<PAGE> 1
MANUALLY SIGNED ORIGINAL
Page 1 of 58 Sequentially Numbered Pages
Exhibit Index on Page 13
--
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- - ------ EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED APRIL 30, 1994. OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- - ----- EXCHANGE ACT OF 1934 FOR THE TRANSITION FROM -------- TO -------------.
Commission file number: 1-9494
TIFFANY & CO.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3228013
(State of incorporation) (I.R.S. Employer Identification No.)
727 FIFTH AVE. NEW YORK, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 755-8000
</TABLE>
Former name, former address and former fiscal year, if changed since last
report ---------.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock as of the latest practicable
date: Common Stock, $.01 par value, 15,663,438 shares outstanding at the close
of business on APRIL 30, 1994.
<PAGE> 2
TIFFANY & CO. AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - April 30, 1994
(Unaudited) and January 31, 1994 3
Consolidated Statements of Income - for the
three months ended April 30, 1994
and 1993 (Unaudited) 4
Consolidated Statements of Stockholders'
Equity - for the three months ended
April 30, 1994 (Unaudited) 5
Consolidated Statements of Cash Flows - for
the three months ended April 30, 1994
and 1993 (Unaudited) 6
Notes to Consolidated Financial Statements 7-8
(Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
(a) Exhibits
(b) Reports on Form 8-K
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
April 30, January 31,
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 8,260 $ 4,994
Accounts receivable, less allowances of
$4,144 and $4,170 54,971 67,330
Income tax receivable 15,489 12,517
Inventories 282,054 262,282
Prepaid expenses 18,292 17,718
-------- --------
Total current assets 379,066 364,841
Property and equipment, net 96,697 97,365
Deferred income taxes 15,681 15,404
Other assets, net 30,137 26,799
-------- --------
$521,581 $504,409
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 74,599 $ 59,289
Accounts payable and accrued liabilities 80,558 79,980
Income taxes payable 2,392 6,359
Merchandise and other customer credits 6,924 6,947
------- --------
Total current liabilities 164,473 152,575
Long-term trade payable 27,101 25,394
Reserve for product return 13,479 13,663
Long-term debt 101,500 101,500
Deferred income taxes 6,702 6,758
Postretirement benefit obligation 14,746 14,320
Other long-term liabilities 947 1,118
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value; authorized
30,000 shares, issued 15,663 and 15,660 157 157
Additional paid-in capital 70,572 70,498
Retained earnings 126,862 126,082
Foreign currency translation adjustments (4,958) (7,656)
-------- --------
Total stockholders' equity 192,633 189,081
-------- --------
$521,581 $504,409
======== ========
</TABLE>
See notes to consolidated financial statements
- 3 -
<PAGE> 4
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the
Three Months Ended
April 30,
--------------------------
1994 1993
---- ----
<S> <C> <C>
Net sales $131,207 $109,481
Cost of goods sold 64,007 58,700
-------- --------
Gross profit 67,200 50,781
Selling, general and administrative
expenses 60,783 46,523
Provision for uncollectible accounts 303 553
-------- --------
Income from operations 6,114 3,705
Other expenses, net 2,817 1,870
-------- --------
Income before income taxes 3,297 1,835
Provision for income taxes 1,421 798
-------- --------
Net income $ 1,876 $ 1,037
======== ========
Net income per share:
Primary $ 0.12 $ 0.07
======== ========
Fully diluted $ 0.12 $ 0.07
======== ========
Weighted average number of common shares:
Primary 15,803 15,755
Fully diluted 16,696 16,648
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE> 5
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Foreign
Total CommonStock Additional Currency
Stockholders' ------------------ Paid-In Retained Translation
Equity Shares Amount Capital Earnings Adjustments
------------ ------ ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, January 31, 1994 $189,081 15,660 $157 $70,498 $126,082 $(7,656)
Exercise of stock options 70 3 - 70 - -
Tax benefit from exercise of
stock options 4 - - 4 - -
Cash dividends on common stock (1,096) - - - (1,096) -
Foreign currency translation
adjustments 2,698 - - - - 2,698
Net income 1,876 - - - 1,876 -
-------- ------ ---- ------- -------- ------
BALANCES, April 30, 1994 $192,633 15,663 $157 $70,572 $126,862 $(4,958)
======== ====== ==== ======= ======== =======
</TABLE>
See notes to consolidated financial statements
- 5 -
<PAGE> 6
TIFFANY & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the
Three Months Ended
April 30,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,876 $ 1,037
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,196 2,721
Provision for uncollectible accounts 303 553
Reduction in reserve for product return (184) -
Deferred income taxes (362) (1,083)
Postretirement benefit provision 426 475
(Increase)/decrease in assets and increase/
(decrease) in liabilities
Accounts receivable 12,957 (783)
Inventories (12,386) 3,668
Income tax receivable (2,972) -
Prepaid expenses (109) (224)
Other assets, net (3,386) (169)
Accounts payable and accrued liabilities (686) (7,291)
Income taxes payable (4,055) (730)
Merchandise and other customer credits (23) 263
Other long-term liabilities 332 (686)
-------- --------
Total adjustments to net income (5,949) (3,286)
-------- --------
Net cash used in operating activities (4,073) (2,249)
-------- --------
Cash Flows From Investing Activities:
Capital expenditures (2,495) (2,780)
Other (127) 0
-------- --------
Net cash used in investing activities (2,622) (2,780)
-------- --------
Cash Flows From Financing Activities:
Increase in short-term borrowings 10,983 9,294
Proceeds from exercise of stock options 70 143
Tax benefit from exercise of stock options 4 1
Cash dividends on common stock (1,096) (1,093)
-------- --------
Net cash provided by financing activities 9,961 8,345
-------- --------
Net increase in cash and short-term investments 3,266 3,316
Cash and short-term investments at beginning
of year 4,994 6,672
-------- --------
Cash and short-term investments at end of three
months $ 8,260 $ 9,988
======== ========
Supplemental Disclosure Of Cash Flow Information:
Cash paid during the three months for:
Interest expense $ 3,102 $ 3,483
======== ========
Income taxes $ 8,816 $ 2,655
======== ========
</TABLE>
See notes to consolidated financial statements
- 6 -
<PAGE> 7
TIFFANY & CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the
accounts of Tiffany & Co. and all majority-owned domestic and foreign
subsidiaries (the "Company"). All material intercompany balances and
transactions have been eliminated. The statements are without audit
and, in the opinion of management, include all adjustments (which
include only normal recurring adjustments except for the adjustment
necessary as a result of the LIFO method of inventory valuation, which
is based on assumptions as to inflation rates and projected fiscal
year-end inventory levels) necessary to present fairly the Company's
financial position as of April 30, 1994 and the results of operations
and cash flows for the interim periods presented. The audited
financial statements for January 31, 1994 are presented without
accompanying footnotes which are included in the Company's Form 10-K
filing.
Since the Company's business is seasonal, with a higher proportion of
sales and income generated in the last quarter of the fiscal year, the
results of operations for the three months ended April 30, 1994 and
1993 are not necessarily indicative of the results of the entire
fiscal year.
2. INVENTORIES
Inventories at April 30, 1994 and January 31, 1994 are summarized as
follows:
<TABLE>
<CAPTION>
April 30, January 31,
1994 1994
----------- -----------
(in thousands)
<S> <C> <C>
Finished goods $237,698 $219,010
Raw materials 41,408 40,210
Work in process 5,860 5,097
-------- --------
284,966 264,317
Reserves (2,912) (2,035)
-------- --------
$282,054 $262,282
======== ========
</TABLE>
At April 30, and January 31, 1994, $197,799,000 and $177,379,000,
respectively, of inventories were valued using the LIFO method. The
excess of such inventories valued at replacement cost over the value
based upon the LIFO method was approximately $9,370,000 and $8,470,000
at April 30, 1994 and January 31, 1994, respectively. The LIFO
valuation method had the effect of decreasing net income by $0.03 and
$0.05 per share, for the three month periods ended April 30, 1994 and
1993, respectively.
- 7 -
<PAGE> 8
3. POSTEMPLOYMENT BENEFITS
Effective February 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Accounting for Postemployment Benefits"
("SFAS No. 112"), which requires the accrual of the cost of
postemployment benefits rather than expensing the costs when incurred.
These benefits include salary continuation, severance benefits,
disability benefits and continuation of health care benefits and life
insurance coverage for former employees after employment but before
retirement. The adoption of this standard did not have a material
impact on the Company's reported results of operation or financial
condition.
5. FOREIGN CURRENCY HEDGING PROGRAM
During the first quarter, the Company initiated a foreign currency
hedging program intended to minimize its risk on foreign currency
denominated transactions. In connection with this program, the
Company will from time to time enter into foreign currency purchased
put options and forward exchange contracts, which are designated as
hedges of commitments to purchase merchandise and settle liabilities
in foreign currencies. The market value gains and losses on these
foreign exchange contracts are deferred and then recognized when the
related transactions are settled. At April 30, 1994, the Company had
purchased put options maturing at various dates through March 23,
1995, giving it the right, but not the obligation, to sell
47,520,000,000 yen at certain predetermined rates.
6. EARNINGS PER SHARE
Primary earnings per common share data has been computed by dividing
net income by the weighted average number of shares outstanding during
the period, including dilutive stock options. Fully diluted earnings
per common share has been computed by dividing net income, after
giving effect to the elimination of interest expense and bond
amortization fees, net of income tax effect, applicable to the
convertible subordinated debentures, by the weighted average number of
shares outstanding including dilutive stock options and the assumed
conversion of the subordinated debentures using the "if converted"
method.
7. SUBSEQUENT EVENT
On May 19, 1994, Tiffany's Board of Directors declared a quarterly
dividend of $0.07 per common share. This dividend will be paid on
July 11, 1994 to stockholders of record on June 20, 1994.
- 8 -
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company operates three channels of distribution: U.S. Retail includes
retail sales in Company-operated stores in the U.S. and wholesale sales to
independent retailers in North America; Direct Marketing includes corporate
(business-to-business) and catalog sales; and International Retail includes
retail sales through Company-operated stores and boutiques, corporate sales,
and wholesale sales to independent retailers and distributors, primarily in
Asia-Pacific, Europe, Canada and the Middle East.
Net sales increased 20% to $131,207,000 in the three months (first quarter)
ended April 30, 1994.
U.S. Retail sales increased 18% to $57,223,000 in 1994's first quarter.
Comparable U.S. store sales rose 16% due to sales increases in all U.S. branch
stores and in New York. Sales growth was primarily generated by local-market
customers and secondarily by higher sales to foreign tourists. Management
attributes the increase to the success of its merchandising and marketing
programs, as well as to an improved economy and higher levels of consumer
confidence.
Direct Marketing sales increased 4% to $18,807,000 in the first quarter due to
strong catalog sales and a modest increase in corporate sales to businesses.
International Retail sales were $55,177,000, compared with $42,870,000 in the
first quarter of 1993, or a 29% increase. International Retail sales in both
periods are not comparable, due to the Company's realignment of its Japan
business in July 1993 (discussed below). However, weak economic conditions and
cautious consumer spending are continuing to affect the Company's sales in
Japan and Europe. When measured in Japanese yen, sales in Company-operated
boutiques that were open more than one year declined 11% in the first quarter
below the comparable 1993 period (which included retail sales in boutiques then
operated by Mitsukoshi). Outside Japan, the Company's Asian-Pacific stores
experienced strong sales growth in the first quarter. In Europe, lower
comparable store sales reflected declines in Italy and Germany.
In July 1993, the Company effected a realignment of its business in Japan by
assuming the merchandising and marketing responsibilities for each of the 29
TIFFANY & CO. boutiques in Japan previously operated by Mitsukoshi Ltd., an
operator of department stores in Japan. As part of this transaction, the
Company agreed to repurchase $115,000,000 of merchandise previously sold to
Mitsukoshi. As a consequence, the Company recorded a $115,000,000 provision for
product return in the second quarter of 1993 which reduced gross profit by
$57,500,000 and reduced net income by $32,700,000 (net of income tax benefit of
$24,800,000), or $2.07 per share. At April 30, 1994, approximately $30,000,000
of merchandise remained to be repurchased throughout the period ending February
28, 1998. No further charges or sales reversals are anticipated in connection
with this transaction.
- 9 -
<PAGE> 10
Under the new arrangement, Mitsukoshi no longer purchases TIFFANY & CO.
merchandise on a wholesale basis for resale in Japan. Instead, Mitsukoshi acts
for the Company in the sale of merchandise owned by the Company and the Company
recognizes as revenues the retail price charged to the ultimate consumer in
Japan, as opposed to the wholesale price previously charged to Mitsukoshi. As a
result, the Company's reported sales in the first quarter of 1994 showed a
significant increase due to the Japan realignment. The Company now holds
inventories for sale, establishes retail prices, bears the risk of currency
fluctuations, provides one or more brand managers in each boutique, controls
merchandising and display within the boutiques, manages inventory and controls
and funds all advertising and publicity programs with respect to TIFFANY & CO.
merchandise. Mitsukoshi is paid at the rate of approximately 27% of retail
sales in compensation for providing boutique facilities and sales and clerical
staff, as well as for the collection of receivables and security of store
inventories. The new arrangement entails greater seasonality in sales for the
Company than did the prior wholesale arrangement with Mitsukoshi. The Company
is experiencing greater expenses in Japan under the new arrangement, but is
also recording higher revenues at the retail level. In general, management
believes that the Company's increased revenues and corresponding gross profit
more than offset the increased expenses. In addition, as a result of this
business realignment in Japan, the Company's reported sales and earnings
results benefit from a strengthening Japanese yen and are adversely affected by
a strengthening U.S. dollar. However, in early Fiscal 1994, the Company
initiated a foreign currency hedging program intended to minimize the negative
impact of changes in the dollar-yen relationship on the Company's financial
results.
Since the realignment, the Company has initiated a number of changes in its
Japan business, including: the establishment of model stock unit inventories
for each boutique; the installation of the Company's merchandise replenishment
system, which significantly expedites the flow of merchandise to the boutiques;
and a retail price reduction of approximately 20% for solitaire diamond rings
which resulted in substantially increased unit volume. During the second
quarter of 1994 the Company plans to introduce several new jewelry collections
in Japan, increase its advertising expenditures and reduce retail prices for
substantially all other product categories. Typically, retail prices of
imported luxury goods in Japan have reflected a premium to "home market"
prices, although a recent trend has been to reduce that premium. The Company
plans to reduce prices by approximately 25% on products that represent
approximately 55% of its Japan retail sales. After the price reduction, the
premium over U.S. prices will be approximately 50%, based on current exchange
rates. Management believes the resultant pricing will be competitive with both
local and foreign brands. As a result of its experience with the solitaire
diamond ring price reduction, management believes that planned price
reductions, despite reduced gross margins, will positively affect sales and
earnings in Japan. The Company is also currently in the process of
remerchandising its product line and enhancing product displays in its
boutiques in Japan.
Gross margin (gross profit as a percentage of sales) was 51.2% in the first
quarter, compared with 46.4% in 1993's first quarter. The increase was
primarily attributable to the effect of recording retail sales as part of the
Japan realignment.
- 10 -
<PAGE> 11
Operating expenses (selling, general and administrative expenses and the
provision for uncollectible accounts) in the first quarter increased 30% over
the prior-year period. The increase was primarily attributable to increased
expenses related to the Japan realignment. The ratio of operating expenses to
net sales was 46.6% and 43.0% in the first quarters of 1994 and 1993,
respectively.
Other expense (primarily interest expense) increased in the first quarter,
primarily due to interest expense on higher average short-term borrowings.
As a result of the above factors, net income in the first quarter of 1994 rose
81% to $1,876,000, or $0.12 per share, compared with $1,037,000, or $0.07 per
share, in 1993's first quarter.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Management believes that the Company's financial condition at April 30, 1994
provides sufficient liquidity and resources to support current business
activity and planned expansion.
Working capital and the corresponding current ratio were $214,593,000 and 2.3:1
at April 30, 1994, compared with $212,266,000 and 2.4:1 at January 31, 1994.
Accounts receivable at April 30, 1994 were 18% lower than January 31, 1994,
primarily due to seasonal reductions from payments received for purchases that
were made in the preceding fourth quarter. Inventories (the largest component
of working capital) at April 30, 1994 were 8% higher than at January 31, 1994
due to increased merchandise purchases to support the Company's growth and the
effect of translating foreign inventories into U.S. dollars. The Company's
objective continues to be to reduce worldwide comparable store inventory levels
in Fiscal 1994 in order to improve inventory turnover and asset productivity.
Capital expenditures were $2,495,000 and $2,780,000 in the first quarters of
1994 and 1993, respectively.
Total debt (short-term borrowings and long-term debt) and its corresponding
ratio to total capital (total debt and stockholders' equity) were $176,099,000
and 47.8% at April 30, 1994, compared with $160,789,000 and 46.0% at January
31, 1994.
The Company's sources of working capital continue to be internally generated
funds, as well as funds available under a $100,000,000 revolving credit
facility and a yen 2,500,000,000 (approximately $24,600,000) line of credit.
Management anticipates that these sources of funds will be sufficient to
support planned worldwide business expansion, as well as seasonal working
capital increases typically required during the third and fourth quarters of
the year.
- 11 -
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.3 Tiffany & Co. 1986 Stock Option Plan, as amended and
restated, approved by the Registrant's stockholders
on May 19, 1994.
10.116 Tiffany & Co. Employee Profit Sharing and Retirement
Savings Plan, effective August 1, 1994.
11 Statement re Computation of Per
Share Earnings.
(b) Reports on form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TIFFANY & CO.
(Registrant)
Date: June 2, 1994 By:/s/ James N. Fernandez
------------------------------------
James N. Fernandez
Senior Vice President - Finance
and Chief Financial Officer
(principal financial officer)
- 12 -
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Numbered Page
- - ----------- -------------
<S> <C> <C>
10.3 Tiffany & Co. 1986 Stock Option Plan, as amended
and restated, approved by the Registrant's
stockholders on May 19, 1994 . . . . . . . . . . . . . . . . . . . 14
10.116 Tiffany & Co. Employee Profit Sharing
and Retirement Savings Plan, effective August 1, 1994 . . . . . . . . . . . . . . 17
11 Statement re Computation of
Per Share Earnings . . . . . . . . . . . . . . . . . . . 58
</TABLE>
- - ---------------------------------
- 13 -
<PAGE> 1
TIFFANY & CO.
1986 STOCK OPTION PLAN
(AS AMENDED AND RESTATED)
1. Purpose of the Plan. Under this Stock Option Plan (the "Plan") of
Tiffany & Co., a Delaware corporation (the "Company"), options may be granted
to eligible employees to purchase shares of the Company's common stock, $.01
par value per share ("Common Stock"). The Plan is designed to enable the
Company to attract, retain and motivate such persons by providing for or
increasing their proprietary interest in the Company.
2. Stock Subject to Plan. The maximum number of shares that may be
subject to options granted hereunder shall be two million seven hundred nine
thousand (2,709,000) shares of Common Stock, subject to adjustments under
Section 7 below. Shares of Common Stock subject to the unexercised portions of
any options granted under this Plan which expire, terminate or are cancelled
may again be subject to options under the Plan.
3. Eligible Persons. The persons eligible to be considered for the grant
of options hereunder are key employees of the Company or its parent or
subsidiaries.
4. Payment. Payment for Common Stock purchased upon any exercise of an
option granted hereunder shall be made in full in cash concurrently with such
exercise, except that, if the Committee, as defined in Section 10 herein, shall
have authorized such payment and if the Company is not then prohibited from
purchasing or acquiring shares of stock, payment may be made in whole or in
part with shares of stock of the Company delivered in lieu of cash concurrently
with such exercise, the shares so delivered to be valued on the basis of their
fair market value on the date of exercise. If the Company is required to
withhold an amount on account of any federal or state income tax imposed as a
result of any exercise of an option, the optionee shall pay such amount to the
Company by check or in cash concurrently with the exercise of the option.
5. Exercise Price. The exercise price for each option granted hereunder
shall not be less than 100% of the fair market value of the Common Stock at the
date of the grant of such option.
6. Nontransferability. Any option granted under this Plan shall by its
terms be nontransferable by the optionee otherwise than by will or the laws of
descent and distribution, and shall be exercisable, during the optionee's
lifetime, only by the optionee.
7. Adjustments. If the outstanding shares of stock of the class then
subject to this Plan are increased or decreased, or are changed into or
exchanged for a different number or kind of shares or securities, as a result
of one or more reorganizations, recapitalizations, stock splits, reverse stock
splits, stock dividends and the like, appropriate adjustments shall be made in
the number and/or type of shares or securities for which options may thereafter
- Page 14 -
<PAGE> 2
be granted under this Plan and for which options then outstanding under this
Plan may thereafter be exercised. Any such adjustments in outstanding options
shall be made without changing the aggregate exercise price applicable to the
unexercised portions of such options.
8. Maximum Option Term. No option granted under this Plan may be
exercised in whole or in part more than eleven years after the date of grant.
9. Plan Duration. Options may not be granted under this Plan after
January 31, 2001.
10. Administration. The Plan shall be administered by a Committee (the
"Committee") of the Board of Directors of the Company (the "Board") which shall
consist of not less than two Directors of the Company each of whom shall be an
"outside director" for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and regulations promulgated thereunder. The Board may
from time to time add to or remove members from the Committee, and shall have
the sole authority to fill vacancies on the Committee. Subject to the express
terms and conditions of the Plan and the terms of any option outstanding under
the Plan, the Committee shall have full power to construe the Plan and the
terms of any option granted under the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan or such options and to make all
other determinations necessary or advisable for the administration of the Plan,
including, without limitation, the power to determine which persons meet the
requirements of Section 3 hereof for selection as participants in the Plan, and
to which of the eligible persons, if any, options shall be granted under the
Plan and, subject to the provisions of this Plan, to establish the terms and
conditions required or permitted to be included in option agreements. Each
member of the Committee shall not, at the time he exercises discretion in
administering the Plan, be eligible or at any time within one year prior
thereto have been eligible for selection as a person to whom stock options may
be granted pursuant to the Plan or any other plan of the issuer or any of its
affiliates entitling the participants therein to acquire stock, stock options
or stock appreciation rights of the issuer or any of its Affiliates, provided,
however, that members of the Committee shall be entitled to elect participation
in the Company's 1988 Director Option Plan.
11. Amendment and Termination. The Board may at any time alter, amend,
suspend or terminate this Plan. However, unless taken with the approval of the
stockholders of the Company, no such action of the Board may:
(A) materially increase the benefits accruing to participants in the Plan;
(B) materially increase the number of securities which may be issued under
the Plan; or
(C) materially modify the requirements as to eligibility for participation
in the Plan.
In addition, no such action shall deprive any optionee, without his consent, of
any option granted to the optionee pursuant to the Plan or of any of his rights
under such option.
- Page 15 -
<PAGE> 3
12. Exercise in Installments. Subject to Section 13 below options granted
under the Plan shall become exercisable in four equal installments as follows:
on or after the first anniversary of the grant date twenty-five (25%) percent;
and twenty-five (25%) percent on or after the second, third and fourth
anniversary of the grant date, respectively.
13. Change of Control. On the occurrence of a Change in Control of the
Company, any time periods relating to the exercise of any stock option granted
under the Plan shall be accelerated so that such options (including any
unmatured installments thereof) may be immediately exercised in full. A
"Change in Control of the Company" shall be deemed to have occurred if: (A)
any person or group of persons acting in concert acquires thirty-five percent
(35%) in voting power or amount of the equity securities of the Company
(including the acquisition of any right, option, warrant or other right to
obtain such voting power or amount, whether or not presently exercisable)
unless such acquisition is authorized or approved of by the Board of Directors
of the Company; (B) individuals who constitute the Board of Directors of the
Company on January 21, 1988 (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board of Directors, provided that any
individual becoming a director subsequent to the date January 21, 1988 whose
election, or nomination for election by the Company's stockholders, was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such individual is named as a nominee for
director) shall be, for the purposes of this subsection (B), considered as
though such individual were a member of the Incumbent Board; or (C) any other
circumstance with respect to a change in control of the Company occurs which
the Committee deems to be a Change in Control of the Company. As used herein,
the word "person" shall mean an individual or an entity.
14. Termination of Employment for the Convenience of the Company. The
Committee, in the case of an employee's termination of employment for the
convenience of the Company, shall have the authority, exercisable in the
discretion of the Committee on a case by case basis, to (i) extend the date by
which option installments must be exercised following an employee's termination
of employment (the "Reference Date"), but in no event to a date later than the
earlier of the third anniversary of the date of such employee's termination of
employment (the "Third Anniversary Date") or the Expiration Date, (ii) extend
the Exercise Date, but in no event to a date later than the earlier of the
Third Anniversary Date or the Expiration Date, and/or (iii) accelerate the
vesting of option installments which have not become exercisable as of the
Reference Date, but in no event to a date earlier than six months following the
date of grant of the option; provided, however, that, in each such case, the
Committee shall have the authority to extend the Reference Date and/or the
Exercise Date to a date no later than the Expiration Date.
15. Maximum Option Grants to an Eligible Person. The maximum number of
shares of Common Stock subject to option grants made in any fiscal year of the
Company to any one eligible person hereunder shall be fifty thousand (50,000)
shares.
- Page 16 -
<PAGE> 1
TIFFANY & CO.
EMPLOYEE PROFIT SHARING AND RETIREMENT SAVINGS PLAN
ARTICLE I. PURPOSE
Effective as of February 1, 1988, Tiffany & Co. (the "Company"), a
Delaware corporation with its executive offices and principal place of business
at 727 Fifth Avenue, New York, NY 10022, established the Tiffany & Co. Employee
Stock Ownership Plan (the "Plan") and executed a trust agreement establishing
the Tiffany & Co. Employee Stock Ownership Trust, which is intended to form a
part of the Plan. The purpose of the Plan is to provide its eligible employees
with the benefits of ownership of the common stock of the Company under the
terms of the Plan and to motivate eligible employees to contribute to the
financial success of the Company.
Effective August 1, 1994, the Tiffany & Co. Employee Stock Ownership
Plan was amended to establish a cash or deferred arrangement under Section
401(k) of the Internal Revenue Code of 1986, as amended, and was renamed the
"Tiffany & Co. Employee Profit Sharing and Retirement Savings Plan (the
"Plan"). The Plan and its related Trust, which is a part of the Plan, are
maintained for the exclusive benefit of eligible employees and their
beneficiaries. The portion of the Plan establishing an employee stock
ownership feature has been adopted to meet the requirements of a qualified
employee stock ownership plan and stock bonus plan under Sections 401(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended. The portion of
the Plan establishing the cash or deferred arrangement under Section 401(k) of
the Internal Revenue Code of 1986, as amended, has been adopted to meet the
requirements of a profit sharing plan and a qualified cash or deferred
arrangement under Sections 401(a) and 401(k) of the Internal Revenue Code of
1986, as amended.
The provisions of this Plan, as set forth herein, shall apply only to
an Employee who terminates employment on or after August 1, 1994 (the
"Effective Date").
ARTICLE II. DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS: Capitalized words and phrases appearing in this Plan
shall have the respective meanings set forth in this Article, unless the
context clearly indicates to the contrary.
May 19, 1994 17
<PAGE> 2
2.2 PRINCIPAL ENTITIES:
(a) Plan: The Tiffany & Co. Employee Profit Sharing and Retirement
Savings Plan, the plan set forth herein, as amended from time to time.
(b) Trust (or Trust Fund): The fund known as the Tiffany & Co.
Employee Profit Sharing and Retirement Savings Trust, maintained in
accordance with the terms of the trust agreement, as from time to time
amended, which constitutes a part of this Plan.
(c) Company: The Company or any successor corporation which adopts
the Plan.
(d) Employer: The Company or any Related Company which is the
employer of an Employee.
(e) Trustee: The corporation or individuals appointed by the Board
of Directors of the Company to be Trustee under the Trust.
(f) Committee: The persons appointed pursuant to Article VIII to
assist in the administration of the Plan in accordance with said
Article.
(g) Employee: Any person employed in the United States by the
Company or any Related Company.
(h) Eligible Employee:
(i) With respect to the ESOP Feature, an Employee who is not
and has not been an Executive Officer of the Company on or
within six months prior to any date relevant hereunder to the
determination of his participation;
(ii) With respect to the 401(k) Feature, an Employee who
completes one Year of Service as computed from his date of
hire; and
(iii) Notwithstanding anything else in the Plan to the
contrary, an Employee employed by Glassware Acquisition Inc.
shall not be eligible to participate under the Plan.
(i) Participant: An Employee participating in the Plan in
accordance with the provisions of Section 3.1.
(j) Former Participant: A Participant whose employment with an
Employer has terminated but who has a vested account balance under the
Plan which has not been paid in full and therefore is continuing to
participate in the allocation of Trust Fund income.
May 19, 1994 18
<PAGE> 3
(k) Fiduciaries: The Company and the Trustee, but only with
respect to the specific responsibilities of each for Plan and Trust
administration, all as described in Section 8.1.
(l) Beneficiary: A person or persons (natural or otherwise)
designated by a Participant in accordance with the provisions of
Section 6.6 to receive any death benefit which shall be payable under
the Plan.
(m) ESOP Feature: The portion of the Plan that was adopted to meet
the requirements of a qualified employee stock ownership plan and
stock bonus plan under Sections 401(a) and 4975(e)(7) of the Code.
(n) 401(k) Feature: The portion of the Plan that was adopted to
meet the requirements of a qualified cash or deferred arrangement and
profit sharing plan under Sections 401(a) and 401(k) of the Code.
(o) Executive Officer: An Employee designated from time to time by
the Company's Board of Directors as an officer for purposes of Section
16 of the Securities Exchange Act of 1934.
2.3 DETERMINATION OF BENEFITS:
(a) Service: The period of a Participant's employment considered
in accordance with Section 3.2 in the determination of his eligibility
for benefits under the Plan.
(b) Authorized Leave of Absence: Any absence authorized by the
Employer under the Employer's standard personnel practices, provided
that all persons under similar circumstances are treated alike in the
granting of such Authorized Leaves of Absences, and provided further
that the Employee returns or retires within the period of authorized
absence. An absence due to service in the armed forces of the United
States shall be considered an Authorized Leave of Absence provided
that the Employee complies with all of the requirements of Federal law
in order to be entitled to reemployment and provided further that the
Employee returns to employment with the Employer within the period
provided by such law.
(c) Compensation: The total remuneration which a Participant
receives for work or personal services performed for an Employer, as
reported on form W-2. Effective February 1, 1994, any amount in
excess of $150,000 in any single plan year (as adjusted for increases
in the cost-of-living pursuant to Section 401(a)(17) of the Code)
shall be excluded.
May 19, 1994 19
<PAGE> 4
(d) Company Stock: Shares of common stock of $.01 par value of the
Company which constitute "employer securities" under Section
4975(e)(8) of the Code.
(e) Participant Stock Account: The account of a Participant which
is credited with his allocable shares of Company Stock purchased and
paid for by the Trust under the ESOP Feature or contributed to the
Trust under the ESOP Feature. This account is measured in shares of
Company Stock.
(f) Annual Additions: The aggregate of amounts credited to a
Participant Stock Account from Company contributions, any forfeitures
credited to the Participant Stock Account and any Tax Deferred
Contributions credited to the Participant's Tax Deferred Contributions
Account.
(g) Disability: A physical or mental condition which, in the
judgment of the Committee, based upon medical reports and other
evidence satisfactory to the Committee, presumably permanently
prevents an Employee from satisfactorily performing his usual duties
for his Employer or the duties of such other position or job which his
Employer makes available to him and for which such Employee is
qualified by reason of his training, education or experience.
(h) Unallocated Stock Account: The interim account used to reflect
unleveraged stock acquisitions by the Trust prior to the allocation of
such stock to Participant Stock Accounts.
(i) Suspense Account: The account used to reflect stock acquired
with loan proceeds pursuant to Section 7.3.
(j) Related Company:
(i) Any corporation which is a member of a controlled
group of corporations (within the meaning of Section
1563(a) of the Code, determined without regard to
Sections 1563(a)(4) and (e)(3)(c) of the Code of
which the Company is a component member and each
company (whether or not incorporated) which is under
common control with the Company, as such common
control is defined in Section 414(c) of the Code and
Regulations issued thereunder. For the purpose of
applying Section 414 of the Code, "more than 50%"
shall be substituted for "at least 80%" each place it
appears in Section 1563(a)(1).
(ii) Any entity within an affiliated service group as
determined by sections 414(m) and (o) of the Code.
May 19, 1994 20
<PAGE> 5
(k) Highly Compensated: Any Employee who during the year or
preceding year:
(i) was at any time a 5% owner of the Company or an
Employer; or
(ii) received Compensation in excess of $99,000; or
(iii) received Compensation from an Employer in excess of
$66,000 and was in the top paid group of Employees
(as defined in Section 414(q) of the Code) for the
year; or
(iv) was at any time an officer of the Company or an
Employer and received compensation greater than 50%
of the amount in effect under Section 415(b)(1)(A) of
the Code for such year.
In determining who is Highly Compensated, the Committee shall apply
the rules set forth in Section 414(q) of the Code and any regulations
issued thereunder.
(l) Retirement: Termination from employment after attaining age 65.
(m) 401(k) Compensation: (i) In the case of an Employee who is not
paid on a piecework basis, the actual base salary paid to him for
services rendered to the Company (exclusive of amounts attributable to
the exercise of employee stock options), including straight time for
all hours worked, commissions, bonuses, premiums and incentives; and
(ii) in the case of an Employee who is paid on a piecework basis, the
actual remuneration paid to him. Any amount in excess of $150,000 (as
adjusted for increases in the cost-of-living pursuant to Section
401(a)(17) of the Code) shall be excluded.
(n) Tax Deferred Contributions: Contributions to the Trust on
behalf of a Participant who is an Employee made pursuant to an
election under Section 401(k) of the Code as provided for in Article
IV of the Plan.
(o) Tax Deferred Contributions Account: The account of a
Participant which is credited with his Tax Deferred Contributions as
defined under Section 2.3(n).
(p) Rollover Contributions: Contributions to the Trust by an
Employee or Participant constituting eligible rollover distributions
under Section 402(a)(5) or Section 408(d)(3)(A)(ii) of the Code as
provided for in Article IV of the Plan.
May 19, 1994 21
<PAGE> 6
(q) Rollover Contributions Account: The account of an Employee or
Participant which is credited with his Rollover Contributions as
defined under Section 2.3(p).
(r) Balanced Blend Fund: A fund invested in a diversified
selection of individual investment funds, including bond funds, common
stock funds and other fixed income and equity funds, as may be
purchased by the Trustee in its sole discretion.
(s) Common Stock Fund: A fund invested in common or capital stocks
of large publicly traded U.S. companies, and such other types of
equity investments as may be purchased by the Trustee in its sole
discretion, including investments in any commingled trust established
by the Trustee for the investment of funds of profit sharing and
pension plans which trust is exempt from tax under Section 501(a) of
the Code by reason of qualifying under Section 401(a) of the Code,
mutual funds or pooled investment funds or trusts which invest
primarily in such equity investments.
(t) GIC Fund: A fund invested in a diversified portfolio primarily
comprised of guaranteed investment contracts offered by insurance
companies and investment contracts offered by banks and other
short-term obligations, as may be purchased by the Trustee in its sole
discretion, including investments in any commingled trust established
by the Trustee for the investment of funds of profit-sharing and
pension plans which trust is exempt from tax under Section 501(a) of
the Code by reason of qualifying under Section 401(a) of the Code,
mutual funds or pooled investment funds or trusts which invest
primarily in such obligations.
(u) Special Capital Fund: A fund invested in common or capital
stocks of smaller publicly traded U.S. companies, and such other types
of equity investments as may be purchased by the Trustee in its sole
discretion, including investments in any commingled trust established
by the Trustee for the investment of funds of profit sharing and
pension plans which trust is exempt from tax under Section 501(a) of
the Code by reason of qualifying under Section 401(a) of the Code,
mutual funds or pooled investment funds or trusts which invest
primarily in such equity investments.
(v) Valuation Date: The [first] day of each month.
2.4 OTHER DEFINITIONS:
(a) Effective Date: August 1, 1994, the date on which the
provisions of this Plan became effective.
May 19, 1994 22
<PAGE> 7
(b) ERISA: Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(c) Plan Year: The 12-month period commencing on February 1 and
ending on January 31.
(d) Allocation Date: For purposes of allocating income, April 30,
July 31, October 31 and January 31. For purposes of allocating
Employer contributions and Employee forfeitures, January 31 of each
Plan Year.
(e) Code: The Internal Revenue Code of 1986, as amended from time
to time.
(f) Enrollment Months: The months of February, May, August and
November in each year.
(g) Forfeiture: The portion of a Participant's Participant Stock
Account forfeited on termination of employment as provided under
Section 6.4 below.
(h) 401(k) Accounts: The portion of the Trust allocable to a
Participant's Tax Deferred Contributions Account and Rollover
Contributions Account.
(i) Telephonic System: The telephonic interactive voice response
system maintained by the Plan's recordkeeper as authorized by the
Committee.
2.5 CONSTRUCTION: The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender and the singular to
include the plural, unless the context clearly indicates to the contrary. The
words "hereof", "herein", and other similar compounds of the word "here" shall
mean and refer to the entire Plan, not to any particular provision or Section.
Article and Section headings are included for convenience of reference and are
not intended to add to, or subtract from, the terms of the Plan.
ARTICLE III. PARTICIPATION AND SERVICE
3.1 PARTICIPATION: An Eligible Employee who was a Participant in the Plan
on January 31, 1994, shall continue as a Participant in the Plan with respect
to the ESOP Feature. Any other Eligible Employee shall become a Participant
with respect to the ESOP Feature as of the first day of the first Plan Year on
which he is an Eligible Employee. An Eligible Employee as of the Effective
Date shall become a Participant with respect to the 401(k) Feature as of the
Effective Date; provided, that he elects to participate in the Plan through use
of the Telephonic System. An Employee who is not an Eligible Employee as of
the Effective Date may become a
May 19, 1994 23
<PAGE> 8
Participant with respect to the 401(k) Feature during the first Enrollment
Month that occurs after he becomes an Eligible Employee; provided, that he
elects to participate in the Plan during such Enrollment Month that occurs
after he becomes an Eligible Employee through use of the Telephonic System. An
Eligible Employee who fails to elect participation in the 401(k) Feature of the
Plan during the first Enrollment Month may subsequently, from time to time,
elect to participate in the 401(k) Feature of the Plan through use of the
Telephonic System. Participation in the 401(k) Feature shall become effective
as of the first day of the Enrollment Month next following such election to
participate, unless such election to participate is made during an Enrollment
Month, in which case such election to participate shall become effective [on
the day after] such election is communicated to the Plan recordkeeper. Any
election to participate in the 401(k) Feature shall be effective as to 401(k)
Compensation earned after the date of such election. All such elections to
participate in the 401(k) Feature shall be confirmed by the Plan's recordkeeper
to the participant and to the Plan.
3.2 SERVICE: A Participant's eligibility for certain benefits under the
Plan shall be determined by his period of Service. Service shall be based on
Hours of Employment and Years of Service, disregarding: (i) any years when the
Participant had fewer than 1,000 Hours of Employment determined under Section
3.5; and (ii) Years of Service before the Effective Date, except that Years of
Service before the Effective Date will be counted if the Employee was employed
on the Effective Date. A "Year of Service" shall be determined by reference to
the date on which the Employee's employment with an Employer commenced or
re-commenced, as the case may be, and shall consist of twelve-month periods
commencing with such date or the anniversary of such date.
3.3 PARTICIPATION AND SERVICE UPON REEMPLOYMENT: Except for the continuing
Participation in Trust Fund Income of a Former Participant, Participation in
the Plan shall cease upon termination of employment with an Employer.
Employment shall be considered terminated only if an Employee is not on an
Authorized Leave of Absence and is no longer receiving or entitled to receive
credit for Hours of Employment under Section 3.5. Typically, termination of
employment will have resulted from Retirement, death, voluntary or involuntary
termination of employment, unauthorized absence, or by failure to return to
active employment with an Employer or to retire by the date on which an
Authorized Leave of Absence expired.
If such a termination of employment occurred prior to February 1,
1988, upon reemployment, the Employee shall be treated as a new Employee for
all purposes of the Plan.
May 19, 1994 24
<PAGE> 9
Upon an Employee's termination of employment on or after February 1,
1988, a Plan Year during which the Employee completes less than 500 hours of
employment due to a termination of employment, shall constitute a "1-year Break
in Service".
Upon the reemployment of any person after the Effective Date who had
previously been employed by an Employer on or after the Effective Date, the
following rules shall apply in determining his Participation in the Plan and
his Service under Section 3.2:
(a) Participation Before a Break in Service: If an Eligible
Employee is rehired before he has a 1-year Break in Service, (i) he
shall participate under the ESOP Feature of the Plan as of the date of
his reemployment if he was a Participant on the date his employment
terminated, or, if he was not a Participant on the date his employment
terminated, on the earlier of (A) the first day of the first Plan Year
beginning after the date on which he has completed one Year of Service
or (B) the date 6 months after the date on which he completes one Year
of Service and (ii) he shall be eligible to participate under the
401(k) Feature of the Plan, as of the first day of the Enrollment
Month next following the date on which he has completed one year of
Service; provided that he elects to participate in the Plan in
accordance with Section 3.1.
(b) Participation After a Break in Service: (i) If an Eligible
Employee is rehired after he has a 1-year Break in Service, but prior
to cancellation of his prior Service (as determined below), he shall
participate under the ESOP Feature in the Plan on the date of his
reemployment if he was a Participant on the date his employment
terminated, or, if he was not a Participant on the date his employment
terminated, on the earlier of (A) the first day of the first Plan Year
beginning after the date on which he has completed one Year of Service
or (B) the date 6 months after the date on which he completes one Year
of Service. However, if such an Employee is rehired after
cancellation of his prior Service (as determined below) he shall
participate or reparticipate in the Plan on the first day of the first
Plan Year on which he is an Eligible Employee. (ii) If an Eligible
Employee is rehired after he has a 1-year Break in Service, he shall
be eligible to participate under the 401(k) Feature of the Plan, (A)
if he had satisfied the eligibility requirements of the Plan with
respect to the 401(k) Feature or was a Participant, as of the first
day of the month coinciding with or next following the date of his
reemployment; or (B) if he had not satisfied the eligibility
requirements of the Plan with respect to the 401(k) Feature and was
not an Eligible Employee, he shall be considered a new hire for
eligibility purposes.
May 19, 1994 25
<PAGE> 10
(c) Service For Vested Participants under the ESOP Feature: In the
case of a Participant under the ESOP Feature who had two or more Years
of Service when his prior period of employment terminated, any Service
attributable to his prior period of employment shall be reinstated as
of the date of his reparticipation.
(d) Service For other Employees: In the case of a reemployed
Employee who was not a Participant in the Plan during his prior period
of employment or in the case of a Participant under the ESOP Feature
who did not have two or more Years of Service when his prior period of
employment terminated, any Service attributable to his prior period of
employment shall not be canceled and shall be restored only if one of
the following is applicable:
(1) the number of his consecutive years of Break in Service
was less than the aggregate number of years of his pre-break
Service (determined under Section 3.2 without regard to
whether participation in the Plan had commenced), or
(2) the Employee's number of consecutive years of Break in
Service was less than 5, or
(3) the Employee's Break in Service commenced due to a
"maternity or paternity leave" and the number of his
consecutive years of Break in Service was less than the
aggregate number of years in his pre-break Service plus one
year (considering Service determined under Section 3.2 without
regard to whether participation in the Plan had commenced), or
(4) the Employee's Break in Service commenced due to a
"maternity or a paternity leave" and the number of his
consecutive years of Break in Service was less than 6 years.
For the purpose of this Plan, "maternity or paternity leave" means
termination of employment or absence from work due to the pregnancy of the
Employee, the birth of a child of the Employee, the placement of a child in
connection with the adoption of the child by an Employee, or the caring for an
Employee's child during the period immediately following the child's birth or
placement for adoption. The Committee shall determine, under rules of uniform
application and based on information provided to the Committee by the Employee
whether or not the Employee's termination of employment or absence from work is
due to "maternity or paternity leave".
May 19, 1994 26
<PAGE> 11
3.4 TRANSFERS:
(a) Transfers between Employers shall not interrupt Plan
Participation or Service credit hereunder.
(b) For the purposes of determining eligibility to participate in
the Plan and Service under Section 3.2, an Employee shall receive
recognition of his employment by any Related Company, provided that
all such employment is determined in accordance with the reemployment
provisions of Section 3.3.
(c) If a Participant is transferred to employment with a Related
Company, or to a position with an Employer, which makes him ineligible
for continued coverage under the Plan, his participation under the
Plan shall be suspended, provided, however, that during the period of
his employment in such ineligible position: (i) his Participant Stock
Account shall receive no Employer contribution or Forfeiture
allocations under Section 5.3, (ii) he shall continue to participate
in Income allocations pursuant to Sections 5.4 and 5.5; and (iii) the
provisions of Article VI shall continue to apply.
(d) For the purposes of this Section 3.4, Related Employer shall
mean (i) any corporation which is a member of the controlled group of
corporations of which the Company is a part, (ii) any trade or
business which is under common control with an Employer, and (iii) any
member of an affiliated service group which includes an Employer, all
as defined by Section 414 of the Code.
3.5 HOURS OF EMPLOYMENT: Under this Article III, Hours of Employment shall
include the following:
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for an Employer, including any
period of accrued vacation for which Compensation is paid upon
termination of employment.
(b) Up to 501 hours for any single continuous period during which
the Employee performs no duties but is directly or indirectly paid or
entitled to payment by an Employer (regardless of whether employment
has terminated) due to vacation, holiday, illness, incapacity
including disability, layoff, jury duty, military duty or leave of
absence; excluding, however, any period for which a payment is made or
due under this Plan or under a plan maintained solely for the purpose
of complying with workmen's compensation or unemployment compensation
or disability insurance laws, or solely to reimburse the Employee for
medical or medically-related expenses. An Employee shall be deemed to
be "directly
May 19, 1994 27
<PAGE> 12
or indirectly paid, or entitled to payment by the Employer" regardless
of whether such payment is (i) made by or due from the Employer
directly, or (ii) made indirectly through a trust fund, insurer or
other equity to which the Employer contributes or pays premiums.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer, without
duplication of hours provided above, and subject to the 501-hour
restriction for periods described in the foregoing subparagraph (b).
The foregoing provisions shall be administered in accordance with
Department of Labor rules set forth in Section 2530.200b- 2 of the Rules and
Regulations for Minimum Standards for Employee Benefit Plans. The periods of
absence described as Service in Section 3.2 shall be credited in addition to,
but not in duplication of, the periods described in the foregoing provisions.
ARTICLE IV. CONTRIBUTIONS
4.1 COMPANY CONTRIBUTIONS UNDER THE ESOP FEATURE: For each Plan Year the
Company may make Company Contributions under the ESOP Feature to the Trust in
the form of shares of Company Stock and/or cash in such amounts (or under such
formulae) as may be determined by the Company's Board of Directors; provided,
however, that Company Contributions under the ESOP Feature shall not be made
for any Plan Year in amounts which can be allocated to no Participants'
Accounts by reason of the allocation limitation described in Section 5.9 or in
amounts which are not deductible under Section 404(a) of the Code.
4.2 PAYMENT UNDER THE ESOP FEATURE: Except as otherwise provided in
Section 4.3 the Company's total annual contribution under the ESOP Feature
shall be made, in one or more installments, not later than the due date
(including extensions thereof) for filing the federal income tax return of the
Company for its fiscal year ending during the Plan Year for which the
contribution is made. Except as otherwise provided in Section 4.3 any
contribution under the ESOP Feature made in cash shall, in the sole discretion
of the Company's Board of Directors, be (i) used to purchase available Company
Stock or (ii) allocated to Participants' Accounts; provided, however, that to
the extent required, any cash contributions shall be used to repay any portion
of a loan made by the Plan under Section 7.3.
If the Company's contribution is made in shares of Company Stock, the
Company Stock will be valued at the average of closing prices of the Company
Stock as quoted on any system (such as NASDAQ) sponsored by a national
securities association, or as reported on any national securities exchange if
such Company Stock is listed on a national exchange, for each day when the
Company
May 19, 1994 28
<PAGE> 13
Stock is in fact traded during the 20 trading day period immediately preceding
the date of the contribution. If the Company Stock is not in fact traded on an
exchange or in the over-the-counter market on at least 10 of said 20
immediately preceding trading days, or the Company Stock is neither listed on a
national exchange or quoted on a national quotation system, the value of the
Company Stock shall equal its fair market value as of the date of the
contribution, as determined in good faith by the Trustee.
4.3 TAX DEFERRED CONTRIBUTIONS:
(a) Rate of Tax Deferred Contributions: A Participant who is an
Eligible Employee may elect for any Plan Year to have his Employer
make payments of a portion of his 401(k) Compensation for the Plan
Year as contributions to the Trust on behalf of such Participant
pursuant to Section 401(k) of the Code. Such contributions shall be
at a rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10%, 11%, 12%, 13%,
14% or 15% of 401(k) Compensation for the Plan Year (or portion
thereof of participation) as elected by such Participant and shall be
referred to as Tax Deferred Contributions. An Employee who begins
participation when he first becomes eligible on a date other than
February 1st may elect a contribution rate in whole percentages for
Tax Deferred Contributions for the remainder of that Plan Year which
would result in the Participant having aggregate contributions for
such Plan Year within the applicable limits set forth above taking
into account his 401(k) Compensation for the entire Plan Year. In no
event shall a Participant's Tax Deferred Contributions for any taxable
year of such Participant exceed $9,240 subject to an annual
cost-of-living adjustment by the Secretary of the Treasury pursuant to
Section 402(g)(5) of the Code. The Company shall make Tax Deferred
Contributions to the Trust as of the earliest date on which such Tax
Deferred Contributions can reasonably be segregated from the general
assets of the Company, but in no event later than 90 days from the
date on which such amounts would otherwise have been paid as part of
the Eligible Employee's 401(k) Compensation. A Participant shall have
a nonforfeitable interest (100% vested) in his Tax Deferred
Contributions. Participants are not permitted to make voluntary
employee after-tax contributions to the Plan.
(b) Change in Rate of Tax Deferred Contributions: Subject to the
limitations in Section 4.3.(a), a Participant may change or
discontinue his election with respect to Tax Deferred Contributions.
An election to increase or decrease the rate of such Contributions
shall be made through use of the Telephonic System at least 10 days
before the effective date for such change unless waived by the
Committee. Any such change shall be effective the first day of the
next February or August, whichever may first occur. A Participant may
make
May 19, 1994 29
<PAGE> 14
a change to increase or decrease his rate of Tax Deferred
Contributions no more than two times in a Plan Year. An election to
cease or discontinue such Contributions shall be made through use of
the Telephonic System at least 10 days before the effective date for
such election unless waived by the Committee. Any such election shall
be effective with the next payroll period. If a Participant elects to
cease or discontinue his Tax Deferred Contributions, he may elect to
resume making such Contributions on the first day of any subsequent
February and August. An election to resume making Tax Deferred
Contributions shall be made through use of the Telephonic System at
least 10 days before the effective date for such change unless waived
by the Committee. All such changes in the rate of Tax Deferred
Contributions shall be confirmed in writing by the Plan's recordkeeper
to the Participant initiating the change and to the Plan.
(c) Actual Deferral Percentage Limitations: Tax Deferred
Contributions elected by Participants for any Plan Year shall be
subject to the actual deferral percentage limitations of Section
401(k)(3) of the Code. The Committee may take any and all action it
deems necessary to comply with the actual deferral percentage
limitations of Section 401(k)(3) of the Code with respect to any Plan
Year including limiting the percentage or amount of Tax Deferred
Contributions elected by any or all Participants who are Highly
Compensated and including actions permitted by Sections 401(k)(8) and
402(g)(2)(A)(i) of the Code and regulations thereunder.
(d) Contributions Not Limited to Net Profits: All Tax Deferred
Contributions shall be made, whenever possible, out of the net profits
of the Company for the taxable year ending with or within said Plan
Year or out of retained earnings, if any, of the Company as of the
close of said taxable year. However, all such Contributions shall be
made as required by the Plan even in the absence of sufficient net
profits or retained earnings.
4.4 ROLLOVER CONTRIBUTIONS: An Employee or Participant who has received a
distribution of his interest in a qualified retirement plan of a former
employer that constitutes a defined contribution plan not subject to the
qualified joint and survivor requirements of Section 401(a)(11) may elect,
subject to the approval of the Committee, to contribute in cash to the Trust
all or a portion of such distribution which constitutes an eligible rollover
distribution under Section 402(a)(5) or Section 408(d)(3)(A)(ii) of the Code.
Such contributions shall be referred to as Rollover Contributions. Such
Rollover Contributions must be made within time limits prescribed by the Code
and the Committee shall obtain such assurances and certifications it may deem
necessary from the Employee or Participant to establish to its satisfaction
that the
May 19, 1994 30
<PAGE> 15
Rollover Contribution qualifies for rollover treatment under the Code and will
not adversely affect the qualification of the Plan under Section 401(a) of the
Code. The Trustee, subject to approval of the Committee, may also accept in
cash directly from the trustee under a qualified retirement plan of a former
employer all or a portion of the amount of a distribution which qualifies as an
"eligible rollover distribution" as defined in Section 402(f)(2)(A) of the
Code. Such direct rollover transfers shall also be referred to as Rollover
Contributions. The Committee shall obtain such assurances and certifications
it may deem necessary from the Employee or Participant to establish to its
satisfaction that there is compliance with the applicable provisions of the
Code relating to such Rollover Contributions. The Employee or Participant
shall have a nonforfeitable interest (100% vested) in his Rollover
Contributions, if any. All such Contributions shall be credited to a separate
account for such Employee or Participant as provided in Article V.
4.5 MAXIMUM CONTRIBUTIONS: The aggregate amount of contributions made by
the Company shall not exceed fifteen percent (15%) of the aggregate
compensation (as defined in Section 415(c)(3) of the Code) of all Participants
during the Plan Year, except as provided in this Section 4.5. For any Plan
Year with respect to which Employer contributions are applied to repay any
portion of a loan made to the Plan under Section 7.3, the total amount of
Company contributions used to repay principal on all such loans shall not
exceed twenty-five percent (25%) of such aggregate Participant compensation for
the Plan Year. The Company may contribute any amount in excess of the maximum
for the Plan Year, without limitation, for the purpose of paying interest on
such loans. Furthermore, the contributions made by the Company to this Plan,
when combined with any other qualified plans, shall not exceed the maximum
allowable deductions permitted under Section 404 of the Internal Revenue Code.
4.6 DISPOSITION OF FORFEITURES: Upon termination of employment, a
Participant's Forfeiture, if any, shall be reallocated in accordance with
Section 5.3 among the Participant Stock Accounts of other eligible Participants
as of the end of the Plan Year in which his employment terminated.
However, if the terminated Participant (i) returns to the employ of
the Company, (ii) is entitled to have any Service attributable to his prior
period of employment restored pursuant to Section 3.3(d), and (iii) repays,
before the earlier of five (5) years after the first date on which he is
re-employed or the close of the first period of five (5) consecutive one-year
Breaks in Service commencing after his receipt of the distribution, if any, the
amount of the distribution, if any, he received from his Participant Stock
Account under Section 6.5 at his previous termination of employment, then the
repaid amount and an amount
May 19, 1994 31
<PAGE> 16
equal to the Forfeiture resulting from his previous termination of employment
shall become the beginning balance in his new Participant Stock Account.
Unless and until a Forfeiture is reinstated under the preceding sentence, the
reemployed Participant's beginning balance in his new Participant Stock Account
shall be zero.
ARTICLE V. ACCOUNTS
5.1 PARTICIPANT'S STOCK ACCOUNTS: The Company shall maintain a Participant
Stock Account in the name of each Participant and such account shall be
credited annually as of each Allocation Date with the amounts allocated to such
Participant. If it deems it necessary, the Company may create subaccounts for
Participants to account for assets not invested in Company Stock. Unless
otherwise required by applicable law, the maintenance of all accounts shall be
for bookkeeping purposes only and no segregation of Trust Fund assets shall be
required.
5.2 PARTICIPANT'S STOCK ACCOUNTS IN GENERAL: As soon as practicable after
the Employer has made the annual allocations to the Participant Stock Account
for each Participant, the Employer shall cause the Trustee to notify each
Participant with respect to the status of such Participant's Stock Account as
of such date. Such allocation and notification shall not vest in any
Participant any right, title or interest in the Trust, except to the extent, at
the time or times, and upon the terms and conditions set forth herein.
5.3 ALLOCATION OF EMPLOYER CONTRIBUTIONS AND FORFEITURES UNDER THE ESOP
FEATURE: As of each Allocation Date the total number of shares and fractional
shares of Company Stock contributed to the Trust under the ESOP Feature,
purchased by the Trust with cash contributions by the Company under the ESOP
Feature, or released from the Suspense Account pursuant to Section 7.3 during
the Plan Year shall be computed and allocated along with any Forfeitures which
have arisen during such Plan Year.
A Participant is entitled to share in the allocation of Company Stock
under the ESOP Feature for each Plan Year in which he is (a) credited with at
least 1,000 Hours of Service and (b) is an Eligible Employee with respect to
the ESOP Feature or on an Authorized Leave of Absence on the Allocation Date;
provided, however, that a Participant who qualifies to share in such allocation
because he is on an Authorized Leave of Absence may not be or have been an
Executive Officer of the Company on such Allocation Date or within six (6)
months prior thereto. A Participant who retires, dies or terminates employment
due to Disability during a Plan Year shall also share in the allocation of
Company Stock as aforesaid.
May 19, 1994 32
<PAGE> 17
Such allocation shall be made equally among the Participant Stock
Accounts of all Participants entitled to share therein.
5.4 ALLOCATION OF CASH DIVIDENDS UNDER THE ESOP FEATURE: Cash dividends on
Employer Stock allocated to a Participant's Stock Account shall be credited to
that Participant's Account. Cash dividends on unallocated shares of Employer
Stock under the ESOP Feature shall be allocated in accordance with the
provisions of Section 5.5. Under the ESOP Feature, any dividends may, in the
sole discretion of the Committee, be distributed to the Participants or used to
repay a loan under Section 7.3.
5.5 ALLOCATION OF EARNINGS AND LOSSES RESPECTING PARTICIPANT STOCK
ACCOUNTS: As of each Allocation Date the Trustee shall determine the fair
market value of the Trust assets and the net earnings and gains or losses of
the Trust after first deducting any expenses which have not been paid by the
Company or which have been reimbursed to the Company pursuant to Article VII.
After the Trustee has completed its calculations, the Employer shall allocate
the net earnings and gains or losses of the Trust since the prior Allocation
Date to the accounts of the Participants. Dividends shall be allocated over
the beginning share balance less any distributions actually paid. Interest and
other earnings shall be allocated over the beginning share balance less any
distribution actually made. The Trustee may also make such other adjustments to
the accounts as it deems necessary and appropriate in order to achieve an
equitable allocation of the net earnings and gains or losses as long as it does
so in a uniform and nondiscriminatory manner.
5.6 INTERIM ACCOUNTINGS: Company Stock under the ESOP Feature when
initially acquired by the Trustee shall be credited to the Unallocated Stock
Account or Suspense Account, which accounts shall be measured in shares. As of
each Allocation Date, the balance in the Unallocated Stock Account shall be
allocated to Participant Stock Accounts in the manner described in Section 5.3.
The balance in the Suspense Account shall be released in accordance with
Section 7.3(b) and allocated in the manner described in Section 5.3.
5.7 OTHER ACCOUNTS: The Committee shall establish and maintain separate
accounts for each individual to which shall be allocated (i) the Tax Deferred
Contributions allocable to each Participant; (ii) a Rollover Contribution, if
any, allocable to the Employee or Participant, and (iii) an Employee's or
Participant's share of the income and expenses and realized and unrealized
gains and losses attributable to such Contributions.
May 19, 1994 33
<PAGE> 18
5.8 INVESTMENT OF TAX DEFERRED CONTRIBUTIONS AND ROLLOVER CONTRIBUTIONS
ACCOUNT:
(a) The Trustee shall invest the 401(k) Accounts pursuant to the
direction of Participants in any one or more of the following
investment options approved by the Committee:
(i) Company Stock,
(ii) Balanced Blend Fund,
(iii) Common Stock Fund,
(iv) GIC Fund or
(v) Special Capital Fund;
provided, however, that an Executive Officer may not direct the
investment of Contributions into Company Stock until six months after
he has ceased being an Executive Officer. It is intended that the
Plan provide Participants with the right to exercise control over the
assets in their 401(k) Accounts within the meaning of Section 404(c)
of ERISA and the regulations thereunder.
(b) A Participant or Employee may initially elect to direct the
Trustee to invest his Tax Deferred Contributions, if any, and Rollover
Contributions, if any, by using the Telephonic System. The investment
direction designation shall be in whole percentages of such
Contributions. Each Participant or Employee may change his investment
direction monthly by giving notice to the Plan's recordkeeper using
the Telephonic System. A change of investment direction shall be
effective on the first day of the first month coincident with or next
following the date on which such notice is received by the Plan's
recordkeeper and shall apply only with respect to Contributions made
subsequent to the effective date of such change. A change in
investment direction must be communicated to the Plan's recordkeeper
no later than the 20th day of a month to be effective as of the first
day of the next following month. A change of investment direction
shall be confirmed in writing by the Plan's recordkeeper to the
Participant or Employee initiating the investment change.
(c) Each Participant or Employee may at any time transfer funds
held in his 401(k) Accounts among the various types of investments
permitted by Section 5.8(a) by giving notice to the Plan's
recordkeeper by using the Telephonic System. A transfer shall be
effective on the first day of the month coincident with or next
following the date on which such notice is received by the Plan's
recordkeeper; provided, that instructions for transfer must be
communicated to the recordkeeper no later that the 20th day of a month
to be effective as of the first day of the next following month. All
transfer directions shall be in whole percentages of the
May 19, 1994 34
<PAGE> 19
value held in each Account involved in the transfer direction. All
transfer investment directions shall be confirmed in writing by the
Plan's recordkeeper to the Participant initiating the investment
transfer.
(d) The value of the funds standing to the credit of an individual
in his 401(k) Accounts on any Valuation Date shall be equal to the sum
of the value of the invested funds held in his 401(k) Accounts and
shall reflect the total fair market value of his interest in his
selected investment funds, as determined by the Trustee in good faith.
The Committee shall advise Participants and Employees periodically of
the value of their Accounts.
5.9 LIMITATIONS ON ANNUAL ADDITIONS: Notwithstanding anything contained
herein to the contrary, allocation of Company contributions (including Tax
Deferred Contributions) for any Plan Year shall be subject to the following:
(a) If allocation of Company contributions under the ESOP Feature
in accordance with Section 5.3 will result in an allocation of an
excess of more than one-third the total contributions under the ESOP
Feature for a Plan Year to the accounts of the Highly Compensated,
then allocation of such contributions under the ESOP Feature shall be
adjusted so that such excess will not occur.
(b) After adjustment, if any, required by the preceding paragraph,
the Annual Additions during any Plan Year to any Participant's
accounts shall not exceed the lesser of $30,000 (or, if greater, 1/4
of the dollar limitation in effect under Section 415(b)(1)(A) of the
Code) or 25% of the Participant's Compensation from the Employer and
all Related Companies. In addition, the increased limitations
provided in Section 415(c)(6)(A) of the Code shall be applicable if
permissible under the Code. In the event that Annual Additions to all
the accounts of a Participant would exceed the aforesaid limitations,
they shall be reduced in the following priority:
(1) allocation of any excess to the accounts of the other
Participants in proportion to the Compensation of said other
Participants until the accounts of said other Participants
reach the limits of the first sentence of this paragraph,
(2) any additional amounts shall be held in the Trust for
allocation to Participant Accounts in later years in
proportion to Compensation in later years, such allocation to
occur as rapidly as may be done without violating the limits
of the first sentence of this paragraph (b).
May 19, 1994 35
<PAGE> 20
(3) Notwithstanding Sections 5.9(b)(1) and (2) above, to the
extent that a distribution of a Participant's Tax Deferred
Contributions would reduce the excess Annual Additions in his
account to comply with the limits of the first sentence of
this paragraph, the amount necessary to reduce such excess
Annual Additions shall be distributed from his Tax Deferred
Contributions Account. Any such distribution shall include
any earnings attributable to the amount distributed.
If the Company or any Related Company contributes amounts, on behalf
of Employees covered by this Plan, to other "defined contribution plans" as
defined in Section 3(34) of ERISA, the limitation on annual additions provided
in this Section 5.9 shall be applied to annual additions in the aggregate to
this Plan and such other plans. Reduction of annual additions, where required,
shall be accomplished first by reductions under such other plans pursuant to
the directions of the named fiduciary for administration of such other plans or
under priorities, if any, established by the terms of such other plans and then
by allocating any remaining excess for this Plan in the manner and priority set
out above with respect to this Plan.
In any case where a Participant under this Plan is also a Participant
under a "defined benefit plan" as defined in ERISA Section 3(35) or is a
Participant under a defined benefit plan and other defined contribution plans
maintained by the Company or a Related Company, the sum of the "defined benefit
plan fraction" (as defined in Section 415(e)(2) of the Code) and the "defined
contribution plan fraction" (as defined in Section 415(e)(3) of the Code) shall
not exceed 1.00. Reduction of contributions to or benefits from all plans,
where required, shall be accomplished by first reducing benefits under such
other defined benefit plan or plans, then reducing contributions or allocating
excess in the manner and priority set out above with respect to other defined
contribution plans, and finally by allocating any remaining excess for this
Plan in the manner and priority set out above with respect to this Plan.
5.10 TOP-HEAVY PROVISIONS: The following provisions are included in the
Plan pursuant to Section 401(a)(10)(B)(ii) of the Code and shall become
effective only if and in any Plan Year in which the Plan is determined to be a
Top-Heavy Plan under Section 416(g) of the Code.
(a) Determination of Top-Heavy: The Plan will be considered a
Top-Heavy Plan for a Plan Year if as of the last day of the preceding
Plan Year (or as of January 31, 1989 for the Plan Year ending on that
date), (1) the value of the Participant Stock Accounts (but not
including any allocations to be made as of such last day of the Plan
Year except contributions
May 19, 1994 36
<PAGE> 21
actually made on or before that date and allocated pursuant to Section
5.3) and Tax Deferred Contributions Accounts of Participants who are
Key Employees (as defined in Section 416(i) of the Code) exceeds 60%
of the value of the Participant Stock Accounts (but not including any
allocations to be made on or before that date and allocated pursuant
to Section 5.3) and Tax Deferred Contributions Accounts of all
Participants (the "60% Test") or (2) the Plan is part of a required
aggregation group as defined below and the required aggregation group
is top-heavy. However, and notwithstanding the results of the 60%
test, the Plan shall not be considered a Top-Heavy Plan for any year
in which the Plan is a part of a required or permissive aggregation
group as defined below which is not top-heavy.
(b) Minimum Vesting: If a Participant's termination of employment
occurs while the Plan is a Top-Heavy Plan, such Participant's Vested
Percentage in his Participant Stock Account shall be as provided in
Section 6.4 in that such section meets the requirements of Section
416(b) of the Code.
(c) Minimum Allocation: Most non-Key Employees (defined as any
Employee who is not a Key Employee) participating in this Plan are
also participants in a defined benefit plan maintained by an Employer.
Consequently, any minimum benefits required due to the top-heavy
status of this Plan for such non-Key employees will be provided in
such defined benefit plan or plans if such provision will satisfy the
minimum benefit provisions of Section 416(c)(2)(A) of the Code. For
any Plan Year during which the Plan is deemed to be a Top-Heavy Plan:
(i) if such provision will not satisfy the minimum benefit provisions
of Section 416(c)(2)(A) of the Code or (ii) if a non-Key Employee who
is not a Participant in a defined benefit plan sponsored by the
Employers, who is eligible to participate hereunder and who is
actively employed by an Employer on the last day of the Plan Year,
then, in either or both events (i) or (ii), non-Key Employees not
deemed to have received a minimum benefit for the purposes of Section
416(c)(2)(A) of the Code pursuant to such defined benefit plan or
plans shall receive an allocation of a minimum Employer contribution.
Such minimum contribution shall be the lesser of (i) 3% of the non-Key
Employee's compensation (within the meaning of Section 415 of the
Code) for the Plan Year or (ii) the percentage at which contributions
are made (or required to be made) under Sections 4.1 and 4.3 of the
Plan for such Plan Year for the Key Employee for whom such percentage
is the highest for such Plan Year. In determining the highest rate of
contribution applicable to any Key Employee under this Section
5.10(c), amounts that such Key Employee elects to defer under a
qualified arrangement under Section 401(k) of the Code provided by an
Employer shall be treated as employer contributions.
May 19, 1994 37
<PAGE> 22
(d) Impact on Maximum Benefits: With respect to any Plan Year in
which the Plan is a Top-Heavy Plan, for the purposes of Section 5.9 of
the Plan, the computation of the "defined benefit plan fraction" and
"defined contribution plan fraction" shall be adjusted in accordance
with Section 416(h)(1) of the Code, except that such adjustment shall
not have the effect of reducing any benefit accrued under a defined
benefit plan prior to the first day of the Plan Year in which this
provision becomes applicable.
(e) Aggregation with Other Plans:
(i) Required Aggregation: If a Key Employee under this Plan
also participates or participated in another plan of an
Employer (regardless of whether such plan has been terminated)
which is qualified under Code Section 401(a) or which is
qualified under Code Section 408(k), or if any plan of an
Employer so qualified must be aggregated so that either this
Plan or any other plan described in the first clause of this
sentence will meet the anti-discrimination and coverage
requirements of Code Section 401(a)(4) or 410, then this Plan
and any such other plan will be aggregated for purposes of
determining top-heaviness. This Plan will automatically be
deemed top-heavy if such required aggregation of plans is
top-heavy as a group and will automatically be deemed not
top-heavy if such required aggregate of plans is not top-heavy
as a group.
(ii) Permissive Aggregation: Any other plan of an Employer
which is qualified under Code Section 401(a) or which is a
simplified employee pension plan under Code Section 408(k),
and which is not in the required aggregation referenced in (i)
above, may be aggregated with this Plan (and with any other
plan(s) in the required aggregation group in (i) above) for
purposes of determining top-heaviness if such aggregation
would continue to meet the antidiscrimination and coverage
requirements of Code Sections 401(a)(4) and 410. This Plan
will automatically be deemed not top-heavy if such permissive
aggregation of plans is not top-heavy as a group.
(iii) Determining Aggregate Top-Heavy Status: The top-heavy
status of the plans as a group is determined by aggregating
the plans' respective top-heavy determinations that are made
as of determination dates that fall within the same calendar
year.
May 19, 1994 38
<PAGE> 23
5.11 VOTING AND EXERCISING OTHER RIGHTS OF SECURITIES:
(a) Each Participant is entitled to direct the Trustee as to the
manner in which Company Stock represented by such Participant's
Participant Stock Account and/or 401(k) Accounts invested in Company
Stock is to be voted and as to the manner in which rights other than
voting rights with respect to such Company Stock are to be exercised.
(b) The Trustee shall notify Participants of each occasion for the
exercise of voting rights within a reasonable period (not less than 30
days, unless a 30-day period is impossible or impractical) before such
rights are to be exercised. The notice shall include all proxy
solicitation and other materials distributed by the Employer to
shareholders with regard to such exercise of voting rights.
(c) The Trustee shall take whatever steps are reasonably necessary to
allow Participants to exercise rights other than voting rights of
Company Stock represented by the Participant Stock Account and/or
401(k) Accounts of such Participant invested in the Company Stock.
(d) The number of shares to which each Participant entitled to vote
shall have the right to direct the exercise of the rights thereof
shall be determined for any record date by the number of shares
allocated to the Participant's Stock Account on the last Allocation
Date or the number of shares of Company Stock allocated to a
Participant's 401(k) Accounts on the last Valuation Date.
(e) The Trustee shall vote fractional shares by combining the
directions on voting of such fractional shares to the extent possible.
(f) The Trustee shall vote any unvoted shares allocated to
Participant Stock Accounts, shares in the Unallocated Stock Account
and in the Suspense Account or shares held in the Participant's 401(k)
Accounts on behalf of such Participant in the same proportion and in
the same manner as the shares in the Participant Stock Accounts and/or
the 401(k) Accounts are voted by the Participants.
(g) The Trustee shall make no recommendation regarding the manner of
exercising any rights under this Paragraph, including whether or not
such rights should be exercised.
5.12 PUT OPTION: If the Company Stock is, as of the Effective Date, or becomes
not readily tradeable on an established market as of the date of distribution,
then any Participant, who is otherwise entitled to a distribution from the
Plan, shall have the right
May 19, 1994 39
<PAGE> 24
(hereinafter referred to as the "Put Option") to require that his Employer
repurchase any Employer Stock under a fair valuation formula. The Put Option
shall only be exercisable during the 60 day period immediately following the
date of distribution and if the Put Option is not exercised within such 60 day
period, then it shall only be exercised for an additional period of 60 days
beginning with the first day of the following Plan Year. This Put Option shall
be nonterminable within the meaning of Internal Revenue Service Regulation
54.4975-(11)(a)(ii).
The amount paid for Company Stock under the Put Option shall be paid
within 30 days after the exercise of the Put Option, or, at the election of the
Company, in substantially equal periodic payments (not less frequently than
annually) over a period beginning not later than 30 days after the exercise of
the Put Option and not exceeding 5 years. There shall be adequate security
provided and reasonable interest paid on the unpaid balance due under this
paragraph.
ARTICLE VI. BENEFITS
6.1 WITHDRAWALS DURING EMPLOYMENT: Subject to Sections 6.7 (regarding
minimum distributions), 6.9 (regarding hardship distributions), 6.10 (regarding
Participant loans) and 7.4 (regarding diversification), there shall be no
in-service withdrawals made by a Participant (or Employee, with regard to
Rollover Contributions). Distributions may only be made on account of
termination of employment, death or Disability.
6.2 RETIREMENT OR DISABILITY: If a Participant's employment with the
Employer is terminated at or after he attains age 65 (Retirement), or if his
employment is terminated at any earlier age because of Disability, he shall be
vested in, and entitled to receive, 100% of the entire amount then in each of
his accounts. Payment of benefits due under this Section shall be made in
accordance with Section 6.5.
6.3 DEATH: In the event that the termination of a Participant is caused by
his death, his Beneficiary shall be vested in and paid 100% of the entire
amount then in each of his accounts. Payment of benefits due under this
Section shall be made in accordance with Section 6.5.
6.4 TERMINATION FOR OTHER REASONS: If a Participant's employment with the
Employer is terminated before age 65 for any reason other than Disability or
death, the Participant shall be entitled to an amount equal to the balance, if
any, then credited to his Tax Deferred Contributions Account, his Rollover
Contributions Account, and a percentage of the balance then credited to his
Participant Stock Account. Such percentage shall be determined in accordance
with the following schedule:
May 19, 1994 40
<PAGE> 25
<TABLE>
<CAPTION>
Vested Forfeiture
Years of Service Percentage Percentage
---------------- ---------- ----------
<S> <C> <C>
Less than 2 0% 100%
2 years or more 100% 0%
</TABLE>
Payment of benefits due under this Section shall be made in accordance
with Section 6.5. The Forfeiture Percentage of a terminated Participant's
Participant Stock Account shall be a Forfeiture and shall be reallocated and/or
reinstated as provided in Section 4.6 above.
6.5 PAYMENT OF BENEFITS: Payment under Sections 6.2, 6.3 and 6.4 shall be
in the form of a lump sum. Subject to the limitations set forth below in this
Section 6.5 and to the requirements of Section 6.7, and unless such payment
shall be subject to a contrary election which Participant or his beneficiary
shall be entitled to make pursuant to this Section 6.5, payment under Sections
6.2, 6.3 and 6.4 shall be made no later than the 60th day following the date
Participant terminates his service with Employer.
(a) Account Balance of $3,500 or less: Except as provided in Section
6.7 below, no distribution shall be made to a Participant without his
consent; provided, that, if the present value of such Participant's
account balances is $3,500 or less, no such consent shall be required.
(b) Death, Disability or Retirement: In the case of a Participant who
terminates employment due to death, Disability or Retirement, the
Participant may elect to (i) receive a distribution based on the most
recent Allocation Date with respect to the ESOP Feature or Valuation
Date with respect to the 401(k) Feature or (ii) defer the distribution
until the following Plan Year in which event the distribution will
include the January 31 allocation for income, Employer contributions
and forfeitures in respect of the Plan Year of such termination.
(c) Latest Date for Distribution: Subject to Section 6.7 below and to
subsection (a) of this Section 6.5, if applicable, payment under
Sections 6.2, 6.3 and 6.4 shall be made no later than the 60th day
after the latest of the close of the Plan Year in which: (1) occurs
the date on which the Participant attains age 65, (2) occurs the 10th
anniversary of the year in which the Participant commenced
participation in the Plan or (3) the Participant terminates his
service with Employer.
(d) Distribution: Distributions from the Participant's Stock Account
will be made in Employer Stock. Distributions from that portion of a
Participant's 401(k) Accounts invested in
May 19, 1994 41
<PAGE> 26
Company Stock shall be distributed in Employer Stock or cash, at the
election of the Participant; provided that such election shall be made
at least 30 days before the date of the distribution. Any
distribution of fractional shares and other funds shall be distributed
in cash. Company Stock will be valued for distribution purposes at
the closing price on the last trading day of the quarter preceding
payment. The Committee shall follow the Beneficiary designation under
Section 6.6 in the case of a distribution on account of Participant's
death.
6.6 DESIGNATION OF BENEFICIARY: Designation of a Beneficiary or Beneficiaries
under the Plan shall be governed by the following rules:
(a) Designation Procedure: Subject to the provisions of subsection
(b), each Participant from time to time may designate any person or
persons (who may be designated primarily, contingently or successively
and who may be an entity other than a natural person) as his
Beneficiary or Beneficiaries to whom his Plan benefits are paid if he
dies before receipt of all such benefits. Each Beneficiary
designation shall be in a form prescribed by the Committee and will be
effective only when filed with the Committee during the Participant's
lifetime.
Each Beneficiary designation filed with the Committee will
cancel all Beneficiary designations previously filed with the
Committee. The revocation of a Beneficiary designation no matter how
effected, shall not require the consent of any designated Beneficiary
except as provided in subparagraph (b) below.
(b) Spousal Consent: If the Participant is married at the date of his
death, no Beneficiary designation shall be effective under the Plan
unless the Participant's spouse consented in writing to such
designation, the spouse's consent acknowledged the effect of such
designation and the spouse's signature has been witnessed by a Plan
representative (which shall include a member of the Committee) or a
notary public. Any Beneficiary designation previously made by a
Participant shall be automatically revoked upon the marriage or
remarriage of a Participant.
Notwithstanding the foregoing, spousal consent to a
Participant's Beneficiary designation shall not be required if:
(i) the spouse is designated as the sole primary beneficiary
the Participant, or
May 19, 1994 42
<PAGE> 27
(ii) it is established to the satisfaction of the Committee
that spousal consent cannot be obtained because there is no
spouse, because the spouse cannot be located or because of
such other circumstances as may be prescribed in regulations
issued by the Secretary of the Treasury.
Any consent by a spouse or any determination that the consent
is not required pursuant to paragraphs (i) or (ii) above, shall be
effective only with respect to such spouse.
(c) Lack of Designation: If any Participant fails to designate a
Beneficiary in the manner provided above, or if the Beneficiary
designated by a deceased Participant dies before him or before
complete distribution of the Participant's benefits, such
Participant's benefits shall be paid in accordance with the following
order of priority:
(i) to the Participant's surviving spouse, or if there be
none surviving,
(ii) to the Participant's children, per capita, in equal
parts, or if there be none surviving,
(iii) to the Participant's father and mother, per capita in
equal parts, or if there be none surviving,
(iv) to the Participant's estate.
6.7 REQUIRED DISTRIBUTIONS: Notwithstanding any election or provision to
the contrary in Section 6.5 hereof, any benefits to which a Participant is
entitled shall commence not later than the April 1 following the calendar year
in which the Participant attains age 70 1/2, whether or not his employment had
terminated in such year. Any such required distribution shall be made in
accordance with Section 401(a)(9) of the Code and any rules and regulations,
including those applicable to the distribution of any incidental death benefit,
over the life of such Participant (or over the lives of such Participant and
his Beneficiary). In determining the amount of such distribution, life
expectancies shall be recalculated. Notwithstanding anything else to the
contrary, the Accounts of a deceased Participant or Former Participant shall be
distributed within five years after the death of such Participant or Former
Participant.
6.8 ROLLOVERS TO ANOTHER PLAN: Notwithstanding any provision of the Plan
to the contrary, if, on or after February 1, 1993, (i) a Participant, (ii) a
Beneficiary who is a Spouse, or (iii) a Spouse or former Spouse who is an
alternate payee under a Qualified Domestic Relations Order referred to in
Section 6.11 becomes entitled to a distribution under the Plan which qualifies
as an"eligible rollover distribution" as defined in Section 402(c)(4)
May 19, 1994 43
<PAGE> 28
of the Code, such individual may elect to have all or a portion of such
distribution paid or transferred directly to a selected "eligible retirement
plan" as defined in Section 402(c)(8)(B) of the Code, provided that such
retirement plan to which such transfer is to be made accepts the transfer. The
Committee may establish reasonable rules and procedures regarding a direct
rollover distribution permitted under this Section.
6.9 HARDSHIP WITHDRAWALS: A Participant may apply to the Committee on the
basis of hardship for approval to withdraw, in cash, all or a portion of the
value of his Tax Deferred Contributions (excluding all earnings thereon) and
his Rollover Contributions, if any.
(a) Determination of Hardship Withdrawal: For the purpose of
withdrawals, the value of all such Contributions shall be determined
on the Valuation Date coinciding with or next following the date as of
which the application is approved by the Committee and shall be paid
as soon as practical thereafter. All withdrawals under this Section
6.9 shall be made from the Participant's current investment elections
on a pro rata basis. The Committee shall approve such application
only to relieve an immediate and heavy financial need of the
Participant (including his Spouse or any dependent), not in excess of
the amount required to relieve such financial need, and only if, and
to the extent, such need cannot be satisfied from other resources
reasonably available to him (including assets of his Spouse and minor
children reasonably available to him). The amount required to relieve
the claimed financial need may include an amount designed to offset
Federal income tax liability including withholding and Federal excise
tax liability, if any. In making a determination whether to approve
any such application, the Committee may require the Participant to
submit such proof as to the existence of such financial need as the
Committee shall deem necessary and shall consider all relevant facts
and circumstances presented by the Participant.
(b) Immediate and Heavy Financial Need: For purposes of this Section,
an immediate and heavy financial need may include, but is not limited
to, a distribution on account of (i) medical expenses (within the
meaning of Section 213(d) of the Code) incurred by the Participant,
his Spouse, or any dependent (within the meaning of Section 152 of the
Code), (ii) purchase (excluding mortgage payments) of the
Participant's principal residence, (iii) payment of tuition and
related educational fees for the next 12 months of post-secondary
education for the Participant, his Spouse, or any dependent, (iv) the
need to prevent the eviction of the Participant from his principal
residence or foreclosure on the mortgage of his principal residence,
and (v) any other event permitted under Treasury regulations.
May 19, 1994 44
<PAGE> 29
(c) Participant Representations: In determining whether a
distribution is necessary to satisfy such financial need, the
Committee reasonably may rely upon the Participant's representation
that the need cannot be satisfied from other resources reasonably
available to him. For this purpose, the Committee, in the absence of
contrary knowledge, shall accept the Participant's representation that
such financial need cannot be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by reasonable liquidation
of assets, to the extent such liquidation would not itself cause a
financial need, (iii) by cessation of all Tax Deferred Contributions
under the Plan, (iv) by other distributions (other than on account of
hardship) or nontaxable (at the time of the loan) loans from this Plan
and all other plans maintained by the Company or from any other plan
maintained by any other employer in which the Participant is a member,
or (v) by borrowing from commercial sources on reasonable commercial
terms.
(d) Committee Determination: In the alternative to reasonably relying
on such representations, at the Participant's option, the Committee
may deem a distribution necessary to satisfy such financial need if
all of the following requirements are satisfied: (i) the distribution
is not in excess of the amount of the financial need, (ii) the
Participant has obtained all distributions (other than hardship
distributions) and all nontaxable loans currently available under all
plans maintained by the Company, (iii) the Participant is prohibited
from making any Tax Deferred Contributions under the Plan and elective
contributions and employee contributions under all other plans
maintained by the Company for twelve (12) months after receipt of the
hardship distribution, and (iv) the Participant may not make, in the
taxable year immediately following the taxable year of the hardship
distribution, elective contributions under Section 401(k) of the Code
under this Plan and all other plans maintained by the Company in
excess of the applicable limit under Section 402(g) of the Code for
the next taxable year less the amount of such Participant's Tax
Deferred Contributions for the taxable year of the hardship
distributions.
All determinations under this Section shall be based upon uniform and
nondiscriminatory rules and standards applicable to all Participants similarly
situated and shall be final, conclusive and binding on all interested parties.
6.10 PARTICIPANT LOANS: The Committee or its delegate may approve a
Participant's application and direct the Trustee to make a loan to such
Participant up to an amount equal to 50 percent of the value of his 401(k)
Accounts, including accrued earnings thereon,
May 19, 1994 45
<PAGE> 30
as of the Valuation Date coinciding with or next following the date as of which
the application is approved by the Committee, or its delegate, as the case may
be. All loans shall be made from the Participant's 401(k) Accounts and shall
be deducted from current investment options on a pro rata basis. All loan
repayments shall be invested in accordance with the Participant's then current
investment election. The Committee shall establish procedures and make loans
pursuant to this Section 6.10 under terms and conditions as it deems
appropriate including, without limitation, interest rate, minimum and maximum
loan amount, required security, repayment by payroll deduction and default
procedures. Such terms and conditions shall conform to Section 408(b)(1) of
ERISA and Section 4975(d)(1) of the Code including regulations thereunder and
the maximum loan amount, repayment period and repayment schedule for any such
loan shall be within the limits of and conform to the provisions of Section
72(p)(2) of the Code and the regulations thereunder. In no event may a
Participant have outstanding more than one loan from all qualified plans
sponsored by the Company including this Plan.
6.11 NONALIENATION OF BENEFITS: Except with respect to federal income tax
withholding, benefits payable under this Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind either
voluntary or involuntary, including any such liability which is for alimony or
other payments for the support of a spouse or former spouse or for any other
relative of the Employee, prior to actually being received by the person
entitled to the benefit under the terms of the Plan; any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or
otherwise dispose of any right to benefits payable hereunder, shall be void.
The Trust Fund shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any person entitled to benefits
hereunder.
Notwithstanding the above, the Committee shall direct the Trustee to
comply with a "Qualified Domestic Relations Order", as defined below.
A Qualified Domestic Relations Order is a judgment, decree or order
(including approval of a property settlement agreement) made pursuant to a
state domestic relations law (including community property law) that relates to
the provision of child support, alimony payments or marital property rights to
a spouse, former spouse, child or other dependent of a Participant ("Alternate
Payee") and which:
(a) creates or recognizes the existence of an Alternate Payee's
right to, or assigns to an Alternate Payee the right to, receive all
or a portion of the benefits payable to a Participant under this Plan;
and
May 19, 1994 46
<PAGE> 31
(b) specifies (i) the name and last known mailing address (if any)
of the Participant and each Alternate Payee covered by the order, (ii)
the amount or percentage of the Participant's Plan benefits to be paid
to any Alternate Payee, or the manner in which such amount or
percentage is to be determined and (iii) the number of payments or the
period to which the order applies and each plan to which the order
relates; and
(c) does not require the Plan to:
(i) provide any type or form of benefit or any option not
otherwise provided under the Plan;
(ii) pay any benefits to any Alternate Payee prior to the
earlier of the affected Participant's termination of
employment or the earlier of either (I) the earliest date
benefits are payable under the Plan to a Participant or (II)
the later of the date the Participant attains age 50 or the
earliest date on which the Participant could obtain a
distribution from the Plan if the Participant separated from
service;
(iii) pay any benefits which are not vested under the Plan;
(iv) provide increased benefits; or
(v) pay benefits to an Alternate Payee that are required to
be paid to another Alternate Payee under a prior Qualified
Domestic Relations Order.
For purposes of this Plan, an Alternate Payee who had been married to
the Participant for at least one year may be treated as a spouse with respect
to the portion of the Participant's benefit in which such Alternate Payee has
an interest provided that the Qualified Domestic Relations Order provides for
such treatment. However, under no circumstances may the spouse of an Alternate
Payee (who is not a Participant hereunder) be treated as a spouse under the
terms of the Plan.
Upon receipt of any judgment, decree or order (including approval of a
property settlement agreement) relating to the provision of payment by the Plan
to an Alternate Payee pursuant to a state domestic relations law, the Committee
shall promptly notify the affected Participant and any Alternate Payee of the
receipt of such judgment, decree or order and shall notify the affected
Participant and any Alternate Payee of the Committee's procedure for
determining whether or not the judgment, decree or order is a Qualified
Domestic Relations Order.
May 19, 1994 47
<PAGE> 32
The Committee shall establish a procedure to determine the status of a
judgment, decree or order as a Qualified Domestic Relations Order and to
administer Plan distributions in accordance with Qualified Domestic Relations
Orders. Such procedure shall be in writing, shall include a provision
specifying the notification requirements enumerated in the preceding paragraph,
shall permit an Alternate Payee to designate a representative for receipt of
communications from the Committee and shall include such other provisions as
the Committee shall determine, including provisions required under regulations
promulgated by the Secretary of the Treasury.
During any period in which the issue of whether a judgment, decree or
order is a Qualified Domestic Relations Order is being determined (by the
Committee, a court of competent jurisdiction or otherwise), the Committee shall
account for separately the amount, if any, which would have been payable to the
Alternate Payee during such period as if the judgment, decree or order had been
determined to be a Qualified Domestic Relations Order.
If the judgment, decree or order is determined to be a Qualified
Domestic Relations Order within the 18-month period following the receipt by
the Committee of the Qualified Domestic Relations Order, then payment of the
amount shall be paid to the appropriate Alternate Payee. If such a
determination is not made within the 18-month period, the amount shall be
returned to the Participant's accounts under the Plan and shall be paid at the
time and the manner provided under the Plan as if no order, judgment or decree
had been received by the Committee.
ARTICLE VII. TRUST FUND AND INVESTMENT
7.1 TRUST FUND: All contributions under this Plan shall be paid to the
Trustee and deposited in the Trust Fund. However, all contributions made by
the Employer are expressly conditioned upon the initial and continued
qualification of the Plan under the Internal Revenue Code, including any
amendments to the Plan, and upon the deductibility under Section 404 of the
Internal Revenue Code of contributions made to provide Plan benefits. Upon the
Employer's request, a contribution which was made by a mistake of fact, or
conditioned upon qualification of the Plan or any amendment thereof or upon the
deductibility of the contribution Under Section 404 of the Internal Revenue
Code of 1986, shall be returned to the Employer within one year after payment
of the contribution, the denial of the qualification or the disallowance of the
deduction (to the extent disallowed), whichever is applicable.
Except as provided above, all assets of the Trust Fund, including
investment income, shall be retained for the exclusive benefit of Participants,
Former Participants and Beneficiaries and
May 19, 1994 48
<PAGE> 33
shall be used to pay benefits to such persons or to pay administrative expenses
of the Plan and Trust Fund to the extent not paid by the Company and shall not
revert to or inure to the benefit of the Company.
7.2 INVESTMENT OF THE TRUST FUND: The Trustee shall invest the portion of
the Trust Fund accumulated under the ESOP Feature primarily in Company Stock.
The Committee may direct the Trustee to incur debt from time to time to finance
the acquisition of Company Stock under the ESOP Feature by the Trust Fund. The
Trustee may also invest the Trust Fund in cash, cash equivalents, certificates
of deposit, money market funds, guaranteed investment contracts, short term
securities, bonds and other investments desirable for the Trust at the
direction of the Committee.
7.3 LOANS UNDER THE ESOP FEATURE:
(a) The Committee may direct the Trustee to incur a loan on behalf of
the Trust in a manner and under conditions which will cause the loan
to be an "exempt loan" within the meaning of Section 4975(d)(2) of the
Code and regulations thereunder. A loan shall be used primarily for
the benefit of Plan Participants and their Beneficiaries. The
proceeds of each such loan shall be used, within a reasonable time
after the loan is obtained, only to purchase Company Stock, to repay
the loan or to repay any prior loan. Any such loan shall provide for a
reasonable rate of interest, an ascertainable period of maturity and
shall be without recourse against the Plan. Any such loan shall be
secured solely by shares of Company Stock acquired with the proceeds
of the loan and shares of such stock that were used as collateral on a
prior loan which was repaid with the proceeds of the current loan.
Such stock pledged as collateral shall be placed in a Suspense Account
and released pursuant to part (b) below as the loan is repaid.
Company Stock released from the Suspense Account shall be allocated in
the manner described in Section 5.3. No person entitled to payment
under a loan made pursuant to this Section shall have recourse against
any Trust Fund assets other than the stock used as collateral for the
loan, Company contributions of cash that are available to meet
obligations under the loan and earnings attributable to such
collateral and the investment of such contributions. Company
contributions made with respect to any Plan Year during which the loan
remains unpaid, and earnings on such contributions, shall be deemed
available to meet obligations under the loan, unless otherwise
provided by the Company at the time such contributions are made.
(b) Any pledge of stock as collateral under this Section shall
provide for the release of shares so pledged upon the payment of any
portion of the loan. Shares so pledged shall
May 19, 1994 49
<PAGE> 34
be released in the proportion that the principal and interest paid on
the loan for the Plan Year bear to the aggregate principal and
interest paid for the current Plan Year and each Plan Year thereafter,
as provided in Treasury Regulation 54.4975-7(b)(8).
(c) Payments of principal and interest on any loan under this Section
shall be made by the Trustee at the direction of the Committee solely
from: (i) Company contributions available to meet obligations under
the loan, (ii) earnings from the investment of such contributions,
(iii) earnings attributable to stock pledged as collateral for the
loan, (iv) the proceeds of a subsequent loan made to repay the loan,
and (v) the proceeds of the sale of any stock pledged as collateral
for the loan. The contributions and earnings available to pay the
loan must be accounted for separately by the Committee until the loan
is repaid.
(d) Subject to the limitations in Section 5.9 on annual additions to a
Participant's Account, assets released from a Suspense Account by
reason of payment made on a loan shall be allocated immediately upon
such payment to the accounts of all Participants who then would be
entitled to an allocation of contributions if such payment had been
made on the last day of the Plan Year.
(e) Except as provided in Sections 5.12 and 7.3(f) of this Plan or as
permitted under Treasury Regulation Section 54.4975- 7(b)(10), no
security acquired with the proceeds of an "exempt loan" may be subject
to a put, call, or other option, or buy-sell or similar arrangement
while held by and when distributed from the Plan, whether or not the
Plan is then an ESOP, as defined in Treasury Regulation Section
54.4975-7(b)(1)(i). The protections afforded by this Section 7.3(e)
shall be "non-terminable" within the meaning of Treasury Regulation
Section 54.4975-11(a)(3)(ii).
(f) If Company Stock is acquired by the Trust with the proceeds of an
"exempt loan" and, when distributed, such stock either (i) is not
publicly traded or (ii) is subject to a "trading limitation" within
the meaning of Treasury Regulation Section 54.4975-7(b)(10), then any
Participant to whom such stock is distributed (or such Participant's
donee or a person (including an estate or its distributee) to whom
such stock passes by reason of the Participant's death) shall have the
right to require that his Employer (or an affiliate or shareholder of
such Employer specified by the Company) repurchase such stock at its
value as of the last day of the immediately preceding Plan Year,
determined in accordance with Treasury Regulation Section
54.4975-11(d)(5). The foregoing put option shall be exercisable
during the 15 month period
May 19, 1994 50
<PAGE> 35
immediately following the date of distribution, exclusive of any time
during which the put option cannot be honored by application of state
or Federal law. Subject to the provisions of Treasury Regulation
Section 54.4975-7(b)(12)(v), the amount paid for such stock shall be
paid within 30 days after the exercise of the option, or, at the
election of the party bound by such option, in substantially equal
periodic payments (not less frequently than annually) over a period
beginning not later than 30 days after the exercise of such option and
not exceeding 5 years. There shall be adequate security provided and
reasonable interest paid on the unpaid balance due under this Section.
In the case of Company Stock which is publicly traded without
restriction when distributed but ceases to be so traded within 15
months after distribution, the Company shall notify in writing each
Participant to whom such stock was distributed within 10 days after
such stock ceases to be so traded that for the remainder of the 15
month period such stock shall be subject to the foregoing put option.
The put option described in this Section 7.3(f) shall be
"non-terminable" within the meaning of Treasury Regulations Section
54.4975-11(a)(1)(ii).
7.4 DIVERSIFICATION: Any Plan Participant under the ESOP Feature who
becomes a Qualified Participant (as defined below) shall have the right to make
an election as follows: such a Participant may elect within 90 days after the
close of each Plan Year in the Qualified Election Period (as defined below) to
diversify 25% of his Participant Stock Account, less any amount to which a
prior election applies. In the case of the last year to which an election
applies, 50% shall be substituted for 25% in the prior sentence.
If an election is made under the provisions of the foregoing
paragraph, the portion of the Participant Stock Accounts covered by such an
election shall at the election of the Participant either (i) be distributed to
the Participant or (ii) be transferred to a separate account under one of the
investment options (other than that invested in Company Stock) offered under
the 401(k) Feature.
For the purposes of this paragraph, the term "Qualified Participant"
means a Participant who has completed at least 10 years of participation under
the Plan and has attained age 55. For the purposes of this Section 7.4, the
term "Qualified Election Period" means the 6-Plan-Year period beginning with
the first Plan Year in which the Participant becomes a Qualified Participant.
May 19, 1994 51
<PAGE> 36
ARTICLE VIII. ADMINISTRATION
8.1 ALLOCATION OF RESPONSIBILITY AMONG FIDUCIARIES FOR PLAN AND TRUST
ADMINISTRATION: The Fiduciaries shall have only those specific powers, duties,
responsibilities and obligations as are specifically given them under this Plan
or the Trust. The Company shall have the sole responsibility for making the
contributions provided for under Sections 4.1 and 4.3, and shall have the sole
authority to appoint and remove the Trustee and members of the Committee, and
to amend or terminate in whole or in part, this Plan or the Trust. The Company
shall have the final responsibility for administration of the Plan, which
responsibility is specifically described in this Plan and the Trust. The
Committee shall have the specific delegated powers and duties described in the
further provisions of this Article VIII, and such further powers and duties as
hereinafter may be delegated to it by the Company. The Trustee shall have the
sole responsibility for the administration of the Trust and management of the
assets held under the Trust, all as specifically provided in the Trust. Each
Fiduciary warrants that any directions given, information furnished, or action
taken by it shall be in accordance with the provisions of the Plan or the Trust
as the case may be, authorizing or providing for such direction, information or
action. Furthermore, each Fiduciary may rely upon any such direction,
information or action of another Fiduciary as being proper under this Plan or
the Trust and is not required under this Plan or the Trust to inquire into the
propriety of any such direction, information or action. It is intended under
this Plan, and the Trust that each Fiduciary shall be responsible for the
proper exercise of its own powers, duties, responsibilities and obligations
under this Plan and the Trust and shall not be responsible for any act or
failure to act of another Fiduciary. No Fiduciary guarantees the Trust Fund in
any manner against investment loss or depreciation in asset value.
8.2 APPOINTMENT OF COMMITTEE: A Committee consisting of at least three
persons shall be appointed by and serve at the pleasure of the Board of
Directors of the Company to assist in the administration of the Plan. All
usual and reasonable expenses of the Committee may be paid in whole or in part
by the Company, and any expenses not paid by the Company shall be paid by the
Trustee out of the principal or income of the Trust Fund. Any members of the
Committee who are Employees shall not receive compensation with respect to
their services for the Committee.
8.3 CLAIMS PROCEDURE: The Committee shall make all determinations as to
the right of any person to a benefit. Any denial by the Committee of the claim
for benefits under the Plan by a Participant or Beneficiary shall be stated in
writing by the Committee and delivered or mailed to the Participant or
Beneficiary; and such notice shall set forth the specific reasons for the
denial, written to the best of the Committee's ability in a manner that may be
May 19, 1994 52
<PAGE> 37
understood without legal or actuarial counsel. In addition, the Committee
shall afford a reasonable opportunity to any Participant or Beneficiary whose
claim for benefits has been denied for a review of the decision denying the
claim and, in the event of continued disagreement, either may appeal to the
Employer, whose decision shall be final.
8.4 RECORDS AND REPORTS: The Employer (or the Committee if so designated
by the Employer) shall exercise such authority and responsibility as it deems
appropriate in order to comply with ERISA and governmental regulations issued
thereunder relating to records of Participant's service, account balances and
the percentage of such account balances which are nonforfeitable under the
Plan, notifications to Participants, annual registration with the Internal
Revenue Service and annual reports to the Department of Labor.
8.5 OTHER COMMITTEE POWERS AND DUTIES: The Committee shall have such
duties and powers as may be necessary to discharge its duties hereunder,
including, but not by way of limitation, the following:
(a) to construe and interpret the Plan, decide all questions of
eligibility and determine the amount, manner and time of payment of
any benefits hereunder;
(b) to prescribe procedures to be followed by Participants or
Beneficiaries filing applications for benefits;
(c) to prepare and distribute in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(d) to receive from the Employers and from Participants such
information as shall be necessary for the proper administration of the
Plan;
(e) to furnish the Employers, upon request, such annual reports with
respect to the administration of the Plan as are reasonable and
appropriate;
(f) to receive, review and keep on file (as it deems convenient or
proper) reports of the financial condition, and of the receipts and
disbursements, of the Trust Fund from the Trustee;
(g) to appoint or employ individuals to assist in the administration
of the Plan and any other agents it deems advisable, including legal
and actuarial counsel.
The Committee shall have no power to add to, subtract from or modify
any of the terms of the Plan, or to change or add to any benefits provided by
the Plan, or to waive or fail to apply any requirements for eligibility for a
benefit under the Plan.
May 19, 1994 53
<PAGE> 38
8.6 RULES AND DECISIONS: The Committee may adopt such rules as it deems
necessary, desirable or appropriate. All rules and decisions of the Committee
shall be uniformly and consistently applied to all Participants in similar
circumstances. When making a determination or calculation, the Committee shall
be entitled to rely upon information furnished by a Participant or Beneficiary,
the Company, the legal counsel of the Company or the Trustee.
8.7 COMMITTEE PROCEDURES: The Committee may act at a meeting or in writing
without a meeting. The Committee shall elect one of its members as chairman,
appoint a secretary, who may or may not be a Committee member, and advise the
Trustee of such actions in writing. The secretary shall keep a record of all
meetings and forward all necessary communications to the Company, or the
Trustee. The Committee may adopt such bylaws and regulations as it deems
desirable for the conduct of its affairs. All decisions of the Committee shall
be made by the vote of the majority including actions in writing taken without
a meeting.
8.8 AUTHORIZATION OF BENEFIT PAYMENTS: The Committee shall issue
directions to the Trustee concerning all benefits which are to be paid from the
Trust Fund pursuant to the provisions of the Plan.
8.9 APPLICATION AND FORMS FOR BENEFITS: The Committee may require a
Participant or Beneficiary to complete and file with the Committee an
application for a benefit and all other forms approved by the Committee, and to
furnish all pertinent information requested by the Committee. The Committee
may rely upon all such information so furnished it, including the Participant's
or Beneficiary's current mailing address.
8.10 FACILITY OF PAYMENT: Whenever, in the opinion of the Company and the
Committee, a person entitled to receive any payment of a benefit or installment
thereof hereunder is under a legal disability or is incapacitated in any way so
as to be unable to manage his financial affairs, the Trustee may be directed to
make payments to such person or to his legal representative or to a relative or
friend of such person for his benefit, or to apply the payment for the benefit
of such person in such manner as the Employer and the Committee consider
available. Any payment of a benefit or installment thereof in accordance with
the provisions of this Section shall be a complete discharge of any liability
for the making of such payment under the provisions of the Plan.
8.11 INDEMNIFICATION OF THE COMMITTEE: The Committee and the individual
members thereof shall be indemnified by the Company and not from the Trust Fund
against any and all liabilities arising by reason of any act or failure to act
made in good faith pursuant to the provisions of the Plan, including expenses
reasonably incurred in the defense of any claim relating thereto.
May 19, 1994 54
<PAGE> 39
8.12 INDEPENDENT APPRAISAL: If the Company Stock is or becomes not readily
tradeable on an established securities market, then any valuation required
under this Plan will be conducted by an independent appraiser (as defined in
Section 401(a)(28) of the Code).
ARTICLE IX. MISCELLANEOUS
9.1 NONGUARANTEE OF EMPLOYMENT: Nothing contained in this Plan shall be
construed as a contract of employment between any Employer and any Employee, or
as a right of any Employee to be continued in the employment of any Employer,
or as a limitation of the right of any Employer to discharge any of its
Employees, with or without cause.
9.2 RIGHTS TO TRUST ASSETS: No Employee or Beneficiary shall have any
right to, or interest in, any assets of the Trust Fund upon termination of his
employment or otherwise, except as provided from time to time under the Plan
and then only to the extent of the benefits payable under the Plan to such
Employee or Beneficiary out of the assets of the Trust Fund. All payments of
benefits as provided for in this Plan shall be made solely out of the assets of
the Trust Fund and none of the Fiduciaries shall be liable therefor in any
manner.
9.3 NONFORFEITABILITY OF BENEFITS: Subject only to the specific provisions
of this Plan, nothing shall be deemed to divest a Participant of his right to
the nonforfeitable benefit to which he becomes entitled in accordance with the
provisions of this Plan.
9.4 DISCONTINUANCE OF COMPANY CONTRIBUTION: In the event of a permanent
discontinuance of contributions to the Plan by the Company, the accounts of all
Participants shall, as of the date of such discontinuance become 100% vested
and nonforfeitable.
ARTICLE X. AMENDMENTS AND ACTION BY COMPANY
10.1 AMENDMENTS: The Company reserves the right to make from time to time
any amendment or amendments to this Plan which do not cause any part of the
Trust Fund to be used for, or diverted to, any purpose other than the exclusive
benefit of Participants, Former Participants or their Beneficiaries; provided,
however, that the Company may make any amendment it determines necessary or
desirable, with or without retroactive effect, to comply with ERISA.
10.2 ACTION BY COMPANY: Any action by the Company under this Plan may be by
resolution of its Board of Directors, or by any person or persons duly
authorized by resolution of said Board to take such action.
May 19, 1994 55
<PAGE> 40
ARTICLE XI.
SUCCESSORS AND MERGER OR CONSOLIDATION OF PLANS
11.1 SUCCESSOR: In the event of the dissolution, merger, consolidation or
reorganization of the Company, provision may be made by which the Plan and
Trust will be continued by the successor; and, in that event, such successor
shall be substituted for the Company under the Plan. The substitution of the
successor shall constitute an assumption of the Plan liabilities by the
successor and the successor shall have all of the powers, duties and
responsibilities of the Company under the Plan.
11.2 CONDITIONS APPLICABLE TO MERGERS OR CONSOLIDATION OF PLANS: In the
event of any merger or consolidation of the Plan with, or transfer in whole or
in part of the assets and liabilities of the Trust Fund to, another trust fund
held under any other plan of deferred compensation maintained or to be
established for the benefit of all or some of the Participants of this Plan,
the assets of the Trust Fund applicable to such Participants shall be merged or
consolidated with or transferred to the other trust fund only if:
(a) each Participant would (if either this Plan or the other plan then
terminated) 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 before the
merger, consolidation or transfer (if this Plan had then terminated);
(b) resolutions of the Board of Directors of the Employer under this
Plan, or of any new or successor employer of the affected
Participants, shall authorize such transfer of assets; and, in the
case of the new or successor employer of the affected Participants,
its resolutions shall include an assumption of liabilities with
respect to such Participants inclusion in the new employer's plan; and
(c) such other plan and trust are qualified under Sections 401(a) and
501(a) of the Code.
ARTICLE XII. PLAN TERMINATION
12.1 RIGHT TO TERMINATE: In accordance with the procedures set forth in
this Article, the Company may terminate the Plan at any time. In the event of
the dissolution, merger, consolidation or reorganization of the Company, the
Plan shall terminate and the Trust Fund shall be liquidated unless the Plan is
continued by a successor to the Company in accordance with Section 11.1.
May 19, 1994 56
<PAGE> 41
12.2 PARTIAL TERMINATION: Upon termination of the Plan by the Company with
respect to a group of Participants, the Trustee shall, in accordance with the
directions of the Committee, allocate and segregate for the benefit of the
Employees then or theretofore employed by the Employer with respect to which
the Plan is being terminated the proportionate interest of such Participants in
the Trust Fund. The funds so allocated and segregated shall be used by the
Trustee to pay benefits to or on behalf of Participants in accordance with
Section 12.3.
12.3 LIQUIDATION OF THE TRUST FUND: Upon partial or total termination of
the Plan, the accounts of all Participants affected thereby shall become fully
vested, and the Committee may direct the Trustee: (a) with respect to the
401(k) Feature, to distribute the value of the Participant's Tax Deferred
Contributions Account and Rollover Contributions Account balances thereunder in
a single lump sum; provided that such distribution may be made only if no
successor plan within the meaning of Section 401(k)(2)(B)(ii)(II) of the Code
is maintained, and (b) with respect to the ESOP Feature, (i) to continue to
administer the Trust Fund and pay Participant Stock Account balances in
accordance with Section 6.5, to Participants affected by the termination upon
their termination of employment or to their Beneficiaries upon such a
Participant's death, until the Trust Fund has been liquidated, or (ii) to
distribute the assets remaining in the Trust Fund with respect to the ESOP
Feature , after payment of any expenses properly chargeable thereto, to
Participants, former Participants and Beneficiaries in proportion to their
respective Participant Stock Account balances.
In case the Committee directs liquidation of the Trust Fund pursuant
to (a) above, the expense of administering the Plan and Trust, if not paid by
the Employer, shall be paid from the Trust Fund.
12.4 WITHDRAWAL BY RELATED COMPANY: Any Related Company that has adopted
the Plan may, by action of its Board of Directors, suspend or terminate the
making of Tax Deferred Contributions from 401(k) Compensation of Participants
or Employer Contributions under the ESOP Feature with respect to Participants
in the employ of such Related Company.
12.5 MANNER OF DISTRIBUTION: To the extent that no discrimination in value
results, any distribution after termination of the plan may be made, in whole
or in part, in cash, in securities or other assets in kind, or in
nontransferrable annuity contracts, subject to the right of Participants to
demand Company Stock. All noncash distributions shall be valued at fair market
value at date of distribution.
May 19, 1994 57
<PAGE> 1
Item 6. TIFFANY & CO. AND SUBSIDIARIES
EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
April 30, April 30,
1994 1993
-------- --------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income on which primary
earnings per share are based $ 1,876 $ 1,037
======= =======
Weighted average number of
common shares 15,663 15,623
Add:
Weighted average effect of the
exercise of stock options 140 132
------- -------
Weighted average number of shares on
which primary earnings are based 15,803 15,755
======= =======
Primary net income per common share $ 0.12 $ 0.07
======= ========
FULLY DILUTED EARNINGS PER SHARE:
Net income on which primary earnings
per share are based $ 1,876 $ 1,037
Add:
Interest and fees on convertible
subordinated debt, net of
applicable income taxes 467 461
------- -------
Net income on which fully diluted
earnings per share are based $ 2,343 $ 1,498
======= =======
Weighted average number of common
shares used in calculating
fully diluted earnings per share 15,803 15,755
Shares assumed upon conversion
of convertible debt, using the
"if converted" method 893 893
------- -------
Weighted average number of shares
used in calculating fully diluted
earnings per share 16,696 16,648
======= =======
Fully diluted net income per common share $ 0.12 $ 0.07
======= =======
</TABLE>
NOTE: In anticipation of the 6 3/8% Convertible Subordinated Debenture's
dilutive effect in the fourth quarter, fully diluted earnings per share
reflects the weighted average number of common shares outstanding under
the "if converted" method which assumes conversion as of the bond
issuance date of the Debentures. Since the "if converted" method had no
effect on fully diluted earnings per share (anti-dilutive) for the three
months ending April 30, 1994 and 1993, primary earnings per share was
used for financial statement presentation purposes.
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