of the Code.
(7) "Annuity Starting Date" means:
(a) the first day of the first period for which an amount is
payable as an annuity; or
(b) in the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred
which entitle the Member to such benefit.
The first day of the first period for which a benefit is to be
received by reason of Disability shall be treated as the Annuity
Starting Date only if such benefit is not an auxiliary benefit.
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(8) Notwithstanding the above, if a Member's vested Accrued Benefit
does not exceed $3,500 ($5,000, for Plan Years beginning on and
after January 1, 1998), the Trustee may direct that such amount
shall be immediately distributable as a lump sum. However, no
distribution may be made under the preceding sentence after the
annuity starting date unless the Member and the Spouse of a
Member (or where the Member has died, the Surviving Spouse)
consents, in writing, to such distribution.
(9) If a Member's vested Accrued Benefit exceeds (or at the time of
any prior distribution exceeded) $3,500 ($5,000, for Plan Years
beginning on and after January 1, 1998), and the Member and the
Spouse of the Member (or where the Member has died, the Surviving
Spouse) consents, in writing, the Trustee may immediately
distribute the present value of such annuity.
(10) "Installment Option" means substantially equal monthly
installments over a designated period not to exceed the joint
life and last survivor life expectancy of the Member and his
Beneficiary. Such payments must commence pursuant to the
provisions of Section 6.6 of this Plan, and shall continue after
the Member's death to his Beneficiary until the entire vested
Accrued Benefit has been distributed. A Member (or in the case of
a deceased Member, the Beneficiary) may elect to receive the
unpaid portion of his vested Accrued Benefit in a lump sum as of
any Valuation Date by submitting a written request to the Plan
Administrator.
(11) The terms of any annuity contract purchased and distributed by
the Plan to a Member or Spouse herein shall comply with the
requirements of this Plan. Any annuity contract distributed
herein shall be nontransferable.
(12) In the case of a QJSA, the Plan Administrator must notify each
Member of, in writing, and no less than 30 and no more than 90
days prior to the annuity starting date:
(a) the terms and conditions of the QJSA;
(b) the Member's right to make and the effect of an election to
waive the QJSA form of benefit;
(c) the rights of a Member's Spouse; and
(d) the right to make and the effect of a revocation of a
previous election to waive the QJSA.
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(13) In the case of a QPSA, the Plan Administrator must provide each
eligible Member with a written notification comparable to and in
accordance with (12) above within the applicable period for such
Member. The applicable period is whichever of the following
periods is last to occur:
(a) the period beginning with the first day of the Plan Year in
which the Member attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the Member
attains age 35;
(b) a reasonable period ending after the Employee becomes a
Member;
(c) a reasonable period ending after subsection K. below ceases
to apply to the Member; and
(d) a reasonable period ending after this subsection first
applies to the Member.
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from service in the
case of a Member who separates from service before attaining age
35.
For purposes of applying the preceding, a reasonable period
ending after the enumerated events described in (2), (3) and (4)
is the end of the two-year period beginning one year prior to the
date the applicable event occurs, and ending one year after that
date. In the case of a Member who separates from service before
the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a Member
thereafter returns to employment with the Employer, the
applicable period of such Member shall be redetermined.
6.10 Evidence in Writing. The Plan Administrator may require the Member to
furnish a letter or other evidence in writing from the administrator of the
plan from which the rollover or transfer originates, stating that the
acceptance of the transfer or rollover shall not affect the tax qualified
status of the Plan.
6.11 Hardship Withdrawal. A Member may apply in accordance with administrative
procedures established by the Plan Administrator for a hardship withdrawal
from his vested Accrued Benefit at any time. The withdrawal must satisfy
the criteria set forth below, and may be approved or disapproved at the
discretion of the Plan Administrator. Hardship withdrawals from a Member's
Pre-Tax Contribution Account are not permitted from income on a Member's
Pre-Tax Contributions, except to the extent of earnings on or before
December 31, 1988, nor are such withdrawals permitted to include Employer
contributions which were treated as
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Pre-Tax Contributions as a result of the application of the special
nondiscrimination requirements under rules prescribed by the Secretary of
the Treasury for Employer contributions that are used to meet the vesting
and withdrawal restrictions for Pre-Tax Contributions. The circumstances
which may warrant approval of a Member's application for a hardship
withdrawal are:
A. General Rule. For purposes of this Plan, a hardship distribution must
be made on account of an immediate and heavy financial need of the
Member and must be in an amount not to exceed the sum necessary to
satisfy such financial need.
B. Immediate and Heavy Financial Need. The determination of whether a
Member has an immediate and heavy financial need shall be made on the
basis of whether a request satisfies the definition of "Deemed
Immediate and Heavy Financial Need" as set forth below. A financial
need shall not fail to qualify as immediate and heavy merely because
such need was reasonably foreseeable or voluntarily incurred by the
Member.
C. Deemed Immediate and Heavy Financial Need. A distribution shall be
deemed to be made on account of an immediate and heavy financial need
of the Member if the distribution is on account of:
(1) medical expenses described in Code Section 213(d) incurred by the
Member, the Member's spouse, or any dependents of the Member (as
defined in Code Section 152);
(2) purchase (excluding mortgage payments) of a principal residence
for the Member;
(3) payment of tuition for the next twelve months of post-secondary
education for the Member, the Member's spouse, children or
dependents;
(4) the need to prevent the eviction of the Member from his principal
residence or foreclosure on the mortgage of the Member's
principal residence; or
(5) such other events set forth by the Commissioner of the Internal
Revenue Service through the publication of revenue rulings,
notices, and other documents of general applicability.
The amount of the immediate and heavy financial need may include
any amounts necessary to pay any federal, state or local income
taxes or penalties reasonably anticipated to result from the
distribution.
D. Distribution Necessary to Satisfy Financial Need (Certification
Method). A distribution shall not be treated as necessary to satisfy
an immediate and
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<PAGE>
heavy financial need of a Member to the extent the amount of the
distribution is in excess of the amount required to relieve the
financial need or to the extent such need may be satisfied from other
resources that are reasonably available to the Member. This
determination is to be made on the basis of all relevant facts and
circumstances. A distribution shall be treated as necessary to satisfy
a financial need if the Employer reasonably relies upon the Member's
representation and the Member certifies in writing that the need
cannot be relieved:
(1) through reimbursement or compensation by insurance or otherwise;
(2) by reasonable liquidation of the Member's assets, to the extent
such liquidation would not itself cause an immediate and heavy
financial need;
(3) by cessation of elective contributions or Member contributions
under the Plan; or
(4) by other distributions or nontaxable (at the time of the loan)
loans from plans maintained by the Employer or by any other
employer, or by borrowing from commercial sources on reasonable
commercial terms.
E. For purposes of this Section, the Member's resources shall be deemed
to include those assets of a Member's spouse and minor children that
are reasonably available to the Member. This provision shall be
interpreted in a manner consistent with regulations issued by the
Internal Revenue Service.
F. The determination of the existence of financial hardship and the
amount required to be distributed to meet the need created by the
hardship must be made in a uniform and nondiscriminatory manner.
6.12 Withdrawals Permitted After Age 59-1/2. Notwithstanding the foregoing, a
Member may apply in accordance with administrative procedures established
by the Plan Administrator for a withdrawal from all or a portion of his
vested Accrued Benefit any time after attaining age 59-1/2. Such withdrawal
shall not be subject to the requirements set forth in Section 6.11 but are
subject to the conditions set forth in Section 6.14 below.
6.13 Withdrawal of After-Tax Contributions. A Member who has made After-Tax
Contributions under the Prior Plan may withdraw such contributions if his
Spouse, if married, consents in writing to such withdrawal by submitting a
request to the Plan Administrator in accordance with the administrative
procedures established by the Plan Administrator specifying the amount to
be withdrawn. The amount withdrawn shall be governed by the provisions of
Section 6.14.
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6.14 Conditions For Withdrawals. The following conditions apply to withdrawals
made under Sections 6.11, 6.12 and 6.13:
A. a Member may make only one hardship withdrawal and one withdrawal from
his After-Tax Contribution Account per valuation period. No more than
two hardship and after-tax withdrawals may be made within a Plan Year.
There will be no restriction on the number of withdrawals after age
59-1/2.
B. all withdrawals shall be based on the value of the Member's applicable
accounts as of the Valuation Date coincident with the date payment is
made; and
C. any withdrawal made hereunder from a Member's Transfer Account by a
married Member shall be subject to the written consent of his Spouse;
and
D. withdrawals shall be made prorata from the investment fund(s) in which
designated the Member's accounts are invested.
6.15 Direct Rollover.
A. With respect to any distribution of $200 or more described in this
Section 6 which constitutes an eligible rollover distribution within
the meaning of Code Section 401(a)(31)(C), the distributee thereof
shall, in accordance with procedures established by the Plan
Administrator or Committee, be afforded the opportunity to direct that
such distribution be transferred directly to the trustee of an
eligible retirement plan (a "direct rollover"). For purposes of the
foregoing sentence, an "eligible retirement plan" is (1) a qualified
trust within the meaning of Code Section 402 which is a defined
contribution plan the terms of which permit the acceptance of rollover
distributions, (2) an individual retirement account or annuity within
the meaning of Code Section 408 (other than an endowment contract), or
(3) an annuity plan within the meaning of Code section 403(a), which
is specified by the distributee in such form and at such time as the
Plan Administrator or Committee may prescribe.
B. Notwithstanding the foregoing, if the distributee elects to have his
eligible rollover distribution paid in part to him and part as a
direct rollover:
(1) the direct rollover must be in an amount of $500 or more; and
(2) a direct rollover to two or more eligible retirement plans shall
not be permitted.
C. The Plan Administrator shall, within a reasonable period of time prior
to making an eligible rollover distribution from this Plan, provide a
written explanation to the distributee of the direct rollover option
described above, as well as the provisions under which such
distribution will not be
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<PAGE>
subject to tax if transferred to an eligible retirement plan within 60
days after the date on which the distributee received the
distribution. A distribution may commence less than thirty (30) days
after the notice required by Section 1.411(a)-11(c) of the Treasury
Regulations is required to be given, provided the Plan Administrator
informs the Member he has a right to a period of not less than thirty
(30) days to consider the decision of whether or not to elect a
distribution, and the Member, after receiving the notice,
affirmatively elects a distribution.
6.16 Withholding of Income Tax.
A. Notification of Withholding of Federal Income Tax. All Members and
beneficiaries entitled to receive benefits under the Plan shall be
notified of the Plan's obligation to withhold federal income tax from
any benefits payable pursuant to the terms of the Plan. Such notice
shall be in writing, be given at the times set forth in subsection (b)
and contain the information set forth in subsection (c) of this
Section.
B. Time of Notice. The notice described in subsection (a) shall be
provided not earlier than 90 days before such payment is to be made
and not later than the time the Member or beneficiary is furnished
with his claim for benefits application.
C. Content of Notice. The notice required by subsection (a) shall
contain, at a minimum:
(1) with respect to any distribution which is an eligible rollover
distribution within the meaning of Code Section 3405(c)(3) (other
than an eligible rollover distribution of less than $200 which is
exempt from withholding under regulations prescribed by the
Secretary of the Treasury), advise the payee that there shall be
withheld from such distribution an amount equal to 20% thereof
(or such other amount as may from time to time be prescribed by
the Code, or the Secretary of the Treasure or his delegate),
unless the payee directs the Committee to transfer such
distribution as a direct rollover to an eligible retirement plan,
within the meaning of Section 6.15 hereof, in accordance with
such procedures as the Committee may prescribe (a "transfer
direction"),
(2) with respect to any distribution which is not an eligible
rollover distribution within the meaning of Code Section
3405(c)(3):
(i) advise the payee of his right to elect not to have
withholding apply to any payment or distribution and explain
the manner in which such election may be made, and include
or indicate the source of any forms necessary to make the
election;
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<PAGE>
(ii) advise the payee of his right to revoke such an election at
any time;
(iii) advise the payee that any election remains effective until
revoked;
(iv) advise the payee that penalties may be incurred under the
estimated tax payment rules if the payee's payments of
estimated tax are not adequate and sufficient tax is not
withheld from payments under this Plan; and
(v) advise the payee that the election not to have federal
income tax withheld from benefits is prospective only and
that any election made after a payment or distribution to
the payee is not an election with respect to such payment or
distribution.
D. Effective Date of Election. Any transfer direction, election or
revocation of any election by a payee shall become effective
immediately upon receipt by the Plan Administrator or Committee of the
transfer direction, election or revocation. Thereafter, the Plan
Administrator or Committee shall, unless otherwise provided by
applicable law, regulation or other guidance by the Secretary of the
Treasure or his delegate, withhold federal income tax in accordance or
consistent with the instructions filed by the payee.
E. Failure to Make Election.
(1) In the case of an eligible rollover distribution, if the payee
fails to provide the Plan Administrator or Committee with a
transfer direction, the Plan Administrator or Committee shall
withhold an amount equal to 20% of the amount of the distribution
(or such other amount as may be from time to time prescribed by
the Code, or the Secretary of the Treasury or his delegate).
(2) In the case of a distribution which is not an eligible rollover
distribution, if the payee fails to provide the Plan
Administrator or Committee with a withholding certificate, the
Plan Administrator or Committee shall withhold, in the case if a
periodic distribution, the amount which would be required to be
withheld from such payment if such payment were a payment of
wages by an employer to an employee for the appropriate payroll
period, determined as if the payee were a married person claiming
three withholding allowances. In the case of a nonperiodic
distribution, 10% of the amount of the distribution shall be
withheld.
F. Coordination with Internal Revenue Code and Regulations.
Notwithstanding the foregoing, the Plan Administrator or Committee
shall
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<PAGE>
discharge its withholding and notice obligations in accordance with
the Code and regulations and such other guidance with respect thereto
as may be promulgated from time to time by the Secretary of the
Treasury or his delegate.
6.17 Manner of Payment of Benefits. To the extent that any distribution under
Section 6.1 is to be made out of the Foamex Stock Fund, such portion of
such distribution shall be paid either (a) entirely in cash or (b) entirely
in whole shares of Common Stock of Foamex International Inc. and in cash to
the extent of any fractional shares, as the Member or his Beneficiary, as
the case may be, shall elect. Absent such an election, amounts
distributable from the Foamex Stock Fund in connection with such a
distribution under Section 6.1 shall be paid entirely in cash. The portion
of any such distribution under Section 6.1 made out of all other investment
funds under the Plan, as well as all distributions under all other
provisions of this Section 6, shall be entirely in cash.
6.18 Distributions to Employees on Disposition of Assets or Subsidiary. Anything
in this Section 16 to the contrary notwithstanding, lump sum distributions
to a Member shall be permitted upon the occurrence of an event described in
Section 401(k)(10)(ii) or (iii) of the Code, unless provided otherwise in
the purchase agreement between the Employer and the acquiring corporation.
Any such lump sum shall be distributed to the Member by the end of the
second calendar year following the year in which such event occurs.
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<PAGE>
SECTION 7
ACTUAL DEFERRAL AND ACTUAL CONTRIBUTION PERCENTAGE TESTING
7.1 Actual Deferral Percentage Tests. Effective for Plan Years beginning on and
after January 1, 1997, the actual deferral percentage (ADP) of Pre-Tax
Contributions for the Plan Year, as set forth under Section 3.1, for
Members who are Highly Compensated Employees shall not exceed the greater
of A. or B. as follows:
A. the preceding Plan Year's ADP of Members who were Non-Highly
Compensated Employees for such year, times 1.25; or
B. the preceding Plan Year's ADP of Members who were Non-Highly
Compensated Employees for such year times 2.0, but not to exceed the
preceding Plan Year's ADP of Members who are Non-Highly Compensated
Employees by more than two (2) percentage points.
The Plan Administrator may elect to calculate the ADP for non-Highly
compensated Employees on the basis of current Plan Year elections in
accordance with regulations issued by the Secretary of the Treasury.
The ADP for Union Employees and the ADP for non-Union Employees shall
be calculated in accordance with applicable Treasury Regulations.
7.2 ADP Formula. Effective for Plan Years beginning on and after January 1,
1997, the ADP for a specified group of Members for the applicable Plan Year
shall be the average of the ratios calculated separately for each Member in
such group determined by dividing:
A. the amount of Pre-Tax Contributions actually paid to the Plan on
behalf of such Member for such Plan Year, by
B. such Member's Compensation for such Plan Year.
The Plan Administrator shall determine as soon as practicable after
the end of the Plan Year whether the ADP results satisfy either of the
tests contained in the Section immediately preceding. In the event
neither test is satisfied, the Employer may elect among the following:
(1) to make an Additional Pre-Tax Contribution for Non-Highly
Compensated Employees. The Additional Pre-Tax Contribution shall
be a uniform percentage of Compensation for each such Member.
Such "Additional Pre-Tax Contribution" shall be deposited to each
eligible Member's Pre-Tax Contribution Account within the time
period required by any applicable law(s) and/or regulation(s).
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<PAGE>
(2) to reduce the allowable Pre-Tax Contribution deferral percentage
of Highly Compensated Employees.
(3) to treat Employer Matching Contributions as Pre-Tax
Contributions, as permitted pursuant to, and subject to the
restrictions described in Section 7.5 hereof.
C. The Plan shall take into account the Actual Deferral Ratios of all
Eligible Employees for purposes of the ADP test set forth in Code
Section 401(k). For this purpose, an Eligible Employee is any Employee
who is directly or indirectly eligible to make a Pre-Tax Contribution
under the Plan for all or a portion of a Plan Year and includes an
Employee who would be an active Member but for the failure to make
required contributions and an Employee whose eligibility to make
Pre-Tax Contributions has been suspended because of an election (other
than certain onetime elections) not to participate, or to take either
a hardship distribution or a loan. In the case of an Eligible Employee
who makes no elective contributions the deferral ratio that is to be
included in determining the ADP is zero. Notwithstanding the
foregoing, Eligible Employee shall be defined in accordance with
Treasury Regulation 1.401(k)-1(g)(4). To the extent such definition is
inconsistent with this subsection C., the meaning of Eligible Employee
set forth in the regulation shall govern.
D. A Pre-Tax Contribution shall be taken into account under the ADP test
of Section 401(k)(3)(A) of the Code for a Plan Year only if it relates
to Compensation that either would have been received by the Employee
in the Plan Year (but for the deferral election) or is attributable to
services performed by the Employee in the Plan Year and would have
been received by the Employee within 2-1/2 months after the close of
the Plan Year (but for the deferral election).
E. For purposes of calculating the ADP test, Pre-Tax Contributions,
Additional Pre-Tax Contributions and Qualified Matching Contributions
must be contributed to the Trust before the last day of the twelve
month period immediately following the Plan Year to which the
contributions relate. For this purpose, a Pre-Tax Contribution is
considered allocated as of a date within a Plan Year if the allocation
is not contingent on participation or performance of services after
such date.
7.3 Calculations of Excess Contributions. Effective for Plan Years beginning on
or after January 1, 1997, the amount of Excess Contributions for a Highly
Compensated Employee shall be based on the amount of Pre-Tax Contributions
made on behalf of, or by, each such employee in accordance with Section
401(k)(8)(C) of the Code and the Treasury Regulations thereunder.
7.4 Failure to Correct Excess Contributions. Failure to correct Excess
Contributions by the close of the Plan Year following the Plan Year for
which they were made shall cause the cash or deferred arrangement to fail
to satisfy the requirements of Code Section 401(k)(3) for the Plan Year for
which the Excess Contributions
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<PAGE>
were made and for all subsequent years they remain in the Trust. Also, the
Employer shall be liable for a 10% excise tax on the amount of Excess
Contributions unless corrected by distribution of Excess Contributions
within 2-1/2 months after the close of the Plan Year for which they were
made.
7.5 Additional Pre-Tax and Matching Contributions. Additional Pre-Tax
Contributions and Matching Contributions may be treated as Pre-Tax
Contributions for purposes of the ADP test of Code section 401(k) only if
such contributions are nonforfeitable when made and subject to the same
distribution restrictions that apply to elective contributions. Additional
Pre-Tax Contributions and Matching Contributions which may be treated as
Pre-Tax Contributions must satisfy these requirements without regard to
whether they are actually taken into account as Pre-Tax Contributions for
purposes of satisfying the ADP tests.
Additional Pre-Tax Contributions and/or Matching Contributions may be
treated as Pre-Tax Contributions only if the conditions described in
section 1.401(k)-1(b)(5) of the Treasury Regulations are satisfied.
The amount of the Additional Pre-Tax Contribution for Non-Highly
Compensated Employees, the amount of the Employer Matching Contribution
treated as a Pre-Tax Contribution, or the reduction in the allowable
Pre-Tax Contribution deferral for Highly Compensated Employees shall be
such that at least one of the tests contained in Section 7.1 is satisfied.
7.6 Distribution of Excess Contributions. Excess Contributions, as adjusted
below, shall be distributed no later than the last day of the Plan Year to
Members on whose behalf such Excess Contributions were made for the
preceding Plan Year. Excess Contributions shall mean the amount described
in section 401(k)(8)(B) of the Code.
A. Excess Contributions shall be calculated after giving effect to income
earned and losses incurred on the Member's Pre-Tax Contributions for
the Plan Year pursuant to Treasury regulation 1.401(k)-1(f)(4). The
income or loss allocable to Excess Contributions shall be that income
or loss allocable to the sum of the Member's Pre-Tax Contributions
and, if applicable, qualified Matching Contributions for the Plan Year
multiplied by a fraction, the numerator of which is the Excess
Contribution on behalf of the Member for the Plan Year and the
denominator of which is the sum of the Member's account balances
attributable to Pre-Tax Contributions.
B. After the adjustment for income or loss, the amount of such Excess
Contributions to be distributed to the Member shall be further
adjusted by reducing such amounts (in accordance with regulations
authorized by law), by the amount of Excess Deferral Amounts, if any,
distributed to the Member. Amounts distributed under this Section
shall be treated as distributions from the Member's Pre-Tax
Contribution Account.
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C. In the alternative, any other methods of allocating income or loss on
the Excess Contribution may be utilized in the manner provided by the
Internal Revenue Service.
D. Any Employer Matching Contributions associated with Excess
Contributions or deferrals in excess of the Adjustment Factor shall be
forfeited and shall be used to reduce future Employer Matching
Contributions.
7.7 Actual Contribution Percentage Test. Effective for Plan Years beginning on
and after January 1, 1997, any Employer Matching Contributions deposited to
the Plan under Section 3.2 shall be tested for nondiscrimination pursuant
to Code Section 401(m), by means of the Actual Contribution Percentage
(ACP) Test, as follows:
A. The average amount of such Plan Year contributions for the preceding
Plan Year (determined as a percentage of Compensation per Employee)
for Members who were Highly Compensated Employees for such year shall
not exceed the greater of (1) or (2) as follows:
(1) the average amount of such contributions for the preceding Plan
Year (determined as a percentage of Compensation per Employee)
for Members who were Non-Highly Compensated Employees for such
year times 1.25; or
(2) the average amount of such contributions for the preceding Plan
Year (determined as a percentage of Compensation per Employee)
for Members who were Non-Highly Compensated Employees for such
year times 2.0, but not to exceed the average amount of such
contributions for the preceding Plan Year for Members who were
Non-Highly Compensated Employees for such year by more than two
(2) percentage points.
The Plan Administrator may elect to calculate the ACP for non-Highly
compensated Employees on the basis of current Plan Year elections in
accordance with regulations issued by the Secretary of the Treasury.
B. For the purposes of this Section the Plan shall take into account the
actual contribution ratios of all Members for purposes of the ACP test
in Code Section 401(m). For this purpose, a Member is any Employee who
is directly or indirectly eligible to receive an allocation of
Employer Matching Contributions and includes an Employee who would be
a Member but for the failure to make required contributions, or a
Member whose right to receive Employer Matching Contributions has been
suspended because of an election (other than certain one-time
elections) not to participate. In the case of a Member who receives no
Employer Matching Contributions, the contribution ratio that is to be
included in determining the Code Section 401(m) nondiscrimination
requirements is zero.
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C. In calculating the ACP test of Code Section 401(m) for a Plan Year,
contributions shall be taken into account as follows: An Employer
Matching Contribution is taken into account for a Plan Year only if it
is (1) made on account of the Eligible Employee's Pre-Tax
Contributions for the Plan Year, (2) allocated to the Member's account
during that year, and (3) paid to the trust by the end of the twelfth
month following the close of that Plan Year. Qualified Matching
Contributions as defined in Treasury Regulation Section
1.401(k)-1(g)(13)(iii) which are used to meet the requirements of
section 401(k)(3)(A) are not to be taken into account for purposes of
the nondiscrimination test of Code Section 401(m). The actual
contribution ratios and ACP shall be calculated to the nearest
one-hundredth of one percent.
D. The Plan Administrator shall determine whether the Employer Matching
Contributions satisfy either of the nondiscrimination tests stated
above within a reasonable period following the end of the Plan Year,
but in no event later than such time as may be required by law.
E. Additional Pre-Tax Contributions may be treated as Employer Matching
Contributions for purposes of the ACP test of Code Section 401(m) only
if such contributions are nonforfeitable when made and distributable
only under the following circumstances:
(1) the Employer's Retirement, death, Disability or separation from
service;
(2) the termination of the Plan without establishment of a successor
plan;
(3) the Employee's attainment of age 59-1/2;
(4) the sale or other disposition by a corporation to an unrelated
corporation, which does not maintain the Plan, of substantially
all of the assets used in a trade or business, but only with
respect to Employees who continue employment with the acquiring
corporation; and
(5) the sale or other disposition by a corporation of its interest in
a subsidiary to an unrelated entity which does not maintain the
Plan, but only with respect to Employees who continue employment
with the subsidiary. Additional Pre-Tax Contributions which may
be treated as Employer Matching Contributions must satisfy these
requirements without regard to whether they are actually taken
into account as Employer Matching Contributions.
F. Pre-Tax Contributions and/or Additional Pre-Tax Contributions may be
treated as Employer Matching Contributions only if the conditions
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described in Section 1.401(m)-1(b)(4) of the Treasury Regulations are
satisfied.
G. The Employer may make an additional Employer Matching Contribution for
the benefit of only Non-Highly Compensated Employees if, in its
discretion, such an additional contribution is necessary to the Plan's
qualification and passing of the ACP test under Code Section 401.
H. The ACP for Union Employees and the ACP for non-Union Employees shall
be calculated in accordance with applicable Treasury Regulations.
7.8 Distribution of Excess Aggregate Contribution. Excess Aggregate
Contributions, attributable to Employer Matching Contributions of a Member
who is a Highly Compensated Employee, as adjusted for income and losses
thereon, shall, at the discretion of the Plan Administrator, be forfeited
(provided that such Employer Matching Contributions are not vested) by or
distributed to the Member, from the Member's Employer Matching Contribution
Account in proportion to the Member's Employer Matching Contributions for
the Plan Year, by the end of the Plan Year following the Plan Year in which
the contributions were made. Excess Aggregate Contributions shall mean the
amount described in Section 401(m)(6)(B) of the Code
7.9 Calculation of Excess Aggregate Contributions. Effective for Plan Years
beginning on or after January 1, 1997, the amount of Excess Aggregate
Contributions for a Highly Compensated Employee under a Plan subject to the
requirements of Code Section 401(m) shall be determined on the basis of the
amount of contributions made on behalf of, or by, each such Employee in
accordance with Section 401(m)(6)(C) of the Code and Treasury Regulations
thereunder.
7.10 Adjustment for Gain or Loss. The Excess Aggregate Contributions shall be
adjusted for income or loss by multiplying the income or loss allocable to
the Member's Employer Matching Contributions for the Plan Year by a
fraction, the numerator of which is the Excess Aggregate Contributions on
behalf of the Member for the Plan Year and the denominator of which is the
sum of the Member's account balance attributable to Employer Matching
Contributions on the last day of the Plan Year. In the alternative, any
other methods of allocating income or loss on the Excess Aggregate
Contribution may be utilized in the manner provided by the Internal Revenue
Service.
7.11 Forfeitures Treated as Annual Additions. Amounts forfeited by Highly
Compensated Employees under Section 7.8 shall be treated as an Annual
Addition under the Plan and, shall be applied to reduce future Employer
Matching Contributions, or shall be designated as a distribution of an
Excess Aggregate Contribution, and shall be distributed by the end of the
Plan Year following the Plan Year for which such Excess Aggregate
Contributions were made. Employer Matching Contributions which are vested
may not be forfeited to correct Excess Aggregate Contributions. No
forfeitures arising under this section shall be allocated to the account of
any Highly Compensated Employee.
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7.12 Special Rules.
A. The contribution percentage and deferral percentage for any Member who
is a Highly Compensated Employee for the Plan Year and who is eligible
to make Pre-Tax Contributions, or to have Employer Matching
Contributions allocated to his account under two or more plans that
are maintained by the Employer or an Affiliated Employer and described
in section 401(a) of the Code or arrangements described in Section
401(k) of the Code, shall be determined as if all such contributions
were made under a single plan.
B. In the event that this Plan satisfies the requirements of sections
410(b) and 401(a)(4) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements of
sections 410(b) and 401(a)(4) of the Code only if aggregated with this
Plan, then the contribution percentages of Members shall be determined
as if all such plans were a single plan.
C. The determination and treatment of the contribution percentage of any
Member shall satisfy such other requirements as may be prescribed by
the Secretary of the Treasury.
D. Effective for Plan Years beginning on and after January 1, 1997, in
the event that the sum of the average ADP and average ACP determined
after any corrections required to meet said tests are made, of those
Highly Compensated Employees subject to either or both tests, exceeds
the Aggregate Limit as defined herein, then the contribution
percentage of those Members who are Highly Compensated Employees shall
be reduced, on the basis of the amount of contributions on behalf of,
or by, each such employee, until said Aggregate Limit is not exceeded.
The amounts of said reduction for each Highly Compensated Employee
shall be treated as an Excess Contribution.
"Aggregate Limit" means the sum of:
(1) 125% of the greater of the average ADP for eligible Non-Highly
Compensated Employees or the average ACP for eligible Non-Highly
Compensated Employees for the Plan Year; and
(2) two plus the lesser of such average ADP or average ACP, but not
greater than 200% of said lesser amount.
In the alternative "Aggregate Limit" means the sum of:
(1) 125% of the lesser of the ADP for the eligible Non-Highly
Compensated Employees or the ACP for the eligible Non-Highly
Compensated Employees for the Plan Year; and
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(2) two plus the greater of such ADP or ACP above, but not greater
than 200% of said greater amount.
SECTION 8
TOP-HEAVY PROVISIONS
8.1 Top-Heavy Pre-emption. During any Plan Year in which this Plan is
Top-Heavy, as defined in Section 8.2 below, the Plan shall be governed in
accordance with this Section, which shall control over other provisions.
8.2 Top-Heavy Definitions. For purposes of this Section, the following
definitions shall apply:
A. "Contribution Rate" means the sum of contributions made by the
Employer under this Plan, excluding salary deferral contributions made
under this or any other plan maintained by the Employer, plus
forfeitures allocated to the Member's accounts for the Plan Year,
divided by his Compensation for the Plan Year. To determine the
Contribution Rate, the Plan Administrator shall consider all qualified
defined contribution plans maintained by the Employer and all
Affiliated Companies (within the meaning of the Code), as a single
plan.
B. "Determination Date" means the last day of the preceding Plan Year,
except in the initial Plan Year, Determination Date means the last day
of such Plan Year. For purposes of testing the Top-Heavy status of
Required and Permissive Aggregation Groups, Determination Date means
the last day of each respective plan's Plan Year which occurs in the
calendar year coincident with the Determination Date of this Plan.
C. "Key Employee" means any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
"Determination Period" was an officer of the Employer if such
individual's annual Compensation exceeds 50 percent of the dollar
limitation under section 415(b)(1)(A) of the Code, an owner (or
considered an owner under section 318 of the Code) of one of the ten
largest interests in the employer if such individual's compensation
exceeds 100 percent of the dollar limitation under section
415(c)(1)(A) of the Code, a 5-percent owner of the Employer, or a
1-percent owner of the Employer who has an annual compensation of more
than $150,000. Annual compensation means compensation as defined in
section 415(c)(3) of the Code, but includes amounts contributed by the
Employer pursuant to a salary reduction agreement which are excludable
from the Employee's gross income under section 125, 402(a)(8), 402(h)
or 403(b) of the Code. The "Determination Period" is the Plan Year
containing the determination date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with section 416(i)(1) of the Code and the regulations thereunder.
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D. "Non-Key Employee" means any Employee currently eligible to
participate in the Plan who is not a Key Employee.
E. "Permissive Aggregation Group" means the Required Aggregation Group
plus any other qualified plans maintained by the Employer and
Affiliated Companies, but only if such resultant group would satisfy,
in the aggregate, the requirements of the Code, sections 401(a)(4) and
410. The Plan Administrator shall determine which plans to take into
account in determining the Permissive Aggregation Group.
F. "Required Aggregation Group" means:
(1) each qualified plan of the Employer and Affiliated Companies
(including any terminated plan that covered a Key Employee and
was maintained within the five year period ending on the
Determination Date) in which at least one (1) Key Employee
participates during the Plan Year containing the Determination
Date or any of the four preceding Plan Years; and
(2) any other qualified plan of the Employer and Affiliated Companies
which enables a plan described in (1) above, to meet the
requirements of sections 401(a)(4) or 410 of the Code.
G. "Top-Heavy" shall describe the status of the Plan in any Plan Year if
the "Top-Heavy Ratio" as of the Determination Date exceeds sixty
percent (60%).
(1) "Top-Heavy Ratio" is a fraction as of the Determination Date, as
follows:
Accrued Benefit of all Key Employees
Accrued Benefits of all Employees
(2) Notwithstanding (1) above, the Top-Heavy Ratio shall be computed
pursuant to section 416(g) of the Code, and any regulations
issued thereunder.
(3) Solely for the purpose of determining the Top-Heavy Ratio, the
accrued benefit of an Employee other than a Key Employee shall be
determined (a) under the method, if any, that uniformly applies
for accrual purposes under all defined benefit plans maintained
by the Employer and Affiliated Companies, or if there is no such
method, then (b) as if such benefit accrued not more rapidly than
the slowest accrual rate permitted under the fractional accrual
rule of section 411(b)(1)(C) of the Code.
(4) For purposes of this Section only, "Accrued Benefit" shall
include or exclude Rollovers pursuant to regulation 1.416-1,T-32.
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(5) If an individual is not a Key Employee but was a Key Employee in
a prior year or if any individual has not performed services for
the Employer at any time during the five (5) year period ending
on the Determination Date, any Accrued Benefit for such
individual shall not be taken into account in determining the
Top-Heavy status of the Plan.
(6) 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 12-month period ending on the
Determination Date, except as provided in section 416 of the Code
and the regulations thereunder for the first and second plan
years of a defined benefit plan.
(7) The Accrued Benefit shall include any part of any account balance
distributed in the 5-year period ending on the Determination
Date.
(8) The present value shall be based only on the interest rate and
mortality rates specified in the defined benefit plan.
8.3 Aggregation of Plans. All Required Aggregation Groups shall be considered
(pursuant to section 416(g) of the Code) with this Plan in determining
whether this Plan is Top-Heavy.
A. If such aggregation constitutes a Top-Heavy group, each plan so
aggregated shall be considered Top-Heavy.
B. If such aggregation does not constitute a Top-Heavy group, none of the
plans so aggregated shall be considered Top-Heavy.
At the direction of the Plan Administrator and subject to the restrictions
of sections 401(a)(4) and 410 of the Code, Permissive Aggregation Groups
may be considered with this Plan plus any Required Aggregation Groups to
determine whether such group is Top-Heavy. If such aggregation does not
constitute a Top-Heavy group, none of the plans so aggregated shall be
considered Top-Heavy.
8.4 Minimum Contribution Rate. Subject to Section 8.7 below, for any Plan Year
in which this Plan is Top-Heavy, a minimum contribution shall be made for
each Non-Key Employee who is not covered by a collective bargaining
agreement and who is employed as of the last day of the Plan Year which
shall equal the lesser of:
A. three (3%) percent of Compensation; or
B. the highest Contribution Rate received by a Key Employee in that Plan
Year.
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This Top-Heavy Contribution shall be made irrespective of such Non-Key
Employee's Hours of Service, Compensation or failure to make contributions,
as applicable hereunder.
8.5 Deposit of Minimum Contribution. The Plan Administrator shall deposit any
minimum contribution made under this Section to a "Top-Heavy Contribution
Account" for each Non-Key Employee. Such account shall become part of his
Accrued Benefit and shall vest pursuant to Section 8.6 hereof.
8.6 Top-Heavy Vesting Schedule. In any Plan Year in which this Plan is
Top-Heavy, any Member who is credited with at least one Hour of Service
during such Plan Year shall vest in accordance with Section 5.1 or the
following schedule, whichever produces the greater benefit:
Years of Vested
Service Percentage
Less than 2 years 0%
After 2 years but less than 3 20%
After 3 years but less than 4 40%
After 4 years but less than 5 60%
After 5 years but less than 6 80%
After 6 or more years 100%
During any Plan Year in which this Plan is not Top-Heavy, vesting shall be
determined pursuant to Section 5, except that nonforfeitable rights
obtained under the Top-Heavy vesting schedule shall continue as such.
8.7 Combined Defined Benefit and Defined Contribution Plans. In the event that
the Employer maintains a defined benefit and a defined contribution plan,
A. and the defined benefit plan benefits a Key Employee and depends on
this Plan to satisfy sections 401(a)(4) and 410 of the Code, the
minimum Contribution Rate for Non-Key Employees hereunder shall be
five percent (5%) irrespective of the Contribution Rate for Key
Employees; and
B. the figure "1.0" shall be substituted for the figure "1.25" as it
applies in Section 3.6 hereof if:
(1) the Top-Heavy Ratio exceeds ninety percent (90%), or
(2) the Plan is Top-Heavy for the Plan Year, and the Contribution
Rate under Section 8.4 is less than seven and one-half percent
(7-1/2%).
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C. Notwithstanding the foregoing, the minimum contribution requirements
of section 416 of the Code shall be satisfied by the defined benefit
plan maintained by the Employer in which the Employee participates.
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SECTION 9
DESIGNATION OF BENEFICIARY
9.1 Named Beneficiary. Each Member may designate in writing, filed with the
Plan Administrator, a Beneficiary to whom, in the event of the Member's
death, all benefits or any unpaid balance of benefits shall be payable.
However, each married Member who designates a Beneficiary other than his
Spouse must provide the Plan Administrator with a spousal consent to the
designation of such other Beneficiary. Such spousal consent shall set forth
the effects of such waiver and must be either notarized or witnessed by a
Plan representative. Subject to such spousal consent, the Beneficiary(ies)
so designated may be changed by the Member at any time. The facts as shown
by the records of the Plan Administrator at the time of death shall be
conclusive as to the identity of the proper payee and the amount properly
payable, and payment made in accordance with such facts shall constitute a
complete discharge of any and all obligations hereunder.
9.2 No Named Beneficiary. If no such designation is on file with the Plan
Administrator at the time of death of the Member, or if such designation is
not effective for any reason, then such death benefit shall be payable to
the deceased Member's Spouse, if living. If such Spouse is not living,
payment shall be made to the deceased Member's estate.
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SECTION 10
MANAGEMENT OF THE FUND
10.1 Contributions Deposited To Trust. All contributions to the Plan by the
Employer and Employees shall be committed in trust to the Trustee selected
by the Plan Sponsor subject to the terms of the Trust created in Section 1
of the Trust, to be held, managed, and disposed of by the Trustee in
accordance with the terms of the Trust and this Plan. The Trustee selected
may be changed from time to time by the Plan Sponsor in accordance with the
terms of the Trust.
10.2 No Reversion to Employer. The Trust shall contain such provisions as shall
render it impossible, except as is provided under Sections 3.7 and 11.3,
for any part of the corpus of the Trust or income thereon to be at any time
used for, or diverted to, purposes other than for the exclusive benefit of
Members or their Beneficiaries.
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SECTION 11
DISCONTINUANCE AND LIABILITIES
11.1 Termination. The Plan may be terminated at any time by the Plan Sponsor,
but only upon condition that such action is taken under the Trust or
otherwise, as shall render it impossible at any time under the Trust for
any part of the corpus of the Trust or income thereon to be at any time
used for, or diverted to purposes other than for the exclusive benefit of,
active and retired employees, except as is provided under Sections 3.7 and
11.3. If the Plan is terminated the Fund shall be held for distribution by
the Trustee, who shall distribute to the Members then participating in the
Fund the full amount standing to their credit on the date of such
termination, less the administrative costs to the Trustee for such
distribution, in accordance with the methods specified under Section 6.
In the event that the Employer sponsors any other defined contribution
plan, if a Member does not consent to a distribution upon termination of
this Plan, that Member's Accrued Benefit shall be transferred to the other
aforesaid defined contribution plan. Notwithstanding the foregoing, if the
Employer sponsors any other defined contribution plan all salary deferral
contributions will be transferred to said plan upon the termination of this
Plan.
11.2 No Liability For Employer. The Employer shall have no liability with
respect to the payment of benefits or otherwise under the Plan, except to
pay over to the Trustee as provided in the Plan such contributions as are
made by the Employer and any and all contributions made by the Members.
Further, the Employer shall have no liability with respect to the
administration of the Trust or of the Fund held by the Trustee, and each
Member and/or Beneficiary shall look solely to the Fund for any payments or
benefits under the Plan.
11.3 Administrative Expenses. The Employer may elect to pay all administrative
expenses of the Plan, including compensation of the Trustee, consultants,
auditors, recordkeepers and counsel, but the Employer shall not be obliged
to pay such expenses. If the Employer elects not to pay such expenses, they
shall be paid from the Trust. Any expenses directly relating to the
investments of the Trust, such as taxes, commissions, and registration
charges, shall be paid from the Trust.
11.4 Non-forfeitability Due to Termination(s). Upon termination, partial
termination or upon complete discontinuance of contributions under the
Plan, the rights of all affected Employees to their Accrued Benefits
accrued to the date of such termination, partial termination or
discontinuance, shall become nonforfeitable.
11.5 Exclusive Benefit Rule. This Plan and Trust are for the exclusive benefits
of the Members and their Beneficiaries. This Plan shall be interpreted in a
manner consistent with this intent and with the intention of the Employer
that the Trust satisfy those provisions of the Internal Revenue Code
relating to employees' trusts.
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11.6 Mergers. In the case of any merger or consolidation of the Plan with, or
transfer of Plan assets or liabilities to, any other plan, provisions shall
be made so that each Member in the Plan on the date thereof (if the Plan
then terminated) would receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he
would have been entitled to receive immediately prior to the merger,
consolidation or transfer (if the Plan had then terminated).
11.7 Non-allocated Trust Assets. Any portion of the Fund which is unallocated at
the time of termination of the Plan shall be allocated among Members of the
Plan in a nondiscriminatory manner selected by the Plan Administrator.
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SECTION 12
ADMINISTRATION
12.1 Establishment of the Benefits Committee. The complete authority to control
and manage the operation and administration of the Plan shall be placed in
the Foamex L.P. Benefits Committee (the "Committee"). The Committee shall
consist of at least three members, appointed from time to time by the Plan
Sponsor to serve at the pleasure thereof. The Plan Sponsor shall designate
one member of the Committee as its Chairman. Any member of the Committee
may resign at any time by delivering his written resignation to the
Chairman.
12.2 Organization of the Committee. The Chairman, when present, shall preside at
meetings of the Committee. In his absence, those present shall choose one
of their number to act as Chairman. The Committee shall appoint a
Secretary, who shall keep the minutes of the meetings and perform such
other duties as may be assigned to him by the Committee, together with such
other officers as it shall deem necessary. Neither the Secretary nor any
other officer appointed by the Committee need be a member of the Committee
or a Participant in the Plan. The Committee shall act by the majority of
members then in office at all meetings, but it may act upon matters by
unanimous vote in writing without a meeting. The Committee may authorize
one or more of its members and/or its Secretary to sign directives and
communications and to execute documents on behalf of the Committee.
12.3 Powers of the Committee. For purposes of ERISA, the Committee shall be the
"Named Fiduciary" for operation and administration of the Plan, and the
"Plan Administrator". The Committee is designated as agent for service of
legal process against the Plan.
The Committee shall have all powers and duties necessary or appropriate to
operate and administer the Plan, including, but not limited to, the
following specific functions:
(A) to act on applications for benefits;
(B) to determine eligibility, service and other questions;
(C) to establish rules for the administration of the Plan;
(D) to submit an annual report to the Plan Sponsor;
(E) to file all reports and make all disclosures required under ERISA; and
(F) to appoint other fiduciaries to carry out various specific fiduciary
responsibilities in the administration of the Plan. Such appointment
shall be made and accepted by the appointee in writing and shall be
effective upon the written approval of the Plan Sponsor.
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The Committee shall have discretionary authority to interpret the Plan and
to resolve ambiguities, inconsistencies and omissions, which findings shall
be binding, final and conclusive.
The Committee shall also receive and review all reports of the Trustees and
the collective trustees of any separate investment, and shall report
thereon to the Plan Sponsor. Benefits payable under the Plan shall be paid,
at the direction of the Committee from the assets held by a Trustee.
12.4 Reliance on Professionals. The members of the Committee shall be entitled
to rely upon all tables, valuations, certificates and reports furnished by
any duly appointed actuary (who shall be an "enrolled actuary" as defined
in section 7701(a)(35) of the Code), upon all certificates and reports made
by any duly appointed accountant, and upon all opinions given by any duly
appointed legal counsel. The members of the Committee shall be fully
protected against any action or inaction taken or omitted in good faith in
reliance upon such tables, valuations, certificates, reports or opinions
and any such action or inaction shall be conclusive upon each of them and
upon all persons having any interest under the Plan.
12.5 Liability and Indemnification. The Committee shall operate and administer
the Plan for the exclusive purpose of providing the benefits under the Plan
(and for determining the reasonable expenses of the Plan) 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. No member of the Committee shall be personally liable for any action
or inaction with respect to any duty or responsibility imposed upon such
person by the terms of the Plan unless such action or inaction is finally
determined by a court, and all time for appeal has lapsed, to be a breach
of the standard of conduct expressed in this Section. The Company shall
indemnify each member of the Committee against any expenses which are
reasonably incurred in connection with any legal action to which such
person is a party by reason of his duties and responsibilities with respect
to the Plan, excepting only expenses and liabilities arising from his own
gross negligence or willful misconduct, as finally determined by a court,
and all time for appeal has lapsed.
12.6 Fiduciary Insurance. Subject to the approval of the Plan Sponsor, the
Committee shall have the right to purchase such insurance as it deems
necessary to protect the Plan and the Trust from loss due to any breach of
fiduciary responsibility by any person. Any premiums due on such insurance
shall be paid by the Company. Nothing in this Section shall prevent the
Company, at its own expense, from providing insurance to any person to
cover potential liability of that person as a result of a breach of
fiduciary responsibility.
12.7 Claims Procedure. Each Member or Beneficiary must claim any benefit to
which he believes he is entitled under this Plan by notifying the Committee
in accordance with procedures established by the Committee.
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The Committee shall decide whether to honor a claim within ninety (90) days
of the date on which the claim is filed, unless special circumstances
require a longer period for adjudication and the claimant is notified in
writing of the reasons for an extension of time; provided, however, that no
extensions shall be permitted beyond ninety (90) days after the date on
which the claimant received notice of the extension of time from the
Committee. If the Committee fails to notify the claimant of his decision to
grant or deny such claim within the time specified by this subsection, such
claim shall be deemed to have been denied by the Committee and the review
procedure described below shall become available to the claimant.
If a claim is denied, it must be denied within a reasonable period of time,
and be contained in a written notice stating the following:
A. the specific reason for the denial;
B. a specific reference to the Plan provision on which the denial is
based;
C. a description of additional information necessary for the claimant to
perfect his claim, if any, and an explanation of why such material is
necessary; and
D. an explanation of the Plan's claim review procedure.
The claimant shall have sixty (60) days to request a review of the denial
by the Committee, who shall provide a full and fair review. The request for
review must be written and submitted to the same person who handles initial
claims. The claimant may review pertinent documents, and he may submit
issues and comments in writing. The decision by the Committee with respect
to the review must be given within sixty (60) days after receipt of the
request, unless special circumstances require an extension (such as for a
hearing). In no event shall the decision be delayed beyond one hundred and
twenty (120) days after receipt of the request for review. The decision
shall be written in a manner calculated to be understood by the claimant,
and it shall include specific reasons and refer to specific Plan provisions
as to its effect.
12.8 Trustee Has Authority to Invest. All Funds of the Plan shall be invested by
the Trustee in accordance with the provisions of the Plan and Trust, and
the Trustee shall have full authority and liability in this regard. To the
extent that individual Members are permitted to direct investment of their
account balances, and to the extent a Member exercises such right to direct
investment, the Trustee shall be relieved from any liability therefore
pursuant to ERISA Section 404(c).
12.9 Removal For Personal Involvement. No individual may participate in the
consideration of any matter of or question concerning the Plan which
specifically and uniquely relates to him because of his participation under
the Plan.
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SECTION 13
AMENDMENTS
13.1 Amendment Restrictions. The provisions of this Plan may be amended at any
time and from time to time by the Plan Sponsor or the Committee, provided
that:
A. no such amendment shall be effective unless this Plan, as so amended,
shall be for the exclusive benefit of persons in, or formerly in, the
employ of Employer, or their Beneficiaries;
B. no such amendment shall operate to deprive a Member of any rights or
benefits irrevocably vested in him under the Plan prior to such
amendment;
C. no such amendment shall be effective to the extent that it decreases a
Member's Accrued Benefit. For purposes of this Section 13, a Plan
amendment which has the effect of decreasing a Member's Accrued
Benefit or eliminating an optional form of benefit, with respect to
benefits attributable to service before the amendment, shall be
treated as reducing an Accrued Benefit.
If any amendment shall be necessary or desirable to conform to the
provisions and requirements of the Code or any amendment thereto, or any
regulation issued pursuant thereto, no such amendment thereto shall be
considered prejudicial to the interest of a Member or his Beneficiary, or a
diversion of any part of Fund to a purpose other than for their exclusive
benefit.
13.2 Amending the Plan. The Plan Sponsor may amend the Plan at any time by
resolution or by such other action permitted by the Plan Sponsor's charter,
by-laws, or such other method permitted by the laws of the State of
Delaware. A copy of such amendment shall be provided to the Trustee and the
Plan Administrator. The Committee may amend the Plan by resolution or such
other method as may be authorized by the Plan Sponsor.
13.3 Retroactive Amendments. Any modification or amendment of the Plan may be
made retroactive if such retroactivity is deemed to be necessary in order
for the Plan to conform to or satisfy the conditions of any law,
governmental regulations or ruling, or to meet the requirements of
applicable sections of the Code, or the corresponding regulations and such
retroactive modification is permissible under such law, regulation or
ruling.
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SECTION 14
LOANS
14.1 Permitted Loans. A Member may make application to the Plan Administrator to
borrow from his vested Accrued Benefit. That application must be made in
accordance with administrative procedures established by the Plan
Administrator, and must specify the amount and term requested. The Plan
Administrator shall determine whether the application for a loan is to be
approved after an evaluation of all necessary documentation regarding the
credit-worthiness of the applicant. All applications for loans shall be
evaluated in a uniform and nondiscriminatory manner, and loans shall not be
made available to Highly Compensated Employees in an amount greater than
that for other Employees. Loans that are granted shall be based on the
value of the Member's Accrued Benefit as of the last Valuation Date and
shall be subject to the following conditions:
A. the aggregate amount of all such loans to a Member shall not exceed
the lesser of:
(1) $50,000, reduced by the greatest value of any outstanding loan
balance owed by the Member during the one-year period ending on
the day before the loan is made, or
(2) 50% of his vested Accrued Benefit;
B. the minimum amount of any loan made hereunder shall be $1,000;
C. no more than one (1) loan per twelve (12) month period shall be
granted hereunder, and only one outstanding loan shall be permitted at
any time; and
D. a fee of $20 shall be charged for a loan application. The $20 loan
application fee consists of a $20 processing fee charged by a third
party administrator.
14.2 Collateral Required. A note shall be signed by the Member pledging as
collateral an amount equal to 50% of his vested Accrued Benefit and such
other collateral as may be necessary to adequately secure the loan.
14.3 Repayment. The loan shall be repaid in substantially equal installments
consisting of principal and interest at least quarterly. The term of the
loan is not to exceed five (5) years unless the loan is used to buy or
build the Member's principal residence. The term of a loan which is used to
buy or build the Member's principal residence is not to exceed fifteen (15)
years. Principal residence status shall be determined at the time of the
loan. Loan repayments are to be deducted from the salary paid by the
Employer to such Member;
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<PAGE>
except that any loan shall become payable in full upon a Member's
termination of employment. Notwithstanding the foregoing, a Member who is
on leave for Disability or on leave of absence without pay shall be
permitted to suspend loan repayments for a period of up to one year.
14.4 Interest Charges. Interest shall be charged on loans based on a return
commensurate with the prevailing rates charged by other institutions in the
business of lending money for loans made under similar circumstances.
Interest shall be charged on loans made on or after October 1, 1997 as
follows: the interest rate for loans made during a calendar quarter shall
be the prime rate as published in The Wall Street Journal on the last
business day of the prior calendar quarter, plus one percent (1%).
14.5 Failure To Make Timely Payment. In the event an installment payment is not
paid within thirty (30) days following the due date of an installment, the
Plan Administrator shall give written notice to the Member sent to his last
known address. If such installment payment is not made within fifteen (15)
days thereafter, the Plan Administrator shall have the right to accelerate
the loan and to reduce the Member's Accrued Benefit to the extent permitted
by law by the amount of the unpaid loan balance including interest then due
but not before the time at which the Member may first receive a
distribution, except as permitted in regulations section 1.401(a)-13(d). If
the Member's Accrued Benefit must be used to eliminate any Plan loan which
is in default, the Member's various accounts shall be depleted in the
following order:
A. Pre-Tax Contribution Account;
B. Rollover Account;
C. Employer Matching Contribution Account, to the extent vested;
D. After-Tax Contribution Account;
E. Rollover Account;
F. Transfer Account.
14.6 Termination of Employment. In the event of the termination of a Member's
employment before the loan is repaid in full, the unpaid balance thereof,
together with interest immediately due thereon, shall become due and
payable; and the Trustee shall first satisfy the indebtedness from the
amount payable to the Member or to the Member's Beneficiary before making
any payments to the Member or to the Member's Beneficiary.
14.7 Loans to Non-Employees. Any Member who ceases to be an active Employee
shall not be eligible to make a loan hereunder. Notwithstanding the
foregoing, however, loans will be made available to a terminated Employee
who is also a "party in interest" as that term is defined in ERISA Section
3(14).
62
<PAGE>
14.8 Order of Accounts Reduced. In determining the origin of any loan proceeds,
the Member's various accounts, including any earnings thereon, shall be
reduced in the following order:
A. Pre-Tax Contribution Account;
B. Rollover Account;
C. Employer Matching Contribution Account, to the extent vested;
D. After-Tax Contribution Account;
E. Rollover Account;
F. Transfer Account.
14.9 Segregated Investment. The loan shall be made proportionately from all
Investment Fund(s) in a Member 's Account. The loan shall be considered as
a segregated investment of the Member.
14.10 General Administration. The Trustee and the Plan Administrator shall have
the right to establish such procedures as may be reasonable, necessary or
desirable to carry out the provisions of this Section 14.
63
<PAGE>
SECTION 15
MISCELLANEOUS
15.1 "Spendthrift" Provision. Subject to Section 15.2 below, no benefit under
the Plan shall be subject in any manner to anticipation, pledge,
encumbrance, alienation, levy or assignment, nor to seizure, attachment or
other legal process for the debts of any Employee, Member or Beneficiary,
unless required by law. Notwithstanding the foregoing, a Participant's
benefit may be reduced as provided in Section 401(a)(13)(C) of the Code.
15.2 QDRO Exception. In the event that a Qualified Domestic Relations Order
("QDRO") (as defined by Section 414(p) of the Code) is issued with respect
to any Member, the Plan Administrator shall notify the Member and the
alternate payee(s) of the order received and segregate and conservatively
invest the portion of the Member's Accrued Benefit which would be payable
to the alternate payee(s) as if the order received were a QDRO. Within 18
months of the order, the Plan Administrator shall proceed with either A. or
B. as follows:
A. if the order is determined to be a QDRO, the Plan Administrator shall
pay (notwithstanding the provisions of Section 6 hereof) the alternate
payee(s) in accordance with the terms of such order and with Code
section 414(p) and ERISA section 206(d) at the time specified in such
order. Payments may be made prior to the Member's "earliest retirement
age" (as defined in Code section 414(p) and ERISA section 206(d))
pursuant to a QDRO; or
B. if the order is determined not to be a QDRO, or, the issue remains
undetermined, the Plan Administrator shall pay the portions of the
Member's Accrued Benefit segregated in accordance with the above to
the Member or Beneficiary(ies) who are otherwise entitled to such
benefit.
If, 18 months after issuance of the order, a determination is made
that the order is a QDRO, the determination shall be applied
prospectively only.
15.3 No Guarantee of Employment. Nothing contained in this Plan or the Trust
shall be held or construed to create any liability upon the Employer to
retain any Employee in its employ. The Employer reserves the right to
discontinue the services of any Employee without any liability except for
salary or wages that may be due and unpaid whenever, in its judgment, its
best interests so require.
15.4 Uniformed Services Employment and Reemployment Rights Act of 1994.
Notwithstanding any provisions of this Plan to the contrary, contributions,
benefits, and service credit with respect to qualified military service
will be provided in accordance with section 414(u) of the Code.
64
<PAGE>
15.5 Controlling Law. The Plan shall be construed, administered and governed in
all respects in accordance with the laws of the State of Delaware to the
extent such laws are not superseded by federal law. If any provision herein
is held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
FOAMEX L.P.
DATE: __________________
By:
- ----------------------------- -------------------------
Witness Authorized Officer
65
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