-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GfP9KvixSVivfFW8ei799Q20RVVlU59FiwxtZ5YlxoVtcL32rOnM52fxBFDHXGnD CHiTX94Ev/jGO5FvP386xA== 0000075042-00-000003.txt : 20000531 0000075042-00-000003.hdr.sgml : 20000531 ACCESSION NUMBER: 0000075042-00-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000101 FILED AS OF DATE: 20000328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH B GOSH INC CENTRAL INDEX KEY: 0000075042 STANDARD INDUSTRIAL CLASSIFICATION: 2300 IRS NUMBER: 390519915 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-13365 FILM NUMBER: 580372 BUSINESS ADDRESS: STREET 1: 112 OTTER AVE STREET 2: P O BOX 300 CITY: OSHKOSH STATE: WI ZIP: 54901 BUSINESS PHONE: 9202318800 MAIL ADDRESS: STREET 1: 112 OTTER AVE CITY: OSHKOSH STATE: WI ZIP: 54901 10-K 1 10-K 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Mark One [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended JANUARY 1, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ Commission File No. 0-13365 OshKosh B'Gosh, Inc. A DELAWARE Corporation 39-0519915 (I.R.S. ID) 112 Otter Avenue Oshkosh, Wisconsin 54901 Telephone number: (920) 231-8800 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, Par Value $.01 per share Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Company's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 13, 2000, there were outstanding 10,361,239 shares of Class A Common Stock and 2,240,555 shares of Class B Common Stock, of which 9,898,898 shares and 1,136,317 shares, respectively, were held by non-affiliates of the Company. Based upon the closing sales price as of March 13, 2000, the aggregate market value of the Class A Common Stock held by non-affiliates was $176,936,546. The Class B Common Stock is no longer listed or quoted on any established trading market, but it is convertible into Class A Common Stock on a share-for-share basis. Based on that conversion right, the value of Class B Common Stock held by non-affiliates was $20,311,666. DOCUMENTS INCORPORATED BY REFERENCE OshKosh B'Gosh, Inc. definitive Proxy Statement for its annual meeting to be held on May 5, 2000 (or such later date as the directors may determine), incorporated into Part III INDEX PART I PAGE Item 1. Business 5 (a) General Development of Business 5 (b) Financial Information About Industry Segments 6 (c) Narrative Description of Business 6 Product 6 Raw Materials, Manufacturing and Sourcing 7 Sales and Marketing 9 International Licensing and Distribution 10 Trademarks 10 Seasonality 10 Working Capital 11 Backlog 11 Competitive Conditions 11 Environmental Matters 12 Employees 12 Item 2. Properties 12 Item 3. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 PART II Item 5. Market for the Company's Common Stock and Related Stockholder Matters 13 Item 6. Selected Financial Data 14 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Conditions 14 Item 7A. Quantitative and Qualitative Disclosures About Market Ris 22 Item 8. Financial Statements and Supplementary Data 23 Item 9. Disagreements on Accounting and Financial Disclosure 39 PART III Item 10. Directors and Executive Officers of the Company 40 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management 40 Item 13. Certain Relationships and Related Transactions 40 PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 41 PART I ITEM 1. BUSINESS (a) General Development of Business OshKosh B'Gosh, Inc. (together with its subsidiaries, the "Company") was founded in 1895 and was incorporated in the state of Delaware in 1929. The Company designs, manufactures, sources, and markets apparel primarily for the children's wear and youth wear markets. The Company also offers a children's footwear collection. While its heritage began in the men's work wear market, the Company is currently best known for its line of high quality children's wear. It is the Company's vision to become the dominant global marketer of branded products for children ages newborn to ten through leverage of the existing brand franchise in OshKosh B'Gosh and utilization of the Company's core competencies to supply the market with all appropriate product for children where quality, durability, and fashion innovation are important. The Company is also pursuing niche opportunities in adult apparel, where the Company's century old heritage can provide meaningful differential advantage to address the needs of the marketplace. The success of the children's wear business can be attributed to the Company's core themes: quality, durability, style, trust, and Americana. These themes have propelled the Company to the position of market leader in the branded children's wear industry. The Company strategically extends the product line and also leverages the economic value of the OshKosh B'Gosh name via both domestic and international licensing agreements. In addition to the Company's wholesale business, the Company also operates a chain of 130 domestic OshKosh B'Gosh branded stores, including 124 factory outlet stores, four showcase stores, and two stripmall stores. The Company operates an OshKosh B'Gosh showcase store in New York City to feature a full line of OshKosh product in a signature environment designed to reinforce brand awareness among consumers. The Company's retail product line in its OshKosh B'Gosh branded stores includes OshKosh B'Gosh branded product in sizes from newborn to girls 6X and boys 7 and youth wear for girls and boys under the trade names Genuine Girl (girls sizes 7-16) and Genuine Blues (boys sizes 8-16). Based on the sales performance of the Genuine Girl line in the OshKosh B'Gosh operated retail stores, the Company expanded the distribution of this product line to wholesale customers beginning with the Spring 1998 season. The Company is also currently distributing to wholesale customers, on a test basis, the Genuine Blues line. The Company's comprehensive strategic planning initiative guides the Company's business focus. Under this initiative, combined with management's commitment to more efficiently utilize working capital, the Company continues to take steps to improve product marketability, streamline operations, reduce its capital base and cost structure, and improve delivery performance. These actions included an analysis of product extensions, commitment to the wholesale customer base, periodic review of significant licensee arrangements, and continued development of an effective global sourcing strategy. The Company designs and closely manages the manufacture of all of its apparel and footwear. Company designers develop fabrication, trim accessories, and detailed manufacturing specifications. The product is then manufactured according to detailed Company specifications and production schedules in Company-owned manufacturing facilities or at third party contractor locations worldwide. Product sourcing is based on manufacturing capacity, quality, and lead times, in addition to capabilities of specific manufacturing facilities. The Company leverages its name and brand equity into a wide variety of children's products including children's apparel accessory items such as hats, socks and eyewear, bedding and other nursery decor, juvenile products including car seats and strollers, and developmental toys. The Company regularly reviews the seasonal offerings of all related products both locally and internationally for consistency, brand image, and quality. The Company earns royalties for use of its name on children's and men's wear products throughout the world, and from related accessories distributed in the United States and worldwide. (b) Financial Information About Industry Segments The Company is engaged in only one line of business, namely, the apparel industry. (c) Narrative Description of Business Products The Company designs, manufactures, sources and markets a broad range of children's clothing as well as lines of youth wear and footwear under the OshKosh, OshKosh B'Gosh, Genuine Girl, and Genuine Blues labels. The products are distributed primarily through better quality department and specialty stores, 130 Company owned domestic stores, and foreign retailers. The children's wear and youth wear business is targeted to reach the middle to upper middle segment of the sportswear market through the use of innovative designs, quality fabrics, and classic styling. The Company believes that its trade name is a valuable asset in the marketing of its apparel, signifying apparel that is classic in design and of high quality construction. The Company tradename and trademarks are generally displayed prominently on OshKosh product. Children's wear is marketed in size ranges from layette/newborn and infant/toddler to girls 6X and boys 7. Youth wear is in size ranges girls 7 to 16 and boys 8 to 16. The Company's children's wear and youth wear business includes a broad range of product categories, which are offered in two main groups: Fashion and Classics. The Fashion group is organized primarily in a collection format of seasonal themes, developed by an in-house product development staff. The products in a collection share a primary design theme which is carried out through fabric design and the distinctive use of colors, screenprint, embroidery, and trim applications. These collections are generally presented as three to five small groups within each merchandising season. The Company also offers a Classics product line, consisting primarily of staple denim products with multiple wash treatments and coordinating garments. The Classics product offerings for each season will typically consist of a variety of clothing items including bib overalls, pants, jeans, shorts and shortalls (overalls with short pant legs), shirts, blouses and knit tops, skirts, jumpers, sweaters, dresses, playwear, and fleece. This product line is developed to be somewhat less seasonal, with signature OshKosh B'Gosh classic styling. These styles are available to retail customers for replenishment throughout the year. Some Classics items are also designed to serve as a foundation for the Fashion group, with seasonal colors and styles to complement the Company's Fashion product offering. Most products are designed by an in-house staff. Product design requires long lead times, with products generally being designed a year in advance of the time they actually reach the retail market. While the Company's products are generally traditional in nature and not intended to be "designer" items, the Company attempts to incorporate current trends and consumer preferences in its designs. In selecting fabric and prints for its products, the Company seeks, where possible, to obtain exclusive rights to unique fabric designs from its suppliers in order to provide the Company, for a limited period of time, with some protection from imitation by competitors. Raw Materials, Manufacturing, and Sourcing All raw materials used in the manufacture of Company products are purchased from unaffiliated suppliers. The Company purchases its raw materials directly for its owned manufacturing facilities and may also procure and retain ownership of fabric related to garments cut and assembled by contract manufacturers. In other circumstances, fabric is procured by the contract manufacturer directly but in accordance with the Company's specifications. In 1999, approximately 88% of the Company's direct expenditures for raw materials (fabric) were from its five largest suppliers, with the largest such supplier accounting for approximately 48% of total raw material expenditures. Fabric and various non-fabric items, such as thread, zippers, rivets, buckles, and snaps, are purchased from a variety of domestic and foreign sources, based on quality, pricing, and availability. The fabric and accessory market in which OshKosh B'Gosh purchases its raw materials is composed of a substantial number of suppliers with similar products and capabilities, and is characterized by a high degree of competition. As is customary in its industry, the Company has no long-term contracts with its suppliers. To date, the Company has experienced little difficulty in satisfying its requirements for raw materials, considers its sources of supply to be adequate, and believes that it would be able to obtain sufficient raw materials should any one of its product suppliers become unavailable. Product development and administration are primarily coordinated from the Company's headquarters facility in Oshkosh, WI or its design studio in New York City. The majority of the product engineering and sample making, allocation of production among plants and independent contractors, material purchases, and invoice payments is done through the Company's Oshkosh headquarters. Substantially all designs and specifications utilized by independent manufacturers are provided by the Company. In 1999, approximately 64% of the Company's product line (excluding footwear) was sourced from off-shore Company-operated facilities and numerous third party contractors throughout the world, in accordance with the Company's specifications. Most domestic production takes place in the Company's three Tennessee and two Kentucky plants. The Company also leases sewing plants in Honduras and Mexico, where cut apparel pieces are received from the United States and are reimported by OshKosh B'Gosh as finished goods under Section 9802 (previously Section 807). In recent years, as part of the Company's review of manufacturing capacity and utilization, the Company closed or downsized certain domestic manufacturing facilities and continued to expand its use of offshore manufacturing capabilities. These actions were part of the Company's on-going effort to improve its product cost structure. The Company has established guidelines for each of its third party manufacturers in order to monitor product quality, labor practices, and financial viability. It also employs agents, based in regional locations abroad, to monitor compliance with design specifications and quality standards. The Company believes that its overall global manufacturing strategy gives the Company maximum flexibility to properly balance the need for timely shipments, high quality products, and competitive pricing. While no long-term, formal arrangements exist with its third- party manufacturers, the Company considers these relationships to be satisfactory. The Company believes it could, over a period of time, obtain adequate alternative production capacity if any of its independent manufacturers become unavailable. As part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia. If financial, political or other related difficulties were to adversely impact the Company's contractors in Asia, it could disrupt the supply of products contracted for by the Company. A sustained disruption of such sources of supply could, particularly on a short-term basis, have an adverse impact on the Company's operations. Because higher quality apparel manufacturing is generally labor intensive (sewing, pressing, finishing and quality control), the Company has continually sought to take advantage of time saving technical advances in areas like computer-assisted design, computer-controlled fabric cutting, computer evaluation and matching of fabric colors, automated sewing processes, and computer-assisted inventory control and shipping. In order to realize economies of operation within the domestic production facilities, cutting operations are located in one of the Company's five plants, with all domestic product washing, pressing, and finishing done in one facility in Tennessee and all screenprint and embroidery done in one facility in Kentucky. Quality control inspections of both semi-finished and finished products are required at each plant, including those of independent manufacturers, to assure compliance. Customer orders for Fashion products are booked from three to six months in advance of shipping. Because most Company production of styled products is scheduled to fill orders already booked, the Company believes that it is better able to plan its production and delivery schedules than would be the case if production were in advance of actual orders. In order to secure necessary fabrics on a timely basis and to obtain manufacturing capacity from independent suppliers, the Company must make substantial advance commitments, sometimes as much as five to seven months prior to receipt of customer orders. Inventory levels therefore depend on Company judgment of market demand. Sales and Marketing In order to meet the diverse needs of its broad customer base, the Company uses a wide variety of distribution channels to market its products. Wholesale distribution is made primarily through better quality department and specialty stores, although sales are also made through direct mail catalog companies, foreign retailers, and other outlets. In 1999, the Company's products were sold to approximately 1,000 wholesale customers (approximately 6,500 stores) throughout the United States, and a sizable number of international accounts. Product sales to better quality department and specialty stores are made primarily by the Company's sales force. In addition to the central sales office in Oshkosh, the Company maintains a regional sales office in New York and Dallas. A portion of the Company's sales force is assigned specific large national accounts, while others are assigned to defined geographic territories. In sparsely populated areas and new markets, manufacturer's representatives represent the Company on a non-exclusive basis. In addition to its wholesale activities, OshKosh B'Gosh products are also sold through 130 Company-owned domestic retail stores, operating under three formats: factory outlet stores, four showcase stores, and two strip mall stores. The Company operates 124 domestic factory outlet stores, which carry a large selection of first quality Company branded apparel at a discount to conventional retail prices. The factory outlet stores also provide a means of distributing excess and out-of-season product, reducing the amount of such product sold to discounters at excessively low prices. The four showcase stores are full price, full service stores featuring a full line of OshKosh B'Gosh product in a signature environment designed to convey the total OshKosh image and build brand recognition among customers. The stores are also used to test new styles and merchandising strategies. The Company also began testing a new strip center retail prototype by opening two strip mall stores in 1999. These strip mall stores will feature a large selection of OshKosh B'Gosh products that are consistently value priced. The Company's broad distribution base insulates the Company from reliance on any one customer. The Company's largest wholesale customer, Kids "R" Us, accounted for 12% of the Company's 1999 sales, while the Company's largest ten and largest 100 customers accounted for approximately 46% and 55% of 1999 sales, respectively. Domestic marketing programs are aimed at both the Company's retail accounts and ultimate consumers, with a main goal of increasing overall brand awareness. A national marketing program includes advertising in both consumer and trade publications, local cooperative advertising, promotions, and in-store merchandising. The Company is partnering with department store customers to enhance brand presentation and availability of the OshKosh B'Gosh brand through the creation of "showcase" environments. The showcase environment is a focused merchandising strategy that creates a highly impactful retail presentation of the OshKosh brand. By the use of custom fixtures, comprehensive in-store merchandising support, focused advertising, and promotions, the Company, along with its key customers, is able to communicate a powerful and consistent brand presence to the consumer. International Licensing and Distribution The Company's products are distributed worldwide through approximately 36 licensees and distributors in over 75 countries. Licensing and distribution agreements allow the Company to develop international markets without the need to maintain a capital commitment in localized warehousing, offices, personnel, and inventory. The Company provides design assistance to its licensees to ensure products are appropriate to each foreign market and consistent with the Company's brand image. The licensees and distributors either purchase fabric or finished product directly from the Company, manufacture their own product, or contract the production of the product from third-party manufacturers. Each licensee and distributor is responsible for the marketing and distribution of specific product categories within defined regions specified in the licensing or distribution agreement. Distribution must be through marketing channels consistent with the Company's domestic operations and as approved by the Company. The Company also provides advertising guidelines and support in the development of localized marketing programs. Trademarks The Company utilizes the OshKosh, OshKosh B'Gosh, Genuine Girl, or Genuine Blues trademarks on most of its products. Other significant trademarks include a white triangular patch on the back of bib garments and the Genuine Article. The Company currently has approximately 47 trademark registrations and four pending trademark applications in the United States and has trademark registrations in approximately 110 countries outside the U.S. These trademarks and universal awareness of the OshKosh B'Gosh name are significant in marketing the products. Therefore, it is the Company's policy to vigorously defend its trademarks against infringement under the laws of the U.S. and other countries. The Company is not aware of any material infringing uses. Seasonality Products are designed and marketed primarily for three principal selling seasons: PRIMARY RETAIL SALES SEASON BOOKING PERIOD SHIPPING PERIOD Spring/Summer August-September January-May Fall/Back-to-School January-February June-August Winter/Holiday April-May September-December The Company's business is increasingly seasonal, with highest sales and income in the third quarter, which is the Company's peak wholesale shipping period and a major retail selling season at its retail stores. The Company's second quarter sales and income are the lowest because of both relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 2000 quarterly sales and income. Working Capital Working capital needs are affected primarily by inventory levels, outstanding accounts receivable, and trade payables. In November, 1999, the Company entered into a new unsecured credit agreement with a number of banks that provides for a five year $125 million term loan for the repurchase of shares of its common stock through May, 2000, and a three year $75 million revolving credit facility available for general corporate purposes, including cash borrowings and issuances of letters of credit. The revolving credit facility expires November 3, 2002. There were no outstanding borrowings against the revolving credit arrangement at January 1, 2000, with $44 million outstanding on the term loan. Inventory levels are affected by order backlog and anticipated sales. Accounts receivable are affected by payment terms offered. It is general practice in the apparel industry to offer payment terms of ten to sixty days from date of shipment. The Company offers net 30 days terms only. The Company believes that its working capital requirements and financing resources are comparable with those of other major, financially sound apparel companies. Backlog The dollar amount of backlog of orders believed to be firm as of the end of the Company's fiscal year and as of the preceding fiscal year end is not material for an understanding of the business of the Company taken as a whole. Competitive Conditions The apparel industry is highly competitive and consists of a number of domestic and foreign companies. Some competitors have assets and sales greater than those of the Company. In addition, the Company competes with a number of firms that produce and distribute only a limited number of products similar to those sold by the Company, or sell only in certain geographic areas being supplied by the Company. A characteristic of the apparel industry is the requirement that a marketer recognize fashion trends and adequately provide products to meet such trends. Competition within the apparel industry is generally in terms of quality, price, service, style, and with respect to branded product lines, consumer recognition, and to a lesser extent on the basis of service and price. The Company is focusing attention on the issues of price and service, and has taken, and will continue to take, steps to reduce costs, become more competitive in the eyes of value conscious consumers, and deliver the service expected by its customers. The Company's share of the overall children's wear market is quite small. This is due to the diverse structure of the market where there is no truly dominant producer of children's garments across all size ranges and garment types. The Company believes that in its primary channel of distribution, department and specialty stores, it holds the largest share of the branded children's wear market. Environmental Matters The Company's compliance with Federal, State, and local environmental laws and regulations had no material effect upon its capital expenditures, earnings, or competitive position. The Company does not anticipate any material capital expenditures for environmental control in either the current or succeeding fiscal years. Employees At January 1, 2000, the Company employed approximately 3,600 persons. Approximately 17% of the Company's personnel are covered by collective bargaining agreements with the United Food and Commercial Workers Union. ITEM 2. PROPERTIES Approximate Floor Area in Location Square Feet Principal Use Albany, KY 20,000 Manufacturing Byrdstown, TN 32,000 Manufacturing Celina, TN 38,250 Laundering/Pressing Choloma, Honduras (2) 47,000 Manufacturing Gainesboro, TN 61,000 Sample Production/Distribution Jamestown, TN 43,000 Manufacturing Liberty, KY 218,000 Manufacturing/Warehousing New York City, NY (1) 18,255 Sales Offices/Showroom Design Studio Oshkosh, WI 99,000 Exec. & Operating Offices Oshkosh, WI 88,000 Leased to Outside Party Oshkosh, WI 128,000 Distribution/Warehousing Uman, Mexico (3) 134,000 Manufacturing White House, TN 284,000 Distribution/Warehousing All properties are owned by the Company with the exception of: (1) Lease expiration date--2007, (2) Lease expiration date--2001, (3) Lease expiration date--2006. The Company believes that its properties are well maintained and its manufacturing equipment is in good operating condition and adequate for current production. The Company's retail stores occupy leased premises, with lease terms generally in the range of 5 - 7 years. These leasehold interests are generally well suited for the Company's retail operations. For information regarding the terms of the leases and rental payments thereunder, refer to Note 6 to the consolidated financial statements of this Form 10-K. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and lawsuits will not have a material adverse effect on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Quarterly Common Stock Data 1 1999 1998 Stock price Dividends Stock price Dividends High Low per share High Low Per share Class A Common Stock 1st $ 20-1/4 $14-15/16 $0.05 $20-1/4 $14-1/2 $0.035 2nd 22-3/4 17-1/8 0.05 23 17-3/4 0.035 3rd 20-7/8 14-1/4 0.05 24-9/16 18-1/4 0.05 4th 22-3/8 18-7/8 0.05 24-1/4 17-7/8 0.05 Class B Common Stock 1st - - $0.0425 - - $0.03 2nd - - 0.0425 - - 0.03 3rd - - 0.0425 - - 0.0425 4th - - 0.0425 - - 0.0425 1 Adjusted for the two-for-one stock split in September 1998. The Company's Class A common stock trades on the Over-The-Counter market and is quoted on NASDAQ under the symbol GOSHA. The table reflects the "last" price quotation on the NASDAQ National Market System and does not reflect mark-ups, mark-downs, or commissions and may not represent actual transactions. The Company's Class B common stock is not currently traded on the Over-The-Counter market. As of February 15, 2000, there were 1,202 Class A common stock shareholders of record and 131 Class B common stock shareholders of record. ITEM 6. SELECTED FINANCIAL DATA Financial Highlights (Dollars in thousands, except per share amounts) Year Ended January 1, January 2, December 31, December 31, December 31, 2000 1999 1997 1996 1995 Financial results Net sales $429,786 $423,232 $395,196 $444,766 $432,266 Net income 32,448 29,335 22,558 1,119 10,947 Return on sales 7.5% 6.9% 5.7% 0.3% 2.5% Financial condition Working capital $ 27,342 $ 76,876 $ 82,762 $104,641 $ 95,414 Total assets 129,699 162,568 174,788 196,033 208,579 Shareholders'equity 23,439 103,017 113,157 138,077 150,078 Data per common share Net income Basic $ 2.01 $ 1.54 $ 1.02 $ .05 $ .43 Diluted 1.99 1.52 1.02 .05 .43 Cash dividends declared Class A .20 .17 .14 .14 .14 Class B .17 .145 .12 .12 .12 Shareholders'equity 1.86 5.75 5.74 5.86 6.03 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales. As a Percentage of Net Sales for the Year Ended January 1,* January 2,* December 31, 2000 1999 1997 Net sales 100.0% 100.0% 100.0% Cost of products sold 58.1% 60.9% 63.5% Gross profit 41.9% 39.1% 36.5% Selling, general and administrative expenses 31.2% 29.5% 29.2% Royalty income, net (1.7%) (2.0%) (2.0%) Operating income 12.4% 11.6% 9.3% Other income (expense) - net (0.1%) 0.1% 0.3% Income before income taxes 12.3% 11.7% 9.6% Income taxes 4.8% 4.8% 3.9% Net income 7.5% 6.9% 5.7% * Effective January 1, 1998, the Company changed its fiscal year to a 52/53 week period ending on the Saturday closest to December 31. Accordingly, the Company's fiscal year 1998 ended January 2, 1999, while the Company's 1999 fiscal year ended January 1, 2000. This change did not have a material impact on the comparability of the Company's annual results of operations. 1999 COMPARED TO 1998 Net Sales Net sales in 1999 were $429.8 million, a $6.6 million (1.5%) increase over 1998 net sales of $423.2 million. A summary of the Company's net sales for the years ended January 1, 2000 and January 2, 1999 follows: Net Sales (in millions) Domestic Wholesale Retail International Total 1999 $212.3 $ 210.4 $ 7.1 $ 429.8 1998 226.1 191.4 5.7 423.2 Increase (decrease) (13.8) 19.0 1.4 6.6 Percent increase (decrease) (6.1%) 9.9% 24.6% 1.5% The Company's 1999 domestic wholesale unit shipments were down approximately 0.3% compared to 1998. The decrease in unit shipments resulted from a combination of less closeout merchandise sold during the year and lower demand for the Company's classics product offering. The decrease in wholesale sales dollars resulted from a combination of lower average selling prices, increased promotional programs, and product mix (a higher mix of lighter weight, lower unit cost garments). The Company currently anticipates wholesale unit shipments for the first half of 2000 to be down approximately 3-5% as compared to the first half of 1999. The Company's 1999 increased retail sales resulted from a combination of a 4.5% comparable store sales gain and sales volume from newly opened stores. During 1999, the Company opened 11 factory outlet stores, closed 4 factory outlet stores, and closed 1 showcase store. The Company also began testing a new store concept by opening 2 strip mall stores in 1999. At January 1, 2000, the Company operated 130 domestic OshKosh B'Gosh retail stores, including 124 factory outlet stores, 4 showcase stores and 2 strip mall stores. Current Company plans for 2000 call for the addition of approximately 14 new OshKosh B'Gosh retail stores including 6 strip mall stores, and the closing of 8 to 11 factory outlet stores. For 2000, the Company currently anticipates low single digit comparable store sales gains. Gross Profit The Company's gross profit margin as a percentage of net sales increased to 41.9% in 1999 compared with 39.1% in 1998. This gross profit margin improvement was due primarily to continued implementation and execution of the Company's global sourcing strategy, operating efficiencies at the Company's domestic sewing facilities, the Company's ongoing focus on product design and development activities, and the favorable impact of liquidation of certain LIFO inventory layers. During 1999, approximately 64% of units sourced were from off-shore venues as compared to 58% in 1998. The Company's current 2000 sourcing plan indicates that approximately 79% of units will be sourced outside of the United States. Substantially all of the Company's inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) basis. As a result of a substantial reduction of the Company's inventory levels at January 1, 2000, the 1999 gross profit margin was favorably impacted by an approximate $2.2 million benefit related to the liquidation of certain LIFO layers. This compares with an approximate $.6 million benefit in 1998. The Company does not currently anticipate further significant liquidation of LIFO layers in the foreseeable future. Selling, General and Administrative Expenses (S,G&A) The Company's S,G&A expenses for 1999 of $134.0 million were $9.2 million over 1998 S,G&A expenses of $124.8 million. As a percent of net sales, S,G&A expenses were 31.2% in 1999 as compared to 29.5% in 1998. The primary reasons for these increased expenses relate to a combination of continued expansion of the Company's retail operations, costs associated with the Company's transition to an updated product distribution system and related processes, and expansion of the Company's brand enhancing activities. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. The Company's net royalty income was $7.4 million in 1999, a $.8 million decrease compared to 1998 net royalty income of $8.2 million. Royalty income from domestic licensees was approximately $2.3 million in 1999 as compared to $2.8 million in 1998 and reflects the Company's decision not to renew its domestic outerwear license (which expired in May, 1998). Royalty income from foreign licensees was approximately $5.1 million in 1999 as compared to $5.4 million in 1998. The Company's 1999 foreign licensee royalty income was negatively impacted by adverse economic conditions in Latin America and the Company's decision not to renew the Japanese license agreement (which ended in March, 1998). The Company currently anticipates modest growth in its net royalty income from licensees in 2000. Operating Income As a result of the factors described above, the Company's 1999 operating income improved to $53.7 million. This represents a 9.7% increase over 1998 operating income of $48.9 million. Other Income (Expense) -Net The Company's 1999 net other income (expense) was a $.5 million expense compared to $.4 million income in 1998. Interest expense increased by approximately $1.1 million in 1999 as a result of borrowings to help finance the Company's Dutch Auction tender offer in November, 1999 and other stock repurchase transactions. Income Taxes The Company's 1999 effective income tax rate was approximately 39.0% as compared to approximately 40.5% in 1998. The Company currently anticipates an effective income tax rate of approximately 39.0% for 2000. The rate reduction in 1999 compared to 1998 is due primarily to the implementation of certain income taxation strategies. Net Income Net income for the year ended January 1, 2000 of $32.4 million represented a $3.1 million (10.6%) increase over net income for the year ended January 2, 1999 of $29.3 million. The Company's ongoing stock repurchase programs and Dutch Auction tender offer resulted in a significant reduction in its weighted-average diluted shares outstanding during 1999. This decrease, combined with the 10.6% increase in net income, resulted in a 30.9% increase in diluted earnings per share for 1999 of $1.99 as compared to $1.52 in 1998. 1998 COMPARED TO 1997 Net Sales Net sales in 1998 were $423.2 million, a $28.0 million (7.1%) increase over 1997 net sales of $395.2 million. A summary of the Company's net sales for the years ended January 2, 1999 and December 31, 1997 follows: Net Sales (in millions) Domestic Wholesale Retail International Total 1998 $ 226.1 $ 191.4 $ 5.7 $ 423.2 1997 214.1 173.9 7.2 395.2 Increase (decrease) 12.0 17.5 (1.5) 28.0 Percent increase (decrease) 5.6% 10.1% (20.8%) 7.1% The Company's 1998 domestic wholesale unit shipments were up approximately 7.8% over 1997. The increases in unit shipments and sales dollars were the result of increased demand for the Company's fashion and classics product offerings. The Company's 1998 increased retail sales resulted from a combination of a 4.9% comparable store sales gain and sales volume from newly opened stores. Comparable store sales for 1998 were favorably impacted by increased sales of Genuine Girl and Genuine Blues branded products for the entire period. These bigger sizes were introduced during the first quarter of 1997. During 1998, the Company opened 10 factory outlet stores, closed 4 factory outlet stores, and closed 3 showcase stores. At January 2, 1999, the Company operated 122 domestic OshKosh B'Gosh retail stores, including 117 factory outlet stores and 5 showcase stores. Gross Profit The Company's gross profit margin as a percent of net sales increased to 39.1% in 1998 compared with 36.5% in 1997. This gross profit margin improvement was due primarily to continued implementation and execution of the Company's global sourcing strategy, improved operating efficiencies at the Company's domestic sewing facilities, and the Company's continuing focus on product design and development activities. During 1998, approximately 58% of units sourced were outside of the United States as compared to 53% in 1997. Selling, General and Administrative Expenses (S,G&A) The Company's S,G&A expenses for 1998 of $124.8 million were $9.4 million over 1997 S,G&A expenses of $115.4 million. As a percent of net sales, S,G&A expenses were 29.5% in 1998 as compared to 29.2% in 1997. The primary reasons for these increased expenses relate to a combination of continued expansion of the Company's retail operations, increased volume of wholesale unit shipments, and expansion of the Company's brand enhancing activities. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. The Company's net royalty income was $8.2 million in 1998, a $.3 million increase over 1997 net royalty income of $7.9 million. Royalty income from domestic licensees was approximately $2.8 million in 1998 as compared to $2.6 million in 1997. Royalty income from foreign licensees was approximately $5.4 million in 1998 as compared to $5.3 million in 1997. The Company's 1998 foreign licensee royalty income was negatively impacted by adverse economic conditions in Asia and the Company's decision not to renew its Japanese license arrangement (which ended in March, 1998). These adverse conditions were offset by increased royalty income from the Company's Canadian and European licensees. Operating Income As a result of the factors described above, the Company's 1998 operating income improved to $48.9 million. This represents a 32.6% improvement over 1997 operating income of $36.9 million. Other Income (Expense) -Net The Company's 1998 net other income decreased to $.4 million as compared to $1.3 million in 1997. The Company's interest income in 1998 was approximately $.9 million lower than in 1997 as a result of significantly lower cash and short-term investments carried by the Company in 1998. Income Taxes The Company's 1998 effective income tax rate was approximately 40.5% as compared to approximately 41% in 1997. Net Income Net income for the year ended January 2, 1999 of $29.3 million represented a $6.7 million (30%) increase over net income for the year ended December 31, 1997 of $22.6 million. The Company's ongoing stock repurchase programs resulted in a reduction in its weighted-average diluted shares outstanding during 1998. This decrease, combined with the 30% increase in net income, resulted in a 49% increase in diluted earnings per share for 1998 of $1.52 as compared to $1.02 in 1997. SEASONALITY OF BUSINESS The Company's business is increasingly seasonal, with highest sales and income in the third quarter, which is the Company's peak wholesale shipping period and a major retail selling season at its retail stores. The Company's second quarter sales and income are the lowest both because of relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 2000 quarterly sales and income. YEAR 2000 CONSIDERATIONS The Company did not experience any significant operating problems as a result of Year 2000. The Company executed its Year 2000 program primarily with existing internal resources and some outside consultants. The Company spent an aggregate of approximately $1 million on its remediation efforts. All costs associated with the Year 2000 compliance were funded with cash flow generated from operations and were expensed as incurred. These amounts did not have a material impact on the Company's business, operations, or financial condition. FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY At January 1, 2000, the Company's cash, cash equivalents, and investments were $9.6 million, compared to $16.8 million at the end of 1998. This reduction is attributable to the Company's stock repurchases, offset in part by cash generated from operations. Net working capital at January 1, 2000 was $27.3 million compared to $76.9 million at January 2, 1999, and $82.8 million at December 31, 1997. Accounts receivable at January 1, 2000 were $16.5 million compared to $24.0 million at January 2, 1999. The decrease in accounts receivable is attributable to reduced wholesale shipments in the fourth quarter of 1999. Inventories at January 1, 2000 were $48.5 million, compared to $65.6 million at the end of 1998 as part of a planned reduction in inventory levels. Management believes that January 1, 2000 inventory levels are generally appropriate for anticipated 2000 business activities. The reduction in working capital is attributable to reductions in accounts receivable and inventories, and reflecting the current portion of long term debt related to the Company's stock repurchases. Cash provided by operations amounted to approximately $70.0 million in 1999, compared to $42.2 million in 1998 and $35.9 million in 1997. The increase in cash provided by operating activities in 1999 over 1998 is primarily attributable to reduced accounts receivable and inventory levels. The increase in cash provided by operating activities in 1998 compared to 1997 is primarily attributable to improved net income in 1998. Cash used in investing activities totaled $6.2 million in 1999, compared to $2.2 million in 1998, and $6.5 million in 1997. Capital expenditures were $7.1 million in 1999, compared with $11.4 million in 1998, and $6.6 million in 1997, and are currently budgeted at $10.0 million for 2000. Capital expenditures in 1999 related primarily to retail store expansions and remodeling, while capital expenditures in 1998 related primarily to the Company's upgrade of its distribution systems and Whitehouse, Tennessee distribution facilities. These capital expenditures were offset by reductions in the levels of investments. Depreciation and amortization are currently budgeted at $8.0 million for 2000. Cash used in financing activities totaled $69.0 million in 1999, compared to $39.5 million in 1998, and $46.9 million in 1997. The Company's primary financing activities consisted of stock repurchase transactions, dividends, and borrowings under the Company's new credit agreement. In November, 1999, the Company acquired 3,498,300 shares of its Class A common stock and 6,805 shares of its Class B common stock in conjunction with its Dutch Auction tender offer. Under the term of the Dutch Auction tender offer, all shares purchased were at $21 per share, which totals approximately $72.9 million. On December 6, 1999 the Company's Board of Directors authorized a repurchase program for up to 1.5 million shares of its Class A common stock. During 1999, the Company repurchased 253,900 shares of its Class A common stock under this program for approximately $4.8 million. For all of 1999, the Company repurchased 5,446,642 shares of its Class A common stock and 6,805 shares of its Class B common stock under its current and prior repurchase programs and Dutch Auction tender offer for approximately $110.4 million. During 1998, the Company repurchased 1,888,500 shares of its Class A common stock under its current and prior repurchase programs for approximately $37.6 million and during 1997, the Company repurchased approximately 3,796,000 shares of its Class A common stock and approximately 84,000 shares of its Class B common stock for approximately $44 million. On August 10, 1998, the Company's Board of Directors declared a two-for-one stock split for Class A and Class B common stock, effected in the form of a stock dividend. Dividends on the Company's Class A and Class B common stock totaled $.20 per share and $.17 per share, respectively, in 1999 and $.17 per share and $.145 per share, respectively, in 1998. In November, 1999, the Company entered into a new unsecured credit agreement with a number of banks that provides for a five year $125 million term loan for the repurchase of shares of its common stock through May, 2000 and a three year $75 million revolving credit facility available for general corporate purposes, including cash borrowings and issuances of letters of credit. The revolving credit facility expires November 3, 2002. There were no outstanding borrowings against the revolving credit arrangement at January 1, 2000, with $44 million outstanding on the term loan. The Company believes that the new credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs as well as its capital expenditures, required payments on long term debt, and business development needs. FORWARD-LOOKING STATEMENTS This report contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding future unit shipments, planned store expansions and store closings, future comparable store net sales, future inventory levels and valuation implications, future growth in royalty income, future effective income tax rate, planned capital expenditures and depreciation and amortization expenses, and future cash needs. In addition, from time to time, the Company may issue press releases and other written communications, and representatives of the Company may make oral statements which contain forward-looking information. Except for historical information, matters discussed in such oral and written communications, including this report, are forward- looking statements. Such forward-looking statements are based on current assumptions and expectations that involve risks and uncertainties. Actual results may differ materially. The Company's future results of operations and financial position can be influenced by such factors as the level of consumer spending for apparel, particularly in the children's wear segment, overall consumer acceptance of the Company's product styling, the financial strength of the retail industry, including, but not limited to, business conditions and the general economy, natural disasters, competitive factors, risk of non-payment of accounts receivable, the unanticipated loss of a major customer, failure of Company suppliers to timely deliver needed raw materials, as well as risk associated with foreign operations. In addition, the inability to ship Company products within agreed timeframes due to unanticipated manufacturing delays or the failure of Company contractors to deliver products within scheduled timeframes are risk factors in ongoing business. As a part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia. If financial, political or other related difficulties were to adversely impact the Company's contractors in the Asian region, it could disrupt the supply of products contracted for by the Company. The forward-looking statements included herein are only made as of the date of this report. The Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk The credit agreement entered into by the Company in November, 1999 provides for $125 million to finance repurchases of the Company's common stock and a $75 million revolving credit facility available for general corporate purposes. Borrowings under this agreement bear interest at a variable rate, based on the London Interbank Offered Rates. Accordingly, the Company is affected by interest rate changes on its long-term debt. Management monitors this risk by carefully analyzing the short- term rates on its long-term debt portfolio and comparable long- term interest rates. The Company does not presently hedge its interest rate risk. With respect to this debt, a 1% change in interest rates would not have a material impact on the Company's interest expense for fiscal 2000. Foreign Currency Risk The Company contracts for the manufacture of apparel with contractors in Asia, Central America, and Mexico. While these contracts are stated in terms of U.S. dollars, there can be no assurance that the cost for the production of the Company's products will not be affected by exchange fluctuations between the United States and the local currencies of these contractors. Due to the number of currencies involved, the Company cannot quantify the potential impact of future currency fluctuations on net income in future years. The Company does not hedge its exchange rate risk. Inflation Risk The Company manages its inflation risks by ongoing review of product selling prices and production costs. Management does not believe that inflation risks are material to the Company's business, its consolidated financial position, results of operations, or cash flows. Investment Risk The Company does not believe it has material exposure to market risk with respect to any of its investments; the Company does not utilize market rate sensitive instruments for trading or other purposes. For information regarding the Company's investments, refer to the "Cash equivalents" and "Investments" notes to the consolidated financial statements on page 19 of this Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Financial Statements: Report of Independent Auditors 24 Consolidated Balance Sheets - January 1, 2000 and January 2, 1999 25 Consolidated Statements of Income - years ended January 1, 2000, January 2, 1999 and December 31, 199 26 Consolidated Statements of Changes in Shareholders' Equity - years ended January 1, 2000, January 2, 1999 and December 31, 1997 27 Consolidated Statements of Cash Flows - years ended January 1, 2000, January 2, 1999 and December 31, 1997 28 Notes to Consolidated Financial Statements 29 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors OshKosh B'Gosh, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of OshKosh B'Gosh, Inc. and subsidiaries (the Company) as of January 1, 2000 and January 2, 1999 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended January 1, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at January 1, 2000 and January 2, 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 1, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Milwaukee, Wisconsin January 28, 2000 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except per share amounts) January 1, January 2, 2000 1999 ASSETS Current assets Cash and cash equivalents $ 9,093 $ 14,308 Investments 511 2,500 Accounts receivable, less allowances of $3,790 in 1999 and $4,240 in 1998 16,514 24,008 Inventories 48,495 65,584 Prepaid expenses and other current assets 774 862 Deferred income taxes 14,200 16,700 Total current assets 89,587 123,962 Property, plant and equipment, net 31,648 32,380 Deferred income taxes 5,400 4,900 Other assets 3,064 1,326 Total assets $ 129,699 $ 162,568 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ 15,000 $ -- Accounts payable 10,269 7,638 Accrued liabilities 36,976 39,448 Total current liabilities 62,245 47,086 Long-term debt 29,000 -- Employee benefit plan liabilities 15,015 12,465 Commitments -- -- Shareholders' equity Preferred stock, par value $.01 per share: Authorized-1,000,000 shares; Issued and outstanding-None -- -- Common stock, par value $.01 per share: Class A, authorized-30,000,000 shares; Issued and outstanding- 10,361,189 shares in 1999, 15,668,859 shares in 1998 104 157 Class B, authorized-3,750,000 shares; Issued and outstanding-2,240,605 shares in 1999, 2,260,522 shares in 1998 23 23 Retained earnings 23,312 102,837 Total shareholders' equity 23,439 103,017 Total liabilities and shareholders' equity $ 129,699 $ 162,568 See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollars in thousands, except per share amounts) For the Year Ended January 1, January 2, December 31, 2000 1999 1997 Net sales $ 429,786 $ 423,232 $ 395,196 Cost of products sold 249,592 257,700 250,815 Gross profit 180,194 165,532 144,381 Selling, general and administrative expenses 133,977 124,798 115,439 Royalty income, net (7,435) (8,186) (7,945) Operating income 53,652 48,920 36,887 Other income (expense): Interest expense (1,469) (399) (305) Interest income 1,092 871 1,797 Miscellaneous (88) (67) (192) Other income (expense) - net (465) 405 1,300 Income before income taxes 53,187 49,325 38,187 Income taxes 20,739 19,990 15,629 Net income $ 32,448 $ 29,335 $ 22,558 Net income per common share Basic $ 2.01 $ 1.54 $ 1.02 Diluted 1.99 1.52 1.02 See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Shareholders' Equity (Dollars and shares in thousands, except per share amounts) Common Stock Additional Other Class A Class B Paid-In Retained Comprehensive Shares Amount Shares Amount Capital Earnings Income Balance - December 31, 1996 21,050 $211 2,522 $25 $ -- $137,231 $610 Net income -- -- -- -- -- 22,558 -- Dividends - Class A ($.14 per share) -- -- -- -- -- (2,698) -- - Class B ($.12 per share) -- -- -- -- -- (293) -- Foreign currency translation Adjustments -- -- -- -- -- -- (610) Conversions of common shares 74 -- (74) -- -- -- -- Stock options exercised 18 -- -- -- 126 -- -- Repurchase and retirement of common shares, net (3,796) (38) (84) (1) (126) (43,838) -- Balance - December 31, 1997 17,346 173 2,364 24 -- 112,960 -- Net income -- -- -- -- -- 29,335 -- Dividends - Class A ($.17 per share) -- -- -- -- -- (2,850) -- - Class B ($.145 per share) -- -- -- -- -- (337) -- Conversions of common shares 104 1 (104) (1) -- -- -- Stock options exercised 110 1 -- -- 779 -- -- Income tax benefit from stock options exercised (2) -- -- -- 550 -- -- Repurchase and retirement of common shares, net (1,889) (18) -- -- (1,329) (36,271) -- Balance - January 2, 1999 15,669 157 2,260 23 -- 102,837 -- Net Income -- -- -- -- -- 32,448 -- Dividends - Class A ($.20 per share) -- -- -- -- -- (2,730) -- - Class B ($.17 per share) -- -- -- -- -- (383) -- Conversions of common shares 13 -- (13) -- -- -- -- Stock options exercised 126 1 -- -- 812 -- Income tax benefit from stock options exercised -- -- -- -- 650 -- -- Repurchase and retirement of common shares,net (5,447) (54) (6) -- (1,462) (108,860) -- Balance - January 1, 2000 10,361 $104 2,241 $23 $ -- $ 23,312 $-- See notes to consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) For the Year Ended January 1, January 2, December 31, 2000 1999 1997 Cash flows from operating activities Net income $ 32,448 $ 29,335 $ 22,558 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,093 8,776 12,301 Amortization 965 630 707 Loss on disposal of assets 96 160 275 Deferred income taxes 2,000 (300) 600 Benefit plan expense, net of contributions 2,550 (880) (318) Changes in operating assets and liabilities: Accounts receivable 7,494 (730) (2,774) Inventories 17,089 2,642 (1,427) Prepaid expenses and other current assets 88 403 625 Accounts payable 2,631 (2,635) 4,865 Accrued liabilities (2,472) 4,840 (1,482) Net cash provided by operating activities 69,982 42,241 35,930 Cash flows from investing activities Additions to property, plant and equipment (7,148) (11,420) (6,602) Proceeds from disposal of assets 691 3,054 2,853 Sale of investments, net 1,989 6,200 1,340 Changes in other assets (1,703) (71) (4,075) Net cash used in investing activities (6,171) (2,237) (6,484) Cash flows from financing activities Principal from long-term borrowings 44,000 -- -- Dividends paid (3,113) (3,187) (2,991) Net proceeds from issuance of common shares 1,463 1,330 126 Repurchase of common shares (110,376) (37,618) (44,003) Other (1,000) -- -- Net cash used in financing activities (69,026) (39,475) (46,868) Net increase (decrease) in cash and cash equivalents (5,215) 529 (17,422) Cash and cash equivalents at beginning of year 14,308 13,779 31,201 Cash and cash equivalents at end of year $ 9,093 $ 14,308 $ 13,779 Supplementary disclosures Cash paid for interest $ 512 $ 224 $ 178 Cash paid for income taxes $ 19,182 $ 20,112 $ 13,565 See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Business OshKosh B'Gosh, Inc. and its wholly-owned subsidiaries (the Company) are engaged primarily in the design, sourcing, and marketing of apparel to wholesale customers and through Company owned retail stores. Principles of consolidation The consolidated financial statements include the accounts of all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash equivalents Cash equivalents consist of highly liquid debt instruments such as money market accounts and commercial paper with original maturities of three months or less. The Company's policy is to invest cash in conservative instruments as part of its cash management program and to evaluate the credit exposure of any investment. Cash equivalents are stated at cost, which approximates market value. Investments Investments are classified as available-for-sale securities and are highly liquid debt instruments. These investments are stated at cost, which approximates market value. Inventories Inventories are stated at the lower of cost or market. Inventories stated on the last-in, first-out (LIFO) basis represent 99.5% of total 1999 and 99.1% of total 1998 inventories. Remaining inventories are valued using the first-in, first-out (FIFO) method. Property, plant and equipment Property, plant and equipment are carried at cost or at management's estimate of fair market value if considered impaired under the provisions of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Depreciation and amortization for financial reporting purposes are calculated using the straight-line method based on the following useful lives: Years Land improvements 10 to 15 Buildings 10 to 40 Leasehold improvements 5 to 10 Machinery and equipment 3 to 10 Revenue recognition Revenue within wholesale operations is recognized at the time merchandise is shipped to customers. Retail store revenues are recognized at the time of sale. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Advertising Advertising costs are expensed as incurred and totaled $13,803, $12,377, and $11,165, in 1999, 1998, and 1997, respectively. Earnings per share The numerator for the calculation of basic and diluted earnings per share is net income. The denominator is computed as follows (in thousands): 1999 1998 1997 Denominator for basic earnings per share- weighted average shares 16,112 19,072 22,033 Employee stock options (treasury stock method) 208 289 151 Denominator for diluted earnings per share 16,320 19,361 22,184 In 1999, the Company had 361,000 employee stock options that are antidilutive and, accordingly, are not included in the diluted earnings per share calculations. No options were antidilutive in 1998 or 1997. Fiscal year The Company adopted a change in its fiscal year during 1998 from a calendar year to a 52/53 week year ending on the Saturday closest to December 31. Fiscal 1999 included 52 weeks and ended on January 1, 2000. Fiscal 1998 included 52 weeks plus three days and ended on January 2, 1999. Fiscal 1997 was a calendar year ended on December 31. All references to years in this report refer to the fiscal years described above. Comprehensive income Comprehensive income equaled net income in 1999 and 1998, and amounted to $21,948 in 1997. The difference between net income and comprehensive income in 1997 represents foreign currency translation adjustments. NOTE 2. INVENTORIES A summary of inventories follows: January 1, January 2, 2000 1999 Finished goods $ 37,262 $ 55,005 Work in process 9,352 9,333 Raw materials 1,881 1,246 Total $ 48,495 $ 65,584 The replacement cost of inventory exceeds the above LIFO costs by $11,381 and $13,899 at January 1, 2000 and January 2, 1999, respectively. Partial liquidation of certain LIFO layers in 1999, 1998, and 1997 increased net income by approximately $1,338, $391, and $577, respectively. NOTE 3. PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment follows: January 1, January 2, 2000 1999 Land and improvements $ 3,191 $ 3,246 Buildings 13,972 13,822 Leasehold improvements 15,613 14,659 Machinery and equipment 34,342 33,861 Total 67,118 65,588 Less: accumulated depreciation and amortization 35,470 33,208 Property, plant and equipment, net $ 31,648 $ 32,380 NOTE 4. CREDIT AGREEMENTS In November, 1999, the Company entered into a new unsecured credit agreement with a number of banks that provides for a five year $125,000 term loan for the repurchase of shares of its common stock through May, 2000, and a three year $75,000 revolving credit facility available for general corporate purposes, including cash borrowings and issuances of letters of credit. The revolving credit facility expires November 3, 2002. Under the terms of the agreement, interest rates are determined at the time of borrowing and are based on London Interbank Offered Rates plus additional basis points based on the Company's financial ratios (effectively 8.0% at January 1, 2000). Commitment fees of .275% are required on the unused revolving credit facility and term loan. The Company is required to maintain certain financial ratios in connection with this agreement. There were no outstanding borrowings against the revolving credit arrangement at January 1, 2000, with $44,000 outstanding on the term loan which is payable in annual installments of $15,000. Letters of credit of approximately $22,509 were outstanding at January 1, 2000, with $52,491 of the unused revolving credit facility available for borrowing. Annual maturities of principal on long-term debt are as follows: Fiscal Year 2000 $ 15,000 2001 15,000 2002 14,000 Total $ 44,000 NOTE 5. ACCRUED LIABILITIES A summary of accrued liabilities follows: January 1, January 2, 2000 1999 Compensation $ 5,780 $ 5,051 Workers' compensation 9,550 10,250 Income taxes 5,468 6,627 Restructuring costs 2,976 4,032 Other 13,202 13,488 Total $ 36,976 $ 39,448 In 1996, the Company recorded special charges related to the discontinuance of the Company's Genuine Kids retail store chain, wind down of the Company's European subsidiary and closing certain manufacturing facilities. The restructuring reserve at January 1, 2000 is considered adequate for remaining plans and related contingencies. NOTE 6. LEASES The Company leases certain property and equipment including retail sales facilities and regional sales offices under operating leases. Certain leases provide the Company with renewal options. Leases for retail sales facilities provide for minimum rentals plus contingent rentals based on sales volume. Minimum future rental payments under noncancellable operating leases are as follows: Fiscal Year 2000 $ 12,706 2001 10,698 2002 9,003 2003 7,402 2004 4,643 Thereafter 3,857 Total minimum lease payments $ 48,309 Total rent expense charged to operations for all operating leases is as follows: 1999 1998 1997 Minimum rentals $ 15,754 $ 16,352 $ 15,005 Contingent rentals 1,191 961 800 Total rent expense $ 16,945 $ 17,313 $ 15,805 NOTE 7. INCOME TAXES Income tax expense (benefit) is comprised of the following: 1999 1998 1997 Current: Federal $ 15,322 $ 16,666 $ 12,396 State and local 3,417 3,624 2,633 Deferred 2,000 (300) 600 Total $ 20,739 $ 19,990 $ 15,629 Deferred tax assets and liabilities relate to temporary differences between the financial reporting and income tax basis of Company assets and liabilities, and include the following components: January 1, January 2, 2000 1999 [Assets (Liabilities)] Current deferred taxes Accounts receivable allowances $ 1,274 $ 1,225 Inventory valuation 3,841 4,964 Accrued liabilities 6,169 6,584 Restructuring costs 1,153 2,052 Valuation reserves and other 1,763 1,875 Total net current deferred tax assets $ 14,200 $ 16,700 Non-current deferred taxes Depreciation $ (195) $ 61 Deferred employee benefits 5,758 4,940 Trademark 478 501 Other (641) (602) Total net non-current deferred tax assets $ 5,400 $ 4,900 Substantially all income is subject to United States taxation. A reconciliation of the federal statutory income tax rate to the effective tax rates reflected in the consolidated statements of income follows: 1999 1998 1997 Federal statutory tax rate 35.0% 35.0% 35.0% Differences resulting from: State and local income taxes, net of federal income tax benefit 4.5 4.6 4.7 Other (.5) .9 1.2 Total 39.0% 40.5% 40.9% NOTE 8. RETIREMENT PLANS The Company has defined contribution and defined benefit pension plans covering substantially all employees. Charges to operations by the Company for these plans totaled $3,454, $3,017, and $2,950 for 1999, 1998, and 1997, respectively. Defined benefit plans The Company sponsors several defined benefit pension plans covering certain hourly and salaried employees. The Company also sponsors an unfunded defined benefit postretirement life and health insurance plan that covers qualifying salaried employees. The actuarial computations utilized the following assumptions as applicable for the most significant plans: 1999 1998 1997 Discount rate 7.5% 6.5% 7.0% Expected long-term rate of return on assets 9.0% 9.0% 9.0% Rates of increase in compensation levels 0-4.5% 0-4.5% 0-4.5% Net periodic pension cost was comprised of: 1999 1998 1997 Service cost $ 2,276 $ 2,052 $ 1,685 Interest cost 2,248 2,006 2,004 Expected return on plan assets (2,841) (2,531) (2,123) Amortization of prior service cost 468 347 457 Amortization of transition obligation (156) (156) (156) Recognized actuarial gain (313) (401) (165) Net periodic pension cost $ 1,682 $ 1,317 $ 1,702 A reconciliation of changes in pension benefit obligation and plan assets follows: 1999 1998 Change in benefit obligation Benefit obligation at beginning of year $ 34,501 $ 31,252 Service cost 2,276 2,052 Interest cost 2,248 2,006 Amendments 270 30 Actuarial (gain) loss (5,850) 764 Benefits paid (1,171) (1,603) Benefit obligation at end of year 32,274 34,501 Change in plan assets Fair value of plan assets at beginning of year 28,865 27,864 Actual return on plan assets 4,592 2,188 Company contributions 2,534 416 Benefits paid (1,171) (1,603) Fair value of plan assets at end of year 34,820 28,865 Funded status Funded status of plan (underfunded) 2,546 (5,636) Unrecognized net actuarial loss (12,944) (4,599) Unrecognized prior service cost 2,316 2,514 Unrecognized transition obligation (615) (771) Prepaid (accrued) benefit cost $ (8,697) $ (8,492) Amounts recognized in the Consolidated Balance Sheets: 1999 1998 Accrued benefit liability $ (9,217) $ (8,940) Prepaid benefit cost 520 448 $ (8,697) $ (8,492) Amounts applicable to the Company's pension plans with projected benefit obligations (PBO) or accumulated benefit obligation (ABO) in excess of plan assets are as follows: PBO and PBO > ABO > ABO > Assets Assets Assets January 1, January 2, January 2, 2000 1999 1999 Projected benefit obligations $ 5,293 $ 33,244 $ 6,744 Accumulated benefit obligations 4,524 24,600 5,768 Fair value of plan assets 2,523 27,582 4,134 Defined contribution plans The Company maintains a defined contribution retirement plan covering certain salaried employees. Annual contributions are discretionary and are determined by the Company's Executive Committee. Charges to operations by the Company for contributions under this plan totaled $1,125, $1,179, and $828, for 1999, 1998, and 1997, respectively. The Company maintains a retirement plan covering certain salaried and hourly employees pursuant to Section 401(k) of the Internal Revenue Code, whereby participants may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. The plan provides for a matching contribution by the Company which amounted to approximately $427, $413, and $376, for 1999, 1998, and 1997, respectively. The Company also has a supplemental retirement program for designated employees. Annual provisions to this unfunded plan are discretionary and are determined by the Company's Executive Committee. Charges to operations by the Company for additions to this plan totaled $220, $108, and $44 for 1999, 1998, and 1997, respectively. Deferred employee benefit plans The Company has deferred compensation and supplemental retirement arrangements with certain key officers. NOTE 9. COMMON STOCK The Company maintains a stock conversion plan whereby shares of Class B common stock may be converted to an equal number of Class A common shares. The Company's common stock authorization provides that dividends be paid on both the Class A and Class B common stock at any time that dividends are paid on either. Whenever dividends (other than dividends of Company stock) are paid on the common stock, each share of Class A common stock is entitled to receive 115% of the dividend paid on each share of Class B common stock. The Class A common stock shareholders are entitled to receive a liquidation preference of $1.875 per share before any payment or distribution to holders of the Class B common stock. Thereafter, holders of the Class B common stock are entitled to receive $1.875 per share before any further payment or distribution to holders of the Class A common stock. Thereafter, holders of the Class A common stock and Class B common stock share on a pro rata basis in all payments or distributions upon liquidation, dissolution, or winding up of the Company. The Class A common stock shareholders have the right to elect or remove, as a class, 25% of the entire board of directors of the Company. Class B common stock shareholders are entitled to elect or remove, as a class, the other 75% of the directors (subject to any rights granted to any series of preferred stock) and are entitled to one vote per share on all matters (including an increase or decrease in the unissued authorized capital stock of any class) presented to the shareholders for vote. In November, 1999, the Company acquired 3,498,300 shares of its Class A common stock and 6,805 shares of its Class B common stock in conjunction with its Dutch Auction tender offer. Under the term of the Dutch Auction tender offer, all shares purchased were at $21 per share, which totals approximately $72,900. On December 6, 1999, the Company's Board of Directors authorized a repurchase program for up to 1.5 million shares of its Class A common stock. During 1999, the Company repurchased 253,900 shares of its Class A common stock under this program for approximately $4,800. For all of 1999, the Company repurchased 5,446,642 shares of its Class A common stock and 6,805 shares of its Class B common stock under its current and prior repurchase programs and Dutch Auction tender offer for approximately $110,400. During 1998, the Company repurchased 1,888,500 shares of its Class A common stock under its current and prior repurchase programs for approximately $37,600 and during 1997, the Company repurchased approximately 3,796,000 shares of its Class A common stock and approximately 84,000 shares of its Class B common stock for approximately $44,000. On August 10, 1998, the Company's Board of Directors declared a two-for-one stock split for Class A and Class B common stock, effected in the form of a stock dividend. Shareholders' equity and all share and per share data have been restated to reflect this dividend. Options The Company has elected to follow Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its employee stock options. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant and the number of shares granted is fixed, no compensation expense is recognized. The Company's 1994 Incentive Stock Option Plan has authorized the grant of options to management personnel and directors for up to 2,940,000 of the Company's Class A common stock. As of January 1, 2000, 1,263,100 shares are available for grant. Options granted generally have 10 year terms and vest ratably over a four year period following date of grant. The following pro forma information regarding net income and net income per share required by SFAS No. 123, "Accounting for Stock Based Compensation," has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1999, 1998, and 1997, respectively: risk- free interest rates of 5.10%, 5.57%, and 6.42%; dividends of $.20 in 1999 and 1998, and $.14 in 1997; volatility factors of the expected market price of the Company's common stock of .575, .472, and .406; and a weighted-average expected life of the option of approximately 8 years. Changes in these subjective assumptions can significantly affect the fair value calculations. The estimated fair value of the options is amortized to expense over the options' vesting period: 1999 1998 1997 Net income as reported $ 32,448 $ 29,335 $ 22,558 Pro forma net income 31,947 28,560 22,230 Net income per common share as reported Basic 2.01 1.54 1.02 Diluted 1.99 1.52 1.02 Pro forma net income per common share Basic 1.98 1.50 1.01 Diluted 1.97 1.48 1.00 A summary of the Company's stock option activity and related information follows: 1999 1998 1997 Weighted- Weighted- Weighted- Options average Options average Options average (000) exercise price (000) exercise price (000) exercise price Outstanding- beginning of year 1,082 $ 11 864 $ 8 604 $ 7 Granted 342 19 347 19 340 8 Exercised (207) 8 (110) 8 (18) 8 Forfeited (24) 14 (19) 13 (62) 8 Outstanding- end of year 1,193 $ 14 1,082 $ 11 864 $ 8 Exerciseable at end of year 448 $ 11 370 $ 8 206 $ 8 Weighted-average fair value of options granted during year $7.70 $ 7.25 $ 2.47
Options outstanding Options exerciseable Weighted- average Weighted- Weighted- Range of Number remaining average Number Average exercise prices outstanding contract life exercise price outstanding exercise $ 7 to $ 9 530 6.4 $ 8 330 $ 8 $ 18 to $ 21 663 8.7 $ 19 118 $ 19 1,193 448
NOTE 10. BUSINESS AND CREDIT CONCENTRATIONS The Company operates principally in one segment: the design, sourcing, and marketing of apparel. Operations of the Company occur primarily within the United States and its customers are not concentrated in any geographic region. The Company provides credit, in the normal course of business, to department and specialty stores. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. In 1999, 1998, and 1997, sales to a wholesale customer, as a percentage of net sales, amounted to approximately 12%, 12%, and 11%, respectively. NOTE 11. LITIGATION The Company is subject to various legal actions and proceedings in the normal course of business. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe the final outcome will have a significant effect on the consolidated financial statements. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 2000. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 2000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 2000. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 2000. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) (1) Financial Statements Financial statements for OshKosh B'Gosh, Inc. listed in the Index to Financial Statements and Supplementary Data are filed as part of this Annual Report. (2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts Schedules not included have been omitted because they are not applicable, immaterial, or the required information is included in the consolidated financial statements or notes thereto. (3) Index to Exhibits (b) Reports on Form 8-K None (c) Exhibits 3.1 Certificate of Incorporation of OshKosh B'Gosh, Inc., as restated, May 7, 1993, previously filed as Exhibit 99.3 to the Company's Current Report on Form 8-K dated October 25, 1995, Commission File Number 0-13365, is incorporated herein by reference. 3.2 By-laws of OshKosh B'Gosh, Inc., as amended, previously filed as exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 0-13365, is incorporated herein by reference. *10.1 OshKosh B'Gosh, Inc. Profit Sharing Plan, as amended. *10.2 OshKosh B'Gosh, Inc. Pension Plan, as amended. *10.3 OshKosh B'Gosh, Inc. Executive Non-Qualified Profit Sharing Plan, as amended. *10.4 OshKosh B'Gosh, Inc. Excess Benefit Plan, as amended. *10.5 OshKosh B'Gosh, Inc. Executive Deferred Compensation Plan, as amended. *10.6 OshKosh B'Gosh, Inc. Officers Medical and Dental Reimbursement Plan, as amended, previously filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 0-13365, is incorporated herein by reference. *10.7 OshKosh B'Gosh, Inc. 1994 Incentive Stock Plan, as amended. 10.8 OshKosh B'Gosh, Inc. 1995 Outside Director's Stock Option Plan, as amended, previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 0-13365, is incorporated herein by reference. *10.9 OshKosh B'Gosh, Inc. Flexible Nonstandardized 401(k) Adoption Agreement and Smith Barney Prototype Defined Contribution Plan Document #05, as amended. 10.10 Credit agreement between OshKosh B'Gosh, Inc. and Firstar Bank Milwaukee, N.A. and participating banks, dated as of November 3, 1999. 21. The following is a list of subsidiaries of the Company as of January 1, 2000. The consolidated financial statements reflect the operations of all subsidiaries as they existed on January 1, 2000. State or Other Jurisdiction of Incorporation or Name of Subsidiary Organization Grove Industries, Inc. Delaware Manufacturera International Apparel, S.A. Honduras OshKosh B'Gosh International Sales, Inc. Virgin Islands OshKosh B'Gosh Asia/Pacific Ltd. (Inactive) Hong Kong OshKosh B'Gosh Deutschland GmbH (Inactive) Germany OshKosh B'Gosh Investments, Inc. Nevada Oshkosh B'Gosh Retail, Inc. Delaware Millennia Manufacturing SRL de CV Mexico 23. Consent of Ernst & Young LLP, Independent Auditors 27. Financial Data Schedule * Represents a plan that covers compensation, benefits and/or related arrangements for executive management. SIGNATURES Date: March 28, 2000 Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OSHKOSH B'GOSH, INC. By: /s/DOUGLAS W. HYDE Chairman of the Board, President and Chief Executive Officer By: /s/DAVID L. OMACHINSKI Vice President-Finance, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Signature Title /S/ DOUGLAS W. HYDE Chairman of the Board, President and Chief Executive Officer /S/ MICHAEL D. WACHTEL Executive Vice President, Chief Operating Officer /S/ DAVID L. OMACHINSKI Vice President-Finance, Treasurer and Chief Financial Officer /S/ STEVEN R. DUBACK Secretary and Director /S/ WILLIAM F. WYMAN Vice President Domestic Licensing /S/ ORREN J. BRADLEY Chairman, Audit Committee Date: March 28, 200 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts (Dollars in Thousands) 1999 1998 1997 Accounts receivable - allowances: Balance at beginning of period $ 4,240 $ 4,225 $ 5,474 Charged to costs and expenses 17,437 15,997 11,836 Deductions - bad debts written off, net of recoveries and other allowances (17,887) (15,982) (13,085) Balance at end of period $ 3,790 $ 4,240 $ 4,225 1999 1998 1997 Restructuring costs: Balance at beginning of period $ 4,032 $ 7,938 $ 10,694 Actual restructuring costs incurred (1,056) (3,906) (2,756) Balance at end of period $ 2,976 $ 4,032 $ 7,938 EXHIBIT 23 Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 333-01051 and No. 333-01053) of OshKosh B'Gosh, Inc. of our report dated January 28, 2000, with respect to the consolidated financial statements and schedule of OshKosh B'Gosh, Inc. and Subsidiaries included in this Annual Report (Form 10-K) for the year ended January 1, 2000. ERNST & YOUNG LLP Milwaukee, Wisconsin March 28, 2000 EX-27 2 FINANCIAL DATA SCHEDULE
5 YEAR JAN-01-2000 JAN-01-2000 9093 511 20304 3790 48495 89587 67118 35470 129699 62245 0 0 0 127 23312 129699 429786 437221 249592 133977 88 0 1469 53187 20739 32448 0 0 0 32448 2.01 1.99
EX-1 3 EXHIBIT 10.1 EXHIBIT 10.1 OSHKOSH B'GOSH, INC. PROFIT SHARING PLAN Generally Effective: January 1, 1998 (unless otherwise stated) OSHKOSH B'GOSH, INC. PROFIT SHARING PLAN TABLE OF CONTENTS Chapter Page INTRODUCTION iv I DEFINITIONS 1 II ELIGIBILITY AND PARTICIPATION 9 2.01 Eligibility 9 2.02 Re-Employment 9 2.03 Exclusion of Collective Bargaining Employees 9 2.04 Change in Participant Status 9 2.05 Employees Not in Eligible Class 9 III CONTRIBUTIONS AND ALLOCATIONS 10 3.01 Discretionary Employer Contributions 10 3.02 Allocation of Employer Contributions and Forfeitures 10 IV CONTRIBUTION LIMITATIONS 11 4.01 Definitions 11 4.02 Maximum Annual Additions 12 4.03 Reduction of Annual Additions 13 4.04 Limitations if Participant in Other Plan(s) 13 V INVESTMENT OF ACCOUNTS 15 5.01 Funding Policy 15 5.02 Employee Direction of Investments 15 5.03 Expenses 15 VI VESTING OF ACCOUNTS 16 6.01 100% Vesting Situations 16 6.02 Vesting Schedule 16 6.03 Bad-Boy Provision 16 6.04 Forfeitures 17 6.05 Resumption of Participation 18 VII PAYMENT OF BENEFITS 19 7.01 Commencement of Benefits 19 7.02 Form of Payment 20 7.03 Incidental Death Benefits 20 7.04 Transfers 21 7.05 Distribution of Small Amounts 21 7.06 Direct Rollover 21 VIII TOP-HEAVY PROVISIONS 23 8.01 Provisions Will Control 23 8.02 Definitions 23 8.03 Minimum Allocation 25 8.04 Nonforfeitability of Minimum Allocation 26 8.05 Minimum Vesting Schedules 26 8.06 Compensation Limitation 27 IX ADJUSTMENT OF ACCOUNTS 28 9.01 Allocation of Trust Earnings 28 9.02 Allocation of Employer Contributions and Forfeitures 28 X DESIGNATION OF BENEFICIARY 29 10.01 Beneficiary Designation 29 10.02 Priority If No Designated Beneficiary 29 XI AMENDMENT OF THE PLAN 30 11.01 Amendment by Employer 30 11.02 Conformance to Law 31 11.03 Right to Terminate 31 11.04 Merger, Consolidation, or Transfer 31 XII CLAIMS PROCEDURE 32 12.01 Written Claim 32 12.02 Claim Denial 32 12.03 Request for Review of Denial 32 12.04 Decision on Review 32 12.05 Additional Time 32 XIII MISCELLANEOUS PROVISIONS 33 13.01 Reversion of Assets 33 13.02 Equitable Adjustment 33 13.03 Reasonable Compensation 33 13.04 Indemnification 33 13.05 Protection from Loss 33 13.06 Protection from Liability 34 13.07 Adoption of Rules and Procedures 34 13.08 Assignment of Benefits 34 13.09 Mental Competency 34 13.10 Authentication 35 13.11 Not an Employment Contract 35 13.12 Appointment of Auditor 35 13.13 Uniform Treatment 35 13.14 Interpretation 35 13.15 Plural and Gender 35 13.16 Headings 35 13.17 Expenses 35 13.18 Unclaimed Accounts 36 13.19 Special Provisions Respecting Military Service 36 13.20 Participation of Affiliated Employers 36 XIV EMPLOYER STOCK SAVINGS ACCOUNTS AND INVESTMENTS 37 14.01 Stock Savings Accounts 37 14.02 Employer Stock Defined 37 14.03 Distributions from Stock Savings Accounts 37 14.04 Employer Stock Valuation 37 INTRODUCTION The name of this Plan is the OshKosh B'Gosh, Inc. Profit Sharing Plan. The validity, construction, and all rights granted under this Plan and Trust will be governed, interpreted, and administered by the laws of the United States under the Employee Retirement Income Security Act of 1974 (ERISA, as it may be amended) and the Internal Revenue Code of 1986 (the Internal Revenue Code, as it may be amended). However, regardless of the preceding, to the extent that ERISA and/or the Internal Revenue Code do not preempt local law, the Plan and Trust will be governed, interpreted, construed, and enforced according to the laws of the State of Wisconsin. If the U.S. Department of Labor or the Internal Revenue Service, or both, determines at any time that this Plan does not meet these requirements or that it is being administered or interpreted in a manner inconsistent with these requirements, the Employer may make the appropriate amendments or adjustments, or both, which may be retroactive, to correct the situation, or terminate the Plan. If any provisions of the Plan and Trust are held to be invalid or unenforceable, the remaining provisions will continue to be fully effective. CHAPTER I DEFINITIONS I.1 Unless the context requires otherwise, the capitalized terms defined below will have the following meanings throughout the Plan: (a) Account is any or all of a Participant's Account(s) as may be established by the Committee from time to time to administer the Plan, depending upon the context of the sentence in which it is used. Account(s) shall include: (1) Regular Account (the Account to which are credited Employer Contributions and earnings thereon). (2) Employee Contributions Account (the Account to which are credited voluntary Employee Contributions and earnings thereon). (b) Affiliated Employer means (i) each corporation which is included as a member of a controlled group with the Employer and trades or businesses, whether or not incorporated, which are under common control by or with the Employer within the meanings of Sections 414(b) and (c) of the Internal Revenue Code of 1986, or any amendments thereof and (ii) any other corporation not described in clause (i) acquired by the Employer and designated by it as an Affiliated Employer, except that for purposes of the limitation on Annual Additions, the term shall also include trades or businesses on the basis of a more than 50% test rather than an 80% test. Further, the term shall include any members of the same affiliated service group within the meaning of Code Section 414(m) and any other entity required to be aggregated with the Employer under Code Sections 414(n) or (o). (c) Anniversary Date is December 31. (d) Beneficiary is the person or entity designated in Chapter X to receive any death benefits of a Participant which become payable under the Plan. (e) Break in Service shall mean, as to any Participant who, as of December 31, 1988 or earlier, had incurred a One Year Break in Service after termination of employment. A One Year Break in Service means a Plan Year in which the Employee does not complete an aggregate of more than 500 Hours of Service with the Employer or Affiliated Employers. As to any Participant who, as of December 31, 1988 or earlier, has not incurred a Break in Service under the rules then in existence, and as to terminations of employment on and after January 1, 1989, a Break in Service shall be any subsequently ending and consecutive five One Year Breaks in Service. Special provisions with respect to military service are contained in Section 13.19 hereof. (f) Code means the Internal Revenue Code of 1986, as amended and as it may be amended. (g) Committee is the organization appointed by the Board of Directors of the Employer (which may name itself as the Committee) for purposes of overseeing the administration of the Plan, and performing any other duties specified in this Plan. A Committee member may resign or be removed at any time by the Board of Directors of the Employer by written notice. To assist it in its duties, the Committee may employ agents or legal counsel. Any such Committee may in its regulations or by action delegate the authority to any one or more of its members to take any action on behalf of the Committee and as to such actions, no meetings or unanimous consent shall be required. The Committee may also act at a meeting or by its unanimous written consent. A majority of the members of the Committee shall constitute a quorum for the transaction of business and shall have full power to act hereunder. All decisions shall be made by vote of the majority present at any meeting at which a quorum is present, except for actions in writing without a meeting which must be unanimous. The Committee may appoint a Secretary who may, but need not, be a member of the Committee. The Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs. Any absent Committee member, and any dissenting Committee member who (at the time of the making of any decision by the majority) registers his dissent in writing delivered at that time to the other Committee members, shall be immune to the fullest extent permitted by law from any and all liability occasioned by or resulting from the decision of the majority. All rules and decisions of the Committee shall be uniformly and consistently applied to all persons in similar circumstances. The Committee shall be entitled to rely upon the Participating Employers' records as to information pertinent to calculations or determinations made pursuant to the Plan. A member of the Committee may not vote or decide upon any matter relating solely to himself or vote in any case in which his individual right of claim to any benefit under the Plan is particularly involved. If, in any case in which a Committee member is so disqualified to act, the remaining members cannot agree, then, the President of the Employer will appoint a temporary substitute member to exercise all of the powers of the disqualified member concerning the matter in which that member is disqualified to act. In the event a dispute arises under the Plan and Trust, the Committee will be the authorized agent for the service of legal process. (h) "Compensation" means total wages, salaries, fees and other amounts received for a particular Plan Year (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment by the Participant from a Participating Employer to the extent that the amounts are includable in gross income (or such Compensation paid or accrued for Plan Years prior to January 1, 1991), and including any elective contributions not otherwise includable in income under a Code Section 125 cafeteria plan or Section 401(k) plan, but excluding reimbursements or other allowances, fringe benefits (cash and non-cash, including, without limitation, any income arising in connection with any stock options, restricted stock or other equity based incentives relating to stock of the Employer), moving expenses, deferred compensation and welfare benefits. In the Plan Year in which an Employee becomes a Participant, for purposes of allocating Employer Contributions, Compensation includes only his Compensation after he becomes a Participant under Chapter II. However, for any Plan Year beginning after December 31, 1988, Compensation in excess of $200,000 (as adjusted as permitted under Code Section 401(a)(17) from time to time) shall be disregarded. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the plan shall not exceed the OBRA `93 annual compensation limit. The OBRA `93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA `93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA `93 annual compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current plan year, the Compensation for that prior determination period is subject of the OBRA `93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day to the first Plan Year beginning on or after January 1, 1994, the OBRA `93 annual compensation limit is $150,000. From and after January 1, 1999, in determining the Compensation of a Participant who is a highly compensated employee as defined in Code Section 414(q) for a Plan Year, all Compensation in excess of $100,000 shall be disregarded. (i) Contributions to the Plan by the Employer and the Participant shall include: (1) "Employer Contributions" shall mean contributions made to the Plan by a Participating Employer. (2) "Employee Contributions" shall mean voluntary Employee contributions made on an after-tax basis. (j) Date of Employment means: (1) the day on which the Employee performs his first Hour of Service on or after the date on which he is employed by the Employer or an Affiliated Employer, or (2) the date on which the Employee performs his first Hour of Service on or after the date on which he is re-employed following a One Year Break in Service. (k) Effective Date of the Plan is January 1, 1952. The Effective Date of this amendment and restatement is January 1, 1998, unless otherwise provided herein. (l) Employee is any person employed directly by the Employer or an Affiliated Employer and for whom the Employer or an Affiliated Employer pays Social Security taxes and who is a salaried employee, but excluding account executives, national account executives, account representatives, sales representatives, store managers, district sales managers, and regional sales managers. By amendment to the Plan effective January 1, 1989, certain classes of employees were excluded from the Plan (the Excluded Group). Individuals who were in the Excluded Group with an undistributed account under the Plan as of July 1, 1989 became 100% vested as of that date, regardless of their years of vesting service, notwithstanding any other provision of this Plan. No further Employer Contributions or forfeitures shall be allocated to the accounts of Participants in the Excluded Group after January 1, 1989, for so long as such individuals remain in the Excluded Group after January 1, 1989, but such account shall continue to be adjusted for investment results of the Trust Fund and become subject to distribution in accordance with Chapter VII hereof. Any individual who was in the Excluded Group but who again became an eligible Employee because of the amendment of this Section as of January 1, 1995 shall be treated from and after that date the same as any other eligible Employee hereunder and if any such individual is not already 100% vested, a separate Regular Account shall be established for such individual subject to the vesting schedule under Section 6.02 and the other vesting provisions of this Plan. Also excluded is any person who is classified by the Employer or an Affiliated Employer as other than as an Employee, for the entire period of such classification, without regard to any subsequent reclassification which may occur by operation of law or otherwise. Leased Employees (as defined in Code Section 414(n)) shall not be included even though it is recognized that such leased employees shall be included for purposes of nondiscriminatory testing under Code Section 410. (m) Employer is OshKosh B'Gosh, Inc. and any successor corporation or partnership by merger, purchase, or otherwise. Unless specifically included, Absorba, Inc. and Essex Outfitters, Inc. and other subsidiaries of OshKosh B'Gosh, Inc. are not considered as an Employer. Due to the change of Essex Outfitters from a subsidiary to a division as of May 31, 1994, and notwithstanding the preceding sentence, Essex Outfitters shall be deemed an Employer as of June 1, 1994. Employees of Essex Outfitters shall become Participants the first of the month coincident with or next following their satisfaction of the Plan's minimum age and service requirements after May 31, 1994. Such employees shall receive Years of Vesting Service credit for service prior to June 1, 1994. The Employer will be the named fiduciary as defined in ERISA. (n) Employment Year means a 12-month period following an Employee's most recent Date of Employment. (o) ERISA is the Employee Retirement Income Security Act of 1974, as amended. (p) Hours of Service means any of the following hours (assuming a 190 hour month for any Employee not paid on an hourly basis who works one hour during the month): (1) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, for the performance of duties for the Employer. These hours will be credited to the Employee for the computation period in which the duties are performed; and (2) Each hour for which an Employee is directly or indirectly paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service will be credited under this paragraph for a single computation period (whether or not the period occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; and (3) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service will not be credited both under (1) or (2) above, as the case may be, and under this definition 3. These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. For purposes of determining whether a One Year Break in Service has occurred for participation and vesting purposes, an Employee who is absent from work a. by reason of her pregnancy, b. by reason of the birth of a child of the Employee, c. by reason of the placement of a child in connection with the adoption of the child by the Employee, d. for purposes of caring for the child during the period immediately following the birth or placement for adoption, Hours of Service shall be credited according to the following rule. During the period of absence, the Employee shall be deemed to have completed the number of hours that normally would have been credited but for the absence. If the normal work hours are unknown, eight hours of service shall be credited for each normal work day during the leave. The Hours of Service to be credited under this paragraph shall be credited in the year in which the absence begins if such crediting is necessary to prevent a One Year Break in Service in that year or in the following year. Provided, however, the total number of Hours of Service credited by this paragraph shall not exceed 501. Hours of Service will be credited for employment with the Employer and any Affiliated Employer. Hours of Service will also be credited for any individual considered an employee under Section 414(n). If records of employment with respect to an Employee's service with the Employer before the effective date of this restatement are insufficient to determine his exact Hours of Service, the Committee will make reasonable estimates of said Hours of Service based on such records of employment. Any such Hours of Service estimates will be made in a uniform, nondiscriminatory manner and will be binding on all Employees. (q) Normal Retirement Age is the date an Employee is 65 years old. (r) Participant is an Employee who has met the eligibility requirements of Chapter II, or a person who has an Account balance under this Plan. (s) Participating Employer means the Employer and any Affiliated Employer authorized by the Employer to participate in this Plan, by extending the same to such Affiliated Employer's eligible Employees. (t) Plan means the OshKosh B'Gosh, Inc. Profit Sharing Plan as it may be amended from time to time. (u) Plan Administrator is OshKosh B'Gosh, Inc. (v) Plan Year is January 1 to December 31. (w) Suspense Account is the separate Account within a Regular Account consisting of the forfeiture (under Section 6.04) of a Participant who terminates employment and who returns to the employ of the Employer or an Affiliated Employer before he incurs five One Year Breaks in Service. (x) Suspense Amount is the dollar amount of the non-Vested portion, if any, of a terminated Participant's Regular Account. The crediting, if any, of Trust earnings to the Suspense Amount will be determined by the Committee in a uniform and nondiscriminatory manner. (y) Trust means the OshKosh B'Gosh, Inc. Profit Sharing Trust, as it may be amended from time to time. (z) Trustee is the person(s), corporation, or combination thereof (and any duly appointed successor) named in the Trust document. (aa) Trust Fund is the total of contributions made to the Trust, increased by profits, income, refunds, and other recoveries received, and decreased by losses and expenses incurred, and benefits paid. Trust Fund may also include any assets transferred to the Trust Fund from the qualified corporate retirement trust of the Employer or any other employer, if permitted by applicable law, and, if permitted by the Committee, the individual retirement account (as defined by the Internal Revenue Code and referred to as IRA in the Plan and Trust) of an Employee, or a distribution to a Participant from the qualified corporate retirement plan of the Employer or another employer. (bb) Valuation Date is any date on which the market valuation of the Trust Fund is made. This valuation must be made on each March 31st, June 30th, September 30th, and December 31st of the Plan Year if there is a need to make a benefit distribution as of such date, as determined by the Committee. If it desires, the Committee in its discretion, may also instruct the Trustee to make valuations at other times. (cc) Vested is that portion of an Account to which a Participant has a nonforfeitable right. (dd) Year of Eligibility Service is the Employment Year of an Employee, provided he completes at least 1,000 Hours of Service during such Employment Year. For an Employee who does not complete at least 1,000 Hours of Service in his Employment Year, a Year of Eligibility Service is a Plan Year, starting with the Plan Year next following his Date of Employment, during which he completes at least 1,000 Hours of Service. (ee) Year of Vesting Service is any Plan Year, starting with the Plan Year in which an Employee is hired by the Employer or an Affiliated Employer, during which such Employee completes at least 1,000 Hours of Service. CHAPTER II ELIGIBILITY AND PARTICIPATION II.1 Eligibility. On and after January 1, 1989, each Employee of a Participating Employer shall become eligible to participate in the Plan on the first day of the pay period coincident with or next following his completion of both of the following requirements: (a) one Year of Eligibility Service following his most recent Date of Employment; and (b) attainment of age 21. II.2 Re-Employment. Notwithstanding the provisions of Section 2.01, any Participant who terminated employment with a Participating Employer after the effective date of this restatement, and is later rehired, shall again become eligible to become a Participant on his most recent Date of Employment. II.3 Exclusion of Collective Bargaining Employees. An Employee who is covered by a collective bargaining agreement to which a Participating Employer is a party will not be eligible to participate in this Plan unless that collective bargaining agreement specifically provides for coverage of such Employee under this Plan. Also, a Participant who becomes covered by a collective bargaining agreement to which a Participating Employer is a party will not be eligible to share in any Employer Contributions and forfeiture reallocations for any Plan Year during which he is covered for the entire Plan Year by that collective bargaining agreement, unless such collective bargaining agreement specifically provides to the contrary. II.4 Change in Participant Status. In the event a Participant is no longer a member of an eligible class of Employees (as defined in Section 1.01(l)) and becomes ineligible to participate, such employee will participate immediately upon returning to an eligible class of Employees. II.5 Employees Not in Eligible Class. In the event an employee who is not a member of the eligible class of Employees (as defined in Section 1.01(l)) becomes a member of the eligible class, such employee will participate immediately if such employee has satisfied the minimum age and service requirements and would have otherwise previously become a Participant. CHAPTER III CONTRIBUTIONS AND ALLOCATIONS III.1 Discretionary Employer Contributions. This Plan is intended to be a discretionary contribution plan, not dependent upon the existence of Employer profits, pursuant to Code Section 401(a)(27). Notwithstanding the preceding, this Plan shall be treated as a profit sharing plan for purpose of Code Sections 401(a), 402, 412, and 417. The Participating Employers agree to pay to the Trustee with respect to each Plan Year such amount, if any, as may be determined by the Board of Directors of the Employer each year. The Employer Contributions for any particular Plan Year shall not exceed the amount (including the amount of any credit-carryovers from prior years available to the Participating Employers) which the Participating Employers may lawfully deduct for federal income tax purposes. Employer Contributions shall be made before or as soon as reasonably possible after the close of the Employer's fiscal year, without interest and within the time limit for deductibility thereof by the Employer as specified by the Internal Revenue Code. III.2 Allocation of Employer Contributions and Forfeitures. Except as provided in Section 6.04, the Employer Contributions shall be allocated to the Regular Accounts of all Participants who are Employees on the last day of the Plan Year or who terminated employment during the Plan Year due to death, retirement (on or after either the attainment of age 65, or the attainment of age 60 and the completion of 10 Years of Vesting Service) or disability, in the proportion that the Compensation of each such Participant bears to the total Compensation of all such Participants. Any forfeitures which become reallocable during the Plan Year under any other provision of this Plan shall be applied to reduce the amount of Employer Contributions otherwise determined for such Plan Year. To the extent any unapplied balance of forfeitures remain, the same shall be similarly applied as soon as possible in the immediately following Plan Years. On the effective date of any total termination of the Plan or complete discontinuance of any contributions to the Trust, any unapplied forfeitures shall be allocated to the Regular Accounts of all Participants who are Employees on such effective date pro rata to Compensation as provided above. CHAPTER IV CONTRIBUTION LIMITATIONS IV.1 Definitions. For purposes of this Chapter IV only, the capitalized terms defined below will have the following meaning when capitalized: Annual Additions means the total of the following amounts, if any, which are allocated to the Combined Accounts of a Participant: (a) Employer Contributions (excluding Employer Contributions arising from an award of back pay by agreement with the Participating Employer or by court order); (b) Amounts forfeited by non-vested previous Participants; and (c) Non-deductible voluntary Employee Contributions. For purposes of determining Annual Additions, a rollover contribution from an IRA of a Participant, or from his account in the qualified retirement plan of his previous employer will not be included. Average Compensation of a Participant is his Total Compensation during the three consecutive Limitation Year period in which he earned a year of service and which produced the highest average. Combined Accounts means the total of all accounts of a Participant in all of the Defined Contribution Plans of the Participating Employer. Defined Benefit Plan is a retirement plan which does not provide for benefits from an individual account of a Participant, but rather such benefits are based on a benefit formula provided by the Plan. Defined Contribution Plan is a retirement plan which provides for an individual account for each Participant and for benefits based entirely on the balance of that account. The account balance is usually derived from contributions, income, expenses, market value increases or decreases, and sometimes non-Vested amounts from Participants who quit before retirement. Employer means the employer that adopts this Plan. All members of a controlled group of corporations (as defined in Section 414(h) as modified by Section 415(h) of the Code), all trades or businesses (whether or not incorporated) under common control (as defined by Section 414(c) as modified by Section 415(h) of the Code), or all members of an affiliated service group (as defined in Section 414(m) of the Code), will be considered a single employer for the purposes of applying the limitations of this Chapter. Limitation Year is the Plan Year. Total Compensation includes a Participant's earned income, wages, salaries, and fees for professional service and other amounts received for personal services actually rendered in the course of employment with an Employer maintaining the plan (including but not limited to, commissions paid salesmen, compensation for services on the basis or a percentage of profits, commissions on insurance premiums, tips and bonuses) and excluding the following: a. Employer contributions to a plan of deferred compensation which are not included in the gross income of the Employee for the taxable year in which contributed, or on behalf of an Employee to a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; b. Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; c. Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and d. Other amounts which receive special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of a 403(b) annuity contract (whether or not the contributions are excludable from the gross income of the Employee). Notwithstanding the above definition, from and after January 1, 1998, Total Compensation shall include any elective deferral contributions (as defined in Code Section 402(g)(3)) and any amounts contributed or deferred by the Employer at the election of the Participant which are not includable in the gross income of the Participant by reason of Code Sections 125 or 457. IV.2 Maximum Annual Additions. The maximum amount of Annual Additions which can be made to the Combined Accounts of a Participant for any Limitation Year is equal to the lesser of: (a) 25% of his Total Compensation for that period; or (b) $30,000 (or such other dollar amount as is specified annually by the Secretary of the Treasury, or his delegate or any other federal law or regulations). IV.3 Reduction of Annual Additions. If the Annual Additions to any Participant's Combined Accounts exceed this maximum for any Limitation Year, the Committee will reduce the amount of his Annual Additions in the following order of priority until the Annual Additions equal the maximum allowed: (a) First, any amounts of voluntary Employee Contributions shall be returned, to the extent required, to the Participant. (b) Second, the forfeitures credited to his Account for the Limitation Year will be reallocated to the appropriate Accounts of all other Participants to the extent required, in the same manner as the other forfeitures for the Limitation Year. (c) Third, and subject to Section 4.02, Employer Contributions shall be reallocated to other Participants covered by the Plan in that Limitation Year. IV.4 Limitations if Participant in Other Plan(s). If a Participant is also a participant in a Defined Benefit Plan (or plans) maintained by the Employer, the decimal equivalent of the sum of the fractions determined as follows for all Defined Benefit Plans and Defined Contribution Plans maintained by the Employer in which he participates shall not exceed 1.0 for any Limitation Year: (a) A defined benefit fraction, the numerator being the projected total annual benefits of the Participant under all Employer-sponsored Defined Benefit Plans (whether or not terminated), and the denominator being the lesser of: (1) the product of 1.25 multiplied by $90,000 (or, if permitted by applicable law, such other dollar amount as is specified annually by the Secretary of the Treasury, or his delegate); or (2) the product of 1.4 multiplied by the Participant's Average Compensation. (b) A defined contribution fraction, the numerator being the sum of the actual Annual Additions to the Participant's Combined Accounts under all Defined Contribution Plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years, and the denominator being the sum of the lesser of the following amounts determined for such Limitation Year and all prior Limitation Years of the Participant's service with the Employer (regardless of whether a Defined Contribution Plan was maintained by the Employer): (1) the product of 1.25 multiplied by $30,000 (or, if permitted by applicable law, such other dollar amount as is specified annually by the Secretary of the Treasury, or his delegate); or (2) the product of 1.4 multiplied by 25% of his Total Compensation for such Limitation Year. In the event the projected annual benefits of a Participant under all Defined Benefit Plans cause the total of the fractions determined under (a) and (b) above to exceed 1.0, the benefits under such Defined Benefit Plans will be reduced to the extent required so that the total of such fractions equals 1.0. From and after January 1, 2000, the special limitations set forth in this Section 4.04 shall no longer apply. CHAPTER V INVESTMENT OF ACCOUNTS V.1 Funding Policy. In order to implement and carry out the provisions of the Plan and to finance the benefits under the Plan, the Employer will establish and maintain a funding policy with respect to the Trust Fund in a manner consistent with applicable law. V.2 Employee Direction of Investments. The Committee may, in its discretion, direct the Trustee to establish "separate investment funds" within the Trust Fund according to Committee specification for the investment of Accounts. The Committee will then establish uniform, nondiscriminatory rules permitting each Participant to direct the percentage of his Account(s) to be invested in each of these separate investment funds. Any such written direction will remain in effect for a Participant until it is replaced by his subsequent written direction filed with the Committee. The Committee may also provide for the transfer of funds within an Account from one separate investment fund to another under uniform rules established by the Committee. If a Participant makes no written direction under this provision, the Committee will direct the Trustee to place 100% of his Account(s) in a separate investment fund chosen by the Committee under uniform, nondiscriminatory rules. V.3 Expenses. The Participating Employers may pay the expenses of administering the Plan, if desired. However, if they do not pay these expenses directly, then, to the extent permitted by law, the payments will be made from the Trust Fund. CHAPTER VI VESTING OF ACCOUNTS VI.1 100% Vesting Situations. A Participant will be fully (100%) Vested in his Regular Account upon the occurrence of any of the following events; provided such event occurs while he is an Employee: (a) either his attainment of his Normal Retirement Age, or his attainment of age 60 and the completion of 10 Years of Vesting Service; (b) his death; (c) his total and permanent disability as determined by a physician selected by the Committee. For purposes of this paragraph, a Participant will be considered totally and permanently disabled if he incurs a mental or physical disability which may be expected to be of a long continued duration or which may be expected to result in death and which prevents him from satisfactorily performing his duties with the Employer or an Affiliated Employer; or (d) the termination (either full or partial) of this Plan or the complete discontinuance of Employer Contributions to this Plan, provided however, that in the event of a partial termination, only those Participants to whom the partial termination applied will be 100% Vested. VI.2 Vesting Schedule. A Participant who is not yet fully Vested under Section 6.01 will be Vested (subject to Section 6.03) in his Regular Account according to the following vesting schedule: Years of Vesting Service Vested Percentage Less than 3 0% 3 or more 100% VI.3 Bad-Boy Provision. Prior to his eligibility for full Vesting under Section 6.01, and whether or not he is eligible to be Vested in his Regular Account under Section 6.02, a Participant with fewer than 5 years of Vesting Service will have no Vested interest in his Regular Account if prior to or after his termination of employment with the Employer or an Affiliated Employer, he commits an act which would constitute a crime against the Employer or an Affiliated Employer under federal law or the laws of the State of Wisconsin. VI.4 Forfeitures. As to any Participant who terminates employment with the Employer and all Affiliated Employers prior to his Retirement Date or earlier death, and prior to becoming fully vested in his Account: (a) If distribution of the vested portion of such a Participant's Regular Account is not made until after he incurs a Break in Service, then the unvested portion of his Account shall be forfeited as of the Anniversary Date of the last Plan Year in such Break in Service and reallocated as provided in Section 3.02 hereof. (b) If such Participant receives distribution of the vested portion of his Regular Account (and his Employee Contributions Account, if any) prior to incurring a Break in Service, then that part of his Account in which he is not vested at the date of such distribution shall be considered a forfeiture as of the date of distribution and shall be reallocated as provided in Section 3.02 hereof as of the Anniversary Date of the Plan Year in which the distribution occurs. A Participant with no vested interest in his Regular Account at his termination shall be deemed to have received a distribution as of his date of termination. (c) The number of Years of Vesting Schedule Service of a terminated Participant who incurs a Break in Service shall not thereafter be increased for purposes of measuring his vested interest in his Regular Account as it exists at the end of such Break in Service. (d) If a Participant terminates his employment with a Participating Employer before he is fully Vested in his Regular Account, receives a distribution and he is later rehired by a Participating Employer before he incurs five One Year Breaks in Service, the Committee will instruct the Trustee to create a Suspense Account for him (prior to any allocations under Section 3.02) in an amount equal to the forfeiture specified in 6.04(b) above. Then, if he is not fully vested in his Regular Account when he subsequently terminates his employment with the Participating Employer, the value of his Regular Account will be calculated according to Sections 6.02 or 6.03, and the value of his Vested Suspense Account will be calculated by multiplying the balance of the Suspense Account by the ratio of: (i) the difference between the Vested percentage under Sections 6.02 or 6.03 and the prior Vested percentage. The prior Vested percentage shall mean the Vested percentage at the prior termination date; and (ii) the difference between 100% and the prior Vested percentage. (e) Any amounts which must be restored to a rehired Participant's Suspense Account pursuant to the foregoing shall first come out of forfeitures and Employer Contributions which would otherwise be applied pursuant to subsection 3.02 for the Plan Year in which the restoration is made, and only thereafter and to the extent necessary, by a special Employer Contribution made solely for this purpose. VI.5 Resumption of Participation. (a) Except as otherwise provided in paragraph (b) below, upon re-employment of any Participant a new Account shall be created to which all allocations of contributions and forfeitures after he is re-employed shall be made. If a Participant had any vested interest in his Regular Account at his termination, all his Years of Vesting Service shall be aggregated to determine the Participant's vested interest in such new Regular Account. If the Participant terminated employment prior to being credited with any vested interest and incurs a Break in Service, only his Years of Vesting Service after his re-employment shall be used to determine his vested interest in such new Regular Account. (b) If a Participant is re-employed before incurring a Break in Service without having received distribution of the vested portion of his Regular Account, then any subsequent allocations of Employer Contributions and forfeitures may be made to the same Account, and the Participant's vested interest in such Account shall be determined under Sections 6.02 or 6.03 based upon his Years of Vesting Service both before and after his re-employment. CHAPTER VII PAYMENT OF BENEFITS VII.1 Commencement of Benefits. Unless a Participant elects in writing to further defer the starting date of any benefit payable under the Plan and Trust, benefits must begin to be paid within 60 days after the later of: (a) the last day of the Plan Year in which he attains age 65; (b) the last day of the Plan Year in which he terminates his employment with the Employer or an Affiliated Employer. Effective January 1, 2000, and notwithstanding any other provisions of this Plan but subject to the special rules pertaining to 5% owners and certain other Participants set forth below, any benefit payable to a Participant shall commence no later than the "Required Beginning Date" for a Participant under Code Section 401(a)(9), as amended by the Small Business Job Protection Act of 1996, which is the April 1st of the calendar year following the later of (i) the calendar year in which the Participant attains age 70 1/2, or (ii) the calendar year in which the Participant retires or terminates service with the Employer or an Affiliated Employer. However, any benefit payable to (i) a Participant who is a more than 5% owner of the "employer" as defined in Code Section 416 with respect to the Plan Year ending in the calendar year in which such Participant attains age 70 1/2 shall commence no later than the April 1st of the calendar year following the calendar year in which such Participant attains age 70 1/2, even if he has not separated from service as of such date. Further, any Participant continuing in the service of the Employer or an Affiliated Employer who attained age 70 1/2 after December 31, 1996 but before January 1, 2000 shall have an option to elect either to begin receiving benefits starting no later than April 1st of the calendar year in which such Participant attains age 70 1/2 or to defer the commencement thereof (and, if applicable, to stop the current receipt of benefits) until retirement or termination of service. If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (a) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (b) the Participant, after receiving the notice, affirmatively elects a distribution. VII.2 Form of Payment. All distributions under this Plan will be made in one, or a combination of, the following forms, as selected by the Participant or his Beneficiary: (a) By payment in a series of substantially equal installments not less frequently than annually; (b) By payment in a lump sum. Distributions will be based on the Account values as of the most recent Valuation Date. VII.3 Incidental Death Benefits. Regardless of any statement to the contrary, the ability of any Participant or Beneficiary to select the timing and method of a distribution option will be limited by the following provisions: (a) If the Participant's entire interest is to be distributed in other than a lump sum, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the Participant's entire interest by the life expectancy of the Participant or joint and last survivor expectancy of the Participant and designated Beneficiary. Life expectancy and joint and last survivor expectancy are computed by the use of the return multiples contained in Section 1.72-9 of the Income Tax Regulations. For purposes of this computation, a Participant's life expectancy may be recalculated no more frequently than annually, however, the life expectancy of a non-spouse Beneficiary may not be recalculated. If the Participant's spouse is not the designated Beneficiary, the method of distribution selected must satisfy the minimum death incidental benefit requirements of Regulation Section 1.401(a)(9)-2. (b) If the Participant dies after distribution of his or her interest has commenced, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. (c) If the Participant dies before distribution of his or her interest commences, the Participant's entire interest will be distributed no later than five years after the Participant's death except to the extent that an election is made to receive distributions in accordance with (1) or (2) below: (1) If any portion of the Participant's interest is payable to a designated Beneficiary, distributions may be made in substantially equal installments over the life or life expectancy of the designated Beneficiary commencing no later than one year after the Participant's death; (2) If the designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the date on which the Participant would have attained age 70+, and, if the spouse dies before payments begin, subsequent distributions shall be made as if the spouse had been the Participant. (d) For purposes of 7.04(c) above, payments will be calculated by use of the return multiples specified in Section 1.72-9 of the regulations. Life expectancy of a surviving spouse may be recalculated annually, however, in the case of any other designated Beneficiary, such life expectancy will be calculated at the time payment first commences without further recalculation. VII.4 Transfers. In addition to the other methods of distribution described in this Chapter, the Committee may direct the Trustee to make distribution of Account balances under this Plan directly to the IRA of a Participant, if such Participant files a written request to that effect with the Committee and such distribution is permitted by law. To the extent permitted by applicable law, neither the Participating Employer, the Committee, the Plan Administrator, nor the Trustee will incur any liability under this Plan for Account distributions made in the specified amount to a Participant's IRA in accordance with such written request, regardless of any adverse tax consequences which may be incurred by the Participant as a result of such distribution. The Plan will not accept the transfer into the Trust Fund of IRA's or distributions to Participants from other qualified retirement plans. VII.5 Distribution of Small Amounts. Notwithstanding the other provisions of this Chapter VII, if the vested portion of all of the Accounts of a Participant who terminates, retires, or dies does not exceed $3,500 (or such other sum as may be permitted from time to time by applicable governmental regulations) as of the Valuation Date preceding the Participant's termination, such vested interest shall be distributed in the form of a single sum cash distribution as soon as practicable following the Participant's termination. VII.6 Direct Rollover. (a) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (b) Definitions (i) Eligible Rollover Distribution: An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 1 any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; 2 any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; 3 the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities); 4 returns of Section 401(k) elective deferrals that are returned as a result of the Section 415 limitations; 5 corrective distributions of excess contributions, excess deferrals, and excess aggregate contributions, together with the income allocable to these corrective distributions; 6 loans treated as distributions under Section 72(p) and not excepted by Section 72(p)(2); 7 loans in default that are deemed distributions; 8 a distribution less than $200; and 9 similar items designated by the IRS in revenue rulings, notices, and other guidance of general applicability. (ii) Eligible Retirement Plan: An Eligible Retirement Plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (iii) Distributee: A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employees' spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (iv) Direct Rollover: A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. CHAPTER VIII TOP-HEAVY PROVISIONS VIII.1 Provisions Will Control. If the Plan is or becomes Top-Heavy in any Plan Year beginning after December 31, 1983, the provisions of Chapter VIII will supersede any conflicting provisions in the Plan. VIII.2 Definitions. For purposes of this Chapter VIII the following definitions shall apply: (a) Employer: Means all Participating Employers and all Affiliated Employers. (b) Key Employee: Any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the Determination Period was: (1) an officer of the Employer having annual compensation from the Employer greater than 50% of the amount in effect under Section 415(b)(1)(A) for any such Plan Year; (2) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Employer if such individual's compensation exceeds the dollar limitation under Section 415(c)(1)(A) of the Code; (3) a 5% owner of the Employer; or (4) a 1% owner of the Employer who has an annual compensation of more than $150,000. The Determination Period is the Plan Year containing the Determination Date and the 4 preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Section 416(i)(l) of the Code and the regulations thereunder. (c) Top-Heavy Plan: For any Plan Year beginning after December 31, 1983, this Plan is Top-Heavy if any of the following conditions exist: (1) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of Plans. (2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%. (3) If this Plan is a part of Required Aggregation Group and part of Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. (d) Top-Heavy Ratio: (1) If the Employer maintains one or more defined benefit plans and the Employer has not maintained any defined contribution plans (including any Simplified Employee Pension Plan) which during the 5-year period ending on the Determination Date(s) has or has had account balances, the Top-Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the Present Value of accrued benefits of all Key Employees as of the Determination Date(s) (including any part of any accrued benefit distribution in the 5-year period ending on the Determination Date(s)), and the denominator of which is the sum of all accrued benefits distributed in the 5-year period ending on the Determination Date(s) determined in accordance with Section 416 of the Code and the regulations thereunder. (2) If the Employer maintains one or more defined benefit plans and the Employer maintains or has maintained one or more defined contribution plans (including any Simplified Employee Pension Plan) which during the 5-year period ending on the Determination Date(s) has or has had account balances, the Top-Heavy Ratio for any Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of account balances under the aggregate defined contribution plan or plans for all Key Employees and the Present Value of accrued benefits under the aggregate defined benefit plan or plans for all Key Employees, and the denominator of which is the sum of the account balances under the aggregate defined contribution plan or plans for all Participants and the Present Value of accrued benefits under the aggregate defined benefit plan or plans for all Participants as determined in accordance with Section 416 of the Code and the regulations thereunder. The account balances under a defined contribution plan and the Present Value of accrued benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are adjusted for any distribution made in the 5-year period ending on the Determination Date. (3) For purposes of (1) and (2) above, the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date except as provided in Section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a Participant who: (i) is not a Key Employee but who was a Key Employee in a prior year; or (ii) has not received any compensation from any employer maintaining the Plan at any time during the 5-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. (e) Permissive Aggregation Group: The Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (f) Required Aggregation Group: (1) Each qualified plan of the Employer in which at least one Key Employee participates, and (2) any other qualified plan of the Employer which enables a plan described in (1) to meet the requirements of Sections 401(a)(4) or 410 of the Code. (g) Determination Date: For any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the last day of that year. (h) Valuation Date: December 31st of each Plan Year, as of which account balances or accrued benefits are valued for purposes of calculating the Top-Heavy Ratio. (i) Present Value: Present Value shall be based only on the interest and mortality rates specified in the defined benefit plan. VIII.3 Minimum Allocation. (a) Except as otherwise provided in (c) and (d) below, the Employer Contributions and forfeitures allocated on behalf of any Participant who is not a Key Employee shall not be less than the lesser of three percent of such Participant's Compensation or in the case where the Employer has no defined benefit plan which designates this Plan to satisfy Section 401 of the Code, the largest percentage of Employer Contributions, as a percentage of the first $200,000 of the Key Employee's Compensation, allocated on behalf of any Key Employee for that year. The minimum allocation is determined without regard to any Social Security contribution. This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation in that year because of the Participant's failure to complete 1,000 Hours of Service (or any equivalent provided in the Plan). (b) For purposes of computing the Minimum Allocation, Compensation will mean Compensation as defined in Section 1.01(h). (c) The provisions in (a) above shall not apply to any Participant who was not employed by the Employer on the last day of the Plan Year. (d) The provisions in (a) above shall not apply to any Participant to the extent that the Participant is covered under any other plan or plans of the Employer and the Employer has provided that the minimum allocation or benefit requirement applicable to Top-Heavy plans will be met in the other plan or plans. VIII.4 Nonforfeitability of Minimum Allocation. The minimum allocation required (to the extent required to be nonforfeitable under Section 416(b)) may not be forfeited due to any suspension of benefits upon re-employment of retiree. VIII.5 Minimum Vesting Schedules. For any Plan Year in which this Plan is Top-Heavy, the following vesting schedule will automatically apply to the Plan: Years of Vesting Service Vested Percentage 1 0% 2 20% 3 or more 100% The minimum vesting schedule applies to all benefits within the meaning of Section 411(a)(7) of the Code, including benefits accrued before the effective date of Section 416 and benefits accrued before the Plan became Top-Heavy. Further, no reduction in vested benefits may occur in the event the Plan's status as Top-Heavy changes for any Plan Year. However, this Section does not apply to the account balances of any Employee who does not have an Hour of Service after the Plan has initially become Top-Heavy and such Employee's account balances attributable to Employer Contributions will be determined without regard to this Section. If the vesting schedule under the Plan shifts in or out of the above schedule for any Plan Year because of the Plan's Top-Heavy status, such shift is an amendment to the vesting schedule and the election in Section 11.01(c) of the Plan applies. VIII.6 Compensation Limitation. For any Plan Year in which the Plan is Top-Heavy, only the first $200,000 (or such larger amount as may be prescribed by the Secretary or his delegate) of a Participant's annual Compensation shall be taken into account for purposes of determining Employer Contributions under the Plan. CHAPTER IX ADJUSTMENT OF ACCOUNTS IX.1 Allocation of Trust Earnings. As of each Valuation Date, the Committee will charge the Trustee to value the Trust at its fair market value and any gains or losses will be allocated to the Account of each Participant in proportion to the value of each such Account as of the previous Valuation Date. In making such allocations, the Committee will adjust the beginning or ending Account balances to reflect the amount and timing of any Employee Contributions, withdrawals, and benefit payments under uniform and nondiscriminatory rules established by the Committee. IX.2 Allocation of Employer Contributions and Forfeitures. As of each Anniversary Date, the Committee will allocate Employer Contributions (and forfeitures, if any, which shall be used to reduce Employer Contributions) for the Plan Year ending on that Anniversary Date to the Regular Account of Participants. CHAPTER X DESIGNATION OF BENEFICIARY X.1 Beneficiary Designation. Each Participant may name, or change the name of his Beneficiary(ies) who will receive any death benefits payable to such Beneficiary(ies) under the Plan and Trust. If the Participant designates someone other than his spouse as the primary Beneficiary, then the spouse must give written consent (witnessed by a Plan representative or notary public) to such designation. To be effective, a Beneficiary designation form (available from the Committee) must be on file with the Committee on the Participant's date of death. X.2 Priority If No Designated Beneficiary. If there is no Beneficiary designation form on file, or if the designated Beneficiary(ies) predeceases the Participant, benefit payments required under the Plan and Trust to be payable on death to the Beneficiary(ies) will be distributed in the following order of priority: (a) to the surviving spouse; or, if none (b) to the surviving issue (per stirpes and not per capita); or, if none (c) to the surviving parents equally, or, if one is deceased, to the survivor of them; or, if none (d) to the estate of the Participant. CHAPTER XI AMENDMENT OF THE PLAN XI.1 Amendment by Employer. The Employer may, by resolution of the Board of Directors, amend this Plan at any time. Any amendment by the Employer will be subject to the following rules: (a) Without its written consent, no amendment may increase the duties or liabilities of the Trustee. (b) Except as permitted by law, no amendment may provide for the use of funds or assets under the Plan and Trust other than for the exclusive benefit of Participants or their Beneficiaries. In addition, no amendment may allow Trust Fund assets to revert to or be used or enjoyed by any Participating Employer unless otherwise permitted by law. (c) If an amendment changes the vesting schedule of the Plan, or if the Plan is amended in any way that directly or indirectly affects the computation of a Participant's nonforfeitable percentage, any Participant in the employ of the Participating Employer or an Affiliated Employer on the date such amendment is adopted (or the date it is effective, if later) who has completed at least three years of service at the end of the election period specified below, may make an irrevocable election to remain under the vesting schedule of the Plan as in existence immediately prior to said amendment. If such Participant does not make this election during the election period starting on the date such amendment is adopted, and ending 60 days following the latest of the following dates, he will be subject to the new vesting schedule provided by said amendment: (1) the date the amendment is adopted; (2) the date the amendment is effective; or (3) the date written notice of the amendment is given to the Participant. However, the failure to make an election described above will not result in the forfeiture of any benefits which are already Vested. (d) No amendment may reduce the Vested percentage of a Participant. (e) No amendment may reduce the Account balance of a Participant. XI.2 Conformance to Law. Regardless of the provisions of Section 11.01, the Employer has the right to make whatever amendments are necessary to this Plan or the Trust to bring it into conformity with applicable law. XI.3 Right to Terminate. The Board of Directors of the Employer may, by resolution, terminate the Trust and/or this Plan at any time. However, if the Plan is terminated (either wholly or partially), or if there is a complete discontinuance of Employer Contributions to the Trust, each Participant who is an Employee on the effective date of such total Plan termination or complete discontinuance of contributions (or, if a partial termination, whose severance causes or is a result of such partial termination) will then become 100% Vested in his Accounts. In the event that the Plan is terminated or contributions are discontinued as provided above, all distributions will be made in accordance with the provisions of Chapter VII and, except as provided in Section 7.05, remaining Accounts will continue to share in the experience of the Trust Fund on each Valuation Date as provided in Section 9.01. XI.4 Merger, Consolidation, or Transfer. If the Plan and Trust are merged or consolidated with, or the assets or liabilities are transferred to, any other plan and trust, the benefits payable to each Participant immediately after such action (if the Plan was then terminated) will be equal to or greater than the benefits to which he would have been entitled if the Plan had terminated immediately before such action. CHAPTER XII CLAIMS PROCEDURE XII.1 Written Claim. A Participant or Beneficiary(ies) may make a claim for Plan benefits by filing a written request with the Committee, on a form provided by the Committee. XII.2 Claim Denial. If a claim is wholly or partially denied, the Committee will furnish the Participant or Beneficiary(ies) with written notice of the denial within 60 days of the date the original claim was filed. The notice of denial will specify: (a) the reason for denial; (b) specific reference to pertinent Plan and Trust provisions on which the denial is based; (c) a description of any additional information or requirements needed to be eligible to obtain the denied benefit and an explanation of why such information or requirements are necessary; and (d) an explanation of the claim procedure. XII.3 Request for Review of Denial. The Participant or Beneficiary(ies) will have 60 days from receipt of a denial notice in which to make written application for review by the Committee. The Participant or Beneficiary may request that the review be in the nature of a hearing. The Participant or Beneficiary(ies) will have the rights to representation, to review pertinent documents, and to submit comments in writing. XII.4 Decision on Review. The Committee will issue a decision on such review within 60 days after receipt of an application for review. The Plan Administrator shall have full and complete discretionary authority to determine eligibility for benefits, to construe the terms of the Plan and to decide any matter presented through the claims review procedure. Any final determination by the Plan Administrator shall be binding on all parties. If challenged in court, such determination shall not be subject to de novo review and shall not be overturned unless proven to be arbitrary and capricious upon the evidence considered by the Plan Administrator at the time of such determination. XII.5 Additional Time. The Committee may take additional time, as provided by government regulations, under this Chapter XII, if such time is needed to gather data, perform calculations or reach decisions in the processing of a claim. The Participant or Beneficiary(ies) will be informed by the Committee, in writing, of the need for such additional time prior to the date such extension begins. CHAPTER XIII MISCELLANEOUS PROVISIONS XIII.1 Reversion of Assets. This Plan and Trust are for the exclusive benefit of the Employees of the Participating Employers and none of the assets may be used for any other purpose. Notwithstanding the above, there may be a reversion of assets to the Employer (or the Employee) in the event one of the following occurs: (a) If, in the course of administering the Plan and Trust, errors in accounting arise due to factual errors in information supplied by any Participating Employer, the Committee, the Plan Administrator or the Trustee, equitable adjustments may be made to correct these errors. Excess contributions arising from such adjustments may be returned to the Participating Employer (or Employee, if such contributions are attributable to Employee contributions) within one year after such contributions were made. (b) All Employer Contributions made to the Plan are conditioned on deductibility. For any year(s) that all or a part of the deduction for Employer Contributions to the Plan is disallowed by the Secretary of the Treasury, the amount of the contributions so disallowed must be returned to the Participating Employer within one year after such disallowance. (c) The Plan is terminated as provided for in Chapter XI. XIII.2 Equitable Adjustment. The Committee may make equitable adjustments, which may be retroactive, to correct for mathematical, accounting, or factual errors made in good faith. Such adjustments will be final and binding upon all Participants and other parties in interest. XIII.3 Reasonable Compensation. If for any Plan Year, the Internal Revenue Service determines that the total compensation of a Participant exceeds the amount which can be considered "reasonable" for purposes of the federal income tax return of the Participating Employer, then the Committee will readjust the Account of such Participant to reflect only the "reasonable" compensation of said Participant. XIII.4 Indemnification. To the extent permitted by law, the Employer will indemnify each member of the Committee and any others to whom the Employer has delegated fiduciary duties (except corporate trustees, insurers, or "investment managers" (as defined in ERISA)) against any and all claims, losses, damages, expenses and liabilities arising from their responsibilities in connection with the Plan, unless the same are determined to be due to gross negligence or willful misconduct. XIII.5 Protection from Loss. Neither the Trustee, the Plan Administrator, the Committee nor the Employer guarantee the Trust Fund in any way from loss or depreciation. To the extent permitted by applicable law, the liability of any of these persons, groups of persons, or entities to make any payment under the Plan and Trust is limited to the available assets of the Trust Fund. XIII.6 Protection from Liability. To the maximum extent allowed by law, the Plan Administrator and all Participating Employers, and their agents, designees and employees, shall be free from all liability, joint or several, for their acts, omissions, and conduct, except in the case of their own willful misconduct, gross negligence or bad faith. Specifically and without limitation other than as follows, nothing in the first sentence of this Section or elsewhere in the Plan and Trust shall be construed to relieve any Fiduciary from responsibility or liability for any responsibility, obligation or duty under Part 4 of Title 1 of ERISA (except as provided in Sections 405(b)(1) and 405(d) of ERISA). XIII.7 Adoption of Rules and Procedures. Any group of people acting in a specified capacity under the Plan and Trust (such as the Named Fiduciary, Trustee, Committee, Plan Administrator, "investment manager" (as defined by ERISA) if any, and so on) may create and abide by whatever rules and procedures they desire, so long as these rules and procedures are not inconsistent with the Plan, the Trust and applicable law. If these rules specifically limit the duties and responsibilities of the members of any of these groups, then to the extent permitted by applicable law, the liability to each member under the Plan and Trust will be limited to his specific duties. XIII.8 Assignment of Benefits. A Participant's interest in this Plan may not be assigned or alienated, either voluntarily or involuntarily. This shall not preclude the Trustee from complying with: (i) a qualified domestic relations order (as defined in Section 414(p) of the Code) made pursuant to a domestic relations law requiring deduction from the benefits of a Participant for alimony, child support, or marital property payments, or (ii) on or after August 5, 1997 and pursuant to Code Section 401(a)(13)(c), any court order, judgment, decree, or settlement agreement requiring that a Participant's benefits be reduced where the Participant has committed a breach of fiduciary duty to the Plan or committed a criminal act against the Plan. Notwithstanding any restrictions on the timing of distributions and withdrawals under this Plan, distribution shall be made to an alternate payee in accordance with the terms of an order described in the preceding paragraph, or as determined by the Plan Administrator and alternate payee if provided in the order, even if such distribution is made prior to the Participant's attainment of the earliest retirement age (as defined in Code Section 414(p)(4)). XIII.9 Mental Competency. Every person receiving or claiming benefits under the Plan and Trust will be presumed to be mentally competent until the date on which the Committee receives a written notice (in a form and manner acceptable to it) that such person is incompetent, and that a guardian, conservator or other person legally vested with his care or the care of his estate has been appointed. If the Committee receives acceptable notice that a person to whom a benefit is payable under this Plan and Trust is unable to care for his affairs because of incompetency, any payment due (unless a prior claim for it has been made by duly appointed legal representative) may be paid to the spouse, a child, a parent, a brother or a sister or to any person determined by the Committee to have incurred expenses for such person. Any such payment will be a complete discharge of the obligation of the Participating Employer, Committee, Plan Administrator and Trustee to provide benefits under the Plan and Trust. In the event that the Plan benefits of a person receiving or claiming them are garnished or attached by order of any court, the Committee may bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan. While this action is pending, any benefits that become payable under this Plan will be paid into the court as they become payable. The court will then make the benefit distributions to the recipient it deems proper at the close of said action. XIII.10 Authentication. The Participating Employer, Committee, Plan Administrator and Trustee will be fully protected in acting and relying upon such certificate, affidavit, document or other information which that person requesting such information may consider pertinent, reliable and genuine. Any notice required to be made under the Plan and Trust may be waived, in writing, to the person entitled thereto. In addition, the time period specified in this Plan for filing any such notice may be modified or waived, in writing, by the person entitled thereto. XIII.11 Not an Employment Contract. This Plan and Trust will not be construed as creating or modifying any contract of employment between any Participating Employer and the Employee. XIII.12 Appointment of Auditor. The Employer shall have the right to appoint an independent auditor to audit the books, records, and accounts of the Trustee as they relate to the Plan and Trust. XIII.13 Uniform Treatment. All interpretations made in connection with this Plan and Trust are intended to be exercised in a nondiscriminatory manner so that all Employees in similar circumstances are treated alike. XIII.14 Interpretation. The provisions of the Plan and Trust are to be construed as a whole and not construed separately without relation to the context of the entire agreement. XIII.15 Plural and Gender. When appropriate, the singular nouns in this Plan and Trust may include the plural, and vice versa. Also, wherever the male gender is used in the Plan and Trust, the female gender may be included, and vice versa. XIII.16 Headings. Headings at the beginnings of any Chapter, Section, or subsection are for convenience only and are not to influence the construction of this Plan and Trust. XIII.17 Expenses. The Participating Employers may pay the expenses of administering the Plan, if desired. However, if they do not pay these expenses directly, then, to the extent permitted by law, the payments will be made from the Trust Fund. XIII.18 Unclaimed Accounts. Any Account which is payable without Participant consent in accordance with Article VII, but which cannot be paid due to an inability to locate the applicable Participant or Beneficiary, shall be forfeited and reallocated in accordance with Section 4.03. Prior to any forfeiture, the Plan Administrator shall make reasonable attempts to locate the person entitled to any distribution. Any Account forfeited pursuant to this Section 13.18 shall be restored and paid to the applicable Participant or Beneficiary upon the making of a valid claim by such person in accordance with Plan Section 9.05. The amount to be restored shall equal the vested amount in the Account as of the Valuation Date coincident with or immediately preceding the forfeiture under Section 4.03, then from the Participating Employers' discretionary contribution for a Plan Year, and finally, if necessary from a special one-time Employer Contribution made solely for this purpose. XIII.19 Special Provisions Respecting Military Service. Notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code, effective for individuals whose reemployment occurs after December 11, 1994. XIII.20 Participation of Affiliated Employers. The administrative powers and control of the Employer, as provided in this Plan and the Trust agreement, as well as the sole and exclusive right of amendment and termination (as covered in Chapter XI), and of appointment and removal of the Plan Administrator, the Trustee, and their successors, shall remain solely with OshKosh B'Gosh, Inc. and shall not be diminished in any way by reason of the participation of any Affiliated Employer in the Plan and the Trust agreement. CHAPTER XIV EMPLOYER STOCK SAVINGS ACCOUNTS AND INVESTMENTS XIV.1 Stock Savings Accounts. The Employer Contribution and forfeitures, if any, for the Plan Year ending December 31, 1990, and for each subsequent Plan Year shall be allocated to Participants' Regular Accounts as provided in Article III. Any amounts accumulated in a Participant's Stock Savings Account (pursuant to Employer Contributions and forfeitures, if any, allocated on or after December 31, 1984 but before January 1, 1990) will continue to be held in such Account. Any income, loss, appreciation, and/or depreciation attributable to amounts held in Stock Savings Accounts will be allocated only to such Stock Savings Accounts. XIV.2 Employer Stock Defined. For purposes of this Article XIV, the term "Employer Stock" means any common stock of OshKosh B'Gosh, Inc. The Trustee, or any investment manager or any Special Investment Committee appointed by the Employer under Section 2.05 or Section 2.06 of the Trust, may invest up to 100% of the fair market value of the Trust Fund in Employer Stock ("qualifying employer securities" of the Company, as that term is defined by ERISA). XIV.3 Distributions from Stock Savings Accounts. To the extent Employer Stock is held in Participants' Stock Savings Accounts, a terminating Participant shall be entitled to request, in writing on a form acceptable to the Plan Administrator, that the full value of his Stock Savings Account (or any portion thereof) that becomes distributable under Article VII be distributed in full shares of Employer Stock (any partial share will be paid in cash). XIV.4 Employer Stock Valuation. For purposes of any distribution under the Plan, valuation of the Stock Savings Account shall be made as of the Valuation Date coincident with or immediately preceding the date of distribution. Valuation of any Employer Stock distributed pursuant to an election under Section 14.03 shall be based on the closing price reported by NASDAQ on the last day immediately preceding the date of distribution during which a sale of the Employer Stock was completed. IN WITNESS WHEREOF, this Plan is executed by the Employer, acting through its duly authorized officers, on this _____ day of _______________, 2000. By: Attest: EX-2 4 EXHIBIT 10.2 EXHIBIT 10.2 OSHKOSH B'GOSH, INC. PENSION PLAN Generally Effective: January 1, 1998 (unless otherwise stated) OSHKOSH B'GOSH, INC. PENSION PLAN TABLE OF CONTENTS Chapter Page INTRODUCTION v I DEFINITIONS 1 II ELIGIBILITY AND PARTICIPATION 11 2.01 Eligibility 11 2.02 Re-Employment 11 2.03 Exclusion of Collective Bargaining Employees 11 2.04 Change in Participant Status 11 2.05 Employees Not in Eligible Class 11 III CONTRIBUTIONS 12 3.01 Employer Contributions 12 3.02 Funding Policy 12 3.03 Employee Contributions 12 IV RETIREMENT BENEFITS 13 4.01 Normal Retirement Benefit 13 4.02 Early Retirement 14 4.03 Late Retirement 14 4.04 Non-Duplication of Benefit 15 4.05 Re-Employment 15 V BENEFIT LIMITATIONS 16 5.01 Definitions 16 5.02 General Limitations 17 5.03 Less Than 10 Years 18 5.04 Limitations if Participant in Other Plan(s) 18 VI PRE-RETIREMENT DEATH BENEFITS 20 6.01 Death Benefits 20 6.02 Death Benefit Limitations 20 6.03 Pre-Retirement Death Benefit for Surviving Spouse; Post-Retirement Death Benefits 20 VII OTHER TERMINATION AND VESTING 21 7.01 Full Vesting Dates 21 7.02 Vesting Schedule 21 7.03 Commencement of Benefits 21 7.04 Forfeiture 21 7.05 Resumption of Participation 21 VIII PAYMENT OF BENEFITS 22 8.01 Commencement of Benefits 22 8.02 Automatic Joint and Survivor Benefits 23 8.03 Optional Forms of Payment 24 8.04 Incidental Death Benefits 24 8.05 Transfers 25 8.06 No Other Benefits 26 8.07 Direct Rollover 26 IX DESIGNATION OF BENEFICIARY 28 9.01 Beneficiary Designation; Election of Non-Spouse Beneficiary 28 9.02 Priority If No Designated Beneficiary 29 X TOP-HEAVY PROVISIONS 30 10.01 Provisions Will Control 30 10.02 Definitions 30 10.03 Minimum Accrued Benefit 32 10.04 Adjustment for Benefit Form Other Than Life Annuity 33 10.05 Nonforfeitability of Minimum Accrued Benefit 33 10.06 Minimum Vesting Schedules 33 10.07 Compensation Limitation 34 XI AMENDMENT OF THE PLAN 35 11.01 Amendment by Employer 35 11.02 Conformance to Law 35 11.03 Merger, Consolidation, or Transfer 36 XII TERMINATION OF THE PLAN 37 12.01 Right to Terminate 37 12.02 Termination Priorities 37 12.03 Reversion to Employer 38 12.04 Subsequent Benefit Payments 38 XIII CLAIMS PROCEDURE 39 13.01 Written Claim 39 13.02 Claim Denial 39 13.03 Request for Review of Denial 39 13.04 Decision on Review 39 XIV CONTRIBUTION AND BENEFIT LIMITS TO HIGH PAID EMPLOYEES 40 14.01 When Applicable 40 14.02 Limitations 40 14.03 Limitations if Plan Amended 40 14.04 Alternate Limitations 41 XV MISCELLANEOUS PROVISIONS 42 15.01 Reversion of Assets 42 15.02 Equitable Adjustment 42 15.03 Reasonable Compensation 42 15.04 Indemnification 42 15.05 Protection From Loss 42 15.06 Protection From Liability 43 15.07 Adoption of Rules and Procedures 43 15.08 Assignment of Benefits 43 15.09 Mental Competency 43 15.10 Authentication 44 15.10 Authentication 44 15.11 Not an Employment Contract 44 15.12 Appointment of Auditor 44 15.13 Uniform Treatment 44 15.14 Interpretation 44 15.15 Plural and Gender 44 15.16 Headings 44 15.17 Expenses 44 15.18 Prevention of Escheat 45 15.19 Special Provisions Respecting Military Service 45 15.20 Participation of Affiliated Employers 45 INTRODUCTION The validity, construction, and all rights granted under this Plan and Trust will be governed, interpreted, and administered by the laws of the United States under the Employee Retirement Income Security Act of 1974 (ERISA, as it may be amended) and the Internal Revenue Code of 1986 (the Internal Revenue Code, as it may be amended). However, regardless of the preceding, to the extent that ERISA and/or the Internal Revenue Code do not preempt local law, the Plan and Trust will be governed, interpreted, construed, and enforced according to the laws of the State of Wisconsin. If the U.S. Department of Labor or the Internal Revenue Service, or both, determines at any time that this Plan does not meet these requirements or that it is being administered or interpreted in a manner inconsistent with these requirements, the Employer may either make the appropriate amendments or adjustments, or both, which may be retroactive, to correct the situation, or terminate the Plan. If any provisions of the Plan and Trust are held to be invalid or unenforceable, the remaining provisions will continue to be fully effective. CHAPTER I DEFINITIONS I.1 Unless the context requires otherwise, the capitalized terms defined below will have the following meanings throughout this Plan when capitalized: (a) Accrued Benefit means a Participant's Normal Retirement Benefit earned under the Plan payable at a Participant's Normal Retirement Date based on his Years of Benefit Service and monthly Compensation up to the date for which the Accrued Benefit is being determined. Unless otherwise provided under the Plan, each Section 401(a)(17) employee's Accrued Benefit under this Plan will be the greater of the Accrued Benefit determined for the employee under (1) or (2) below: (1) the employee's Accrued Benefit determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's total years of service taken into account under the Plan for the purposes of benefit accruals, or (2) the sum of: a. the employee's Accrued Benefit as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Section 1.401(a)(4)-13 of the regulations, and b. the employee's Accrued Benefit determined under the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the employee's years of service credited to the employee for the Plan Years beginning on or after January 1, 1994, for purposes of benefit accruals. A Section 401(a)(17) employee means an employee whose current Accrued Benefit as of a date on or after the first day of the first Plan Year beginning on or after January 1, 1994, is based on Compensation for a year beginning prior to the first day of the first Plan Year beginning on or after January 1, 1994, that exceeded $150,000. (b) Actuary is any person or firm selected by the Employer (as provided by applicable law) to make calculations required by law or otherwise desired to be made under the Plan. The Actuary is also responsible for calculating the Actuarial Equivalents required by the Plan in accordance with generally accepted actuarial principles. An Actuary may be removed by the Employer or resign at any time by written notice. (c) Actuarial Equivalent. Two benefits are said to be Actuarial Equivalents if they have the same present value as determined by the Actuary in accordance with generally accepted actuarial principles applied in a uniform and nondiscriminatory manner. The actuarial assumptions to be used in determining Actuarial Equivalents are as follows: (1) For purposes of the small amount cash-out provision of Section 8.01 (relating to amounts not in excess of $3,500) and for purposes of any lump sum payment which may become due because of the pre-retirement death of the Participant, the actuarial assumptions to be used shall be the `applicable mortality table" and the "applicable interest rate." The term "applicable mortality table" means the table prescribed by the IRS from time to time under Section 417(e)(3) of the Code. The term "applicable interest rate" means the annual rate of interest on 30-year Treasury securities as published by the IRS for the second full calendar month preceding the calendar month that contains the annuity starting date (distribution date). However, at any time on or after July 1, 1998, the single sum distribution payable under such small account cash-out provision or because of the pre-retirement death of the Participant must be no less than the single sum distribution calculated using the Unisex Pension 1984 Mortality Table and an interest rate of 5.5%, based upon the Participant's Accrued Benefit under the Plan through June 30, 1997 and based upon the Participant's age on the annuity starting date (distribution date) or the date of death. (2) For purposes of any lump sum payment under the provisions of Section 8.03(d), excluding only any lump sum payment which may become due because of the pre-retirement death of the Participant, the actuarial assumptions to be used shall be the `applicable mortality table" and the "applicable interest rate," as such terms are defined in subsection (1) above. (3) For purposes of optional forms of payment, in circumstances other than those covered by the special rules set forth in paragraphs (1) and (2) above, the actuarial assumptions to be used are the Unisex Pension 1984 Mortality Table and 5.5% interest; provided, however, that in no event may the interest rate exceed the PBGC rates in effect at the date of distribution. (4) For purposes of the benefit increase covered in Plan Section 4.03, the actuarial assumptions to be used are the Unisex Pension 1984 Mortality Table and 5.5% interest; provided, however, that in no event may the interest rate exceed the PBGC rates in effect at the date of distribution. (d) Affiliated Employer. Affiliated Employer means each corporation which is included as a member of a controlled group with the Employer, and trades and businesses whether or not incorporated, which are under common control by or with the Employer within the meanings of Sections 414(b) and (c) of the Internal Revenue Code of 1986, or any amendments thereof. Further, the term shall include any members of the same "affiliated service group" within the meaning of Code Section 414(m) and any other entity required to be aggregated with the Employer under Code Section 414(o). (e) Annuity Starting Date means the first day of the first period for which an amount is payable as an annuity or in any other form, all as provided in Section 417(f) of the Code and regulations thereunder. (f) Beneficiary is the person or entity designated in Chapter IX to receive any death benefits of a Participant which become payable under the Plan. (g) Break in Service shall mean as to any Participant who, as of December 31, 1988 or earlier, had incurred a One Year Break in Service after termination of employment. A One Year Break in Service means a Plan Year in which the Employee does not complete an aggregate of more than 500 Hours of Service with the Employer or Affiliated Employers. As to any Participant who, as of December 31, 1988 or earlier, has not incurred a Break in Service under the rules then in existence, and as to terminations of employment on and after January 1, 1989, a Break in Service shall be any subsequently ending and consecutive five One Year Breaks in Service. Special provisions with respect to military service are contained in Section 15.19 hereof. (h) Code means the Internal Revenue Code of 1986, as amended and as it may be amended. (i) Committee is the organization appointed by the Board of Directors of the Employer (which may name itself as the Committee) for purposes of overseeing the administration of the Plan, and performing any other duties specified in this Plan. A Committee member may resign or be removed at any time by the Board of Directors of the Employer by written notice. To assist it in its duties, the Committee may employ agents or legal counsel. Any such Committee may in its regulations or by action on behalf of the Committee and as to such actions, no meetings or unanimous consent shall be required. The Committee may also act at a meeting or by its unanimous written consent. A majority of the members of the Committee shall constitute a quorum for the transaction of business and shall have full power to act hereunder. All decisions shall be made by vote of the majority present at any meeting at which a quorum is present, except for actions in writing without a meeting which must be unanimous. The Committee may appoint a Secretary who may, but need not, be a member of the Committee. The Committee may adopt such bylaws and regulations as it deems desirable for the conduct of its affairs. Any absent Committee member, and any dissenting Committee member who (at the time of the making of any decision by the majority) registers his dissent in writing delivered at that time to the other Committee members, shall be immune to the fullest extent permitted by law from any and all liability occasioned by or resulting from the decision of the majority. All rules and decisions of the Committee shall be uniformly and consistently applied to all persons in similar circumstances. The Committee shall be entitled to rely upon the Employer's records as to information pertinent to calculations or determinations made pursuant to the Plan. A member of the Committee may not vote or decide upon any matter relating solely to himself or vote in any case in which his individual right of claim to any benefit under the Plan is particularly involved. If, in any case in which a Committee member is so disqualified to act, the remaining members cannot agree, then, the President of the Employer will appoint a temporary substitute member to exercise all of the powers of the disqualified member concerning the matter in which that member is disqualified to act. In the event a dispute arises under the Plan and Trust, the Committee will be the authorized agent for the service of legal process. (j) Compensation is the quotient of total wages, salaries, fees and other amounts received for a particular Plan Year (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment by the Participant from a Participating Employer to the extent that the amounts are includable in gross income (or such Compensation paid or accrued for Plan Years prior to January 1, 1991), and including any elective contributions not otherwise includable in income under a Code Section 125 cafeteria plan or Section 401(k) plan, but excluding reimbursements or other allowances, fringe benefits (cash and noncash, including, without limitation, any income arising in connection with any stock options, restricted stock or other equity based incentives relating to stock of the Employer), moving expenses, deferred compensation and welfare benefits, divided by 12 (or the number of actual completed calendar months for purposes of the first or last Plan Years of employment). For Employees who are salespersons receiving any commissions during the Plan Year, no more than $50,000 of Compensation while so employed (as adjusted under Code Section 414(q)(1)(C); $54,480 in 1989, $56,990 in 1990, $60,535 in 1991, $62,345 in 1992, $64,245 in 1993, and $66,000 in 1994) will be used for purposes of determining benefits under the Plan. This restriction shall not apply to District or Regional Sales Managers. Notwithstanding any provision of the Plan to the contrary, prior to January 1, 1989, "Compensation" will be determined under the terms of the Plan then in effect; provided, however, that with respect to any Employee with an Hour of Service after December 31, 1988, a special rule will apply. For any given Plan Year commencing on or after January 1, 1989, if such Employee is not a "Highly Compensated Employee" (within the meaning of Code Section 414(q)) during such Plan Year, then the five year average monthly Compensation will be determined without regard to (i) the adjusted $50,000 limit provided above, and (ii) the Compensation limitations that were applicable to salespersons under the terms of the Plan as in effect prior to January 1, 1989, for each prior Plan Year during which the Employee was not a Highly Compensated Employee. However, for any Plan Year beginning after December 31, 1988, Compensation in excess of $200,000 (as adjusted as permitted under Code Section 401(a)(17) from time to time) shall be disregarded. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each employee taken into account under the plan shall not exceed the OBRA `93 annual compensation limit. The OBRA `93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA `93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA `93 annual compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA `93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA `93 annual compensation limit is $150,000. (k) Date of Employment means: (1) the day on which the Employee performs his first Hour of Service on or after the date on which he is employed by the Employer or an Affiliated Employer, or (2) the date on which the Employee performs his first Hour of Service on or after the date on which he is re-employed following a Break in Service. (l) Disability is any impairment which arises before a Participant's termination of employment with the Employer or an Affiliated Employer which may be expected to be of a long continued duration or which may be expected to result in death and which prevents him from satisfactorily performing his duties with the Employer or an Affiliated Employer. Determination of such Disability will be made by a physician selected by the Committee. (m) Early Retirement occurs on the first day of any month coinciding with or next following the Early Retirement Date of a Participant in which he incurs a Termination of Employment, provided he has not then attained his Normal Retirement Date. (n) Early Retirement Date is the date on which the Participant has attained the age of 60 and completed 5 years of Vesting Service. (o) Effective Date of the Plan is January 1, 1947. The Effective Date of this amendment and restatement is January 1, 1998, unless otherwise provided herein. (p) Employee is any person employed directly by the Employer or an Affiliated Employer and for whom the Employer or an Affiliated Employer pays Social Security taxes and who in each case is not excluded by the provisions of Section 2.03 hereof relating to collective bargaining employees. "Leased employees" as defined in Code Section 414(n) shall not be eligible to participate in the Plan although it is recognized that such leased employees, if any, must be treated as employees of the Employer or an Affiliated Employer for purposes of certain nondiscrimination, coverage, and other rules under the Code. Also excluded is any person who is classified by the Employer or an Affiliated Employer as other than as an Employee, for the entire period of such classification, without regard to any subsequent reclassification which may occur by operation of law or otherwise. It is recognized that the definition of an eligible "Employee" was significantly expanded as to certain classes of Employees (the "Newly Included Group") by amendment to this Plan effective as of January 1, 1989. Notwithstanding any other provisions of this Plan, individuals in the Newly Included Group shall have all past periods of service with the Employer counted as Years of Eligibility and Vesting Service for purposes of this Plan. Such past service shall also be counted as Years of Benefit Service for purposes of this Plan, except for Years covered under another private defined benefit pension plan sponsored by the Employer. (q) Employer is OshKosh B'Gosh, Inc. and any successor corporation by merger, purchase, or otherwise. Unless specifically included, Absorba, Inc. and Essex Outfitters, Inc. and other subsidiaries of OshKosh B'Gosh, Inc. are not considered as an Employer. (r) Employment Year means a 12-month period following an Employee's most recent Date of Employment. (s) Hours of Service means any of the following hours (assuming a 190 hour month for any Employee not employed on an hourly basis who works one hour during the month): (1) Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer. These hours will be credited to the Employee for the computation period in which the duties are performed; and (2) Each hour for which an Employee is paid, or entitled to payment, by the Employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 Hours of Service will be credited under this paragraph for a single computation period (whether or not the period occurs in a single computation period). Hours under this paragraph will be calculated and credited pursuant to Section 2530.200b-2 of the Department of Labor Regulations which are incorporated herein by this reference; and (3) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer. The same Hours of Service will not be credited both under (1) or (2) above, as the case may be, and under this definition (3). These hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. For purposes of determining whether a One Year Break in Service has occurred for participation and vesting purposes, an employee who is absent from work (i) by reason of her pregnancy, (ii) by reason of the birth of a child of the employee, (iii) by reason of the placement of a child in connection with the adoption of the child by the Employee or (iv) for purposes of caring for the child during the period immediately following the birth or placement for adoption, Hours of Service shall be credited according to the following rule. During the period of absence, the Employee shall be deemed to have completed the number of hours that normally would have been credited but for the absence. If the normal work hours are unknown, eight hours of service shall be credited for each normal workday during the leave. Provided, however, the total number of Hours of Service required by this paragraph to be treated as completed for any period shall not exceed 501. The Hours of Service to be credited under this Section shall be credited in the year in which the absence begins if such crediting is necessary to prevent a One Year Break in Service in that year or in the following year. Hours of Service will also be credited for any individual considered an Employee under Section 414(n). If records of employment with respect to an Employee's service with the Employer before January 1, 1984 are insufficient to determine his exact Hours of Service, the Committee will make reasonable estimates of said Hours of Service based on such records of employment. Any such Hours of Service estimates will be made in a uniform, nondiscriminatory manner and will be binding on all Employees. Hours of Service attributable to employment with the Employer and any Affiliated Employer shall be counted for all purposes of this Plan, except for the determination of Years of Benefit Service under Section 1.01(ii), which credits only Hours of Service accrued while an Employee in the service of a Participating Employer. (t) Joint and Survivor Annuity is an annuity for the life of the Participant, with a survivor annuity for the life of a Participant's spouse which is 50% of the amount of the annuity payable for the life of the Participant and which is the Actuarial Equivalent of the Normal Form of Benefit. (u) Non-Vested or Forfeited means that portion of a benefit to which a Participant would not be entitled under Section 7.02 if he incurred a Termination of Employment. (v) Normal Form of Benefit is a benefit payable monthly for the life of a Participant with no benefits payable to a Beneficiary upon the Participant's death. (w) Normal Retirement Date is the first of the month coinciding with or next following the Participant's attainment of age 65. A Participant will be fully Vested at age 65. (x) Normal Retirement Benefit is the monthly benefit described in Section 4.01 payable beginning the first of the month following the Normal Retirement Date. (y) Participant is an Employee who has met the eligibility requirements of Chapter II. (z) Participating Employer means the Employer and any Affiliated Employer authorized by the Employer to participate in this Plan, by extending the same to such Affiliated Employer's eligible Employees. (aa) Plan means the OshKosh B'Gosh, Inc. Pension Plan as it may be amended from time to time. (bb) Plan Administrator is OshKosh B'Gosh, Inc. (cc) Plan Year is January 1 to December 31. (dd) Termination of Employment of an Employee for purposes of the Plan shall be deemed to occur upon his resignation, discharge, retirement, death, disability, failure to return to active work at the end of an authorized leave of absence, or the authorized extension or extensions thereof, failure to return to work when duly called following a temporary layoff, failure to return from military service within the time prescribed by any law protecting employment rights, or upon the happening of any other event or circumstance, which, under the policy of the Employer or an Affiliated Employer, as in effect from time to time, results in the termination of the employer/employee relationship. (ee) Trust means the OshKosh B'Gosh, Inc. Pension Trust as it may be amended from time to time. (ff) Trustee is the person(s), corporation, or combination thereof, and any duly appointed successor or successors, named as Trustee in the Trust document. (gg) Trust Fund is the total of contributions made to the Trust, increased by profits, income, refunds, and other recoveries received, and decreased by losses and expenses incurred, and benefits paid. (hh) Vested is that portion of an Accrued Benefit to which a Participant has a nonforfeitable right. (ii) Year of Benefit Service for an Employee means a Plan Year during which he completes at least 1,000 Hours of Service in the employ of a Participating Employer. In the event that a Participant is not employed for the entire Plan Year, a partial Year of Benefit Service will be earned as follows: Number of Hours of Service During a Plan Year Year of Benefit Service 1,000 or more 1.0 900 but less than 1,000 .9 800 but less than 900 .8 700 but less than 800 .7 600 but less than 700 .6 500 but less than 600 .5 400 but less than 500 .4 300 but less than 400 .3 200 but less than 300 .2 100 but less than 200 .1 less than 100 0 Years of Benefit Service prior to January 1, 1984 will be determined according to the provisions of the Plan in effect prior to January 1, 1984. Effective January 1, 1991, Employees at the Employer's McEwen facility who become Participants under Section 2.01 may earn a Year of Benefit Service or a partial Year of Benefit Service under the above definition. (jj) Year of Eligibility Service is the Employment Year of an Employee, provided he completes at least 1,000 Hours of Service during such Employment Year. For an Employee who does not compete at least 1,000 Hours of Service in his Employment Year, a Year of Eligibility Service is a Plan Year, starting with the Plan Year next following his Date of Employment, during which he completes at least 1,000 Hours of Service. (kk) Year of Vesting Service is any Plan Year, starting with the Plan Year in which an Employee is hired by the Employer or an Affiliated Employer during which such Employee completes at least 1,000 Hours of Service. CHAPTER II ELIGIBILITY AND PARTICIPATION II.1 Eligibility. On and after January 1, 1989, each Employee of a Participating Employer will become a Participant in the Plan the first of the month coincident with or next following: (a) his attainment of at least age 21; and (b) his completion of one Year of Eligibility Service. Effective May 21, 1991, this Plan is merged with the OshKosh B'Gosh, Inc. McEwen Hourly Employees' Pension Plan (the "McEwen Plan"). Employees participating in the McEwen Plan on May 20, 1991, will become Participants in this Plan on May 21, 1991. Otherwise, Employees at the McEwen facility will become Participants in this Plan as provided in this Section 2.01. II.2 Re-Employment. Notwithstanding the provisions of Section 2.01, any Participant who terminated employment with a Participating Employer after the effective date of this restatement, and is later rehired, shall again become eligible to become a Participant on his most recent Date of Employment. II.3 Exclusion of Collective Bargaining Employees. An Employee who is covered by a collective bargaining agreement to which a Participating Employer is a party will not be eligible to participate in this Plan unless that collective bargaining agreement specifically provides for coverage of such Employees under this Plan. II.4 Change in Participant Status. In the event a Participant is no longer a member of the eligible class of Employees and becomes ineligible to participate, such employee will participate immediately upon returning to the eligible class of Employees. II.5 Employees Not in Eligible Class. In the event an employee who is not a member of the eligible class of Employees becomes a member of the eligible class, such employee will participate immediately if such employee has satisfied the minimum age and service requirements and would have otherwise previously become a Participant. CHAPTER III CONTRIBUTIONS III.1 Employer Contributions. Upon advice from the Actuary, the Participating Employers will contribute from time to time amounts sufficient to fund the benefits under the Plan and Trust. Such contributions will be paid over to the Trustees of the Trust Fund. To the extent any contributions are not deductible under Code Section 404, such contributions shall be returned to the Participating Employers. III.2 Funding Policy. In order to implement and carry out the provisions of the Plan and finance the benefits under the Plan, the Employer will establish and maintain a funding policy with respect to the Trust Fund in a manner consistent with applicable law. III.3 Employee Contributions. Employee contributions are not permitted under this Plan. CHAPTER IV RETIREMENT BENEFITS IV.1 Normal Retirement Benefit. (a) A Participant who retires from a Participating Employer on his Normal Retirement Date is entitled to a monthly Normal Retirement Benefit, payable in the Normal Form of Benefit, in an amount equal to the sum of 1% of the Participant's five-year average monthly compensation (the average of any five consecutive Plan Years or if the actual number of such Years is less than five, the average based on the number of completed months, which produce the highest average) multiplied by his Years of Benefit Service. (b) A Participant who terminates from employment before January 1, 1992, and who was transferred by the Employer from employment covered by another pension plan of the Employer to employment covered by this Plan, will have his retirement benefits calculated based on his Years of Benefit Service earned after his date of transfer. (c) A Participant who terminates on or after January 1, 1992, but before January 1, 1993, and who was transferred by the Employer from employment covered by another pension plan of the Employer to employment covered by this Plan, will have his retirement benefits determined as follows: the Normal Retirement Benefit will be the greater of the amount determined under paragraph (a) of this Section 4.01 (based on his Years of Benefit Service earned after his date of transfer) or an amount equal to the product of (1) times (2), with such product reduced by (3), as follows: (1) the unit benefit (e.g., the dollar amount that is multiplied by Years of Benefit Service), as of the Employee's Termination of Employment from this Plan, payable from the plan under which the Employee was covered prior to the transfer; (2) the Employee's total Years of Benefit Service (including service under the plan which the Employee was covered prior to the transfer); (3) the actual benefit payable from the plan under which the Employee was covered prior to the transfer. (d) A Participant who terminates from employment on or after January 1, 1993, and who, before January 1, 1989, was transferred by the Employer from employment covered by another pension plan of the Employer to employment covered by this Plan, will have his retirement benefits calculated based on all of his Years of Benefit Service earned including employment covered by the other pension plan. (e) A Participant who terminates on or after January 1, 1993, and who, on or after January 1, 1989, was transferred by the Employer from employment covered by another pension plan of the Employer to employment covered by this Plan, will have his retirement benefits determined under paragraph (c) of this Section 4.01. (f) The retirement benefits under this Plan of an Employee who is transferred by the Employer from employment covered by this Plan to employment covered by another pension plan of a Participating Employer, will be calculated up to his date of transfer. (g) Effective May 21, 1991, this Plan and the McEwen Plan are merged. Any Accrued Benefit earned under the terms of the McEwen Plan before May 21, 1991, shall be payable under this Plan. The retirement benefits under this Plan applicable to Employees at the Employer's McEwen facility will be calculated based on Years of Benefit Service on or after January 1, 1991. For the Plan Year ending December 31, 1991, such Employees shall accrue a benefit equal to the greater of the benefit accrued under this Plan (including all service on or after January 1, 1991) or the benefit accrued under the McEwen Plan between January 1, 1991 and May 20, 1991. For purposes of calculating a Participant's five year average monthly compensation for any Plan Year before January 1, 1991, this Plan will take into account compensation earned under the terms of the McEwen Plan then in effect. IV.2 Early Retirement. A Participant who is eligible for Early Retirement may retire from the employ of a Participating Employer at any time prior to his Normal Retirement Date. Such Participant may elect to begin receiving his early retirement benefit on or after his Early Retirement Date, subject to the provisions of Section 8.01. For purposes of this Section 4.02, the amount of a Participant's early retirement benefit is equal to his Accrued Benefit. Such benefit will be reduced to its Actuarial Equivalent for each month that benefits commence before Normal Retirement Date. IV.3 Late Retirement. If a Participant remains in the employ of a Participating Employer after his Normal Retirement Date, unless an election to the contrary is made under Section 8.01, his benefit payments will begin no later than his Required Beginning Date, as defined in Section 8.01. The amount of the benefit payable when such Participant actually retires from the employ of a Participating Employer will be calculated in the same manner as the Normal Retirement Benefit including Compensation and Years of Benefit Service after the Participant's Normal Retirement Date. Such benefit will be offset by the Actuarial Equivalent of any benefit previously paid under this Plan to such Participant. However, if a Participant remains in the employ of a Participating Employer after his Normal Retirement Date, such Participant, upon his subsequent retirement, shall have the value of his benefit in the Normal Form increased by the Actuarial Equivalent of the monthly benefit in the Normal Form to which he would have been entitled had he not continued in employment, for any month after his Normal Retirement Date until the date that benefits actually commence. In the event of such Participant's death while continuing in the employ of a Participating Employer after his Normal Retirement Date, the Actuarial Equivalent value of the additional benefit that would have been provided under the preceding sentence shall be added to the value of his benefit for purposes of any death benefit that may be payable under Chapter VI or VIII. IV.4 Non-Duplication of Benefit. Under no circumstances will the benefit of any Employee who has incurred a Termination of Employment and is later rehired by a Participating Employer be greater than the benefit he would have received if the Termination of Employment had not occurred and he had been continuously employed. Upon such Participant's later retirement or Termination of Employment, the Participant's Normal Retirement Benefit shall be reduced by the Actuarial Equivalent of any benefit previously paid under this Plan to such Participant. IV.5 Re-Employment. If a former Employee who is receiving benefits from the Plan and Trust returns to the employ of the Employer or an Affiliated Employer, his benefit payments shall continue uninterrupted. CHAPTER V BENEFIT LIMITATIONS V.1 Definitions. For purposes of this Chapter V, the capitalized terms defined below will have the following meaning when capitalized: Annual Additions means the total of the following amounts, if any, which are allocated to the Combined Accounts of a Participant: (a) Employer contributions (excluding Employer contributions arising from an award of back pay by agreement with the Employer or by court order); (b) Amounts forfeited by non-Vested previous Participants; (c) Non-deductible voluntary Employee contributions. For purposes of determining Annual Additions, a rollover contribution from an IRA of a Participant, or from his account in the qualified retirement plan of his previous employer will not be included. Average Compensation of a Participant is his Total Compensation during the three consecutive Limitation Year period in which he earned a Year of Vesting Service and which produces the highest average. Combined Accounts means the total of all accounts of a Participant in all of the Defined Contribution Plans of the Employer. Defined Benefit Plan is a retirement plan which does not provide for benefits from an individual account of a Participant, but rather such benefits are based on a benefit formula provided by the Plan. Defined Contribution Plan is a retirement plan which provides for an individual account for each Participant and for benefits based entirely on the balance of that account. The account balance is usually derived from contributions, income, expenses, market value increases or decreases, and sometimes non-Vested (Forfeited) amounts from Participants who terminate employment before retirement. Employer means the employer that adopts this Plan. All members of a controlled group of corporations (as defined in Section 414(h) as modified by Section 415(h) of the Code), all trades or businesses (whether or not incorporated) under common control (as defined by Section 414(c) as modified by Section 415(h) of the Code), or all members of an affiliated service group (as defined in Section 414(m) of the Code), will be considered a single employer for the purposes of applying the limitations of this Chapter. Limitation Year is the Plan Year. Total Compensation includes a Participant's earned income, wages, salaries, and fees for professional service and other amounts received for personal services actually rendered in the course of employment with an Employer maintaining the plan (including but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses) and excluding the following: (a) Employer contributions to a plan of deferred compensation which are not included in the gross income of the Employee for the taxable year in which contributed, or on behalf of an Employee to a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; (b) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (c) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (d) Other amounts which receive special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of a 403(b) annuity contract (whether or not the contributions are excludable from the gross income of the Employee). Notwithstanding the above definition, from and after January 1, 1998, Total Compensation shall include any elective deferral contributions (as defined in Code Section 402(g)(3)) and any amounts contributed or deferred by the Employer at the election of the Participant which are not included in the gross income of the Participant by reason of Code Section 125 or 457. V.2 General Limitations. Under no circumstances will the total annual benefits (which, for purposes of this Chapter means benefits payable in the form of a straight life annuity, without ancillary benefits, or if payable in some other form, the Actuarial Equivalent (computed using an interest rate of 5%) of such form) derived from Employer contributions and payable under all Combined Plans to a Participant who retires at or after the Social Security Retirement Age (as defined in Code Section 415(b)(8)) exceed the lesser of the following for any Limitation Year: (a) $90,000 (the "Dollar Limitation") (effective on January 1, 1988, and each January 1 thereafter, the $90,000 limitation above will be automatically adjusted to the new dollar limitation determined by the Commissioner of Internal Revenue for that calendar year. The new limitation will apply to Limitation Years ending within the calendar year of the date of the adjustment.) (b) 100% of his Average Compensation (as defined in Section 5.01) (the "Compensation Limitation"). If the annual benefit commences after the Social Security Retirement Age, the benefit may not exceed the Actuarial Equivalent of a single life annuity equal to the Dollar Limitation commencing on the Participant's Social Security Retirement Age. To determine Actuarial Equivalence after the Social Security Retirement Age, in the preceding sentence, an interest rate assumption of 5% will be used. If the annual benefit commences before a Participant's attainment of his Social Security Retirement Age, the Dollar Limitation applicable to such benefit shall be reduced to an amount which is equal to a single life annuity commencing at the same time which is the Actuarial Equivalent of a single life annuity equal to the Dollar Limitation commencing on the Participant's Social Security Retirement Age. Notwithstanding the above, if the Participant was a Participant in a plan in existence on July 1, 1982, the maximum permissible amount shall not be less than the Participant's accrued benefit as of September 30, 1983. Notwithstanding the foregoing provisions of this Section 5, if the maximum limitations on retirement benefits, with respect to any person who was a Participant prior to January 1, 1987 and whose retirement benefit (determined without regard to any changes in the Plan after May 6, 1986 and without regard to cost-of-living adjustments occurring after December 31, 1986) exceeds the limitations set forth in this Section, then, for purposes of such Section and Section 415(b) and (e) of the Code, the Dollar Limitations with respect to such Participant shall be equal to such Participant's retirement benefit as of December 31, 1986; provided that such Participant's retirement benefit did not exceed the maximum limitation as in effect for all the Plan Years prior to January 1, 1987. Regardless of anything to the contrary, the limitations described in Section 5.02(a) and (b) above will not apply if the annual benefits of a Participant under all Combined Defined Benefit Plans do not exceed $10,000 in the Plan Year or any prior Plan Year, and if he has never been a Participant in any Defined Contribution Plan of the Employer. V.3 Less Than 10 Years. If the annual benefit commences when the Participant has completed less than ten years of Vesting Service with the Employer, the limitations described in Section 5.02 will be reduced by 10% for each Year of Vesting Service less than ten. V.4 Limitations if Participant in Other Plan(s). If a Participant is also a Participant in a Defined Contribution Plan (or Plans) maintained by the Employer, the decimal equivalent of the sum of the fractions determined as follows for all Defined Benefit Plans and Defined Contribution Plans maintained by the Employer in which he participates shall not exceed 1.0 for any Limitation year: (a) A defined benefit fraction, the numerator being the projected total annual benefits of the Participant under all Employer-sponsored Defined Benefit Plans (whether or not terminated), and the denominator being the lesser of: (1) the product of 1.25 multiplied by $90,000 (or, if permitted by applicable law, such other dollar amount as is specified annually by the Secretary of the Treasury, or his delegate); or (2) the product of 1.4 multiplied by the Participant's Average Compensation. (b) A defined contribution fraction, the numerator being the sum of the actual Annual Additions to the Participant's Combined Accounts under all Defined Contribution Plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years, and the denominator being the sum of the lesser of the following amounts determined for such Limitation Year and all prior Limitation Years of the Participant's service with the Employer (regardless of whether a Defined Contribution Plan was maintained by the Employer): (1) the product of 1.25 multiplied by $30,000 (or, if greater, one-fourth of the Dollar Limitation in effect under Code Section 415(b)(1)(A)); or (2) the product of 1.4 multiplied by 25% of his Total Compensation for such Limitation Year. In the event the projected annual benefits of a Participant under all Defined Benefit Plans cause the total of the fractions determined under (a) and (b) above to exceed 1.0, the annual benefits under the Employer-sponsored Defined Benefit Plans will be reduced to the extent necessary so that the sum of the defined benefit plan fraction and defined contribution plan fraction do not exceed 1.0. From and after January 1, 2000, the special limitations set forth in this Section 5.04 shall no longer apply. CHAPTER VI PRE-RETIREMENT DEATH BENEFITS VI.1 Death Benefits. Except as provided in Section 6.03 and Chapter VIII, any death benefits payable under the Plan and Trust will be according to the provisions of this Section 6.01. The Beneficiary of any Participant (including former Participants with deferred vested benefits) who dies before his Annuity Starting Date will be entitled to a lump sum death benefit, payable as soon as administratively possible after the Participant's death, equal to the present Actuarial Equivalent value (as determined by the Actuary) of the Accrued Benefit of such Participant on his date of death. VI.2 Death Benefit Limitations. Except as provided in Sections 6.01, 6.03 and Chapter VIII, the Beneficiary or spouse of any Participant who dies will not be entitled to any death benefit under the Plan and Trust. VI.3 Pre-Retirement Death Benefit for Surviving Spouse; Post-Retirement Death Benefits. Unless the Participant has designated someone other than his spouse as the primary Beneficiary under the provisions of Section 9.01, the death benefit payable to the spouse of a Participant (including a former Participant with deferred vested benefits) who dies before his Annuity Starting Date will be in the form of a single life annuity for the life of such spouse which is the Actuarial Equivalent of the Accrued Benefit of such Participant. The surviving spouse may elect to commence payment of such annuity within a reasonable period after the Participant's death. Absent an election by the surviving spouse, payment of such annuity will start on the later of the Participant's date of death or the date when the Participant would have attained age 62. The surviving spouse may also elect the lump sum death benefit specified in Section 6.01 above in lieu of such annuity. If the Participant dies after benefits have commenced under one of the forms specified in Chapter VIII, the death benefits payable, if any, will be in accordance with the form of payment then in effect. CHAPTER VII OTHER TERMINATION AND VESTING VII.1 Full Vesting Dates. Upon the date of a Participant's death, retirement or incurrence of a Disability, he will be fully Vested in his Accrued Benefit. VII.2 Vesting Schedule. A Participant who has completed at least 5 Years of Vesting Service and who terminates his employment with the Employer or an Affiliated Employer for reasons other than death, Disability, or retirement will be fully Vested in his Accrued Benefit. If a Participant terminates his employment with the Employer or an Affiliated Employer for reasons other than death, Disability, or retirement before he has completed 5 Years of Vesting Service, he will not be Vested in any benefit in this Plan and his entire Accrued Benefit will be forfeited. VII.3 Commencement of Benefits. The payment of any Vested Accrued Benefit determined under this Chapter will start on the date specified in Section 8.01, and will be adjusted for either or both of the following reasons: (a) If payments start on a date prior to the Participant's Normal Retirement Date, such payments will be adjusted as specified in Section 4.02; (b) If payments are in a form other than the Normal Form of Benefits, such payments will have an Actuarial Equivalent adjustment made. VII.4 Forfeiture. Any Non-Vested Accrued Benefit determined under this Chapter, or any other benefit forfeited by a Participant who dies but is not eligible for death benefits under the Plan and Trust will be retained in the Trust Fund and will be used to reduce the future Participating Employer contributions to the Plan. VII.5 Resumption of Participation. If an Employee returns to the employ of a Participating Employer following a Break in Service, his Years of Vesting Service and Years of Benefit Service which occurred before such Break in Service will be aggregated with his Years of Vesting Service and Years of Benefit Service occurring after such Break in Service if he also meets either of the following requirements: (a) If he was Vested in some or all of his Accrued Benefit under this Plan at the time his Break in Service occurred; or (b) Even if he was not Vested in his Accrued Benefit at the time of his Break in Service, if the number of consecutive One Year Breaks in Service is less than the Years of Vesting Service which occurred before such Break in Service. CHAPTER VIII PAYMENT OF BENEFITS VIII.1 Commencement of Benefits. Unless a Participant elects in writing to further defer the starting date of any benefit payable under the Plan and Trust, benefits must begin to be paid within 60 days after the later of: (a) the last day of the Plan Year in which he attains age 65; or (b) the last day of the Plan Year in which he incurs a Termination of Employment. Effective January 1, 2000, and notwithstanding any other provisions of this Plan but subject to the special rules pertaining to 5% owners and certain other Participants set forth below, any benefit payable to a Participant shall commence no later than the "Required Beginning Date" for a Participant under Code Section 401(a)(9), as amended by the Small Business Job Protection Act of 1996, which is the April 1st of the calendar year following the later of (i) the calendar year in which the Participant attains age 70 1/2, or (ii) the calendar year in which the Participant retires or terminates service with the Employer or an Affiliated Employer. However, any benefit payable to a Participant who is a more than 5% owner of the "employer" as defined in Code Section 416 with respect to the Plan Year ending in the calendar year in which such Participant attains age 70 1/2 shall commence no later than the April 1st of the calendar year following the calendar year in which such Participant attains age 70 1/2, even if he has not separated from service as of such date. Further, any Participant continuing in the service of the Employer or an Affiliated Employer who attained age 70 1/2 after December 31, 1996 but before January 1, 2000 shall have an option to elect either to begin receiving benefits starting no later than April 1st of the calendar year following the calendar year in which such Participant attains age 70 1/2 or to defer the commencement thereof (and, if applicable, to stop the current receipt of benefits) until retirement or termination of service. Any distribution of benefits that was being made to such a Participant in the Joint and Survivor Annuity form may be stopped under the preceding sentence only if consent of the person who was such Participant's spouse when the benefit payments initially commenced is obtained and such consent acknowledges the effect of the election to stop. Any commencement or recommencement of benefits starting after retirement or termination of service of a Participant who has elected to defer (and, if applicable to stop the current receipt of benefits) shall be subject to all of the provisions of Section 8.02 dealing with the mandatory Joint and Survivor Annuity form of distribution for married Participants and the single life annuity form for single Participants and the circumstances under which some other form of distribution may be elected. Any Participant who incurs a Termination of Employment and who later attains the age specified as an Early Retirement Date may elect in writing to the Committee to have his benefit payments begin at any time following such age. Once such election is made, benefit payments must begin within 60 days after the date specified in the election. Notwithstanding any provision of the Plan to the contrary, if the Vested portion of the Accrued Benefit of a Participant who terminates, retires, or dies does not exceed $3,500, the Vested Accrued Benefit shall be distributed in the form of a single sum cash distribution as soon as practicable following the Participant's termination. If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (a) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (b) the Participant, after receiving the notice, affirmatively elects a distribution. VIII.2 Automatic Joint and Survivor Benefits. Unless an optional form of benefit is selected pursuant to a qualified election within the 90-day period ending on the Annuity Starting Date, a married Participant's Vested Accrued Benefit will be paid in the form of a Joint and Survivor Annuity. A qualified election is a waiver of a Joint and Survivor Annuity. The waiver must be in writing and must be consented to by the Participant's spouse. The spouse's consent to a waiver must acknowledge the designation of a specific alternative beneficiary in writing signed by the spouse and witnessed by a Plan representative or notary public. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no spouse or the spouse cannot be located, waiver will be deemed a qualified election. Any consent necessary under this provision will be valid only with respect to the spouse who signs the consent, or in the event of a deemed qualified election, the designated spouse. Additionally, a revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefit. The number of revocations shall not be limited. In the case of a Joint and Survivor Annuity as described above, the Committee shall provide each Participant within a reasonable period under applicable regulations (currently, not less than 30 and no more than 90 days) prior to the Annuity Starting Date a written explanation of: (a) the terms and conditions of a Joint and Survivor Annuity; (b) the Participant's right to make and the effect of an election to waive the Joint and Survivor Annuity form of benefit; (c) the rights of a Participant's spouse; and (d) the right to make, and the effect of, a revocation of a previous election to waive the Joint and Survivor Annuity. If the Participant, after having received the above written explanation, affirmatively elects a form of distribution (with spousal consent if the form is other than the Joint and Survivor Annuity), the Plan may treat such election as a waiver of any remaining portion of the 30-day notice period, provided the distribution does not commence before the expiration of a 7-day period beginning the day after the Participant has received the above written notice and other requirements of applicable regulations are satisfied. Unless an optional form of benefit is selected, an unmarried Participant's Vested Accrued Benefit will be paid in the form of a single life annuity under Section 8.03. VIII.3 Optional Forms of Payment. Except where a Joint and Survivor Annuity is required by Section 6.01 or Section 8.02, all benefit payments will be made in the Normal Form of Benefit unless the Participant (or his Beneficiary, if he is deceased) selects in writing one, or a combination of, the following optional forms of benefits: (a) life income annuity; (b) a joint and survivor annuity providing a survivor benefit to any Beneficiary which is at least 50% but not greater than 100% of the Participant's benefit; (c) a term certain annuity for 120 months, or 180 months; (d) a lump sum payment, but only if Termination of Employment is due to retirement, death, or Disability. (e) if the Participant was employed at the McEwen facility, then he or his Beneficiary may select a life annuity with 120 or 180 monthly benefits guaranteed. Any benefit payable in a form other than the Normal Form of Benefit will be the Actuarial Equivalent of the benefit which would have been payable in the Normal Form of Benefit. Any annuity contracts which may be purchased to provide Plan benefits will be nontransferable. VIII.4 Incidental Death Benefits. Regardless of any statement (with the exception of Section 8.02) to the contrary, the ability of any Participant or any Beneficiary to select the timing and method of a distribution option will be limited by the following provisions: (a) If the Participant's entire interest is to be distributed in other than a lump sum, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the Participant's entire interest by the life expectancy of the Participant or joint and last survivor expectancy of the Participant and designated Beneficiary. Life expectancy and joint and last survivor expectancy are computed by the use of the return multiples contained in Section 1.72-9 of the Income Tax Regulations. For purposes of this computation, a Participant's life expectancy may be recalculated no more frequently than annually, however, the life expectancy of a nonspouse Beneficiary may not be recalculated. If the Participant's spouse is not the designated Beneficiary, the method of distribution selected must satisfy the minimum death incidental benefit requirements of Section 1.401(a)(9)-2 of the regulations which are incorporated herein by this reference. (b) If the Participant dies after distribution of his or her interest has commenced, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. (c) If the Participant dies before distribution of his or her interest commences, the Participant's entire interest will be distributed no later than five years after the Participant's death except to the extent that an election is made to receive distribution in accordance with (1) or (2) below: (1) If any portion of the Participant's interest is payable to a designated Beneficiary, distributions may be made in substantially equal installments over the life or life expectancy of the designated Beneficiary commencing no later than one year after the Participant's death; (2) If the designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (1) above shall not be earlier than the date on which the Participant would have attained age 70 1/2, and, if the spouse dies before payments begin, subsequent distributions shall be made as if the spouse had been the Participant. (d) For purposes of 8.04(c) above, payments will be calculated by use of the return multiples specified in Section 1.72-9 of the regulations. Life expectancy of a surviving spouse may be recalculated annually, however, in the case of any other designated Beneficiary, such life expectancy will be calculated at the time payment first commences without further recalculation. (e) For purposes of this Section 8.04, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority. VIII.5 Transfers. The Plan will not accept the transfer into the Trust Fund of IRA's or distributions to Participants from other retirement plans. VIII.6 No Other Benefits. Except as provided in Chapter XII, no payments shall be made from the Plan and Trust to a Participant except for retirement, death, Disability, or other Termination of Employment. VIII.7 Direct Rollover. (a) This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (b) Definitions (i) Eligible Rollover Distribution: An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: 1 any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of ten years or more; 2 any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; 3 the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities); 4 returns of Section 401(k) elective deferrals that are returned as a result of the Section 415 limitations; 5 corrective distributions of excess contributions, excess deferrals, and excess aggregate contributions, together with the income allocable to these corrective distributions; 6 loans treated as distributions under Section 72(p) and not excepted by Section 72(p)(2); 7 loans in default that are deemed distributions; 8 a distribution less than $200; and 9 similar items designated by the IRS in revenue rulings, notices, and other guidance of general applicability. (ii) Eligible Retirement Plan: An Eligible Retirement Plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (iii) Distributee: A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employees'spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse. (iv) Direct Rollover: A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. CHAPTER IX DESIGNATION OF BENEFICIARY IX.1 Beneficiary Designation; Election of Non-Spouse Beneficiary. Each Participant may name or change the name of his Beneficiary(ies) who will receive any death benefits payable under Chapters VI or VIII of the Plan. However, any designation by a married Participant of someone other than his spouse as the primary Beneficiary for any pre-retirement death benefit payable under Section 6.01 of the Plan is an election to waive the pre-retirement surviving spouse death benefit under Section 6.03 and must be made by the Participant in writing during the election period described below and shall not be effective unless: (a) the Participant's spouse consents in writing to the election; (b) the election designates a specific alternate Beneficiary, including any class of Beneficiaries or any contingent Beneficiaries, which may not be changed without spousal consent (or the spouse expressly permits designations by the Participant without any further spousal consent); (c) the spouse's consent acknowledges the effect of the election; and (d) the spouse's consent is witnessed by a plan representative or notary public. If it is established to the satisfaction of a plan representative that such written consent may not be obtained because there is no spouse or the spouse cannot be located, a waiver will be deemed a qualified election. The election period to waive the pre-retirement surviving spouse death benefit begins on the first day of the Plan Year in which the Participant attains age 35 or the date of the Participant's termination of service, if earlier, and ends on the date of the Participant's death. An earlier waiver (with spousal consent) may be made, but it will become invalid at the beginning of the Plan Year in which the Participant attains age 35 or the date of a vested Participant's termination of service, if earlier. However, a new waiver and consent form may be signed thereafter at any time during the election period. With regard to the election, the Committee shall provide each Participant within the applicable period, with respect to such Participant (and consistent with regulations), a written explanation of the pre-retirement surviving spouse death benefit containing comparable information to that required pursuant to Section 8.02. For the purposes of this paragraph, the term "applicable period" means, with respect to a Participant, whichever of the following periods ends last: (a) The period beginning with the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35; (b) One year ending after the individual becomes a Participant; (c) One year ending after the Plan no longer fully subsidizes the cost of the pre-retirement surviving spouse death benefit with respect to the Participant; or (d) One year ending after Code Section 401(a)(11) first applies to the Participant. Notwithstanding the foregoing, notice must be provided within a reasonable period ending after separation from service in the case of a Participant who separates before attaining age 35. For this purpose, the Committee must provide the explanation within a period beginning one year before the separation from service and ending one year after such separation. If such a Participant thereafter returns to employment with a Participating Employer, the applicable period for such Participant shall be redetermined. IX.2 Priority If No Designated Beneficiary. If there is no Beneficiary designation form on file, or if the designated Beneficiary(ies) predeceases the Participant, benefit payments required under the Plan and Trust to be payable on death to the Beneficiary(ies) will be distributed in the following order of priority: (a) to the surviving spouse; or if none (b) to the surviving issue (per stirpes and not per capita); or, if none (c) to the surviving parents equally, or, if one is deceased, to the survivor of them; or, if none (d) to the estate of the Participant. CHAPTER X TOP-HEAVY PROVISIONS X.1 Provisions Will Control. If the Plan is or becomes Top-Heavy in any Plan Year beginning after December 31, 1983, the provisions of Chapter X will supersede any conflicting provisions in the Plan. X.2 Definitions. For purposes of this Chapter X the following definitions shall apply: (a) Employer: Means all Participating Employers and all Affiliated Employers. (b) Key Employee: Any Employee or former Employee (and the Beneficiaries of such Employee) who at any time during the Determination Period was: (1) an officer of the Employer having annual compensation from the Employer greater than 1.5 times the amount in effect under Section 415(c)(1)(A) for any such Plan Year; (2) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Employer if such individual's compensation exceeds the dollar limitation under Section 415(c)(1)(A) of the Code; (3) a 5% owner of the Employer; or (4) a 1% owner of the Employer who has an annual compensation of more than $150,000. The Determination Period is the Plan Year containing the Determination Date and the 4 preceding Plan Years. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the regulations thereunder. (c) Top-Heavy Plan: For any Plan Year beginning after December 31, 1983, this Plan is Top-Heavy if any of the following conditions exist: (1) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of Plans. (2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%. (3) If this Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. (d) Top-Heavy Ratio: (1) If the Employer maintains one or more defined benefit plans and the Employer has not maintained any defined contribution plans (including any Simplified Employee Pension Plan) which during the 5-year period ending on the Determination Date(s) has or has had account balances, the Top-Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of the Present Value of Accrued Benefits of all Key Employees as of the Determination Date(s) (including any part of any Accrued Benefit distributed in the 5-year period ending on the Determination Date(s)), and the denominator of which is the sum of all Accrued Benefits (including any part of any Accrued Benefits distributed in the 5-year period ending on the Determination Date(s)) determined in accordance with Section 416 of the Code and the regulations thereunder. (2) If the Employer maintains one or more defined benefit plans and the Employer maintains or has maintained one or more defined contribution plans (including any Simplified Employee Pension Plan) which during the 5-year period ending on the Determination Date(s) has or has had account balances, the Top-Heavy Ratio for any Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of account balances under the aggregate defined contribution plan or plans for all Key Employees and the Present Value of Accrued Benefits under the aggregate defined benefit plan or plans for all Key Employees, and the denominator of which is the sum of the account balances under the aggregate defined contribution plan or plans for all Participants and the Present Value of Accrued Benefits under the aggregate defined benefit plan or plans for all Participants as determined in accordance with Section 416 of the Code and the regulations thereunder. The account balances under a defined contribution plan and the Accrued Benefits under a defined benefit plan in both the numerator and denominator of the Top-Heavy Ratio are adjusted for any distribution made in the 5-year period ending on the Determination Date. (3) For purposes of (1) and (2) above, the value of account balances and the Present Value of Accrued Benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date except as provided in Section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and Accrued Benefits of a Participant who: (v) is not a Key Employee but who was a Key Employee in a prior year; or (vi) has not received any compensation from any Employer maintaining the Plan at any time during the 5-year period ending on the Determination Date, will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. Deductible employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans the value of account balances and Accrued Benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. (e) Permissive Aggregation Group: The Required Aggregation Group of plans plus any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (f) Required Aggregation Group: (4) Each qualified plan of the Employer in which at least one Key Employee participates, and (5) any other qualified plan of the Employer which enables a plan described in (1) to meet the requirements of Sections 401(a)(4) or 410 of the Code. (g) Determination Date: For any Plan Year subsequent to the first Plan Year, the last day of the preceding Plan Year. For the first Plan Year of the Plan, the last day of that year. (h) Valuation Date: The first day of the Plan Year, as of which account balances or Accrued Benefits are valued for purposes of calculating the Top-Heavy Ratio. (i) Present Value: Present Value shall be based only on the Actuarial Equivalent interest and mortality rates specified in Section 1.01(c) X.3 Minimum Accrued Benefit: (a) Notwithstanding any other provision in this Plan except (c), (d), and (e) below, for any Plan Year in which this Plan is Top-Heavy, each Participant who is employed on the last day of the Plan Year will accrue a benefit (to be provided solely by Employer contributions and payable in the Normal Form of Benefit) of 2.0% of his or her highest average compensation for the five consecutive years for which the Participant had the highest compensation. The minimum accrual is determined without regard to any Social Security contribution. The minimum accrual applies even though under other Plan provisions the Participant would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the year. (b) For purposes of computing the minimum accrued benefit, compensation will include all wages subject to tax under Section 3101(a) without the dollar limitation of Section 3121(a), but not including deferred compensation other than contributions through a salary reduction agreement to a cash or deferred plan under Section 401(k) or to a tax deferred annuity under Section 403(b) of the Code. (c) No additional benefit accruals shall be provided pursuant to (a) above to the extent that the total accruals on behalf of the Participant attributable to Employer contributions will provide a benefit expressed as a life annuity commencing at the Normal Retirement Date that equals or exceeds 20% of the Participant's highest average compensation for the five consecutive years for which the Participant had the highest compensation. (c) The provisions in (a) above shall not apply to any Participant to the extent that the Participant is covered under any other plan or plans of the Employer. In such case, the minimum allocation or benefit requirement applicable to this Top-Heavy plan will be met in the other plan or plans. (d) All accruals of Employer derived benefit, whether or not attributable to years for which the Plan is Top-Heavy, may be used in computing whether the minimum accrual requirements of paragraph (c) above are satisfied. X.4 Adjustment for Benefit Form Other Than Life Annuity. If the Normal Form of Benefit is other than a single life annuity, the Employee must receive an amount that is the Actuarial Equivalent of the minimum single life annuity benefit. If the benefit commences at a date other than the Normal Retirement Date, the Employee must receive at least an amount that is the Actuarial Equivalent of the minimum single life annuity benefit commencing at the Normal Retirement Date. X.5 Nonforfeitability of Minimum Accrued Benefit. The minimum accrued benefit required (to the extent required to be nonforfeitable under Section 416(b)) may not be forfeited due to any suspension of benefits upon re-employment of retiree. X.6 Minimum Vesting Schedules. For any Plan Year in which this Plan is Top-Heavy, the following vesting schedule will automatically apply to the Plan: Years of Vesting Service Vested Percentage 1 0% 2 20% 3 40% 4 60% 5 100% The minimum vesting schedule applies to all benefits within the meaning of Section 411(a)(7) of the Code, including benefits accrued before the effective date of Section 416 and benefits accrued before the Plan became Top-Heavy. Further, no reduction in Vested benefits may occur in the event the Plan's status as Top-Heavy changes for any Plan Year. However, this Section does not apply to the Accrued Benefits of any Employee who does not have an Hour of Service after the Plan has initially become Top-Heavy and such Employee's Accrued Benefits attributable to Employer contributions will be determined without regard to this Section. If the vesting schedule under the Plan shifts in or out of the above schedule for any Plan Year because of the Plan's Top-Heavy status, such shift is an amendment to the vesting schedule and the election in Section 11.01(c) of the Plan applies. X.7 Compensation Limitation. For any Plan Year in which the Plan is Top-Heavy, only the first $200,000 (or such larger amount as may be prescribed by the Secretary or his delegate) of a Participant's annual Compensation shall be taken into account for purposes of determining benefits under the Plan. CHAPTER XI AMENDMENT OF THE PLAN XI.1 Amendment by Employer. The Employer may, by resolution of its Board of Directors, amend this Plan at any time. Any amendment by the Employer will be subject to the following rules: (a) Without its written consent, no amendment may increase the duties or liabilities of the Trustee. (b) Except as permitted by law, no amendment may provide for the use of funds or assets under the Plan and Trust other than for the exclusive benefit of Participants or their Beneficiaries. In addition, no amendment may allow Trust Fund assets to revert to or be used or enjoyed by any Participating Employer unless otherwise permitted by law. (c) If an amendment changes the vesting schedule of the Plan, or if the Plan is amended in any way that directly or indirectly affects the computation of a Participant's nonforfeitable percentage, any Participant in the employ of a Participating Employer on the date such amendment is adopted (or the date it is effective, if later) who has completed at least three Years of Vesting Service at the end of the election period specified below, may make an irrevocable election to remain under the vesting schedule of the Plan as in existence immediately prior to said amendment. If such Participant does not make this election during the election period starting on the date such amendment is adopted, and ending 60 days following the latest of the following dates, he will be subject to the new vesting schedule provided by said amendment: (6) the date the amendment is adopted; (7) the date the amendment is effective; or (8) the date written notice of the amendment is given to the Participant. However, the failure to make an election described above will not result in the forfeiture of any benefits which are already Vested. (c) No amendment may reduce the Accrued Benefit or Vested percentage of a Participant. XI.2 Conformance to Law. Regardless of the provisions of Section 11.01, the Employer has the right to make whatever amendments are necessary to this Plan or the Trust to bring it into conformity with applicable law. XI.3 Merger, Consolidation, or Transfer. If the Plan and Trust are merged or consolidated with, or the assets or liabilities are transferred to, any other plan and trust, the benefits payable to each Participant immediately after such action (if the Plan was then terminated) will be equal to or greater than the benefits to which he would have been entitled if the Plan had terminated immediately before such action. CHAPTER XII TERMINATION OF THE PLAN XII.1 Right to Terminate. It is the expectation of the Employer that it will continue the Plan and the payment of contributions indefinitely, but continuance of the Plan is not assumed as a contractual obligation of the Employer, and the right is reserved by the Employer, by resolution of its Board of Directors, at any time to reduce, suspend, or discontinue its contributions, or terminate the Plan with respect to certain or all of its Employees. Further, any other Participating Employer may terminate its participation in this Plan by resolution of its Board of Directors. If the Plan is terminated or partially terminated, the Accrued Benefit of each Participant who is in the employ of the Participating Employer on the effective date of the Plan termination or partial termination (as specified by the Participating Employer unless otherwise specified by the PBGC) and whose employment is affected by such termination or partial termination will thereafter be fully vested and nonforfeitable. Such Participant will have recourse only to the assets of the Trust Fund and the PBGC for the payment of such Vested Accrued Benefit. XII.2 Termination Priorities. If the Plan is terminated or partially terminated (whether by the Employer or the PBGC), and the PBGC has notified the Employer that it may proceed with benefit payments under this Plan, the Trust Fund assets (or portion thereof, in the case of partial termination) will be allocated to the appropriate Participants (all Participants in the event of complete Plan termination, in the event of partial termination, only those Participants whose Termination of Employment caused or was the result of such partial termination) in the following order of priority: (a) to provide for the return of Employee contributions, if any; (b) to provide for any benefit of a Participant which was payable as an annuity in either of the following categories: (9) the benefit of a Participant which was in pay status as of the first day of the 3-year period immediately preceding the date the Plan was terminated, as specified by the PBGC; (10) the benefit of a Participant which could have been in pay status as of the first day of the 3-year period immediately preceding the date the Plan was terminated, as specified by the PBGC. For purposes of this Sub-Section (b), such benefit will be determined on the basis of the Plan's provisions which were in effect at any time during the 5-year period ending on such date of Plan termination under which the benefit would be the least; (c) to provide for any other benefit of a Participant (not covered by any of the two previous priority classifications) which is insured and guaranteed by the PBGC; (c) to provide for all other nonforfeitable benefits; (d) to provide for all other benefits. Any allocations provided for under the above priority classifications will be payable to either a Participant or his Beneficiary, whichever is appropriate. In addition, with respect to priority classifications (b), (c), (d), and (e), the amount of an allocation to a Participant under a specified priority classification will be reduced by the amount of such Participant's allocation under a previous priority classification. XII.3 Reversion to Employer. In the event assets remain in the Trust Fund after the complete satisfaction of all liabilities of the Plan and Trust, as specified in Section 12.02, distribution may be made to the Employer of such remaining assets, which will be deemed attributable to the difference between the actuarial assumptions used by the Actuary to determine the funding requirements of the Plan and Trust and the actual experience of the Trust Fund during its operation. XII.4 Subsequent Benefit Payments. Unless otherwise specified by law, the timing, form (with the addition of lump sum distributions), and amount of any benefit payments provided under this Chapter will be made in accordance with the provisions of Chapter VIII. CHAPTER XIII CLAIMS PROCEDURE XIII.1 Written Claim. A Participant or Beneficiary(ies) may make a claim for Plan benefits by filing a written request with the Committee, on a form provided by the Committee. XIII.2 Claim Denial. If a claim is wholly or partially denied, the Committee will furnish the Participant or Beneficiary(ies) with written notice of the denial within 60 days of the date the original claim was filed. The notice of denial will specify: (a) the reason for denial; (b) specific reference to pertinent Plan and Trust provisions on which the denial is based; (c) a description of any additional information or requirements needed to be eligible to obtain the denied benefit and an explanation of why such information or requirements are necessary; and (c) an explanation of the claim procedure. XIII.3 Request for Review of Denial. The Participant or Beneficiary(ies) will have 60 days from receipt of denial notice in which to make written application for review by the Committee. The Participant or Beneficiary may request that the review be in the nature of a hearing. The Participant or Beneficiary(ies) will have the rights to representation, to review pertinent documents, and to submit comments in writing. XIII.4 Decision on Review. The Committee will issue a decision on such review within 60 days after receipt of an application for review. The Committee shall have full and complete discretionary authority to determine eligibility for benefits, to construe the terms of the Plan and to decide any matter presented through the claims review procedure. Any final determination by the Committee shall be binding on all parties. If challenged in court, such determination shall not be subject to de novo review and shall not be overturned unless proven to be arbitrary and capricious upon the evidence considered by the Committee at the time of such determination. XIII.5 Additional Time. The Committee may take additional time, as provided by government regulations, under this Chapter XIII, if such time is needed to gather data, perform calculations or reach decisions in the processing of a claim. The Participant or Beneficiary(ies) will be informed by the Committee, in writing, of the need for such additional time prior to the date such extension begins. CHAPTER XIV CONTRIBUTION AND BENEFIT LIMITS TO HIGH PAID EMPLOYEES XIV.1 When Applicable. Participating Employer contributions on behalf of any of the 25 highest paid Employees at the time the Plan is established and whose anticipated annual benefit exceeds $1,500 will be restricted as provided in Section 14.02 upon the occurrence of the following conditions: (a) The Plan is terminated within 10 years after its establishment; (b) The benefits of such highest paid Employee become payable within 10 years after the establishment of the Plan; or (c) If Section 412 of the Code (without regard to Section 412(h)(2)) does not apply to this Plan, the benefits of such Employee become payable after the Plan has been in effect for 10 years, and the full current costs of the Plan for the first 10 years have not been funded. XIV.2 Limitations. Participating Employer contributions which may be used for the benefit of an Employee described in Section 14.01 shall not exceed the greater of $20,000, or 20% of the first $50,000 of the Employee's compensation multiplied by the number of years between the date of the establishment of the Plan and: (a) if 14.0l(a) applies, the date of the termination of the plan; (b) if 14.0l(b) applies, the date the benefit becomes payable; or (c) if 14.0l(c) applies, the date of the failure to meet the full current costs. XIV.3 Limitations if Plan Amended. If the Plan is amended so as to increase the benefit actually payable in event of the subsequent termination of the Plan, or the subsequent discontinuance of contributions thereunder, then the provisions of the above Sections shall be applied to the Plan as so changed as if it were a new Plan established on the date of the change. The original group of 25 Employees (as described in Section 14.01 above) will continue to have the limitations in Section 14.02 apply as if the Plan had not been changed. The restriction relating to the change of Plan should apply to benefits or funds for each of the 25 highest paid Employees on the effective date of the change except that such restrictions need not apply with respect to any Employee in this group for whom the normal annual pension or annuity provided by Participating Employer contributions prior to that date and during the ensuing ten years, based on his rate of compensation on that date, could not exceed $1,500. The Participating Employer contributions which may be used for the benefit of the new group of 25 Employees will be limited to the greater of: (a) The Participating Employer contributions (or funds attributable thereto) which would have been applied to provide the benefits for the Employees if the previous Plan had been continued without change; (b) $20,000; or (c) The sum of: (11) the Participating Employer contributions (or funds attributable thereto) which would have been applied to provide benefits for the Employees under the previous Plan if it had been terminated the day before the effective date of change, and (12) an amount computed by multiplying the number of years (for which the current costs of the Plan after that date are met) by 20% of his annual compensation, or $10,000, whichever is smaller. XIV.4 Alternate Limitations. Notwithstanding the above limitations the following limitations will apply if they would result in a greater amount of Participating Employer contributions to be used for the benefit of the restricted Employee: (a) In the case of a substantial owner (as defined in Section 4022(b)(5) of ERlSA), a dollar amount which equals the present value of the benefit guaranteed for such Employee under Section 4022 of ERISA, or if the Plan has not terminated, the present value of the benefit that would be guaranteed if the Plan terminated on the date the benefit commences, determined in accordance with regulations of the PBGC; and (b) In the case of the other restricted Employees, a dollar amount which equals the present value of the maximum benefit described in Section 4022(b)(3)(B) of ERISA (determined on the earlier of the date the Plan terminates or the date benefits commence, and determined in accordance with regulations of the PBGC) without regard to any other limitations in Section 4022 of ERISA. CHAPTER XV MISCELLANEOUS PROVISIONS XV.1 Reversion of Assets. This Plan and Trust are for the exclusive benefit of the Employees of the Participating Employers and none of the assets may be used for any other purpose. Notwithstanding the above, there may be a reversion of assets to the Employer (or the Employee) in the event one of the following occurs: (a) If, in the course of administering the Plan and Trust, errors in accounting arise due to factual errors in information supplied by any Participating Employer, the Committee, the Plan Administrator or the Trustee, equitable adjustments may be made to correct these errors. Excess contributions arising from such adjustments may be returned to the Participating Employer within one year after such contributions were made. (b) All Participating Employer contributions made to the Plan under Code Section 412(m) are conditioned on deductibility. For any year(s) that all or a part of a deduction for Participating Employer contributions to the Plan is disallowed by the Secretary of the Treasury, the amount of the contributions so disallowed shall be returned to the Participating Employer within one year after such disallowance. (c) The Plan is terminated as provided for in Chapter XII. XV.2 Equitable Adjustment. The Committee may make equitable adjustments, which may be retroactive, to correct for mathematical, accounting, or factual errors made in good faith. Such adjustments will be final and binding on all Participants and other parties in interest. XV.3 Reasonable Compensation. If for any Plan Year, the Internal Revenue Service determines that the total compensation of a Participant exceeds the amount which can be considered "reasonable" for purposes of the federal income tax return of the Participating Employer, then the Committee will readjust the Accrued Benefit of such Participant to reflect only the "reasonable" compensation of said Participant. XV.4 Indemnification. To the extent permitted by law, the Employer will indemnify each member of the Committee and any others to whom the Employer has delegated fiduciary duties (except corporate trustees, insurers or "investment managers" (as defined in ERlSA)) against any and all claims, losses, damages, expenses and liabilities arising from their responsibilities in connection with the Plan, unless the same are determined to be due to gross negligence or willful misconduct. XV.5 Protection From Loss. Neither the Trustee, the Plan Administrator, the Committee nor the Employer guarantee the Trust Fund in any way from loss or depreciation. To the extent permitted by applicable law, the liability of any of these persons, groups of persons, or entities to make any payment under the Plan and Trust is limited to the available assets of the Trust Fund. XV.6 Protection From Liability. To the maximum extent allowed by law, the Plan Administrator and the Participating Employers, and their agents, designees and employees, shall be free from all liability, joint or several, for their acts, omissions, and conduct, except in the case of their own willful misconduct, gross negligence or bad faith. Specifically and without limitation other than as follows, nothing in the first sentence of this Section or elsewhere in the Plan and Trust shall be construed to relieve any Fiduciary from responsibility or liability for any responsibility, obligation or duty Under Part 4 of Title 1 of ERISA (except as provided in Sections 405(b)(1) and 405(d) of ERlSA). XV.7 Adoption of Rules and Procedures. Any group of people acting in a specified capacity under the Plan and Trust (such as the Named Fiduciary, Trustee, Committee, Plan Administrator, "investment manager" (as defined by ERISA) if any, and so on) may create and abide by whatever rules and procedures they desire, so long as these rules and procedures are not inconsistent with the Plan, the Trust and applicable law. If these rules specifically limit the duties and responsibilities of the members of any of these groups, then to the extent permitted by applicable law, the liability to each member under the Plan and Trust will be limited to his specific duties. XV.8 Assignment of Benefits. A Participant's interest in this Plan may not be assigned or alienated, either voluntarily or involuntarily. This shall not preclude the Trustee from complying with: (i) a qualified domestic relations order (as defined in Section 414(p) of the Code) made pursuant to a domestic relations law requiring deduction from the benefits of a Participant for alimony, child support, or marital property payments, or (ii) on or after August 5, 1997 and pursuant to Code Section 401(a)(13)(c), any court order, judgment, decree, or settlement agreement requiring that a Participant's benefits be reduced where the Participant has committed a breach of fiduciary duty to the Plan or committed a criminal act against the Plan. Notwithstanding any restrictions on the timing of distributions and withdrawals under this Plan, distribution shall be made to an alternate payee in accordance with the terms of an order described in the preceding paragraph, or as determined by the Plan Administrator and alternate payee if provided in the order, even if such distribution is made prior to the Participant's attainment of the earliest retirement age (as defined in Code Section 414(p)(4)). XV.9 Mental Competency. Every person receiving or claiming benefits under the Plan and Trust will be presumed to be mentally competent until the date on which the Committee receives a written notice (in a form and manner acceptable to it) that such person is incompetent, and that a guardian, conservator or other person legally vested with his care or the care of his estate has been appointed. If the Committee receives acceptable notice that a person to whom a benefit is payable under the Plan and Trust is unable to care for his affairs because of incompetency, any payment due (unless a prior claim for it has been made by duly appointed legal representative) may be paid to the spouse, a child, a parent, a brother or a sister or to any person determined by the Committee to have incurred expenses for such person. Any such payment will be a complete discharge of the obligation of the Participating Employer, Committee, Plan Administrator and Trustee to provide benefits under the Plan and Trust. In the event that the Plan benefits of a person receiving or claiming them are garnished or attached by order of any court, the Committee may bring an action for a declaratory judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to be paid under the Plan. While the action is pending, any benefits that become payable under this plan will be paid into the court as they become payable. The court will then make the benefit distributions to the recipient it deems proper at the close of said action. XV.10 Authentication. The Participating Employer, Committee, Plan Administrator and Trustee will be fully protected in acting and relying upon such certificate, affidavit, document or other information which that person requesting such information may consider pertinent, reliable and genuine. Any notice required to be made under the Plan and Trust may be waived, in writing, by the person entitled thereto. In addition, the time period specified in this Plan for filing any such notice may be modified or waived, in writing, by the person entitled thereto. XV.11 Not an Employment Contract. The Plan and Trust will not be construed as creating or modifying any contract of employment between any Participating Employer and the Employee. XV.12 Appointment of Auditor. The Employer shall have the right to appoint an independent auditor to audit the books, records, and accounts of the Trustee as they relate to the Plan and the Trust. XV.13 Uniform Treatment. All interpretations made in connection with the Plan and Trust are intended to be exercised in a nondiscriminatory manner so that all Employees in similar circumstances are treated alike. XV.14 Interpretation. The provisions of the Plan and Trust are to be construed as a whole and not construed separately without relation to the context of the entire agreement. XV.15 Plural and Gender. When appropriate, the singular nouns in the Plan and Trust may include the plural, and vice versa. Also, wherever the male gender is used in the Plan and Trust, the female gender may be included, and vice versa. XV.16 Headings. Headings at the beginnings of any Chapter, Section, or Sub-Section are for convenience only and are not to influence the construction of this Plan and Trust. XV.17 Expenses. The Participating Employers may pay the expenses of administering the Plan, if desired. However, if they do not pay these expenses directly, then, to the extent permitted by law, the payments will be made from the Trust Fund. XV.18 Prevention of Escheat. If the Participating Employer cannot ascertain the whereabouts of any person to whom a payment is due under the Plan, and if a notice of such payment due is mailed to the last known address of such person, as shown on the records of the Participating Employer, and within three months after such mailing such person has not made written claim therefor, the Participating Employer, if it so elects, may direct that such payment and all remaining payments otherwise due to such person be canceled on the records of the Plan and the amount thereof applied to reduce the contributions of the Participating Employer. The Plan and the Trust shall have no further liability therefor, except that, in the event such person later notifies the Participating Employer of his whereabouts and requests the payment due to him under the Plan, the amount so applied shall be paid to him. XV.19 Special Provisions Respecting Military Service. Notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code, effective for individuals whose re-employment occurs after December 11, 1994. XV.20 Participation of Affiliated Employers. The administrative powers and control of the Employer, as provided in this Plan and the Trust agreement, as well as the sole and exclusive right of amendment and termination (as covered in Chapters XI and XII) and of appointment and removal of the Plan Administrator, the Trustee, and their successors, shall remain solely with OshKosh B'Gosh, Inc. and shall not be diminished in any way by reason of the participation of any Affiliated Employer in the Plan and the Trust agreement. IN WITNESS WHEREOF, this Plan is executed by the Employer through its duly authorized officers, on this _____ day of _______________, 2000. By: Attest: EX-3 5 EXHIBIT 10.3 EXHIBIT 10.3 OSHKOSH B'GOSH, INC. EXECUTIVE NON-QUALIFIED PROFIT SHARING PLAN (As Amended and Restated As Of January 1, 2000) WHEREAS, OshKosh B'Gosh, Inc. (the "Company") maintains the OshKosh B'Gosh, Inc. Profit Sharing Plan (the "Profit Sharing Plan"), a tax-qualified deferred profit sharing plan, and amended such Profit Sharing Plan effective as of January 1, 1989 to exclude certain classes of employees formerly eligible from continuing participation therein including the President, all Vice Presidents and any employee whose title includes designation as a director of a particular aspect of the Company's business (the "Excluded Key Employee Group"), and continued such exclusion until January 1, 1995 (the period from January 1, 1989 to January 1, 1995 being hereafter referred to as the "Exclusion Period"), and WHEREAS, the members of the Excluded Key Employee Group during the Exclusion Period will continue to have their account balances held in the Profit Sharing Plan pending ultimate distribution upon their separation of service from the Company or otherwise in accordance with the terms of such Plan and such accounts will continue to share in the investment experience of the Plan until such distribution, but after January 1, 1989 and during the Exclusion Period, will no longer receive any further allocations of Company contributions or forfeitures, and WHEREAS, the Company wishes to provide by means of this document both (i) a "make whole" non-qualified plan that will provide for payments to certain identified members of the Excluded Key Employee Group equivalent to the additional sums they would have been able to accrue under the Profit Sharing Plan but for their exclusion from continuing participation as of January 1, 1989, or beginning participation at any later date and during the Exclusion Period; and (ii) a non-qualified profit sharing plan for certain identified key management or highly compensated employees of the Company or a Participating Employer who are not otherwise eligible for participation in the Profit Sharing Plan, and WHEREAS, the Company amended the Profit Sharing Plan as of January 1, 1999 to exclude consideration of all compensation in excess of $100,000 paid to any participant who is a highly compensated employee as defined in Section 414(q) of the Internal Revenue Code (the "$100,000 Participant Compensation Ceiling") and wishes to provide by means of this document a "make whole" non-qualified profit sharing plan benefit equivalent to the additional sums such participants would have been able to accrue under the Profit Sharing Plan but for the $100,000 Participant Compensation Ceiling, NOW, THEREFORE, the Company hereby establishes such a "make whole" program, to be known as the Oshkosh B'Gosh, Inc. Executive Non-Qualified Profit Sharing Plan (the "Non-Qualified Plan"), as follows: 1. Objectives. The Non-Qualified Plan is intended to provide for (i) a "make whole" payment to certain members of the Excluded Key Employee Group, (ii) benefits for certain other key management or highly compensated employees of the Company or a Participating Employer who are not otherwise eligible for participation in the Profit Sharing Plan, and (iii) benefits for certain individuals affected by the $100,000 Participant Compensation Ceiling. Each of the individuals from each of the foregoing three categories are listed on Exhibit A attached hereto, including such executives and key employees as the Board of Directors or Executive Committee may determine to add from time to time (the "Participants"). 2. Bookkeeping Accounts. The Company or a Participating Employer shall cause bookkeeping reserve accounts (the "Account") to be established for each Participant which shall be established solely as a device for determining the amounts which may become payable to a Participant hereunder. Such Account shall not constitute or be treated as a trust fund of any kind, it being expressly provided that the amounts credited to the Account shall at all times be and remain the sole property of the Company or a Participating Employer. The Participant shall have no proprietary rights of any nature with respect thereto, unless and until such time as a payment thereof is made to the Participant (or beneficiary) as provided herein. Amounts shall be credited (or debited, as the case may be) to each Participant's Account as follows: (a) For each Plan Year from and after January 1, 1989, for which a Participant would have received an allocation of Company contribution or forfeiture or both under the terms of the Profit Sharing Plan if such Participant had not been excluded therefrom and for each Plan Year from and after January 1, 1999 for which a Participant would have qualified for an allocation of Company contribution or forfeiture under the terms of the Profit Sharing Plan but for the $100,000 Participant Compensation Ceiling (the "Prevented Allocations"), such Participant's Account shall be credited with a dollar amount equal to such Prevented Allocations. (b) For each Plan Year from and after January 1, 1989, for which a Participant's Account has been credited with Prevented Allocations such Account shall also be adjusted to reflect the additions or subtractions that would have resulted from actual investment experience under the Profit Sharing Plan had the Prevented Allocations been made under that Plan (the "Prevented Investment Adjustments"). (c) With respect to a Participant who has served in the employ of the Company and of a Participating Employer, separate bookkeeping Accounts will be maintained by each employer to reflect the bookkeeping accruals attributable to the service of the Participant with each employer. Benefits accrued by a Participant while in the employ of the Company will be the sole obligation of the Company, and benefits accrued by such Participant while in the employ of a Participating Employer will be the sole obligation of the Participating Employer. Neither employer shall have any liability for the portion of benefits accrued by the Participant while in the employ of the other employer. The intent hereof is that the balance in each Participant's Account under this Non-Qualified Plan from time to time shall be equal to the balance that would have existed in the Profit Sharing Plan from time to time reflecting post-January 1, 1989 Company or Participating Employer contributions, forfeitures and investment adjustments thereon that would have occurred under the terms of the Profit Sharing Plan if the Participant had been able to continue thereunder or, as the case may be, begin participation thereunder at any later date and continue until the date of termination of service with the Company and all Affiliated Employers, in either case as if the Profit Sharing Plan had not included the $100,000 Participant Compensation Ceiling. 3. Vesting. All individuals who are Participants as of December 31, 1996 shall at all times have a 100% vested interest in the Account balance established for them under this Non- Qualified Plan. All individuals who become Participants on or after January 1, 1997 shall become vested in their Account balances established hereunder on the same terms and conditions as apply in the Profit Sharing Plan, all of which are hereby incorporated by reference." 4. Participating Employer. A Participating Employer is an Affiliated Employer, as that term is defined in the Profit Sharing Plan, authorized by the Company to participate in this Non-Qualified Plan, by extending the same to such Affiliated Employer's eligible employees. 5. Incorporation by Reference of Profit Sharing Plan. The terms and conditions of the Profit Sharing Plan, as amended from time to time, are hereby incorporated by reference into this Non- Qualified Plan (subject however to the 100% vesting provision for accounts as set forth in paragraph 3 above). It is intended that the Accounts in this Non-Qualified Plan be subject to all of the terms and conditions of the Profit Sharing Plan, subject only to the following special limitations: (a) Prevented Allocations and Prevented Investment Adjustments shall be determined and credited or debited to Accounts hereunder, as the case may be, at the same time and in like amount as if the Account were held under the Profit Sharing Plan. (b) The Company or Participating Employer shall commence payments of the vested Account balances under this Non-Qualified Plan on or about March 15th of the year following the year in which the Participant's service terminates, in accordance with (c) below. (c) Account balances under the Non-Qualified Plan shall be paid to the Participant (or Beneficiary, as the case may be), in one of the following methods: (i) In annual installments, to commence on or about March 15th of the year following the year of termination of service with the Company and all Affiliated Employers, with one-tenth of the balance in the Account becoming then payable and with the remaining installments being paid on each anniversary thereof according to the following schedule: Anniversary of Portion of Participant's Account First Payment Date to be Paid 1st 1/9 2nd 1/8 3rd 1/7 4th 1/6 5th 1/5 6th 1/4 7th 1/3 8th 1/2 9th Remainder (ii) Any other payment plan approved by the Company on its sole discretion. (d) Participants may designate any person or persons (including, but not limited to, a trust) to be the "Beneficiary" hereunder. Such designation shall be effected by filing written notification with the Company in the form prescribed by it and may be changed from time to time by similar action. If no Beneficiary is designated, the benefits shall be distributed to the Participant's estate. 6. Claims Procedure. The claims procedure in the Profit Sharing Plan shall apply in full to this Non-Qualified Plan. 7. Company or Committee to Administer. The Company or the Committee (as defined under the Profit Sharing Plan) shall have full and complete discretionary power and authority to construe and interpret this Non-Qualified Plan and to resolve all questions hereunder. Neither the Company, the Participating Employers, nor any member of the Committee or any other person shall be liable for any act or failure to act hereunder, except for gross negligence or fraud. 8. Unsecured Creditor. To the extent that any person acquires a right to receive payments from the Company or a Participating Employer under this Plan, such right shall be no greater than the right of an unsecured creditor. 9. Amendment or Termination. The Board of Directors of the Company reserves the right to amend, terminate or discontinue this Non-Qualified Plan at any time; provided, however, no such action shall reduce or eliminate any amounts accrued in any Accounts hereunder prior to the date of such action and which also would otherwise ultimately have become payable hereunder. EXHIBIT A The following is a listing of employees currently (as of 1/1/00) participating in the Oshkosh B'Gosh, Inc. Executive Non- Qualified Profit Sharing Plan: (LIST) EX-4 6 EXHIBIT 10.4 EXHIBIT 10.4 OSHKOSH B'GOSH, INC. EXCESS BENEFIT PLAN (As Amended and Restated as of January 1, 2000) PREAMBLE WHEREAS, OshKosh B'Gosh, Inc., a Delaware corporation (the "Company"), has heretofore maintained the OshKosh B'Gosh, Inc. Profit Sharing Plan (the "Profit Sharing Plan"), and the OshKosh B'Gosh Pension Plan (the "Pension Plan") as tax-qualified retirement plans for the benefit of its eligible employees and their beneficiaries; and WHEREAS, the Company has heretofore established the Oshkosh B'Gosh, Inc. Excess Benefit Plan, effective as of January 1, 1983 (the "Excess Benefit Plan") to provide make whole benefits for participants in either or both of the Profit Sharing Plan or the Pension Plan which would have otherwise become payable thereunder but for Section 415 of the Internal Revenue Code which places certain limitations on the amount of annual additions to any participant's account(s) in the Profit Sharing Plan, on the amount of benefits receivable by any participant in the Pension Plan and on the total combined amount of both such annual additions and benefits receivable in the case of an individual who is a participant in both such Plans; and WHEREAS, effective as of January 1, 1989, Section 401(a)(17) of the Internal Revenue Code limits the amount of annual compensation which may be taken into account in the calculation of contributions to such Plans; and WHEREAS, effective January 1, 1989, the Company established the Oshkosh B'Gosh Executive Non-Qualified Profit Sharing Plan (the "Non-Qualified Plan") to provide benefits to certain employees who were excluded from further participation in the Profit Sharing Plan in an amount equal to the benefits such excluded employees otherwise would have been entitled to under the Profit Sharing Plan; and WHEREAS, effective as of January 1, 1991, "accrued" compensation is no longer included in the calculation of benefits under the Pension Plan, or the calculation of contributions to be credited under the Profit Sharing Plan or Non-Qualified Plan; and WHEREAS, the Company wishes to maintain such levels of retirement benefits for its employees who are eligible to participate in the Profit Sharing Plan, the Pension Plan, or the Non-Qualified Plan as would otherwise become payable, but for the limitations under Sections 415 and 401(a)(17) of the Internal Revenue Code, by means of supplementary unfunded payments made by the Company under the Excess Benefit Plan as herein amended and restated; and WHEREAS, the Company wishes to maintain such levels of retirement benefits for its employees who are eligible to participate in the Pension Plan or the Non-Qualified Plan as would otherwise become payable, but for the limitations related to "accrued" compensation by means of supplementary unfunded payments made by the Company under the Excess Benefit Plan as herein amended and restated; and WHEREAS, the Company wishes to make the Excess Benefit Plan available to Affiliated Employers who become Participating Employers hereunder; NOW, THEREFORE, the Company hereby amends and restates the Excess Benefit Plan as of January 1, 2000, upon the following terms and conditions: ARTICLE I Definitions 1.1 "Account" shall mean the bookkeeping reserve account for a Participant which shall be established by the Company or a Participating Employer under Article IV hereof solely as a device for determining the amount of supplementary profit sharing benefits under either the Profit Sharing Plan or Non-Qualified Plan which may become payable thereunder. 1.2 "Actuarial Equivalent" shall have the same meaning as used in the Pension Plan. 1.3 "Beneficiary" shall be any person or persons (including, but not limited to, a trust) designated by the Participant. Such designation shall be effected by filing written notification with the Company in the form prescribed by it and may be changed from time to time by similar action. If no Beneficiary is designated, the benefits shall be distributed to the Participant's estate. 1.4 "Effective Date" means January 1, 1983. 1.5 "IRS Limitations" means the limits on contributions or benefits imposed under Sections 415 and 401(a)(17) of the Internal Revenue Code and any reduction in benefits under the Pension Plan or decrease in the amount credited under the Non-Qualified Plan (but not the Profit Sharing Plan) due to the exclusion of accrued compensation in 1991 including, but not limited to, bonuses under the Key Employee Incentive Bonus Plan. 1.6 "Firstar Bank Milwaukee, N.A. Prime Rate" means the rate of interest adopted by the Firstar Bank Milwaukee, N.A., from time to time, as the base rate for interest rate determinations. 1.7 "Non-Qualified Plan" means the Oshkosh B'Gosh, Inc. Executive Non-Qualified Profit Sharing Plan established January 1, 1989. 1.8 "Normal Form of Benefit" shall have the same meaning as used in the Pension Plan. 1.9 "Joint and Survivor Annuity" shall have the same meaning as used in the Pension Plan. 1.10 "Participant" shall have the same meaning as used in the Profit Sharing Plan, the Pension Plan or the Non- Qualified Plan as the case may be. 1.11 "Participating Employer" shall mean an Affiliated Employer, as that term is defined in the Profit Sharing Plan and the Pension Plan, authorized by the Company to participate in this Excess Benefit Plan, by extending the same to such Affiliated Employer's eligible employees. ARTICLE II Purpose 2.1 This Plan is intended to provide benefits to eligible persons in a manner so as to maintain the level of total retirement benefits which, but for the IRS Limitations, would otherwise have been payable under the Profit Sharing Plan, Pension Plan or Non-Qualified Plan. This Plan shall maintain such total retirement benefit levels by means of supplementary unfunded payments made by the Company and any Participating Employer to the individuals eligible for such payments, as set forth in Articles III and IV hereof. ARTICLE III Supplementary Pension Benefits 3.1 Any Participant or Beneficiary who qualifies for commencement of a benefit under the terms of the Pension Plan on or after the Effective Date and whose benefit pursuant thereto is less than what it otherwise would be because of the IRS Limitations shall be eligible to receive supplementary pension benefits hereunder. 3.2 The amount of such supplementary pension benefits shall be an amount equal in value to the reduction in the benefits payable under the terms of the Pension Plan resulting from the application of IRS Limitations calculated as if payable in the Normal Form of Benefit. With respect to a Participant who has served in the employ of the Company and of a Participating Employer, the total supplementary pension benefit for such Participant shall be computed based on the Participant's aggregate years of service and aggregate compensation received from the Company and the Participating Employer. Once the total amount of such supplementary benefit has been determined, the obligation to pay it will be divided between the respective employers based on years of "Benefit Service" as defined in the Pension Plan rendered to each employer. Each employer shall be solely liable for its own portion of the obligation, but shall have no liability for the portion of the supplementary benefit payable by the other employer. 3.3 Payment of such supplementary pension benefits shall be accomplished by unfunded payments directly from the Company or Participating Employer to the Participant or the Beneficiary (as the case may be) in one of the forms determined by the Company, in its sole discretion, as follows: (a) in the Normal Form of Benefit if the Participant is not married on the later of the date such Participant first receives a benefit from the Pension Plan or the date of the Participant's termination of service with the Company and all Affiliated Employers, or (b) as a Joint and Survivor Annuity if such Participant is married on such date or if such Participant is married and dies while in the employ of the Company or an Affiliated Employer under circumstances such that such Participant's spouse is his Beneficiary and such spouse becomes entitled to a benefit under the terms of the Pension Plan because of such Participant's death, or (c) in a single lump sum of Actuarial Equivalent value, but only if Termination of Employment is due to retirement, death, or disability (but under circumstances where small amount lump sums are the automatic form of distribution from the Pension Plan or would be if the supplementary pension benefit were the only benefit considered, such small amount lump sum payments may also be made hereunder, even if the Participant or Beneficiary has not yet qualified for commencement of a benefit under the terms of the Pension Plan), or (d) a term certain annuity for 120 months, or 180 months. All forms of payment of supplementary pension benefits under this Plan shall be Actuarial Equivalents in value. ARTICLE IV Supplementary Profit Sharing Benefits 4.1 Any Participant or Beneficiary who qualifies for commencement of a benefit under the terms of the Profit Sharing Plan or Non-Qualified Plan on or after the Effective date whose benefit pursuant thereto is less than what it otherwise would be because of the IRS Limitations shall be eligible to receive supplementary profit sharing benefits hereunder. 4.2 The amount of such supplementary profit sharing benefits shall be an amount equal to the difference between the aggregate amount of employer contributions and forfeitures which would have been allocated to the Participant's account in the Profit Sharing Plan or to the employer's bookkeeping account for purposes of the Non-Qualified Plan if the IRS Limitations had been disregarded. The amount of such difference for a Participant shall be determined annually and shall be credited to his Account as of the end of the fiscal year quarter during which the amount of such difference can first be determined. The amount so credited to such Participant's Account shall be further credited as of the end of each succeeding quarter with an amount equal to interest at the average Firstar Bank Milwaukee, N.A. Prime Rate in effect during such quarter (an "Interest Equivalent Credit") and all amounts standing to the credit of the Participant's Account as of the end of each fiscal year quarter including any prior Interest Equivalent Credits, shall receive an Interest Equivalent Credit. 4.3 With respect to a Participant who has served in the employ of the Company and of a Participating Employer, separate bookkeeping Accounts will be maintained by each employer to reflect the bookkeeping accruals attributable to the service of the Participant with each employer. Supplementary profit sharing benefits accrued by a Participant while in the employ of the Company will be the sole obligation of the Company, and supplementary profit sharing benefits accrued by such Participant while in the employ of a Participating Employer will be the sole obligation of the Participating Employer. Neither employer shall have any liability for the portion of supplementary profit sharing benefits accrued by the Participant while in the employ of the other employer. 4.4 Payment of such supplementary profit sharing benefits shall be accomplished by unfunded payments directly from the Company or Participating Employer to the Participant or the Beneficiary (as the case may be) in one of the following methods: (a) in annual installments to commence on about March 15th of the year following the year in which the Participant's service with the Company and all Affiliated Employers terminates, with one-tenth of the balance in his Account becoming then payable and with the remaining installments being paid on each anniversary thereof according to the following schedule: Anniversary of First Portions of Participant's Account Payment Date to be Paid 1st 1/9 2nd 1/8 3rd 1/7 4th 1/6 5th 1/5 6th 1/4 7th 1/3 8th 1/2 9th Remainder Interest Equivalent Credits shall continue to be applied on the balance in the Participant's Account in accordance with Section 4.2 until final payment thereof has been made. (b) in any other payment plan approved by the Company in its sole discretion. It shall be the obligation of any Participant under this Section 4.3 hereof to keep the Company and any Participating Employer advised of his current address and neither employer shall have any obligation to commence payout of such Participant's Account unless and until it shall have received the written request therefor specifying his current address. ARTICLE V Amendment or Termination 5.1 The Board of Directors of the Company reserves the right to amend, terminate or discontinue this Plan at any time; provided, however, no such action shall reduce or eliminate any supplementary pension benefits under Article III hereof or supplementary profit sharing benefits under Article IV hereof which are in pay status or which have accrued hereunder prior to the date of such action and which also would otherwise ultimately have become payable hereunder. 5.2 It is recognized and acknowledged that as cost of living adjustments are made from time to time in the IRS Limitations under the provisions of the Internal Revenue Code, accruals of what otherwise would have been needed supplementary pension benefits under Article III hereof may be eliminated in whole or in part because the same can be provided under the terms of the Pension Plan, but that under present law, future cost of living changes in those parts of the IRS Limitations dealing with the Profit Sharing Plan will not eliminate or reduce the need for any otherwise required accruals of supplementary profit sharing benefits under Article IV hereof. No Participant or Beneficiary shall ever be entitled to any benefit payments whatsoever under this Plan unless and until such Participant or Beneficiary first qualifies for a benefit under the Pension Plan (as required by Section 3.1 hereof), under the Profit Sharing Plan (as required by Section 4.1 hereof) or under the Non-Qualified Plan (as required by Section 4.1 hereof). ARTICLE VI Miscellaneous 6.1 Any amount payable to a Participant or Beneficiary hereunder shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind, by will, or by inter vivos instrument. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such payment, whether present or thereafter payable, shall not be recognized by the Company or a Participating Employer. Any payment due hereunder shall not in any manner be subject to the debts or liabilities of the Participant or Beneficiary. If the Participant or Beneficiary shall attempt to alienate, sell, transfer, assign, pledge or otherwise encumber his or her payments under this Plan or any part thereof, or if by reason of his or her bankruptcy or other event happening at any time, such payments would devolve upon anyone else or would not be enjoyed by him or her, then the Company, in its sole discretion, may terminate his or her interest in any such benefit, and hold or apply it to or for the benefit of the Participant or Beneficiary, his or her spouse, children, or other dependents, or any of them, in such manner as the Company may deem proper. 6.2 Every person receiving or claiming payments under this Plan shall be conclusively presumed to be mentally competent until the date on which the Company or a Participating Employer receives a written notice, in form and manner acceptable to it, that such person is incompetent and that a guardian, conservator, or other person legally vested with the care of his estate has been appointed. In the event a guardian or conservator of the estate of any person receiving or claiming payments under the Plan shall be appointed by a court of competent jurisdiction, payments may be made to such guardian or conservator provided that proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Company. Any such payment so made shall be a complete discharge of any liability therefor. 6.3 Participation in this Plan, or any modifications thereof, or the payments of any benefits hereunder, shall not be construed as giving to the Participant any right to be retained in the service of the Company or any Participating Employer, limiting in any way the right of the Company or any Participating Employer to terminate the Participant's employment at any time, evidencing any agreement or understanding, express or implied, that the Company or any Participating Employer will employ the Participant in any particular position or at any particular rate of compensation and/or guaranteeing the Participant any right to receive a salary increase in any fiscal year, such increase being granted only at the sole discretion of the Board of Directors of the Company or a Participating Employer. 6.4 All payments hereunder shall be paid in cash from the general funds of the Company and all Participating Employers and no special or separate fund shall be established and no other segregation of assets shall be made to assure the payment of benefits hereunder. A Participant or Beneficiary shall have no right or title or interest whatever in or to any investments which the Company or any Participating Employer may make to aid it in meeting its obligations hereunder. Nothing in this Plan and no action taken pursuant hereto shall create or be construed to create a trust of any kind or a fiduciary relationship between the Company or any Participating Employer, and any Participant or Beneficiary. To the extent that any person acquires a right to receive payments from the Company or any Participating Employer under this Plan, such right shall be no greater than the right of an unsecured creditor. 6.5 To the extent not pre-empted by the laws of the United States, this document shall be construed, administered and governed under and by the internal laws of the State of Wisconsin. 6.6 Neither the Company, the Participating Employers, nor any officer or director of the Company, any Participating Employer or any other person shall be liable for any act or failure to act hereunder, except for gross negligence or fraud. 6.7 Any benefits payable under the Pension Plan and the Profit Sharing Plan shall be paid solely in accordance with the terms of such Plans and nothing in this document shall operate or be construed in any way to modify, amend or affect the terms of such Plans. 6.8 The claims procedure provided in the Profit Sharing Plan shall apply in full to this Excess Benefits Plan. EX-5 7 EXHIBIT 10.5 EXHIBIT 10.5 OSHKOSH B'GOSH, INC. EXECUTIVE DEFERRED COMPENSATION PLAN (As Amended and Restated as of January 1, 2000) WHEREAS, OshKosh B'Gosh, Inc., a Delaware corporation (the "Company") wishes to establish a deferred compensation program for certain of its key management employees in order to aid the Company and any Participating Employer in attracting and retaining qualified personnel upon whose efforts the continued successful operation of the Company and any Participating Employer will depend, NOW, THEREFORE, the Company hereby establishes such a program, to be known as the OshKosh B'Gosh, Inc. Executive Deferred Compensation Plan (the "Plan"), upon the following terms and conditions: ARTICLE I Definitions 1.1 "Account" means the bookkeeping reserve account for each Participant which shall be established by the Company or a Participating Employer solely as a device for determining the amounts which may become payable to the Participant hereunder. Such Account shall not constitute or be treated as a trust fund of any kind, it being expressly provided that the amounts credited to such Account shall at all times be and remain the sole property of the Company or a Participating Employer. The Participant shall have no proprietary rights of any nature whatsoever with respect thereto, unless and until such time as a payment thereof is made to the Participant (or his beneficiaries) as provided in this Plan. Separate Accounts shall be maintained by each Participant's employer, whether the Company or a Participating Employer, to reflect the bookkeeping accruals attributable to the deferrals made by the Participant while in the employ of each employer and any Supplemental Contributions (as defined in Section 2.2 hereof). 1.2 "Deferred Compensation" means the portion of a Participant's compensation for any Fiscal Year, or part thereof that has been deferred pursuant to this Plan. 1.3 "Officer" means an employee of the Company or a Participating Employer who is either an elected or appointed officer of the Company. 1.4 "Fiscal Year" means the fiscal year of the Company. 1.5 "Interest Equivalent Credits" means such amounts as shall have been credited to a Participant's Account pursuant to Article III hereof. 1.6 "Participant" means an Officer participating in this Plan whose Deferred Compensation amounts, Supplemental Contributions (as defined in Section 2.2 hereof) and Interest Equivalent Credits have not been wholly distributed. 1.7 "Early Retirement Date" and "Disability" shall have the same meanings as used in the Company's qualified pension plan covering Participants, as the same exists from time to time. 1.8 "Participating Employer" shall mean an Affiliated Employer, as that term is defined in the OshKosh B'Gosh, Inc. Profit Sharing Plan, authorized by the Company to participate in this Executive Deferral Compensation Plan, by extending the same to such Affiliated Employer's eligible officers. ARTICLE II Deferred Compensation Election 2.1 Each Officer may elect to have a designated amount or a percentage (subject to Company or Participating Employer approval) of his total compensation, including bonuses, if any, otherwise receivable by him or paid to him on account of services performed, during any Fiscal Year commencing on or after January 1, 1984 deferred in accordance with the terms of this Plan. An Officer desiring to exercise such election as to any such Fiscal Year shall, prior to the beginning of such Fiscal Year (or prior to the beginning of the Officer's initial employment if such employment is to commence other than at the beginning of a Fiscal Year), notify the Company or the Participating Employer in writing of his election of the amount or percentage of such total compensation for such Fiscal Year that he elects to be so deferred by completing, signing and delivering to such employer a deferral election form substantially in the form attached hereto as Exhibit A. The Officer may revoke or change any prior deferral election form by giving at least 30 days prior written notice of such revocation or change to such employer. Any such revocation or change will be given prospective effect only and will not affect prior deferrals. 2.2 The Company or the Participating Employer (whichever is the employer of the Participant of the relevant time) shall make a contribution for each Fiscal Year, which shall be credited to each Participant's Account, of an amount equal to the decrease, if any, in the amount of contributions and forfeitures allocable to the Participant's account under any defined contribution plan (e.g., a profit sharing plan) of the Company (or which would have been allocated as a contribution or forfeiture but for the fact that the Participant is excluded from continuing or commencing participation in such defined contribution plan because of the exclusions in the definition of the eligible class of employees made by the Company in 1989), resulting from the fact that compensation which the Participant elects to defer under this plan is not taken into account as "wages," "salary" or "compensation" in determining the amount of the Company's or a Participating Employer's contribution under such a defined contribution plan and the allocation of that contribution to the Participant's account under such plan. The amount to be so credited is hereinafter referred to as a "Supplemental Contribution." Such Supplemental Contribution shall become nonforfeitable pursuant to the vesting schedule, if any, provided under the Company's defined contribution plan for which the Supplemental Contribution is made. 2.3 The amount of a Participant's Deferred Compensation shall be credited to his Account as of the date, absent an election under this Plan, on which he would have received such amount. The amount of any Supplemental Contribution for a Participant shall be credited to his Account once a year as of the end of the quarter during which the proper amount of such Supplemental Contribution can be determined. ARTICLE III Interest Equivalent Credits 3.1 Any and all amounts of Deferred Compensation, Supplemental Contributions and previously credited interest standing to the credit of each Participant's Account as of the end of each quarter of the Fiscal Year shall receive an Interest Equivalent Credit based upon the average Firstar Bank Milwaukee, N.A. prime rate of interest in effect during such quarter. In calculating such quarterly Interest Equivalent Credit, the amounts which comprise Participant's Account balance as of the end of such quarter shall earn interest commencing with the date such amounts were credited to the Participant's Account (but in no event earlier than the first day of such quarter). By way of illustration, if a Participant's Account had been credited with Deferred Compensation on January 15 of a Fiscal Year, such Deferred Compensation would be entitled to be credited with interest on March 31 of such year based on the period between January 15 and March 31 of such year. The phrase "average Firstar Bank Milwaukee, N.A. prime rate of interest in effect during each quarter" means the weighted average rate of interest adopted by the Firstar Bank Milwaukee, N.A., from time to time during such quarter, as the base rate for interest rate determinations. ARTICLE IV Payments From Account 4.1 The Participant shall become entitled to commence receiving the nonforfeitable amounts credited to his Account upon his termination of employment with the Company at or after his Early Retirement Date or because of his death or Disability. Any Account balances accrued by a Participant while in the employ of the Company will be the sole obligation of the Company and any such balances accrued by a Participant while in the employ of a Participating Employer will be the sole obligation of the Participating Employer. Section 5.1 hereof provides a special rule for determining the separate obligation of the Company and any Participating Employer regarding the supplemental payments therein specified in the case of a Participant who has served in the employ of both. Neither employer shall have any liability for the portion of such Account balances accrued by the Participant while in the employ of the other employer. 4.2 The nonforfeitable amounts credited to a Participant's Account shall be paid to him in one of the following methods: (a) In annual installments, to commence on or about March 15th of the year following the year of termination of service, with one-tenth of the balance in his Account becoming then payable and with the remaining installments being paid on each anniversary thereof according to the following schedule: Anniversary of First Portion of Participant's Account Payment Date to be Paid 1st 1/9 2nd 1/8 3rd 1/7 4th 1/6 5th 1/5 6th 1/4 7th 1/3 8th 1/2 9th Remainder (b) Any other payment plan approved by the Company in it sole discretion. 4.3 Should the Participant's employment with the Company or a Participating Employer terminate for reasons other than specified in Section 4.1 above or other than because of death while in the employ of either employer, the Participant shall become entitled to commence receiving the nonforfeitable amounts credited to his Account on or after his attainment of age 65 in the manner described in Section 4.2 above. Notwithstanding the foregoing, the Company, in its sole discretion, may commence an earlier payout of such Participant's Account. It shall be the obligation of any Participant under this Section 4.3 to keep the Company or a Participating Employer advised of his current address and such employer shall have no obligation to commence payout of such Participant's Account unless and until it shall have received the written request therefor specifying his current address. 4.4 Interest Equivalent Credits shall continue to be applied on the balance in the Participant's Account in accordance with Section 3.1 until the Participant or his designated beneficiary or beneficiaries have received the final payment of such balance. 4.5 The Participant shall have the right to designate a beneficiary or beneficiaries to receive any portion of his Account remaining unpaid at his death. Such designation shall be effected by filing a written notification with the Company in the form prescribed by it and may be changed from time to time by similar action. If the Participant fails to make such designation, any such unpaid portion of his Account shall be paid to his estate. The nonforfeitable balance in a Participant's Account shall become distributable in accordance with this Section 4.5 upon a Participant's death while in the Company's or a Participating Employer's employ or upon his death after termination of employment with the Company or a Participating Employer. 4.6 The Company may, in its sole discretion, on request of a Participant who remains in the Company's or a Participating Employer's employ, determine to make a distribution and the manner of the distribution to such Participant of a portion or all of his nonforfeitable Account, on the basis of personal financial hardship. In the case of personal financial hardship, distribution may be made only when such Participant has established to the satisfaction of the Company that a severe personal financial hardship exists necessitating his request. Without limitation, such a personal financial hardship may arise from unusual or extraordinary medical expenses not covered by insurance of the Participant, of other persons who rely upon the Participant for financial support or education expenses. The purchase or maintenance of a principal residence for the Participant, or other investment opportunities will not be considered financial hardship. ARTICLE V Supplemental Payments 5.1 By way of a payment supplemental to the payments provided for by Article IV hereof, the Company agrees to also pay to a Participant (or to anyone else entitled thereto as a beneficiary of the Participant under the terms of any defined benefit plan (e.g., a pension plan of the Company) an amount or amounts equal to the decrease, if any, in the amounts payable under any such defined benefit plan, resulting from the fact that compensation which the Participant elects to defer under this Plan is not taken into account as "wages," "salary" or "compensation" in determining the amount of any benefit payment under such a defined benefit plan. With respect to a Participant who has served in the employ of the Company and of a Participating Employer, the total supplementary pension benefit shall be computed based on the Participant's aggregate compensation (as if the same had not been reduced by deferrals under this Plan) from both such employers. Once the total amount of such supplementary pension benefit has been determined, the obligation to pay it will be divided between the respective employers based on the ratio of the total deferrals made at each employer that are taken into account in the supplementary pension benefit calculation compared to the total deferrals at both employers that are so taken into account. Each employer shall be solely liable for its own portion of the obligation, but shall have no liability for the portion of the supplementary benefit payable by the other employer. The Company shall determine, in its sole discretion, the method of payment under this Section 5.1. The purpose of this provision is to assure to a Participant that he receive the same total pension benefits that he would have received had he not elected to defer any of his compensation under this Plan. ARTICLE VI Miscellaneous 6.1 Any amount payable from the Participant's Account shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind, by will, or by inter vivos instrument (other than permitted beneficiary designations under Section 4.5 hereof). Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such payment, whether presently or thereafter payable, shall not be recognized by the Company or a Participating Employer. Any payment due hereunder shall not in any manner be subject to the debts or liabilities of the Participant. If the Participant shall attempt to alienate, sell, transfer, assign, pledge or otherwise encumber his payments under this Plan or any part thereof, or if by reason of his bankruptcy or other event happening at any time, such payments would devolve upon anyone else or would not be enjoyed by him, then the Company, in its sole discretion, may terminate his interest in any such benefit, and hold or apply it to or for the benefit of the Participant, his spouse, children, or other dependents, or any of them, in such manner as the Company may deem proper. 6.2 Every person receiving or claiming payments under this Plan shall be conclusively presumed to be mentally competent until the date on which the Company or a Participating Employer receives a written notice, in form and manner acceptable to it, that such person is incompetent and that a guardian, conservator, or other person legally vested with the care of his estate has been appointed. In the event a guardian or conservator of the estate of any person receiving or claiming payments under the Plan shall be appointed by a court of competent jurisdiction, payments may be made to such guardian or conservator provided that proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Company. Any such payment so made shall be a complete discharge of any liability therefor. 6.3 Participation in this Plan, or any modifications thereof, or the payments of any benefits hereunder, shall not be construed as giving to the Participant any right to be retained in the service of the Company or any Participating Employer, limiting in any way the right of the Company or any Participating Employer to terminate the Participant's employment at any time, evidencing any agreement or understanding, express or implied, that the Company or any Participating Employer will employ the Participant in any particular position or at any particular rate of compensation and/or guaranteeing the Participant any right to receive a salary increase in any Fiscal Year, such increase being granted only at the sole discretion of the Board of Directors of the Company or any Participating Employer. 6.4 By electing to participate in this Plan, the Officer agrees that any of his compensation which he elects to defer under this Plan will not be taken into account as "wages," "salary" or "compensation" in determining the amount of any payment or allocation, or for any other purpose, under any pension, retirement or deferred profit sharing plan of the Company or any Participating Employer. 6.5 The Plan shall be construed, administered and governed in all respects under and by the laws of the State of Wisconsin. 6.6 Neither the Company, any Participating Employer nor any officer or director of either or any other person shall be liable for any act or failure to act hereunder, except for gross negligence or fraud. 6.7 The Board of Directors of the Company reserves the right to amend, modify, terminate, or discontinue this Plan at any time; provided, however, no such action shall reduce the amount then credited to the Participant's Account or change the time and manner of payment of such amount, without the consent of the Participant, if living, or his designated beneficiary or beneficiaries, if the Participant is not living. 6.8 The claims procedure provided in the OshKosh B'Gosh, Inc. Profit Sharing Plan shall apply in full to this Plan. EXHIBIT A OSHKOSH B'GOSH, INC. EXECUTIVE DEFERRED COMPENSATION PLAN DEFERRAL ELECTION In accordance with the terms and conditions of the OshKosh B'Gosh, Inc. Executive Deferred Compensation Plan I hereby elect that the following percentages (or amount) of any salary and bonuses which may become payable to me on account of services performed for OshKosh B'Gosh, Inc. during the calendar year 19____ and future calendar years, shall be deferred for payment at a later time, and credited to the Account established in my name, in accordance with and subject to the terms and conditions of such Plan: ______% or $_____ of regular gross salary to be taken out of each monthly paycheck. _____% or $_____ of any bonus which may be declared by OshKosh B'Gosh, Inc. and which is payable to me. I understand that this deferral election shall remain in full force and effect until I revoke and/or change it by properly executing the filing a new deferral election in accordance with the terms and conditions of the Plan. I hereby expressly revoke all prior deferral elections by me and reserve the right to revoke and/or change this deferral election in the manner provided under the terms and conditions of the Plan. Dat Received by OshKosh B'Gosh, Inc. on , 19____. By: EX-7 8 EXHIBIT 10.7 OSHKOSH B'GOSH, INC. 1994 INCENTIVE STOCK PLAN (as amended through 2/23/00) I. INTRODUCTION 1.01 Purpose. This plan shall be known as the Oshkosh B'Gosh, Inc. 1994 Incentive Stock Plan (the "Plan"). The purpose of the Plan is to provide an incentive for key employees of Oshkosh B'Gosh, Inc. and its Subsidiaries to improve corporate performance on a long-term basis, and to attract and retain key employees. It is intended that the Plan and its operation comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule). 1.02 Effective Date. The effective date of the Plan shall be August 8, 1994, subject to approval of the Plan by shareholders of the Company. Any Award granted prior to such shareholder approval shall be expressly conditioned upon shareholder approval of the Plan. II. PLAN DEFINITIONS 2.01 Definitions. For Plan purposes, except where the context clearly indicates otherwise, the following terms shall have the meanings set forth below: (a) "Award" shall mean the grant of any form of stock option or restricted stock. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" shall mean the Committee described in Section 4.01. (e) "Company" shall mean Oshkosh B'Gosh, Inc., a Wisconsin corporation. (f) "Company Stock" shall mean the Company's Class A Common Stock and such other stock and securities as may be substituted therefor pursuant to Section 3.02. (g) "Eligible Employee" shall mean any regular salaried employee of the Company or a Subsidiary who satisfies the requirements of Section 5.01. (h) "Fair Market Value" on any date shall mean, with respect to Company Stock, if the stock is then listed and traded on a registered national securities exchange, or is quoted in the NASDAQ National Market System, the mean of the high and low sale prices recorded in composite transactions as reported in the Wall Street Journal (Midwest Edition) for such date or the preceding business day if such date is not a business day. In the absence of reported sales or if the stock is not so listed or quoted, but is traded in the over-the-counter market, Fair Market Value shall be the mean of the closing bid and asked prices for such shares on the relevant date. (i) "Grantee" shall mean any person who has been granted an Award under the Plan. (j) "Option Period" shall mean the period of time provided pursuant to Section 6.04 within which a stock option may be exercised. (k) "Subsidiary" shall mean any corporation now or hereafter in existence in which the Company owns, directly or indirectly, a voting stock interest of more than fifty percent (50%). III. SHARES SUBJECT TO AWARD 3.01 Available Shares. The total number of shares of Company Stock that may be issued under the Plan shall not exceed one million four hundred thousand (1,400,000) shares. Shares subject to and not issued under an option which expires, terminates, is canceled or forfeited for any reason under the Plan and shares of restricted Company Stock which have been forfeited before the Grantee has received any benefits of ownership, such as dividends from the forfeited shares, shall again become available for the granting of Awards. 3.02 Changes in Common Stock. If any stock dividend is declared upon the Company Stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the Company Stock, resulting in a split or combination or exchange of shares, the aggregate number and kind of shares which may thereafter be granted under the Plan shall be propor- tionately and appropriately adjusted and the number and kind of shares then subject to options granted to employees under the Plan and the per share option price therefor shall be proportionately and appropriately adjusted, without any change in the aggregate purchase prices to be paid therefor. IV. ADMINISTRATION 4.01 Administration by the Committee. The Plan shall be administered by a committee designated by the Board to administer the Plan and shall initially be the Compensation Committee of the Board. The Committee shall be constituted to permit the Plan to comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule). A majority of the members of the Committee shall constitute a quorum. The approval of such a quorum, expressed by a vote at a meeting held either in person or by conference telephone call, or the unanimous consent of all members in writing without a meeting, shall constitute the action of the Committee and shall be valid and effective for all purposes of the Plan. 4.02 Committee Powers. The Committee is empowered to adopt such rules, regulations and procedures and take such other action as it shall deem necessary or proper for the administration of the Plan and, in its discretion, may modify, extend or renew any Award theretofore granted. The Committee shall also have authority to interpret the Plan, and the decision of the Committee on any questions concerning the interpretation of the Plan shall be final and conclusive. The Committee may consult with counsel, who may be counsel for the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. Subject to the provisions of the Plan, the Committee shall have full and final authority to: (a) designate the persons to whom Awards shall be granted; (b) grant Awards in such form and amount as the Committee shall determine; (c) impose such limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate, and (d) waive in whole or in part any limitations, restrictions or conditions imposed upon any such Award as the Committee shall deem appropriate. V. PARTICIPATION 5.01 Eligibility. Key employees of the Company and its Subsidiaries (including officers and employees who may be members of the Board) who, in the sole opinion of the Committee, contribute significantly to the growth and success of the Company or a Subsidiary shall be eligible for Awards under the Plan. From among all such Eligible Employees, the Committee shall determine from time to time those Eligible Employees to whom Awards shall be granted. No eligible employees shall be granted an Award or Awards covering more than 50,000 shares of Company Stock in any calendar year. No Eligible Employee shall have any right whatsoever to receive an Award unless so determined by the Committee. 5.02 No Employment Rights. The Plan shall not be construed as conferring any rights upon any person for a continuation of employment, nor shall it interfere with the rights of the Company or any Subsidiary to terminate the employment of any person or to take any other action affecting such person. VI. STOCK OPTIONS 6.01 General. Stock options granted under the Plan may be in the form of incentive stock options (within the meaning of Code Section 422) or nonqualified stock options. Each option granted under the Plan shall be evidenced by a stock option agreement between the Company and the Grantee which shall contain the terms and conditions required by this Article VI, and such other terms and conditions, not inconsistent herewith, as the Committee may deem appropriate in each case. The holder of an option shall not have any rights as a stockholder with respect to the shares covered by an option until such shares have been delivered to him or her. 6.02 Option Price. The price at which each share of Company Stock covered by an option may be purchased shall be determined in each case by the Committee and set forth in each stock option agreement. In no event shall such price be less than one hundred percent (100%) of the Fair Market Value of the Company Stock when the option is granted. Employees who own, directly or indirectly, within the meaning of Code Section 425(d), more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary corporation shall not be eligible to receive an incentive stock option hereunder unless the purchase price per share under such option is at least 110% of the Fair Market Value of the stock subject to the option and such option by its terms is not exercisable after the expiration of 5 years from the date such option is granted. 6.03 Date Option Granted. For purposes of the Plan, a stock option shall be considered as having been granted on the date on which the Committee authorized the grant of the option, except where the Committee has designated a later date, in which event the later date shall constitute the date of grant of the option; provided, however, that in either case notice of the grant of the option shall be given to the employee within a reasonable time. 6.04 Period for Exercise of Options. Each stock option agreement shall state the period or periods of time within which the option may be exercised by the Grantee, in whole or in part, which shall be the period or periods of time as may be determined by the Committee, provided that: (a) No option granted under this Plan may be exercised until at least six months from the later of (i) the date of grant or (ii) shareholder approval of the Plan, (b) No Option Period for an incentive stock option may exceed ten (10) years from the date the option is granted, and (c) No option may be treated as an incentive stock option unless the Grantee exercises the option while employed by the Company or a Subsidiary or within three months after termination of employment, or if termination is caused by death or disability, within one year after such termination. 6.05 Special Rule for Incentive Stock Options. For so long as Section 422 (or any successor provision) of the Code so provides, the aggregate Fair Market Value (determined as of the date the incentive stock option is granted) of the number of shares with respect to which incentive stock options are exercisable for the first time by a Grantee during any calendar year shall not exceed One Hundred Thousand Dollars ($100,000) or such other limit as may be required by the Code. 6.06 Method of Exercise. Subject to Section 6.04, each option may be exercised in whole or in part from time to time as specified in the stock option agreement. Each Grantee may exercise an option by giving written notice of the exercise to the Company, specifying the number of shares to be purchased, accompanied by payment in full of the purchase price therefor. The purchase price may be paid in cash, by check, or, with the approval of the Committee, by delivering shares of Company Stock which have been beneficially owned by the Grantee, the Grantee's spouse, or both of them for a period of at least six months prior to the time of exercise ("Delivered Stock) or a combination of cash and Delivered Stock. Delivered Stock shall be valued at its Fair Market Value determined as of the date of exercise of the option. No Grantee shall be under any obligation to exercise any option hereunder. 6.07 Merger, Consolidation or Reorganization. In the event of a merger, consolidation or reorganization with another corporation in which the Company is not the surviving corporation, the Committee shall, subject to the approval of the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, take action regarding each outstanding and unexercised option pursuant to either clause (a) or (b) below: (a) Appropriate provision may be made for the protection of such option by the substitution on an equitable basis of appropriate shares of the surviving corporation, provided that the excess of the aggregate Fair Market Value of the shares subject to such option immediately before such substitution over the exercise price thereof is not more than the excess of the aggregate fair market value of the substituted shares made subject to option immediately after such substitution over the exercise price thereof; or (b) The Committee may cancel such option. In such event, the Company, or the corporation assuming the obligations of the Company hereunder, shall pay the employee an amount of cash (less normal withholding taxes) equal to the excess of the highest Fair Market Value per share of the Company Stock during the 60-day period immediately preceding the merger, consolidation or reorganization over the option exercise price, multiplied by the number of shares subject to such option. 6.08 Dissolution or Liquidation. Anything contained herein to the contrary notwithstanding, on the effective date of any dissolution or liquidation of the Company, the holder of each then outstanding and unexercised option shall receive the cash amount described in 6.07(b) hereof and such option shall be cancelled. 6.09 Conditional Cashless Exercise. In connection with the Company's tender offer to purchase shares of Company stock to be dated on or about October 4, 1999 (the "Offer"), a Grantee may elect a conditional cashless exercise of the Grantee's options which are then exercisable. The conditional cashless exercise will permit a Grantee to exercise the option only if, and to the extent, the Company will actually purchase the option shares in the Offer. If after taking into account any proration, the Company purchases less than all of the option shares which the Grantee has tendered in the Offer, the options will be exercised, and the option shares purchased, in the order designated by the Grantee in an option election form. If any of the tendered option shares are not purchased, the related options will not be considered to have been exercised and will remain outstanding. The Grantee will not be required to pay cash for the exercise price, and the consideration received by the Grantee whose option shares are purchased in a conditional cashless exercise will be the difference between the purchase price per share in the Offer and the exercise price per share relating to the option shares so purchased (less applicable tax withholding). VII. RESTRICTED STOCK. 7.01 Administration. Shares of restricted stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the Eligible Employees to whom and the time or times at which grants of restricted stock will be made, the number of shares to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The Committee may condition the grant of restricted stock upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine. The provisions of restricted stock Awards need not be the same with respect to each recipient. 7.02 Awards and Certificates. Each individual receiving a restricted stock Award shall be issued a certificate in respect of such shares of restricted stock. Such certificate shall be registered in the name of such individual and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Oshkosh B'Gosh, Inc. 1994 Incentive Stock Plan and a Restricted Stock Agreement. Copies of such Plan and Agreement are on file at the offices of Oshkosh B'Gosh, Inc." The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any restricted stock Award, the Grantee shall have delivered a stock power, endorsed in blank, relating to the Company Stock covered by such Award. 7.03 Terms and Conditions. Shares of restricted stock shall be subject to the following terms and conditions: (a) Until the applicable restrictions lapse, the Grantee shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of restricted stock. (b) The Grantee shall have, with respect to the shares of restricted stock, all of the rights of a stockholder of the Company, including the right to vote the shares and the right to receive any cash dividends. Unless otherwise determined by the Committee, cash dividends shall be automatically paid in cash and dividends payable in Company Stock shall be paid in the form of additional restricted stock. (c) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and (d) below, all shares still subject to restriction shall be forfeited by the Grantee upon termination of a Grantee's employment for any reason. (d) In the event of hardship or other special circumstances of a Grantee whose employment is involuntarily terminated (other than for cause), the Committee may waive in whole or in part any or all remaining restrictions with respect to such Grantee's shares of restricted stock. (e) If and when the applicable restrictions lapse, unlegended certificates for such shares shall be delivered to the Grantee. (f) Each Award shall be confirmed by, and be subject to the terms of, a Restricted Stock Agreement. VIII. WITHHOLDING TAXES. 8.01 General Rule. Pursuant to applicable federal and state laws, the Company is or may be required to collect withholding taxes upon the exercise of an option or the lapse of stock restrictions. The Company may require, as a condition to the exercise of an option or the issuance of a stock certificate, that the Grantee concurrently pay to the Company (either in cash or, at the request of Grantee but in the discretion of the Committee and subject to such rules and regulations as the Committee may adopt from time to time, in shares of Delivered Stock) the entire amount or a portion of any taxes which the Company is required to withhold by reason of such exercise or lapse of restrictions, in such amount as the Committee or the Company in its discretion may determine. 8.02 Withholding from Shares to be Issued. In lieu of part or all of any such payment, the Grantee may elect, subject to such rules and regulations as the Committee may adopt from time to time, or the Company may require that the Company withhold from the shares to be issued that number of shares having a Fair Market Value equal to the amount which the Company is required to withhold. 8.03 Special Rule for Insiders. Any such request or election (to satisfy a withholding obligation using shares) by an individual who is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 shall be made in accordance with the rules and regulations of the Securities and Exchange Commission promulgated thereunder. IX. GENERAL 9.01 Nontransferability. Unless otherwise specified by the Committee, no Award granted under the Plan shall be transferable or assignable except by last will and testament or the laws of descent and distribution. During the Grantee's lifetime, options shall be exercisable only by the Grantee or by the Grantee's guardian or legal representative. 9.02 General Restriction. Each Award shall be subject to the requirement that if at any time the Board or the Committee shall determine, in its discretion, that the listing, registration, or qualification of securities upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or the issue or purchase of securities thereunder, such option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or the Committee. 9.03 Expiration and Termination of the Plan. Awards may be granted under the Plan at any time and from time to time, prior to August 8, 2004, the date on which the Plan will expire, except as to Awards then outstanding under the Plan, which shall remain in effect until they have been exercised, the restrictions have lapsed or the Awards have expired or been forfeited. The Plan may be abandoned or terminated at any time by the Board of Directors of the Company, except with respect to any Awards then outstanding under the Plan. 9.04 Amendments. The Board may from time to time amend, modify, suspend or terminate the Plan; provided, however, that no such action shall (a) impair without the Grantee's consent any Award theretofore granted under the Plan or deprive any Grantee of any shares of Company Stock which he or she may have acquired through or as a result of the Plan or (b) be made without share- holder approval where such approval would be required as a condi- tion of compliance with Rule 16b-3. 9.05 Construction. Except as otherwise required by applicable federal laws, the Plan shall be governed by, and construed in accordance with, the laws of the State of Wisconsin. EX-9 9 EXHIBIT 10.9 EXHIBIT 10.9 Flexible Nonstandardized 401(k) Adoption Agreement (#007) 062493 I. Employer Information A. Name: OshKosh B'Gosh, Inc. B. Address: 112 Otter Avenue Oshkosh, WI 54902 C. Taxable Year: 1996 D. EIN: 39-0519915 II. Plan Information A. Plan Name: OshKosh B'Gosh, Inc. 401(k) Plan B. Plan Year: the period which ends on 12/31 C. Construction. Except as provided in Section 1.2, the Plan and the Trust Agreement will be subject to the laws of the State of Wisconsin. D. Plan Adoption. The Plan is hereby adopted as [Check one. See Section 14.1.] 1. [ x ] a new profit sharing plan (with cash or deferred arrangement). 2. [ ] an amendment and restatement of the ("Pre-Existing Plan") which was originally effective , 19 . E. Effective Date of this Adoption Agreement: October 1, 1996. III. Eligibility and Participation A. Eligible Employees. All Employees of the Employer and all Employees of the Participating Affiliates who satisfy the Participation Requirement generally will be eligible to participate in the Plan except certain nonresident aliens and: [Check one. See Section 2.19.] 1. [ ] Standard: no other exclusions. 2. [ x ] the following additional categories of Employees: [The Plan must satisfy the nondiscrimination, minimum coverage and minimum participation rules on a continuing basis. See Section 2.19(b).] 1. Exclude retail store employee is store is scheduled to close within 60 days after start date of Plan and exclude Celina Mfg. facility employees. However, notwithstanding any contrary language, participation in this Plan by Employees who are covered by a collective bargaining agreement and the extend of such participation, if any, will be determined by collective bargaining. B. Participation Requirement. In order to participate in this Plan, an Eligible Employee must [Check one. See Section 2.46, Section 4 and Part V.B.1. Enter "N/A" if there will be no minimum age or no waiting period, as applicable.] 1. [ x ] Standard: reach minimum age of 21 and complete waiting period of 1 Year of Service. 2. [ ] no minimum age or waiting period. 3. [ ] reach minimum age of [not to exceed 21] and complete waiting period of Year of Service [not to exceed 1]. 4. [ ] reach minimum age of [not to exceed 21] and complete waiting period of Year of Service [not to exceed 1]; however, each Employee who is an Eligible Employee on the Effective Date will be deemed to satisfy the Participation Requirement on the Effective Date regardless of such Employee's actual age or service. C. Entry Date: [Check one. See Section 2.26 and Section 4.] 1. [ ] Standard; the first day of each Plan Year and the first day of the seventh month of each Plan year. 2. [ ] the date on which the Participant satisfies the Participation Requirement. 3. [ x ] other: first day of the month [Specify date(s). If a single Entry Date is entered, the minimum age in Part III.B cannot exceed 20-1/2 and the maximum waiting period in Part III.B cannot exceed 1/2 year.] IV. Vesting. A. Death, Disability or Retirement. [See Section 8.1(b).] 1. [ x ] Standard. A Participant's Employer Account and Matching Account will be 100% vested if, while an Employee, that Participant dies, becomes Disabled, or reaches Normal Retirement Age or, if applicable, Early Retirement Age. 2. [ ] A Participant's Employer Account and Matching Account will be 100% vested if, while an Employee, that Participant reaches Normal Retirement Age or if the Participant satisfies the following condition: [Check one or more only if desired.] a. [ ] dies while an Employee b. [ ] becomes Disabled while an Employee c. [ ] reaches Early Retirement Age while an Employee. B. General Vesting Schedule. [See Section 8.1 and Section 14.3(c). Generally, the vesting schedule under this Plan must be at least as favorable at the completion of each year as the vesting schedule under the Pre-Existing Plan. The Top-Heavy Vesting Schedule selected in Part XI.A will apply for all Plan Years in which the Plan is a Top-Heavy Plan. See Section 12.4.] 1. Matching Account. [Check one. "Full and Immediate Vesting" must be selected if the 2-year requirement for Matching Contributions is selected in Part VII.A.2.b.5.] a. [ ] Standard. Full and Immediate Vesting. 100% at all times. b. [ x ] Cliff Vesting. 100% after completion of 3 Years of Service [not to exceed 5] or after completion of 0 Years of Service in the event of involuntary termination due to reduction in force or a facility closure, provided either such event occurs at a manufacturing plant, distribution center, (which does not include retail stores), or a finishing center. c. [ ] Graded Vesting. Years of Service Nonforfeitable Percentage Less than 1 % 1 % 2 % 3 % [at least 20%] 4 % [at least 40%] 5 % [at least 60%] 6 % [at least 80%] 7 or more 100% d. [ ] Top-Heavy. The Top-Heavy Vesting Schedule in Part XI.A will apply for all Plan Years. 2. Employer Account. [Check one. "Full and Immediate Vesting" must be selected if the 2-year requirement for Employer Contributions is selected in Part VII.D.2.b.5.] a. [ ] Standard. Full and Immediate Vesting. 100% at all times. b. [ x ] Cliff Vesting. 100% after completion of 3 Years of Service [not to exceed 5] or after completion of 0 Years of Service in the event of involuntary termination due to reduction in force or a facility closure, provided either such event occurs at a manufacturing plant, distribution center, (which does not include retail stores), or a finishing center. c. [ ] Graded Vesting. Years of Service Nonforfeitable Percentage Less than 1 % 1 % 2 % 3 % [at least 20%] 4 % [at least 40%] 5 % [at least 60%] 6 % [at least 80%] 7 or more 100% d. [ ] Top-Heavy. The Top-Heavy Vesting Schedule in Part XI.A will apply for all Plan Years. C. Normal Retirement Age. [Check one. See Section 2.43 and Part XIII.B.] 1. [ x ] Standard. age 65 2. [ ] age [not to exceed 65] 3. [ ] the later of age [not to exceed 65] or the [not to exceed 5th] anniversary of the date on which the Participant commenced participation in the Plan. D. Early Retirement Age: [The designation of an Early Retirement Age may accelerate vesting and distribution. Early Retirement Age cannot exceed Normal Retirement Age. Check one. See Section 2.13 and Section 9.1.] 1. [ x ] Standard: No Early Retirement Age. 2. [ ] age 3. [ ] the later of age or the completion of Years of Service (for vesting purposes). V. Service for Participation and Vesting. A. Method for Crediting Service. [Check one. See Section 3.] 1. [ x ] Standard: "Hour of Service" method. [See Section 3.1.] a. Crediting Hours. Hours will be credited during each Computation Period [Check one. See Section 3.1(c).] (1) [ ] Standard: by maintaining records of the actual hours worked. [See Section 3.1(c)(2)(i).] (2) [ x ] by using the following equivalency [Check one. See Section 3.1(c)(2)(ii).] [ ] 10 Hours of Service for each day. [ ] 45 Hours of Service for each week. [ ] 95 Hours of Service for each semi- monthly payroll period. [ x ] 190 Hours of Service for each month for any employee not paid on an hourly basis. b. Vesting Computation Period. The Computation Period for vesting purposes will be [Check one. See Section 3.1(b)(2).] (1) [ x ] Standard: the Plan Year (2) [ ] the 12 month period beginning on the Participant's hire date and each anniversary of that hire date. c. Participation Computation Period. The initial Computation Period for participation purposes will be the 12 month period beginning on the Participant's hire date. Each subsequent Computation Period after the initial 12 months of employment will be [Check one. See Section 3.1(b)(3).] (1) [ x ] Standard: Plan years beginning after the Participant's hire date. (2) [ ] subsequent 12 month periods beginning on the anniversaries of the Participant's hire date. d. Year of Service for Vesting. For vesting purposes, an Employee will be credited with a Year of Service if, during a Computation Period, the Employee completes at least [Check one. See Section 3.1(d).] (1) [ x ] Standard: 1,000 Hours of Service (2) [ ] [not more than 1,000] Hours of Service. e. Year of Service for Participation. For participation purposes, an Employee will be credited with a Year of Service [Check one. See Section 3.1(b)(3) and Section 3.1(d).] (1) [ x ] Standard: at the end of the Computation Period in which the Employee completes at least 1,000 Hours of Service. (2) [ ] on the date on which the Employee completes at least [not more than 1,000] Hours of Service. (3) [ ] at the end of the Computation Period on which the Employee completes at least [not more than 1,000] Hours of Service. Notwithstanding the foregoing, if a partial Year of Service is selected in Part III.B, no minimum number of Hours of Service will be required. 2. [ ] "Elapsed Time" method. [See Section 3.2.] For purposes of determining whether a Participant is entitled to an allocation of contributions or forfeitures, the Participant will be deemed to have completed more than 500 Hours of Service in a Plan Year if the Participant completes the following period of employment in the Plan Year: [Check one. See Section 2.2(d) and Part VII.] a. [ ] Standard: more than 91 consecutive calendar days. b. [ ] more than 3 consecutive months. B. Special Rules. 1. Vesting Service Exclusions. [See Section 3.8.] In addition to any service that is disregarding under the Break in Service rules described below and in Section 3.7(c), the following service will be excluded for vesting purposes: a. [ x ] Standard: No other exclusions. b. [ ] Years of Service before age 18. c. [ ] Years of Service before the Employer or an Affiliate maintained this Plan or a predecessor plan. d. [ ] Years of Service during a period for which the Employee made no mandatory contributions under a Pre-Existing Plan. 2. Predecessor Employer Service (Vesting and Participation). Generally, unless the Employer maintains the plan of a predecessor employer (for example, an acquired company), service for a predecessor employer will not be credited as service under this Plan. [Check and attach appropriate addendum only if desired. See Section 3.4.] [ ] Service credit will be given under this Plan for certain predecessor employers for participation and/or vesting purposes to the extent provided in Addendum V.B.2. 3. Break in Service Rules. [See Section 3.7 and Section 8.2.] Generally, all service completed before a Break in Service will be credited upon reemployment. Certain service may be excluded under the following rules: a. [ x ] Standard: No exclusions. [See Section 3.7(a).] b. [ ] "One Year Hold Out Rule." [See Section 3.7(b)(1).] This rule, generally, requires rehired Employees to complete a Year of Service before prior vesting and participation service is restored. c. [ ] "Rule of Parity". [See Section 3.7(b)(3).] This rule, generally, disregards vesting and participation service completed before 5 uninterrupted Breaks in Service. d. [ ] "Alternative Maternity/Paternity Rule." [Not applicable if "Elapsed Time" is selected. See Section 3.7(b)(4).] This rule, generally, increases the number of Breaks in Service from 5 to 6 for all Employees in lieu of crediting service for maternity/paternity leave. e. [ ] Alternative to "Buy Back Rule". [See Section 8.2(b).] This rule, generally, does not require former participants (less than 100% vested) to pay back previous distributions upon reemployment (vesting only). A rehired Participant's vested interest in restored amounts will be determined under: [Check one. See Section 8.2(a), Section 8.2(b) and Section 8.2(c).] (1) [ ] Standard: Formula A (2) [ ] Formula B VI. Employee Contributions. A. Elective Deferrals. [See Section 5.3(f). Check one.] 1. [ x ] Standard: will be allowed. [Complete formula below; enter "N/A" if not applicable.] a. Minimum Amount. Not less than 1% of a Participant's Compensation or $ N/A. b. Maximum Amount. For Plan Years ending on and before 12/31/96, not more than 15% of a Participant's Compensation or $ , and for each Plan Year thereafter, not more than 15% of a Participant's Compensation or $ . 2. [ ] will not be allowed. B. Employee Contributions. Employee Contributions [See Section 5.3(g). Check one.] 1. [ x ] Standard: will not be allowed. 2. [ ] will be allowed. [Complete formula below; enter "N/A" if not applicable.] a. Minimum Amount. Not less than % of a Participant's Compensation or $ . b. Maximum Amount. For Plan years ending on and before , not more than % of a Participant's Compensation or $ , and for each Plan Year thereafter, not more than % of a Participant's Compensation or $ . C. Election Rules. [Check one. See Section 5.3(h).] 1. [ ] Standard: If a Participant does not elect to begin Elective Deferrals or Employee Contributions on the Participant's Entry Date, the Participant may elect to begin such contributions as of any following pay date. A Participant's election can be revised (prospectively only) as of any pay date. A Participation who terminates contributions may elect to resume contributions prospectively as of any pay date. 2. [ x ] Alternatives to Standard: A Participant's elections may be made as follows: [Must include at least one day in each calendar year.] a. [ x ] Commencement. [See Section 5.3(h)(2).] effective only as of any first day of any month following the Participant's Entry Date. b. [ x ] Revision. [See Section 5.3(h)(3).] effective only as of any following last day of any month. c. [ x ] Resumption. [See Section 5.3(h)(5).] effective only as of any following a minimum suspension of deferrals of six months. D. Rollover Contributions. Rollover Contributions [Check one. See Section 5.5.] 1. [ x ] Standard: will be allowed and may be made by [Check one.] a. [ x ] Standard: any Eligible Employee. b. [ ] any Eligible Employee who is a Participant. 2. [ ] will not be allowed. E. Limitations on Elective Deferrals. 1. Claims. Claims for a refund of Excess Elective Deferrals must be made no later than [See Section 7.3(f). Check one.] a. [ x ] Standard: March 1. b. [ ] [no earlier than March 1 and no later than April 15.] 2. Deemed Claims. Corrections of Excess Elective Deferrals will be made [See Section 7.3(f)(2). Check one.] a. [ x ] Standard: from this Plan. b. [ ] from the following plan(s): 3. "Gap Period" Income. The income or loss allocable to the "gap period" [Check one. See Section 7.3(e), Section 7.4(d)(2) and Section 7.5(d)(2).] a. [ x ] Standard: shall not be distributed. b. [ ] shall be distributed. 4. Highly Compensated Employees. The following special rules in the temporary Code Section 414(q) regulations and in Code Section 414(q)(12) will apply: [Check one. See Section 7.4(a)(5)(v).] a. [ x ] Standard: no special rules. b. [ ] The special rules set forth in Addendum V.E.3. 5. Recharacterization. Recharacterization of Excess Contributions as Employee Contributions [See Section 7.4(e). Check one.] a. [ x ] Standard: will not be allowed. b. [ ] [Do not check this option 2 if Employee Contributions are not allowed in Part VI.B] will be allowed. VII. Employer Contributions. A. Matching Contributions. [See Section 5.3(b) and Part VII.F.] 1. Formula. [Check one.] a. [ ] Standard: No Matching Contributions will be made. b. [ x ] Matching Contributions will be made on account of: [Check one or both.] [ x ] Elective Deferrals [ ] Employee Contributions under the following formula: [Check and complete one. Enter "N/A" if not applicable. The formula specified and completed must not provide a higher rate of Matching Contributions for Participants who make a higher amount of contributions.] [ ] % of the Participant's contributions which do not exceed $ or % of the Participant's Compensation plus % of the Participant's contributions which exceed $ or %, but contributions in excess of $ or % of the Participant's Compensation will not be matched. [ x ] such percentage of the Participant's contributions as determined by the Employer in its discretion for each Plan Year. [ ] in an amount equal to . 2. Eligible Participant. The Matching Contribution for any Allocation Date will be made only for each Participant who makes Elective Deferrals or Employee Contributions, as applicable, during the period ending on the Allocation Date and who satisfies all of the following requirements: [Check one.] a. [ x ] Standard: no additional requirements. b. [ ] Alternative: [Check one or more.] (1) [ ] the Participant is employed (or on an authorized leave of absence) on the Allocation Date. (2) [ ] the Participant is credited with at least 1,000 Hours of Service in the Plan Year ending on such Allocation Date. [Do not check if "Elapsed Time" is selected or Allocation Date is not Standard Option.] (3) [ ] the Participant is a Nonhighly Compensated Employee. (4) [ ] the Participant is not employed as of the last day of the Plan Year but is credited with more than 500 Hours of Service in the Plan Year. [Do not check if Allocation Date is not Standard Option. Special Hour of Service equivalencies apply if "Elapsed Time" is selected. See Part V.A.2.] (5) [ ] the Participant is credited with at least 2 Years of Service (for participation purposes) on such Allocation Date. (6) [ ] notwithstanding anything to the contrary in clause (1), (2) or (4) of this Part VII.A.2.b, a Participant who died, retired or became disabled during the period ending on the Allocation Date will be eligible [Check one.] [ ] without regard to the number of Hours of Service. [ ] only if he completes the Hours of Service specified in clause (2) or (4), as applicable. [Do not check if Allocation Date is not Standard Option.] 3. Allocation Date. Matching Contributions will be made and allocated as of [Check one.] a. [ ] Standard: the last day of each Plan year. b. [ x ] each month. 4. Forfeitures. Forfeitures attributable to Matching Accounts. [Check one. See Section 6.3(c)(2)(ii).] a. [ x ] Standard: will be applied to reduce Matching Contributions as of the Allocation Date: [Check one. See Section 8.2(e).] (1) [ x ] Standard: which immediately follows the date the Forfeiture occurs. (2) [ ] which immediately follows the last day of the Plan Year in which the Forfeiture occurs. b. [ ] will be reallocated to Active Participants as of the last day of each Plan Year. [Complete Part VII.D.2 to specify who is an Active Participant for this purpose.] c. [ ] will be allocated in accordance with the formula set forth in Addendum VII.A.4.c. [The addendum should describe Allocation Date, eligible Participants and allocation formula.] B. Qualified Matching Contributions. [See Section 5.3(c) and Part VII.F.] 1. Formula. [Check one.] a. [ x ] Standard: No Qualified Matching Contributions will be made. b. [ ] Qualified Matching Contributions will be made on account of: [Check one or both.] [ ] Elective Deferrals [ ] Employee Contributions under the following formula: [Check and complete one. Enter "N/A" if not applicable. The formula specified and completed must not provide a higher rate of Qualified Matching Contributions for Participants who make a higher amount of contributions.] [ ] % of the Participant's contributions which do not exceed $ or % of the Participant's Compensation plus % of the Participant's contributions which exceed $ or %, but contributions in excess of $ or % of the Participant's Compensation will not be matched. [ ] such percentage of the Participant's contributions as determined by the Employer in its discretion for each Plan Year. [ ] in an amount equal to . 2. Eligible Participant. The Qualified Matching Contribution for any Allocation Date will be made only for each Participant who makes Elective Deferrals or Employee Contributions, as applicable, during the period ending on the Allocation Date and who satisfies all of the following requirements: [Check one.] a. [ ] Standard: no additional requirements. b. [ ] Alternative: [Check one or more.] (1) [ ] the Participant is employed (or on an authorized leave of absence) on the Allocation Date. (2) [ ] the Participant is credited with at least 1,000 Hours of Service in the Plan Year ending on such Allocation Date. [Do not check if "Elapsed Time" is selected or Allocation Date is not Standard Option.] (3) [ ] the Participant is a Nonhighly Compensated Employee. (4) [ ] the Participant is not employed as of the last day of the Plan Year but is credited with more than 500 Hours of Service in the Plan Year. [Do not check if Allocation Date is not Standard Option. Special Hour of Service equivalencies apply if "Elapsed Time" is selected. See Part V.A.2.] (5) [ ] the Participant is credited with at least 2 Years of Service (for participation purposes) on such Allocation Date. (6) [ ] notwithstanding anything to the contrary in clause (1), (2) or (4) of this Part VII.B.2.b, a Participant who died, retired or became disabled during the period ending on the Allocation Date will be eligible [Check one.] [ ] without regard to the number of Hours of Service. [ ] only if he completes the Hours of Service specified in clause (2) or (4), as applicable. [Do not check if Allocation Date is not Standard Option.] 3. Allocation Date. Qualified Matching Contributions will be made and allocated as of [Check one.] a. [ ] Standard: the last day of each Plan Year. b. [ ] each . C. Qualified Nonelective Contributions. [See Section 5.3(d) and Part VII.F.] 1. Formula. In addition to the Qualified Nonelective Contributions which may be made for Nonhighly Compensated Employees to satisfy the ADP or ACP limits, [Check one.] a. [ x ] Standard: no additional Qualified Nonelective Contributions will be made. b. [ ] additional Qualified Nonelective Contributions will be made in an amount equal to . 2. Eligible Participant. The Additional Qualified Nonelective Contribution described in this Part VII.C for any Allocation Date will be made only for each Participant who is an Eligible Employee at any time during the period ending on the Allocation Date and who satisfies all of the following requirements: [Check one.] a. [ ] Standard: no additional requirements. b. [ ] Alternative: [Check one or more.] (1) [ ] the Participant is employed (or on an authorized leave of absence) on the Allocation Date. (2) [ ] the Participant is credited with at least 1,000 Hours of Service in the Plan Year ending on such Allocation Date. [Do not check if "Elapsed Time" is selected or Allocation Date is not Standard Option.] (3) [ ] the Participant is a Nonhighly Compensated Employee. (4) [ ] the Participant is not employed as of the last day of the Plan Year but is credited with more than 500 Hours of Service in the Plan Year. [Do not check if Allocation Date is not Standard Option. Special Hour of Service equivalencies apply if "Elapsed Time" is selected. See Part V.A.2.] (5) [ ] the Participant is credited with at least 2 Years of Service (for participation purposes) on such Allocation Date. (6) [ ] notwithstanding anything to the contrary in clause (1), (2) or (4) of this Part VII.C.2.b, a Participant who died, retired or became disabled during the period ending on the Allocation Date will be eligible [Check one.] [ ] without regard to the number of Hours of Service. [ ] only if he completes the Hours of Service specified in clause (2) or (4), as applicable. [Do not check if Allocation Date is not Standard Option.] 3. Allocation Date. The Qualified Nonelective Contributions described in this Part VII.C will be made and allocated as of [Check one.] a. [ ] Standard: the last day of each Plan Year. b. [ ] each . D. Discretionary Employer Contributions. 1. Allocation Formula. The discretionary Employer Contributions will be allocated among Active Participants as follows: [Check one. See Section 5.3(e), Section 6.3(a), Section 6.3(c)(4) and Part VII.F. Do not select an integrated formula for Plan years beginning on and after the Final Compliance Date if the Employer also maintains another integrated plan for such Plan Year.] a. [ x ] Standard: Nonintegrated. [See Section 6.3(a)(1) and Section 6.3(c)(4)(i)(A).] b. [ ] Integrated. [See Section 6.3(a)(2), Section 6.3(c)(4)(i)(B) and Section 12.3(h).] (1) Integration Percentage. [Check one. If the Integration Level is less than the Taxable Wage Base, the Maximum Disparity Rate must be reduced. See Section 2.39.] [ ] Standard: the Maximum Disparity Rate. [ ] % [not to exceed the Maximum Disparity Rate.] (2) Integration Level. [Check one. See Section 2.35.] [ ] Standard: the Taxable Wage Base. [ ] $ or % of the Taxable Wage Base [not to exceed the Taxable Wage Base.] 2. Active Participant. The discretionary Employer Contributions and Forfeitures, if applicable, will only be allocated to: [Check one. See Section 2.2, Section 5.3(e) and Part VII.F.] a. [ x ] Standard: each Participant who is an Eligible Employee at any time during the Plan Year and (1) who is employed (or on an authorized leave of absence) on the last day of the Plan Year and (if the "Hours of Service" method is selected) who is credited with more than 1,000 Hours of Service during the Plan Year or (2) who terminated employment during the Plan Year due to death, disability or retirement. b. [ ] Alternatives to standard: [Check one or more.] (1) [ ] The last day employment requirement will not apply. (2) [ ] The 1,000 hours requirement will not apply. (3) [ ] The exceptions for death, disability and retirement will not apply. (4) [ ] Each Participant who is not employed on the last day of the Plan Year but is credited with more than 500 Hours of Service during the Plan Year will be an Active Participant. [Special equivalencies apply if "Elapsed Time" is selected. See Part V.A.2.] (5) [ ] The Participant must also be credited with at least 2 Years of Service on the last day of the Plan Year. 3. Forfeitures. Forfeitures attributable to Employer Accounts [Check one. See Section 5.3(i) and Section 6.3(c)(4)(ii).] a. [ x ] Standard: will be reallocated to Active Participants as of the last day of each Plan Year in the same manner as Employer Contributions. b. [ ] will be applied to reduce Matching Contributions, Qualified Matching Contributions and/or Qualified Nonelective Contributions. E. Net Profits. 1. General. [Check one. See Section 5.3(a).] a. [ ] Standard: All Employer contributions other than Elective Deferrals will be made out of Net Profits. b. [ x ] Alternatives to Standard: In addition to Elective Deferrals, the following contributions will be made without regard to Net Profits: [Check one or more.] 1. [ x ] Matching Contributions 2. [ ] Qualified Matching Contributions 3. [ x ] Qualified Nonelective Contributions 4. [ x ] Discretionary Employer Contributions 2. Definition. For this purpose, Net Profits will be as defined [Check one. See Section 2.41.] a. [ ] Standard: in Section 2.41(a). b. [ ] in the attached Addendum VII.E.2. F. Minimum Allocations. Each Active Participant (determined without regard to the Participant's completed Hours of Service) who is not a Key Employee, generally, will receive the minimum top-heavy allocation if the Plan is top-heavy. [See Section 6.3(e) and Section 12.] Requiring a Participant to complete a minimum number of hours or to be employed on the last day of a period may result in a failure to satisfy the nondiscrimination rules, minimum coverage rules and minimum participation rules. [See Section 2.2 and Section 2.19.] VIII. Compensation. Compensation for any Plan Year generally means total compensation (not to exceed $200,000 indexed for inflation after 1989) actually paid to a Participant during such Plan Year (unless another determination period is selected). [See Section 2.10.] A. Basic Definition: Total compensation means: [Check one. See Section 2.10(a).] 1. [ x ] Standard: wages, tips and other compensation reportable on Form W-2. [See Section 2.10(a)(1).] 2. [ ] wages subject to federal income tax withholding. [See Section 2.10(a)(2)(i).] 3. [ ] general Code Section 415 compensation. [See Section 2.10(a)(2)(ii) and Section 7.2(a)(2)(ii)(B).] 4. [ ] regular or base salary or wages, including [This option may not be selected if the integrated formula is selected in Part VII.D.1.b. Check one or more only if desired.] a. [ ] overtime b. [ ] bonuses c. [ ] commissions d. [ ] other: Reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits (even if includible in gross income): [Check one. See Section 2.10(a)(2)(iv).] [ ] Standard: will [ x ] will not be included in Compensation as determined in accordance with the definition selected above. B. Determination Period: [Check one. See Section 2.10(d).] 1. [ x ] Standard: the Plan Year 2. [ ] the calendar year ending in the Plan Year. 3. [ ] a period beginning each [Enter the day and month the period begins. The determination period must end with or within the Plan Year, must be at least 12 consecutive months in duration and must apply uniformly to all Employees in the Plan.] C. Salary Reductions. Participant salary reduction contributions (for example, Section 401(k) or flexible benefit plan contributions) [Check one. See Section 2.10(f).] 1. [ x ] Standard: will 2. [ ] will not be included in total compensation. D. Special Rules. [Complete only if desired. See Section 2.10(g).] 1. [ ] Compensation for periods ending before the Entry Date on which an Eligible Employee becomes a Participant will be excluded. [See Section 2.10 (g)(1).] 2. [ ] If this is an amendment to a Pre-Existing Plan, the definition of Compensation will be effective as of [No later than the first day of the first Plan Year after this Plan is adopted. See Section 2.10(g)(2). The definition in the Pre-Existing Plan will continue to apply until that date.] 3. [ ] Compensation for any Plan Year in excess of $ will be excluded. [See Section 2.10(g)(3).] 4. [ ] The following shall be excluded when determining Compensation of Highly Compensated Employee: . [See Section 2.10(g)(4).] IX. Distributions. A. Timing. Vested Plan benefits, generally, will be distributed as follows: [Check one. See Section 9.1(a).] 1. [ x ] Standard: as soon as practical after the Participant separates from service subject to the Participant's consent, if required. 2. [ ] no earlier than the Participant's Normal Retirement Age, Early Retirement Age or Disability, whichever is earlier. B. Elections to Defer. A Participant whose Account is more than $3500 may elect that distribution of vested Plan benefits be deferred until: [Check one. See Section 9.1(e).] 1. [ x ] Standard: the Participant's Required Beginning Date (generally age 70.5). 2. [ ] the later of the Participant's Normal Retirement Age or age 62. C. In-Service Distributions. [See Section 9.2(b).] 1. Elective Deferral Accounts. In-service distributions from Elective Deferral Accounts will be allowed as follows: [Check applicable box(es).] a. [ ] Standard: no distributions before separation from service. b. [ ] on or after age 59.5. [See Section 9.2(b)(4).] c. [ x ] for the following financial hardship(s): [See Section 9.2(b)(3). Check one or more.] (1) [ x ] medical expenses [See Section 9.2(b)(3)(ii)(A).] (2) [ x ] purchase of principal residence [See Section 9.2(b)(3)(ii)(B).] (3) [ x ] tuition [See Section 9.2(b)(3)(ii)(C).] (4) [ x ] foreclosure or eviction [See Section 9.2(b)(3)(ii)(D).] (5) [ x ] other IRS "deemed" financial hardship [See Section 9.2(b)(3)(ii)(E).] 2. Matching Accounts. In-service distributions from Matching Accounts will be allowed as follows: [Check applicable box(es).] a. [ x ] Standard: no distributions before separation from service. b. [ ] on or after age . c. [ ] after the anniversary of Plan participation. d. [ ] for a financial hardship under the safe harbor tests. [See Section 9.2(b)(3).] e. [ ] in accordance with the rules set forth in Addendum IX.C.2. [See Section 9.2(b)(5). The addendum should describe nondiscriminatory objective standards for an in-service distribution after a fixed number of years or upon the prior occurrence of some event such as layoff, illness or hardship.] 3. Employer Accounts. In-service distributions from Employer Accounts will be allowed as follows: [Check applicable box(es).] a. [ x ] Standard: no distributions before separation from service. b. [ ] on or after age . c. [ ] after the anniversary of Plan participation. d. [ ] for a financial hardship under the safe harbor tests. [See Section 9.2(b)(3).] e. [ ] in accordance with the rules set forth in Addendum IX.C.3. [See Section 9.2(b)(5). The addendum should describe nondiscriminatory objective standards for an in-service distribution after a fixed number of years or upon the prior occurrence of some event such as layoff, illness or hardship.] 4. Qualified Nonelective and Qualified Matching Accounts. In-service distributions from Qualified Nonelective and Qualified Matching Accounts will be allowed as follows: [Check applicable box(es).] a. [ x ] Standard: no distributions before separation from service. b. [ ] on or after age 59.5. c. [ ] for financial hardship (pre-89 amounts only). [See Section 9.2(b)(3).] 5. Employee Accounts. Withdrawals from Employee Accounts [See Section 9.2(d). Check one.] a. [ x ] Standard: will be allowed. b. [ ] will not be allowed. D. Joint and Survivor Annuity Rules. [Check one. See Section 10.] 1. [ ] Standard: The entire vested balance will be paid (a) to married Participants as a 50% joint and survivor annuity, (b) to single Participants as a 100% life annuity and (c) to the surviving Spouse of a married Participant who dies before retirement as a 100% preretirement survivor annuity. 2. [ ] The entire vested balance will be paid under the standard joint and survivor annuity rules except the percentages will be: [Percentages must not be less than 50% nor more than 100%.] a. Qualified Joint and Survivor Annuity: % [See Section 10.1(f).] b. Qualified Preretirement Survivor Annuity: % [See Section 10.1(g).] 3. [ x ] The standard joint and survivor annuity rules will not apply. [Check only if the safe harbor rule described in Section 10.5 will be satisfied. This option generally is not available if this Plan or a Pre-Existing Plan provides annuities and separate accounts are not maintained for such Pre- Existing Plan balances. Under this option, the entire vested balance eligible for the safe harbor will be paid to the surviving Spouse of a married Participant who dies before retirement. See Section 10.5.] E. Optional Distribution Forms. [See Section 10.6(c).] In addition to single sum distributions in cash, Participants may also request: 1. [ ] Installments [See Section 10.6(c)(2)(ii).] 2. [ ] Annuity contracts [See Section 10.6(c)(2)(iii).] 3. [ ] The optional forms or in kind distributions offered under a Pre-Existing Plan as described in Addendum XIII.A. 4. [ ] Single sum distributions in kind [See Section 10.6(e).] X. Investment Provisions. A. Individually Directed Investments. An individual's direction of the investment of that individual's Account. [Check one. See Section 13.2.] 1. [ ] Standard: will not be allowed. 2. [ x ] will be allowed and will apply: [Check one.] a. [ x ] Standard: to the entire Account b. [ ] only to the following: B. Participant Loans. Participant loans [Check one. See Section 13.3.] 1. [ ] Standard: will not be allowed. 2. [ x ] will be allowed. a. Accounting. Loans will be treated as an asset of [See Section 13.3(e). Check one.] (1) [ x ] Standard: the Participant's Account. (2) [ ] the Fund. b. Amounts. The $10,000 exception for loans in excess of 50% of Account value [Check one. See Section 13.3(f)(2).] (1) [ x ] Standard: shall not apply. (2) [ ] shall apply. [Note: Loans under this exception must be secured by collateral in addition to the Participant's vested Account.] C. Insurance. A Participant's direction to purchase insurance contracts [Check one. See Section 13.1.] 1. [ x ] Standard: will not be allowed. 2. [ ] will be allowed. XI. Top-Heavy Rules. [See Section 12.] A. Top-Heavy Vesting Schedule. The vesting schedule for any Plan Year in which this plan is a Top-Heavy Plan will be: [Check one. See Section 12.4.] 1. [ ] Standard. Full and Immediate Vesting. 100% of all times. 2. [ x ] Cliff. 100% after completion of 3 Years of Service [not to exceed 3]. 3. [ ] Graded. Years of Service Nonforfeitable Percentage Less than 1 % 1 % 2 % [at least 20%] 3 % [at least 40%] 4 % [at least 60%] 5 % [at least 80%] 6 or more 100% B. Other Plans. [Complete only if the Employer maintains or has ever maintained another plan.] 1. Minimum Allocation. The minimum top-heavy contributions or benefit, if any, will be made under [Check one. See Section 12.3(d) and (g).] a. [ ] Standard: this Plan. b. [ x ] the following plan(s): The OshKosh B'Gosh, Inc. Pension Plan 2. Present Value. [See Section 12.2(f)(3)(iii). Complete only if Employer maintains a defined benefit plan.] "Present value" will be determined using an interest rate of % and the following mortality table: as specified in the defined benefit plan, currently 5.5% and the Unisex Pension 1984 mortality table. 3. Valuation Date. The Top-Heavy Valuation Date for each other plan will be: [See Section 12.2(g). Check one.] a. [ x ] Standard: the most recent valuation date. b. [ ] Other: XII. Limitations on Allocations (Code Section 415). [See Section 7.2.] A. Compensation. For Code Section 415 purposes, Compensation means: [Check one. See Section 7.2(a)(2).] 1. [ x ] Standard: wages, tips and other compensation reportable on Form W-2. [See Section 7.2(a)(2)(i).] 2. [ ] wages, subject to federal income tax withholding. [See Section 7.2(a)(2)(ii)(A) and Section 2.10(a)(2)(i).] 3. [ ] general Code Section 415 compensation. [See Section 7.2(a)(2)(ii)(B).] B. Limitation Year. The Limitation Year will be: [Check one. See Section 7.2(a)(9).] 1. [ x ] Standard: the Plan Year. 2. [ ] the 12 consecutive month period which ends on each C. Other Plans. [Complete only if the Employer maintains or has ever maintained another plan.] 1. Other Defined Contribution Plan. The Annual Additions attributable to this Plan will be determined: [Check one. See Section 7.2(d).] a. [ x ] Standard: by treating the other plan as a Master or Prototype Plan. b. [ ] by using the method described in Addendum XII.C.1.b. 2. Defined Benefit Plan. [Check and attach appropriate addendum only if applicable. See Section 7.2(a)(3), Section 7.2(a)(11), Section 7.2(e) and Section 12.3(g).] [ x ] The Annual Additions attributable to this Plan will be limited by using the method described in Addendum XII.C.2. XIII. Special Provisions for Amendment and Restatement of Pre- Existing Plan, Mergers or Transfers. A. Vesting or Distribution Rules. [Check and attach appropriate description only if applicable. See Section 10.6, Section 14.1(b) and Section 14.5.] [ ] The special vesting or distribution rules which must be preserved under Code Section 411 are described in Addendum XIII.A. B. Normal Retirement Age. [Check only if the normal retirement age under the Pre-Existing Plan was determined with reference to the participation commencement date and the special transitional rule in Section 2.43 is desired. See Section 2.43.] [ ] The Normal Retirement Age of a Participant who commenced participation in the Pre-Existing Plan in a Plan Year beginning before 1988 will be determined under the transitional rule described in Section 2.43. C. Effective Dates. [Check and attach appropriate addendum only if any of the selections made in this Adoption Agreement will become effective as of a date other than the Effective Date set forth in Part II.E. However, the addendum shall in no event delay the effective date of any Plan provisions beyond the latest effective date required for such provision under TRA 86 or other applicable law or regulations.] [ ] Certain elections in this Adoption Agreement shall be effective as of the date(s) specified in Addendum XIII.C. XIV. Trustee Appointment and Trust Agreement. [Check one. See Section 2.66 and Section 2.68.] A. [ x ] Standard Trust Agreement. The standard Trust Agreement will apply and the Trustee will be the following individual(s), bank(s) or other person(s) who can serve as a fiduciary and trustee under the laws of the State shown in Part II.C. Smith Barney Corporate Trust Company [If Smith Barney Shearson Trust Company ("SBSTC") is the Trustee, SBSTC will charge a fee and may require the Employer to complete other documents prior to accepting its appointment as Trustee. Further, SBSTC will act only as a nondiscretionary Trustee and the investment of the Fund will be made as directed by the Plan Administrator or the Employer. See Section 15 and the Trust Agreement.] B. [ ] Alternate Trust Agreement. The alternate Trust Agreement for 401(k) Plans will apply and the Trustee will be , which is a bank or trust company organized under the laws of the State of and which is authorized to serve as a fiduciary and trustee under the laws of such State. [The trustee will charge a fee and will require the Employer to complete other documents, including execution of the alternate Trust Agreement, prior to accepting its appointment as Trustee. Except as described in the Trust Agreement, the Trustee will act only as a nondiscretionary Trustee and will be subject to the directions of the Plan Administrator as a named fiduciary under the Plan in the control and management of the assets of the Fund. Such directions will be communicated to the Trustee by the Recordkeeper as described in the Trust Agreement.] XV. IRS Approval This Plan is a "nonstandardized" plan and an adopting Employer may not rely on the opinion letter issued to the Prototype Sponsor by the National Office of the Internal Revenue Service as evidence that this Plan is qualified under Code Section 401. Any Employer who wishes to obtain reliance that this Plan as adopted by the Employer is qualified must apply to the appropriate Key District Office for a favorable determination letter on this Plan. Smith Barney Shearson will notify each adopting Employer of any amendments that have been made to the Plan by Smith Barney Shearson as Prototype Sponsor or of any intention to discontinue or abandon its sponsorship of the Plan as a prototype plan. SIGNATURES Important: In order to have a valid plan and trust, this Adoption Agreement must be signed by individuals authorized to sign for the Employer and, if applicable, the Trustee and each Participating Affiliate. If the alternate Trust Agreement is specified in Part XIV.B, the Trust Agreement must be signed by the Employer, and Trustee and, if applicable, each Participating Affiliate. This Adoption Agreement will not become effective as a prototype plan unless and until it is accepted by Smith Barney Shearson as the Prototype Sponsor but, upon such acceptance, will be effective as a prototype plan retroactive to the Effective Date. An Affiliate (i.e., member of a controlled group of corporations, commonly controlled group of trades or businesses, or an affiliated service group within the meaning of Code Section 414) may adopt this Plan as a Participating Affiliate. Employer Representations. The undersigned hereby certifies that the adoption of the Plan and the Trust Agreement is authorized by (1) a Board of Directors' resolution for an Employer which is a corporation, or (2) a written authorization by the person or persons duly authorized to act on behalf of an Employer which is not a corporation. If this Adoption Agreement amends and restates a Pre-Existing Plan, the undersigned hereby certifies that such amendment is duly authorized by the Employer. The undersigned hereby acknowledges that the Prototype Sponsor (1) is not responsible for the elections made in this Adoption Agreement, (2) shall have no responsibility whatsoever with respect to the Fund or the operation and administration of this Plan, and (3) has advised the Employer to consult with legal counsel for the Employer regarding the adoption and operation of this Plan. The undersigned further acknowledges that the Employer is solely responsible for the elections made in this Adoption Agreement and for the operation and administration of this Plan. Finally, the undersigned acknowledges that the Prototype Sponsor will charge an annual prototype maintenance fee and hereby authorizes the Prototype Sponsor to charge such fees against any brokerage account maintained for the Plan. Employer Execution. Subject to the terms and conditions of the Plan, the Trust Agreement and this Adoption Agreement, the undersigned hereby has executed this Adoption Agreement to evidence its adoption (or, if applicable, amendment) of the Plan and the Trust Agreement. Signature: /s/David L. Omachinski Title: CFO Date: September 24, 1996 Trustee Execution. Subject to the terms and conditions of the Plan, the Trust Agreement and this Adoption Agreement, the undersigned hereby accepts its appointment as Trustee and has executed this Adoption Agreement to evidence its adoption of the Trust Agreement. [Attach additional signature pages if there are more than three Trustees. If the alternate Trust Agreement is specified in Part XIV.B, the Trustee should execute the alternate Trust Agreement in lieu of executing the Adoption Agreement in this section.] Signature: /s/Marianne Quinn, SBSTC Date: October 1, 1996 Signature: Date: Signature: Date: Participating Affiliates Execution. [Attach additional signature pages if there are more than three Participating Affiliates. An Affiliate which adopts this Plan after this Adoption Agreement is executed should evidence its adoption of this Plan by executing and attaching to this Adoption Agreement a signature page which includes the information set forth below.] Subject to the terms and conditions of the Plan, the Trust Agreement and this Adoption Agreement, the undersigned hereby has executed this Adoption Agreement to evidence its adoption (or, if applicable, amendment) of the Plan and the Trust Agreement. AFFILIATE NAME: OshKosh B'Gosh Retail, Inc. Signature: /s/David L. Omachinski Date: January 1, 2000 Effective Date of Adoption of Plan by Affiliate (if different from the Effective Date in Part II.E.): January 1, 2000 Affiliate Name: Signature: Date: Effective Date of Adoption of Plan by Affiliate (if different from the Effective Date in Part II.E.): Affiliate Name: Signature: Date: Effective Date of Adoption of Plan by Affiliate (if different from the Effective Date in Part II.E.): Prototype Sponsor Acceptance. Subject to the terms and conditions of the Plan, the Trust Agreement and this Adoption Agreement, this Adoption Agreement is accepted by the Prototype Sponsor. Authorized Signature: /s/M. Quinn Date: October 1, 1996 Smith Barney Prototype Defined Contribution Plan Document #05 TABLE OF CONTENTS Page Part 1. Defined Contribution Plan Document # 05 Section 1 Introduction and Construction 1 Section 2. Definitions 1 Section 3. Service Definitions and Rules 6 Section 4. Participation 8 Section 5. Contributions 9 Section 6. Allocations to Accounts 13 Section 7. Statutory Limitations on Allocations 14 Section 8. Vesting and Forfeitures 21 Section 9. Account Distribution - General Rules 22 Section 10. Benefit Payment Forms - Joint and Survivor Annuity Requirements 24 Section 11. Minimum Distribution Requirements 27 Section 12. Top-Heavy Plan Rules 29 Section 13. Insurance, Individually Directed Investments and Participant Loans 31 Section 14. Adoption, Amendment, Withdrawal & Conversion, Merger, Asset Transfers and Termination 33 Section 15. Administration 35 Section 16. Miscellaneous 35 Appendix One to the Smith Barney Prototype Defined Contribution Plan 36 SMITH BARNEY DEFINED CONTRIBUTION PLAN DOCUMENT #05 SECTION 1. INTRODUCTION AND CONSTRUCTION 1.1 Introduction. This Smith Barney Prototype Defined Contribution Plan is established and maintained as a prototype plan by the Prototype Sponsor for its customers and the customers of its subsidiaries and affiliates. This Plan shall be adopted as a prototype plan only with the consent of the Prototype Sponsor or one of its subsidiaries or affiliates as set forth in the related Adoption Agreements and shall be maintained as a prototype plan only in accordance with the terms and conditions set forth in this Plan. 1.2 Controlling Laws. To the extent such laws are not preempted by federal law, this Plan and the related Adoption Agreement and Trust Agreement shall be construed and interpreted under the laws of the state specified in the Adoption Agreement; provided, if Smith Barney Corporate Trust Company has been appointed as Trustee, the Trust Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 1.3 Construction. The headings and subheadings in this Plan have been inserted for convenience of reference only and are to be ignored in the construction of its provisions. Wherever appropriate, the masculine shall be read as the feminine, the plural as the singular, and the singular as the plural. References in this Plan to a section shall be to a section in this Plan unless otherwise indicated. References in this Plan to a section of the Code, ERISA or any other federal law shall also refer to the regulations issued under such section. Unless an alternative option is specified in the Adoption Agreement, the option identified as the "Standard Option" will control. The Employer intends that this Plan and the related Trust Agreement and Adoption Agreement which are part of this Plan satisfy the requirements for tax exempt status under Code section 401(a), Code section 501(a)and related Code sections and that the provisions of this Plan, the Trust Agreement and the Adoption Agreement be construed and interpreted in accordance with the requirements of the Code and the regulations under the Code. Further, except as expressly stated otherwise, no provision of this Plan or the related Trust Agreement or Adoption Agreement is intended to nor shall grant any rights to Participants or Beneficiaries or any interest in the Fund in addition to those minimum rights or interests required to be provided under ERISA and the Code and the regulations under ERISA and the Code. Nothing in this Plan or the related Trust Agreement or Adoption Agreement shall be construed to prohibit the adoption or the maintenance of this Plan or the Trust Agreement as an individually designed plan or as a trust agreement which is part of an individually designed plan, but in such event, the Employer may not rely on the opinion letter issued to the Prototype Sponsor and the Prototype Sponsor shall have absolutely no responsibility for such individually designed plan. Finally, in the event of any conflict between the terms of this Plan and the terms of the Trust Agreement or the Adoption Agreement, the terms of this Plan shall control. 1.4 TRA 86 Amendments. If this Plan is adopted as an amendment to a Pre-Existing Plan in order to satisfy the requirements of TRA 86, the retroactive effective date of any provision required under TRA 86 is intended solely to comply with the Code and is not intended to grant any substantive rights under ERISA to the extent that such provision is different from the Pre-Existing Plan as in effect between the applicable effective date of TRA 86 and the effective date in the final regulations ("transition years"). SECTION 2. DEFINITIONS The capitalized terms in this Plan and the related Adoption Agreement and Trust Agreement shall have the meanings shown opposite those terms in this section 2 and in section 3 for purposes of this Plan. 2.1 Account - means the bookkeeping account maintained under this Plan to show as of any Valuation Date a Participant's interest in the Fund attributable to the contributions made by or on behalf of such Participant and the Fund Earnings on such contributions, and an Account shall cease to exist when exhausted through forfeiture or distributions made in accordance with this Plan. 2.2 Active Participant - means for purposes of eligibility to receive an allocation of the Employer Contribution or Forfeitures for each Plan Year, each Participant who is an Eligible Employee at any time during the Plan Year and who satisfies the following conditions: 2.2(a) Standard Option. 2.2(a)(1) Standardized Plans. If this Plan is adopted as a standardized Plan, such Participant (i) is employed as an Eligible Employee (or on an authorized leave of absence as an Eligible Employee) on the last day of such Plan Year, (ii) terminated employment as an Eligible Employee during such Plan Year on or after Normal Retirement Age or Early Retirement Age or by reason of death or Disability, or (iii) such Participant is not employed on the last day of such Plan Year but completed more than 500 Hours of Service during such Plan Year (or the equivalent period described in section 2.2(d) if the "Elapsed Time" method is specified in the Adoption Agreement). Notwithstanding the foregoing, if the "Hours of Service" method is specified in the Adoption Agreement for a Plan Year beginning before the Final Compliance Date, section 2.2(a)(1)(iii) shall not apply and a Participant who satisfies the requirements of section 2.2(a)(1)(i) shall not be eligible to receive an allocation of the Employer Contribution or Forfeitures for such Plan Year unless such Participant also is credited with at least 1,000 Hours of Service in such Plan Year. 2.2(a)(2) Nonstandardized Plans. If this Plan is adopted as a nonstandardized Plan, such Participant (i) is employed as an Eligible Employee (or on an authorized leave of absence as an Eligible Employee) on the last day of such Plan Year and, if the "Hours of Service" method is specified in the Adoption Agreement, is credited with at least 1,000 Hours of Service in such Plan Year, or (ii) terminated employment as an Eligible Employee during such Plan Year on or after Normal Retirement Age or Early Retirement Age or by reason of death or Disability. 2.2(b) Alternative. Such Participant satisfies the alternative conditions specified in the Adoption Agreement. 2.2(c) Minimum Coverage Requirement. If this Plan is adopted as a nonstandardized Plan and fails to satisfy the minimum coverage and participation requirements of Code section 401(a)(26) and section 410(b)for any Plan Year beginning on and after the Final Compliance Date as a result of the application of the minimum hours or last day employment requirements in this section 2.2, such minimum participation and coverage requirements shall be retroactively amended by executing a new Adoption Agreement within the applicable retroactive correction period in the regulations or, if no such amendment is made, shall be satisfied as follows: 2.2(c)(1) If the Plan utilizes both the minimum hours and last day employment requirements: (i) Step 1 - Each Participant who completes at least 1,000 Hours of Service without regard to whether such Participant is employed on the last day of the Plan Year shall be deemed to be an Active Participant for such Plan Year. (ii) Step 2 - If the minimum participation and coverage requirements are not satisfied after the application of Step 1, then each Participant who completes more than 500 Hours of Service and who is employed on the last day of the Plan Year shall be deemed to be an Active Participant for such Plan Year. (iii) Step 3 - If the minimum participation and coverage requirements are not satisfied after the application of Step 1 and Step 2, then each Participant who is not employed on the last day of the Plan Year but who completed more than 500 Hours of Service in such Plan Year also shall be deemed to be an Active Participant. (iv) Step 4 - If the minimum participation and coverage requirements are not satisfied after the application of Steps 1 through 3, then each Participant who satisfies the last day of employment requirement also shall be deemed to be an active participant without regard to the number of Hours of Service actually completed by such Participant during such Plan Year. 2.2(c)(2) If the Plan utilizes only the last day employment requirement, each Participant who is not employed on the last day of the Plan Year but who completed more than 500 Hours of Service in such Plan Year (or the equivalent period described in section 2.2(d) if the "Elapsed Time" method is specified in the Adoption Agreement) also shall be deemed to be an Active Participant. 2.2 (c) (3)If the Plan utilizes only the minimum hours requirement: (i) Step 1 - Each Participant who completes more than 500 Hours of Service without regard to whether such Participant is employed on the last day of the Plan Year shall be deemed to be an Active Participant. (ii) Step 2 - If the minimum participation and coverage requirements are not satisfied after the application of Step 1, then each Participant who is employed on the last day of the Plan Year shall be deemed to be an Active Participant. 2.2(d) Special Elapsed Time Equivalency Rule. If the "Elapsed Time" method is specified in the Adoption Agreement, a Participant shall be treated as completing more than 500 Hours of Service during such Plan Year for purposes of this section 2.2 if, during such Plan year, the Participant completes more than (A) Standard Option - 91 consecutive calendar days of employment, or (B) Alternative - if so specified in the Adoption Agreement, 3 consecutive calendar months of employment. 2.3 Adoption Agreement - means the agreement by which the Employer adopted this Plan. 2.4 Affiliate - means at any time (a) any parent, subsidiary or sister corporation which at such time is a member of a controlled group of corporations (as defined in Code section 414(b)) with the Employer, (b) any trade or business, whether or not incorporated, which at such time is considered to be under common control (as defined in Code section 414(c)) with the Employer, (c) any person or organization which at such time is a member of an affiliated service group (as defined in Code section 414(m)) with the Employer, and (d) any other organization which at such time is required to be aggregated with the Employer under Code section 414(o). 2.5 Allocation Date - means for a 401(k) Plan the respective dates specified in the Adoption Agreement as of which Matching Contributions, Qualified Matching Contributions and Qualified Nonelective Contributions, as applicable, are made. 2.6 Average Annual Compensation - means for a Target Benefit Plan the average of an Employee's Compensation for the consecutive Plan Year period specified in the Adoption Agreement during which such average is the highest, or if such Employee's entire period of participation in the Plan is less than the number of Plan Years so specified, the Employee's Average Annual Compensation shall be determined by averaging (on an annual basis) the Employee's Compensation for his or her actual period of participation. For purposes of determining a Participant's Average Annual Compensation for any Plan Year beginning after the Final Compliance Date, the annual Compensation taken into account for any prior Plan Year shall not exceed (a) for Plan Years beginning before January 1, 1990, $200,000 and (b) for Plan Years beginning on or after January 1, 1990, the annual Compensation limit described in section 2.1 O(e) in effect for such prior Plan Year. 2.7 Beneficiary - means for each Participant the person or persons so designated in writing by the Participant on a properly completed Election Form. However, if no such designation is made, if no person so designated survives the Participant, or if after checking the last known mailing address the whereabouts of the person so designated is unknown and no death benefit claim is submitted to the Plan Administrator by such person within one year after the Participant's date of death, the Beneficiary shall be deemed to be (a) the Participant's surviving Spouse, or if there is no surviving Spouse, (b) the personal representative of such Participant in his or her fiduciary capacity, if any has qualified within one year from the date of the Participant's death, or if no personal representative has so qualified or remains so qualified, (c) any person determined by a court of competent jurisdiction to be the Participant's Beneficiary for this purpose. If a Beneficiary is not identified and located within 3 years of the Participant's date of death, section 9.6, Missing Person, shall control the distribution of the Participant's Account. 2.8 Board - means (a) for any Employer which is a corporation, the Board of Directors of such Employer and (b) for any Employer which is not a corporation, the person or persons duly authorized to act on behalf of such Employer. 2.9 Code - means the Internal Revenue Code, as amended. 2.10 Compensation. 2.1 0(a) Common Law Employees. For an Employee who is not a Self-Employed Individual or a Leased Employee, the term "Compensation" means for any determination period 2.10(a)(1) Standard Option - the total compensation which is actually paid (in cash or other benefits) by the Employer or any Participating Affiliate to such Employee for such period and which is reportable to the Internal Revenue Service on Form W-2 as wages within the meaning of Code section 3401(a) and all other payments of compensation to such Employee from the Employer or Participating Affiliate (in the course of its trade or business) for which a written statement is required to be furnished to the Employee under Code section 6041(d), Code section 6051 (a)(3) and Code section 6052. Such Compensation shall be determined without regard to any rules under Code section 3401 (a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401 (a)(2)), or 2.10(a)(2) Alternative - if so specified in the Adoption Agreement, the total compensation which is actually paid (in cash or other benefits) by the Employer or any Participating Affiliate to such Employee for such period and which is (i) considered as wages within the meaning of Code section 3401(a) for the purposes of federal income tax withholding at the source but determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2)), (ii) considered as compensation within the meaning of Code section 415(c)(3) as described in section 7.2(a)(2)(ii)(B), (iii) for a nonintegrated nonstandardized Plan (other than a Target Benefit Pension Plan), compensation identified on the payroll records of the Employer or Participating Affiliate as regular or base salary or wages (whether hourly, weekly, monthly, annually or otherwise) and, if so specified in the Adoption Agreement, overtime, bonuses, commissions, and/or other specific compensation, or (iv) compensation as described in section 2.10(a)(1), section 2.10(a)(2)(i) or section 2.10(a)(2)(ii), reduced by all of the following items (even if includable in gross income): reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits, or 2.10(b) Self-Employed. For an Employee who is a Self-Employed Individual, the term "Compensation" means the Employee's Earned Income for such period. 2.10(c) Leased Employees. All compensation paid by a leasing organization to a Leased Employee for personal services rendered to the Employer or a Participating Affiliate for such period shall be treated as Compensation to the extent required under Code section 414(n). 2.10(d) Determination Period. For purposes of this definition and unless otherwise specified in this Plan or the Adoption Agreement, the phrase "determination period" means 2.1 0(d)(1) Standard Option - the Plan Year or 2.10(d)(2) Alternative - the calendar year or other 12 consecutive month period ending with or within the Plan Year specified in the Adoption Agreement. 2.10(e) Limitation. No more than $200,000 (as adjusted in accordance with Code section 401(a)(17)) shall be taken into account under this Plan for any determination period beginning on or after January 1, 1989. The annual Compensation limit under this section 2.10(e) for any determination period shall be adjusted in accordance with Code section 401(a)(17) for the calendar year in which such determination period begins. If the determination period is less than 12 months as a result of a short Plan Year, the annual Compensation limit under this section 2.10(e) shall equal the annual limit for such determination period multiplied by a fraction, the numerator of which is the number of full months in such period and the denominator of which is 12. For purposes of this Compensation limit, the family aggregation rules of Code section 414(q)(6) shall be applied by aggregating only the Participant's spouse and lineal descendants who have not reached age 19 before the end of such determination period. If the limit is exceeded for any determination period as a result of the application of the family aggregation rule, the limit shall be prorated among the individuals affected by this limit in proportion to each such individual's Compensation for such determination period as determined under this section 2.10 before the application of this section 2.10(e). However, if this Plan is adopted as an integrated plan, the preceding sentence shall not apply for purposes of determining the portion of compensation which does not exceed the Integration Level. 2.10(f) Salary Reductions. Any amount which is contributed by the Employer or any Participating Affiliate pursuant to a salary reduction agreement which is not currently includable in an Employee's gross income under Code section 125, section 402(e)(3), section 402(h) or section 403(b) 2.10(f)(1) Standard Option - shall be included in an Employee's Compensation, or 2.10(f)(2) Alternative - if so specified in the Adoption Agreement, shall not be included in an Employee's Compensation. 2.10(g) Special Rules. 2.10(g)(1) If so specified in the Adoption Agreement, an Employee's Compensation shall not include Compensation which is paid to the Employee for periods ending before the Entry Date on which the Employee becomes a Participant. 2.10(g)(2) If this Plan is adopted as an amendment and restatement of a Pre-Existing Plan, this definition shall be effective for Plan Years beginning on or after January 1, 1989 unless a later effective date is specified in the Adoption Agreement; provided, the $200,000 limitation of section 2.10(e) shall not be effective later than the first day of the first Plan Year beginning on or after January 1, 1989 and any such later effective date specified in the Adoption Agreement for the other, provisions of this section 2.10 shall not be later than the Final Compliance Date. 2.10(g)(3) If so specified in the Adoption Agreement for a nonstandardized Plan, a Participant's Compensation in excess of the dollar amount or percentage specified in the Adoption Agreement shall not be taken into account for purposes of determining the amount or allocation of any contributions made by or on behalf of such Participant under this Plan. 2.10(g)(4) If so specified in the Adoption Agreement for a nonstandardized Plan, the Compensation of a Participant who is a Highly Compensated Employee shall not include the specific types of Compensation specified in the Adoption Agreement. 2.11 Covered Compensation - means for each Participant for each Plan Year beginning on or after January 1, 1989, the average (without indexing) of the Taxable Wage Bases in effect under the Social Security Act for each calendar year during the 35-year period ending with the last day of the calendar year in which the Participant attains (or will attain) Social Security Retirement Age, determined by assuming that the Taxable Wage Base for all future years shall be the same as the Taxable Wage Base in effect as of the beginning of such Plan Year. A Participant's Covered Compensation for a Plan Year beginning before the 35-year period ending with the last day of the calendar year in which the Participant attains Social Security Retirement Age is the Taxable Wage Base in effect as of the beginning of the Plan Year. A Participant's Covered Compensation for a Plan Year beginning after such 35-year period is the Participant's Covered Compensation for the Plan Year during which the 35-year period ends. However, a Participant's Covered Compensation shall automatically be adjusted each Plan Year and any increase in a Participant's Covered Compensation shall not result in a decrease in the Participant's accrued benefit which would be impermissible under Code section 411(b)(1)(G) or section 411(d)(6). For purposes of this section 2.11, Social Security Retirement Age means (a) age 65 in the case of a Participant who was born before January 1, 1938, (b) age 66 for a Participant who was born after December 31, 1937, but before January 1, 1955, and (c) age 67 for a Participant who was born after December 31, 1954. 2.12 Disability or Disabled - means an individual's inability to engage in any substantially gainful activity at the individual's customary level of compensation or competence and responsibility as an Employee due to any medically determinable physical or mental impairment or impairments which may be expected to result in death or to last for a continuous period of at least 12 months as determined by a qualified physician or other medical practitioner selected by the Plan Administrator for this purpose in accordance with uniform and nondiscriminatory standards. 2.13 Early Retirement Age - means 2.13(a) Standard Option - the Normal Retirement Age or 2.13(b) Alternative - the alternative Early Retirement Age specified in the Adoption Agreement. 2.14 Earned Income - means for any Self-Employed Individual for any period the net earnings from self-employment (as defined in Code section 1402(a)) for such period from the Employer or any Participating Affiliate for which the personal services of such Employee are a material income-producing factor, where such net earnings are (a) determined without regard to items not included in gross income for purposes of Chapter 1 of the Code and the deductions properly attributable to such items, (b) determined with regard to the deduction allowed to the Self-Employed Individual under Code section 164(f) for taxable years beginning after December 31, 1989, and (c) reduced by the contributions made on behalf of such Employee to any qualified plan (as described in Code 4401 (a)) maintained by the Employer or any Participating Affiliate to the extent such contributions are deductible under Code section 404. 2.15 Effective Date - means the effective date of the Employer's adoption or amendment of this Plan as specified in the Adoption Agreement. However, if this Plan is adopted as an amendment and restatement of a Pre-Existing Plan, certain provisions of this Plan may be effective retroactive to Plan Years beginning before such Effective Date or may be effective at a date later than such Effective Date as specified in this Plan document or in the Adoption Agreement. 2.16 Election Form - means the form or forms provided by or acceptable to the Plan Administrator for making the elections and designations called for under this Plan and no such form shall become effective unless properly completed and timely delivered to the Plan Administrator in accordance with the terms of this Plan and such rules as the Plan Administrator shall adopt from time to time. 2.17 Elective Deferral - means the nonforfeitable contribution made to the Fund by the Employer or a Participating Affiliate on a Participant's behalf under section 5.3(f). 2.18 Elective Deferral Account - means the subaccount established as part of a Participant's Account to record the Participant's Elective Deferrals and the Fund Earnings attributable to such contributions, 2.19 Eligible Employee - means 2.19(a) Standard Option - each Employee of the Employer or a Participating Affiliate other than 2.19(a)(1) an Employee who is included in a unit of employees covered by a collective bargaining agreement between the Employer and employee representatives which agreement does not provide for participation in this Plan if retirement benefits under this Plan were the subject of good faith bargaining; provided, however, that (i) the term "employee representatives" shall not include an organization more than half of whose members are employees who are owners, officers or executives of the Employer, and (ii) an Employee shall not be treated as covered under a collective bargaining agreement if more than 2% of the Employees covered under such agreement are "professionals" (as defined in section 1.410(b)-9(g) of the Federal Income Tax Regulations); and 2.19(a)(2) an Employee who is a nonresident alien (within the meaning of Code section 7701(b)(1)(B) and who receives no earned income (within the meaning of Code section 911(d)(2)) from the Employer or any Participating Affiliate which constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)). 2.19(b) Alternative - If this Plan is adopted as a nonstandardized Plan, the Employer may specify in the Adoption Agreement a category of Employees who shall not be treated as Eligible Employees under this Plan. However, the Plan must satisfy on a continuing basis the nondiscrimination rules under Code section 401(a)(4), the coverage rules under Code section 410(b), and the minimum participation rules under Code section 401(a)(26). 2.20 Employee - means each person who is treated as an employee of the Employer or an Affiliate which is required to be aggregated with the Employer under Code section 414(b), section 414(c), section 414(m) or section 414(o) including (a) a common- law employee (whether full-time, part-time, regular, temporary or otherwise), (b) a Self-Employed Individual, (c) an Owner- Employee, (d) a Leased Employee and (e) each person who is deemed to be an employee under Code section 414(o). 2.21 Employee Account - means the subaccount established as part of a Participant's Account to record (1) the Participant's Employee Contributions under this Plan, (2) the Participant's nondeductible employee contributions, if any, under a Pre- Existing Plan or a plan which is merged into this Plan under section 14.5, and (3) the Fund Earnings attributable to such contributions. It a separate account was not maintained for contributions under other plans as described in clause (2) above, the account balance attributable to such contributions shall be the Participant's total account balance under such other plans multiplied by a fraction, the numerator of which is the total amount of the Participant's nondeductible employee contributions (less withdrawals) and the denominator of which is the sum of the numerator and the total contributions made by the Employer on behalf of the Participant (less withdrawals). For purposes of calculating such fraction, contributed amounts used to provide ancillary benefits shall be treated as contributions and only amounts actually distributed to the Participant (but not amounts which reflect the cost of any death benefits) shall be treated as withdrawals. 2.22 Employee Contribution - means any contribution made by or on behalf of a Participant to the Fund under section 5.3(g) that is includable in the Participant's gross income for the year in which made. 2.23 Employer - means the sole proprietorship, partnership or corporation identified as the Employer in the Adoption Agreement and any successor in interest to such organization. 2.24 Employer Account - means the subaccount established as part of a Participant's Account to record the Participant's share of the Employer Contributions and Forfeitures and the Fund Earnings attributable to such amounts. 2.25 Employer Contribution - means the contributions made by the Employer and by any Participating Affiliate to the Fund under section 5.1, section 5.2, section 5.3(e) or section 5.4. 2.26 Entry Date - means 2.26(a) Standard Option - the first day of each Plan Year and the first day of the 7th month in each Plan Year or 2.26(b) Alternative - the alternative Entry Date specified in the Adoption Agreement. 2.27 ERISA - means the Employee Retirement Income Security Act of 1974, as amended. 2.28 Family Members - means for any year, with respect to a Highly Compensated Employee who is a 5% owner or who is in the group consisting of the 10 Highly Compensated Employees paid the greatest Compensation during such year, (a) such individual's spouse, (b) such individual's lineal ascendants and lineal descendants and (c) the spouses of such lineal ascendants or descendants as determined under Code section 414(q)(6). 2.29 Final Compliance Date - means the first day of the first Plan Year beginning after December 31, 1993 or such other applicable effective date of the final nondiscrimination and other TRA 86 regulations. 2.30 Forfeiture - means the portion of an Account of a Participant which is deducted from such Account in accordance with the terms of this Plan. 2.31 401(k) Plan - means this Plan as adopted by entering into the Standardized 401(k) Plan Adoption Agreement or the Nonstandardized 401(k) Plan Adoption Agreement. 2.32 Fund - means the trust fund created in accordance with this Plan and the Trust Agreement which is a part of this Plan. 2.33 Fund Earnings - means for each period ending on a Valuation Date the investment gains and losses (whether realized or unrealized), income and expenses (other than expenses allocable directly to a specific Account) of the Fund for such period as determined based on the fair market value of the assets of the Fund on such Valuation Date. 2.34 Highly Compensated Employee - means a highly compensated employee within the meaning of Code section 414(q) (as described in section 7.4(a)(5)). 2.35 Integration Level - means the amount of Compensation specified in the Adoption Agreement at or below which the rate of contributions or benefits (expressed as a percentage of such Compensation) provided under the Plan is less than the rate of contributions or benefits (expressed as a percentage of such Compensation) provided under the Plan with respect to Compensation above such amount. The Integration Level for any Plan Year shall not exceed the Taxable Wage Base in effect at the beginning of such Plan Year. 2.36 Leased Employee - means for each Plan Year beginning on or after January 1, 1987 each person who is not a common-law employee of the Employer or an Affiliate, but who, pursuant to an agreement between the Employer or an Affiliate ("recipient") and any other person ("leasing organization"), has performed services for the recipient or the recipient and a related person (as determined in accordance with Code section 414(n)(6)) on a substantially full-time basis for a period of at least one year, which services are of a type historically performed by employees in the business field of the recipient or related person for whom such services are being performed. However, subject to the rules set forth in the regulations under Code section 414(n), such person shall not be treated as a Leased Employee it (a) the total number of such persons does not constitute more than 20% of the total nonhighly compensated work force of the recipient and (b) such person is covered by a money purchase pension plan which is maintained by the leasing organization and which provides for (1) a nonintegrated employer contribution rate of at least 10% of compensation (as defined in Code section 415(c)(3) but including amounts contributed pursuant to a salary reduction agreement which are excludable from the individual's gross income under Code section 125, section 402(e)(3), section 402(h) or section 403(b)), (2) immediate participation and (3) full and immediate vesting. 2.37 Matching Account - means the subaccount established as part of a Participant's Account to record the Matching Contributions made on the Participant's behalf under this Plan and the Fund Earnings attributable to such contributions. 2.38 Matching Contribution - means the contribution made by the Employer and by any Participating Affiliate to the Fund under section 5.3(b) by reason of a Participant's Elective Deferrals or Employee Contributions. 2.39 Maximum Disparity Rate - means 2.39(a) Standard Option - if the Integration Level is equal to the Taxable Wage Base, the greater of 5.7% or the portion of the tax rate under Code section 3111(a) which is attributable to old- age insurance as in effect on the first day of such Plan Year, and 2.39(b) Alternative - if the Integration Level is less than the Taxable Wage Base, the applicable percentage determined in accordance with the following table, where X = the greater of $10,000 or 20% of the Taxable Wage Base TWB = the Taxable Wage Base If the Integration Level: Is More Than But Not More Than Applicable Percentage $0 X 5.7% X 80% of TWB 4.3% 80% of TWB 100% of TWB 5.4% or, if the portion of the tax rate under Code 3111(a) which is attributable to old-age insurance as in effect on the first day of such Plan Year is greater than 5.7%, the applicable percentage in the table above shall be such portion of the tax rate, proportionately reduced in the same manner as the 5.7% amount in the table above. 2.40 Money Purchase Pension Plan - means this Plan as adopted by entering into the Standardized Money Purchase Pension Plan Adoption Agreement or the Nonstandardized Money Purchase Pension Plan Adoption Agreement. 2.41 Net Profits - 2.41(a) Standard Option. The term "Net Profits" means 2.41(a)(1) for an Employer or Participating Affiliate other than a non-profit entity, the current or accumulated earnings for the taxable year for which the Employer contribution is made as determined before federal and state taxes and contributions to this Plan or any other qualified plan, or 2.41(a)(2) for an Employer or Participating Affiliate which is a non-profit entity, the current or accumulated excess of receipts over disbursements for the fiscal year for which the Employer contribution is made. 2.41(b) Alternative. The Employer may specify in an alternative definition of Net Profits in the Adoption Agreement. 2.42 Nonhighly Compensated Employee - means each Employee who is neither a Highly Compensated Employee nor a Family Member. 2.43 Normal Retirement Age - 2.43(a) General. The term "Normal Retirement Age" means 2.43(a)(1) Standard Option - age 65 or 2.43(a)(2) Alternative - the alternative Normal Retirement Age specified in the Adoption Agreement. 2.43(b) Special Rules. 2.43(b)(1) Mandatory Retirement Age. If, consistent with applicable age discrimination law, the Employer enforces a mandatory retirement age, the Normal Retirement Age shall be the earlier of (1) the date the Participant reaches such mandatory retirement age or (2) the date the Participant reaches age 65 or, if an alternative is specified in the Adoption Agreement, the date the Participant reaches Normal Retirement Age as specified in the Adoption Agreement. 2.43(b)(2) Transitional Rule. If (i) the normal retirement age under the terms of the Pre- Existing Plan as in effect for Plan Years beginning before January 1, 1988 was determined with reference to an anniversary of the date on which a Participant commenced participation in such plan ("participation commencement date"), (ii) such anniversary was later than the 5th anniversary of the participation commencement date, (iii) the Normal Retirement Age specified in the Adoption Agreement is determined with reference to an anniversary of the participation commencement date, and (iv) this transitional rule is specified in the Adoption Agreement, then the anniversary for any Participant whose participation commencement date occurred in a Plan Year beginning before January 1, 1988 shall be the earlier of (A) the anniversary under the terms of the Pre-Existing Plan, or (B) the 5th anniversary of the first day of the first Plan Year beginning after December 31, 1987. 2.44 Owner-Employee - means each Self-Employed Individual who is (a) a sole proprietor of the Employer or a Participating Affiliate or (b) a partner owning more than 10% of either the capital or profits interest of the Employer or a Participating Affiliate. 2.45 Paired Plans - means (a) a combination of two or more standardized defined contribution Plans under this Smith Barney Prototype Defined Contribution Plan (Plan Document #05) or (b) a combination of one or more such standardized defined contribution Plans with a standardized defined benefit plan under the Smith Barney Prototype Defined Benefit Plan (Plan Document #06). However, such Plans shall be treated as Paired Plans only if (1) such Paired Plans have the same Plan Year, and (2) no more than one such plan is integrated with social security. 2.46 Participant - means (a) an Eligible Employee who has satisfied the Participation Requirement specified in the Adoption Agreement and has become a Participant in accordance with 4, and (b) any individual for whom an Account continues to exist under the Plan. 2.47 Participating Affiliate - means (a) if this Plan is a standardized Plan, each Affiliate of the Employer or (b) if this Plan is a nonstandardized Plan, each Affiliate which participates in this Plan, as set forth in section l4.1(c) of the Plan; provided, an Affiliate automatically shall cease to be a Participating Affiliate it, and at the time, it ceases to be an Affiliate as set forth in section 14.6(a). 2.48 Participation Requirement - means 2.48(a) Standard Option - attainment of age 21 and completion of a waiting period equal to one Year of Service or 2.48(b) Alternative - the alternative minimum age and waiting period requirement specified in the Adoption Agreement. 2.49 Plan - means this Smith Barney Prototype Defined Contribution Plan, as adopted by the Employer in the form of a Profit Sharing Plan, a 401(k) Plan, a Money Purchase Pension Plan or a Target Benefit Pension Plan, and as amended from time to time in accordance with section 14.2. 2.50 Plan Administrator -means 2.50(a) Standard Option - the Employer or 2.50(b) Alternative - the person or persons designated in writing by the Employer as the Plan Administrator for this Plan. 2.51 Plan Year - means the 12 consecutive month period or the 52/53 week period which ends on the date specified in the Adoption Agreement; provided, however, if this Plan is adopted as a new Plan, the first Plan Year shall be the period beginning on the Effective Date and ending on the date specified in the Adoption Agreement. 2.52 Pre-Existing Plan - means the Employer's prior defined contribution plan and the related trust agreement or other funding arrangement which is described in the Adoption Agreement and which is amended and restated in the form of this Plan. 2.53 Profit Sharing Plan - means this Plan as adopted by entering into the Standardized Profit Sharing Plan Adoption Agreement or the Nonstandardized Profit Sharing Plan Adoption Agreement. 2.54 Prototype Sponsor - means Smith Barney Inc. and any successor to such corporation. 2.55 Qualified Matching Contribution - means the contribution made by the Employer and by any Participating Affiliate to the Fund under section 5.3(c) by reason of a Participant's Elective Deferrals or Employee Contributions. 2.56 Qualified Matching Account - means the subaccount established as part of a Participant's Account to record the Qualified Matching Contributions made on the Participant's behalf under this Plan and the Fund Earnings attributable to such contributions. 2.57 Qualified Nonelective Contribution - means the contribution (other than Matching Contributions, Qualified Matching Contributions and Employer Contributions) made by the Employer and by any Participating Affiliate to the Fund under section 5.3(d). 2.58 Qualified Nonelective Account - means the subaccount established as part of a Participant's Account to record the Qualified Nonelective Contributions made on the Participant's behalf under this Plan and the Fund Earnings attributable to such contributions. 2.59 Rollover Account - means the subaccount established as part of a Participant's Account to record the Participant's Rollover Contributions and the Fund Earnings attributable to such contributions. 2.60 Rollover Contribution - means (a) a contribution of an amount, or more than one amount, which satisfies the applicable rollover requirements under Code section 402 or Code section 408 made by a Participant to the Fund under section 5.5 and (b) effective January 1, 1993, an eligible rollover distribution which is directly transferred to the Fund on or after such date pursuant to a Participant's election under Code section 401 (a)(31). 2.61 Self-Employed Individual - means an individual who is self-employed and who receives Earned Income from the Employer or a Participating Affiliate or who would have received such Earned Income but for the fact that the Employer or the Participating Affiliate did not have Net Profits. 2.62 Spouse - means the person who is lawfully married to the Participant on the date the Participant's Account becomes payable under this Plan or, if a Participant dies before such date, the person who was lawfully married to such Participant on the Participant's date of death. However, a former spouse shall be treated as the Spouse and a current spouse shall not be treated as the Spouse to the extent provided under a qualified domestic relations order as described in Code section 414(p). 2.63 Target Benefit Pension Plan - means this Plan as adopted by entering into the Standardized Target Benefit Pension Plan Adoption Agreement or the Nonstandardized Target Benefit Pension Plan Adoption Agreement. 2.64 Taxable Wage Base - means for any Plan Year the contribution and benefit base in effect under section 230 of the Social Security Act at the beginning of such Plan Year. 2.65 TRA 86 - means the Tax Reform Act of 1986 ("Act") and any other legislation and related regulations, notices or other guidance for which amendments are required to be made at the same time as amendments for such Act. 2.66 Trust Agreement - means the trust agreement between the Employer and the Trustee which is established as part of this Plan and which is set forth in the attached Smith Barney Prototype Defined Contribution Plan Trust Agreement or, if so specified in the Adoption Agreement for a 401(k) Plan, the Smith Barney Prototype Defined Contribution Plan Alternative Trust Agreement for 401(k) Plans. 2.67 Trustee - means the person or persons specified in the Adoption Agreement who serve as the trustee for the Fund under the Trust Agreement and any successor to such person or persons. 2.68 Valuation Date - means (a) the last day of each Plan Year and (b) each other date, if any, agreed upon in advance by the Employer and the Trustee, provided the selection of such other date does not result in discrimination in favor of Highly Compensated Employees which would be prohibited under Code section 401(a). SECTION 3. SERVICE DEFINITIONS AND RULES The definitions and rules in this section 3 shall apply for purposes of measuring an Employee's service (a) for participation purposes - to determine when the Employee has satisfied the Participation Requirement and (b) for vesting purposes - to determine the nonforfeitable interest in his or her Account. 3.1 Hour of Service Method (Standard Option). The definitions and rules in this section 3.1 shall apply unless the "Elapsed Time" method of crediting service is specified in the Adoption Agreement. 3.1(a) Break in Service. 3.1 (a)(1) General. The term "Break in Service" means each Computation Period during which an Employee fails to complete more than 500 Hours of Service. 3.1(a)(2) Maternity/Paternity Rule. Solely for purposes of determining whether an Employee has a Break in Service, an Employee who is absent from work for "maternity or paternity reasons" and who timely furnishes proof of the reason for such absence (in accordance with such nondiscriminatory rules as may be established by the Plan Administrator and communicated to Employees) shall be credited with each Hour of Service for which the Employee would otherwise have been credited but for such absence, or if such Hours of Service cannot be determined, with 8 Hours of Service for each day of such absence. However, the total number of Hours of Service so credited to such Employee shall not exceed 501 Hours of Service. The Hours of Service so credited shall be credited to the Computation Period in which such absence begins if such credit is necessary to prevent a Break in Service in such Computation Period or, if such credit is unnecessary, in the immediately following Computation Period. For purposes of this special maternity/paternity rule, an absence for "maternity or paternity reasons" means an absence (i) by reason of the pregnancy of the Employee, (ii) by reason of the birth of a child of the Employee, (iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. 3.1(b) Computation Period. 3.1(b)(1) General. The term "Computation Period' for purposes of determining Years of Service and Breaks in Service means the applicable period described in this section 3.1(b). 3.1(b)(2) Vesting. The relevant Computation Period for measuring Years of Service and Breaks in Service for vesting purposes shall be (i)Standard Option - the Plan Year or (ii)Alternative - if so specified in the Adoption Agreement, (A) the 12 consecutive month period which begins on the date the Employee first performs an Hour of Service ("hire date") and ends on the date immediately preceding the first anniversary of such hire date and (B) each 12 consecutive month period thereafter beginning on each anniversary of such hire date and ending on the date immediately preceding the next anniversary of such date. 3.1(b)(3) Participation. The initial Computation Period for measuring Years of Service and Breaks in Service for participation purposes shall be the 12 consecutive month period which begins on the first day an Employee first performs an Hour of Service as an Employee ("hire date") and ends on the date immediately preceding the first anniversary of such date. Each subsequent Computation Period shall be (i) Standard Option - each Plan Year, beginning with the Plan Year which begins before the first anniversary of the Employee's hire date (regardless of whether the Employee is credited with 1,000 Hours of Service in the Employee's initial Computation Period). An Employee shall be credited with two Years of Service for participation purposes if the Employee completes 1,000 or more Hours of Service in both the initial Computation Period and the first Plan Year which begins within such initial Computation Period, or (ii) Alternative - if so specified in the Adoption Agreement, the 12 consecutive month period which begins on each anniversary of an Employee's hire date and ends on the date immediately preceding the next anniversary of the Employee's hire date. For participation purposes, an Employee shall be credited with a Year of Service (A) Standard Option - on the last day of the Computation Period in which the Employee is credited with at least 1,000 Hours of Service (or such lesser number of hours specified in the Adoption Agreement) or (B) Alternative - on the first date on which the Employee is credited with at least 1,000 Hours of Service (or such lesser number of hours specified in the Adoption Agreement) provided the Employee completes such specified number of Hours of Service in one Computation Period. Notwithstanding the foregoing, if the Participation Requirement includes a partial Year of Service, no minimum number of Hours of Service shall be required for such partial year and an Employee shall be credited with such partial Year of Service on the date on which such partial period of service is completed. 3.1(b)(4) Change in Computation Period. If an amendment results in a change in the Computation Period, the first Computation Period established under such amendment shall begin before the last day of the preceding Computation Period and each Employee to whom both such Computation Periods apply and who completes 1,000 or more Hours of Service in both such Computation Periods shall be credited with one Year of Service for each such Computation Period. 3.1(c) Hour of Service. 3.1(c)(1) General. The term `Hour of Service" means (i) each hour for which an Employee is paid, or entitled to payment, by the Employer or an Affiliate for the performance of duties as an Employee, which hours shall be credited to the Employee for the relevant Computation Period in which such duties are performed; (ii) each hour for which an Employee is paid, or entitled to payment, by the Employer or an Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; provided (A) no more than 501 hours shall be credited under this clause (ii) for any single continuous period during which no duties are performed (whether or not such period covers more than one relevant Computation Period) and (B) hours under this clause (ii) shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations which are incorporated as part of this Plan by this reference; and (iii) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer or an Affiliate; provided (A) no credit shall be given for an hour described in this clause (iii) it credit also is given for such hour under clause (i) or clause (ii), and (B) an hour described in this clause (iii) shall be credited to the Employee for the relevant Computation Period or Computation Periods to which the award or agreement pertains rather than to the Computation Period in which the award, agreement or payment is made. 3.1(c)(2) Determination. The Employer shall determine an Employee's Hours of Service (i) Standard Option - by actually counting hours and maintaining records which reflect the actual hours worked, or (ii) Alternative - if so specified in the Adoption Agreement, by crediting each such Employee with (A)10 Hours of Service for each day, (B)45 Hours of Service for each week, (C)95 Hours of Service for each semi-monthly payroll period, or (D) 190 Hours of Service for each month during which the Employee otherwise would be credited with at least one Hour of Service. 3.1 (d) Year of Service. The term "Year of Service" means each Computation Period during which an Employee completes at least 3.1(d)(1) Standard Option - 1,000 Hours of Service or 3.1(d)(2) Alternative - such lesser number of Hours of Service specified in the Adoption Agreement. Notwithstanding the foregoing, if the Participation Requirement includes a partial Year of Service, no minimum number of Hours of Service shall be required for such partial year. 3.1(e) Change in Service Calculation Method. If an amendment changes the method of crediting service from the "Elapsed Time" method to the "Hours of Service" method, each Employee who was credited with service under the "Elapsed Time" method shall be credited with service 3.1(e)(1)for the Employee's employment before the Computation Period in which such amendment is adopted, as determined on the basis that one Year of Service credited to the Employee under the "Elapsed Time" method for such employment shall equal one Year of Service under this section 3.1, 3.1(e)(2) for the Employee's employment during the Computation Period in which such amendment is adopted, for a number of Hours of Service determined by uniformly applying one of the equivalencies set forth in section 3.1(c)(2)(ii) to any fractional part of a year credited to the Employee under the "Elapsed Time" method as of the effective date of the amendment, and 3.1(e)(3) for the Employee's employment on and after the effective date of the amendment, as determined under the rules in this section 3.l. 3.2 Elapsed Time Method (Alternative). If the "Elapsed Time" method of crediting service is specified in the Adoption Agreement, the definitions and rules in this section 3.2 shall apply in lieu of the definitions and rules in section 3.1. 3.2(a) Break in Service. 3.2(a)(1) General. The term "Break in Service" means a Period of Severance of at least 12 consecutive months. 3.2(a)(2) Maternity/Paternity Rule. If an Employee is absent from service for "maternity or paternity reasons" and the Employee timely furnishes proof of the reason for such absence (in accordance with such nondiscriminatory rules as may be established by the Plan Administrator and communicated to Employees), the 12 consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a Break in Service. Such 12 consecutive month period shall be neither a Period of Severance nor a period of Service. For purposes of this special maternity/paternity rule, an absence for "maternity or paternity reasons" means an absence (i) by reason of the pregnancy of the Employee, (ii) by reason of the birth of a child of the Employee, (iii) by reason of the placement of a child with the Employee in connection with the adoption of such child by the Employee, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. 3.2(b) Hour of Service. The term "Hour of Service" means each hour for which an Employee is paid, or entitled to payment, by the Employer or an Affiliate for the performance of duties as an Employee during any period of employment. 3.2(c) Period of Severance. The term "Period of Severance" means a continuous period of time during which an Employee is not employed by the Employer or an Affiliate beginning on the date the Employee retires, quits or is discharged, or if earlier, the 12 month anniversary of the date on which the Employee was otherwise first absent from service. 3.2(d) Period of Service. 3.2(d)(1) General. For participation purposes and for vesting purposes, the term "Period of Service" means an Employee's employment completed as an Employee of the Employer and any Affiliate beginning on such Employee's first day of employment or reemployment and ending on the date a Break in Service begins. An Employee's first day of employment or reemployment shall be the first day the Employee performs an Hour of Service. A Period of Service also shall include any Period of Severance of less than 12 consecutive months. 3.2(d)(2) Aggregation. An Employee's employment completed in all Periods of Service shall be aggregated (to the extent that such service is not disregarded under section 3.7 or section 3.8) and the number of days in each Period of Service in excess of a whole year of employment (or, if there is no whole year of employment in any such period, the number of days in such period) shall be aggregated into additional whole years of employment on the assumption that 365 days equals one whole year of employment. 3.2(e) Year of Service. The term "Year of Service" means each 12 consecutive month period of employment completed in any Period of Service beginning on the date an Employee first completes an Hour of Service ("hire date") and ending on the date immediately preceding the anniversary of such hire date. Subsequent Years of Service shall begin on each anniversary of the Employee's hire date and end on the date immediately preceding the next anniversary of such hire date. 3.2(f) Change in Service Calculation Method. If an amendment changes the method of crediting service from the "Hour of Service" method to the "Elapsed Time" method, each Employee who had any service credit under the "Hour of Service" method shall be credited with service 3.2(f)(1) for the Employee's employment before the Computation Period in which such amendment is adopted, as determined on the basis that one Year of Service credited to the Employee under the "Hour of Service" method for such employment shall equal one Year of Service under this section 3.2, 3.2(f)(2) for the Employee's employment during the Computation Period in which such amendment is adopted, as determined under the rules in this section 3.2 or, if greater, as determined for such period under the "Hour of Service" method as converted to Years of Service under the assumption that 365 days equals one Year of Service, and 3.2(f)(3) for the Employee's employment after the last day of the Computation Period in which such amendment is adopted, as determined under the rules in this section 3.2. 3.3 Service Before Effective Date. For participation purposes all periods of employment with the Employer or an Affiliate completed before the Employer adopted this Plan or a predecessor plan ("pre-effective date employment") shall be included (to the extent such service is not disregarded under section 3.7). For vesting purposes all periods of pre-effective date employment shall be included unless such service is disregarded under section 3.7 or section 3.8. Notwithstanding the foregoing, service credit for vesting purposes automatically shall be granted for pre-effective date employment to the extent required by Code section 411(a) for periods during which the Employer or an Affiliate maintained a predecessor plan. 3.4 Service with Predecessor Employer. All periods of employment with a predecessor employer or employers shall be included in calculating an Employee's service to the extent required by Code section 414(a) if the Employer or an Affiliate maintains a plan of such predecessor employer. However, if the Employer or an Affiliate does not maintain a plan of such predecessor employer, periods of employment with such predecessor employer shall be included in calculating an Employee's service 3.4(a) Standard Option - only to the extent required under regulations under Code section 414(a) or 3.4(b) Alternative - only if so specified in the Adoption Agreement. 3.5 Leased Employees. A Leased Employee shall be credited with service as an Employee of the Employer or an Affiliate in accordance with Code section 414(n) or section 414(o). 3.6 Service with Affiliates. An Employee shall be credited with all service with any Affiliate and any other entity which is required to be aggregated with the Employer under Code section 414(o). 3.7 Special Break in Service Rules. 3.7(a) Standard Option. Except as provided in section 3.7(c) and section 8.2, an Employee who has a Break in Service shall be credited after such Break in Service for both participation and vesting purposes with all Years of Service completed before such Break in Service. 3.7(b) Alternative. In addition to the exceptions in section 3.7(c) and section 8.2, the Employer may specify in the Adoption Agreement that certain service completed before a Break in Service may be disregarded under one or more of the rules set forth in this section 3.7(b). 3.7(b)(1) One Year Hold-Out Rule. If the "One Year Hold-Out Rule" is specified in the Adoption Agreement for a nonstandardized Plan, an Employee who has a Break in Service (two Breaks in Service if the Alternative Maternity/Paternity Rule applies) shall not be credited after such Break in Service for participation purposes or vesting purposes with any Year of Service completed before such Break in Service until the Employee completes a Year of Service after such Break in Service. In applying this rule for participation purposes, such Year of Service shall be measured by the Computation Period which begins on an Employee's "reemployment commencement date" and, if necessary, subsequent Computation Periods beginning (i) with the Plan Year which includes the first anniversary of the "reemployment commencement date" if the standard Computation Period in section 3.1(b)(3)(i) is specified in the Adoption Agreement, or (ii) on anniversaries of the "reemployment commencement date" if the alternative Computation Period in section 3.1(b)(3)(ii) is specified in the Adoption Agreement. The "reemployment commencement date" shall be the first day on which the Employee is credited with an Hour of Service for the performance of duties after the first Computation Period in which the Employee incurs a Break in Service. If an Employee who was a Participant before his or her Break in Service completes a Year of Service in accordance with this provision, such Employee's participation shall be reinstated as of his or her reemployment commencement date. 3.7(b)(2) Pre-Participation Rule. If the "Pre-Participation Rule" is specified in the Adoption Agreement, an Employee who has a Break in Service (two Breaks in Service if the Alternative Maternity/Paternity Rule applies) before the Employee satisfies the Participation Requirement shall not be credited for participation purposes with any Year of Service completed before such Break in Service. However, this rule shall only apply if the Participation Requirement for the Plan requires more than one Year of Service and the vesting schedule specified in the Adoption Agreement provides for full and immediate vesting. 3.7(b)(3)Rule of Parity. If the "Rule of Parity" is specified in the Adoption Agreement, the following rules shall apply: (i)General. If an Employee does not have any nonforfeitable interest in the portion of the Employee's Account which is attributable to Employer contributions, the Employee's Years of Service before a period of consecutive Breaks in Service shall not be taken into account in computing service for participation or vesting purposes if the number of consecutive Breaks in Service in such period equals or exceeds the greater of 5 (6 if the Alternative Maternity/Paternity Rule applies) or the aggregate number of Years of Service completed before such Breaks in Service ("pre-break service"). Such pre-break service shall not include any pre-break service disregarded under the preceding sentence by reason of prior breaks in Service. (ii) Participation. If an Employee's Years of Service are disregarded under this rule of parity, the Employee shall be treated as a new Employee for participation purposes. If the Employee's Years of Service are not disregarded under this rule, the Employee shall continue to participate in the Plan, or, if the Employee separated from service, shall participate immediately upon the Employee's reemployment. (iii) Vesting. If a Participant's Years of Service are disregarded under this rule of parity, the Participant's pre- break Years of Service shall be disregarded for purposes of determining the Participant's nonforfeitable interest in the Participant's post-break Employer Account. If a Participant's pre-break Years of Service are not disregarded under this rule of parity, the Participant's pre-break Years of Service shall be counted for purposes of determining the Participant's nonforfeitable interest in the Participant's post-break Employer Account. 3.7(b)(4) Alternative Maternity/Paternity Rule. If the "Alternative Maternity/Paternity Rule" is specified in the Adoption Agreement, the special Maternity/Paternity rule set forth in section 3.1(a)(2) shall not apply and the minimum period of consecutive Breaks in Service required to disregard any service or to deprive any Employee of any right under this Plan shall be increased by one as specified in the parentheticals in this section 3.7 and in section 8.2. 3.7(c) Vesting on Reemployment After Break in Service. If a Participant has 5 or more consecutive Breaks in Service (6 or more consecutive Breaks in Service if the Alternative maternity/Paternity Rule applies), all Years of Service completed after such Breaks in Service shall be disregarded for purposes of determining the Participant's nonforfeitable interest in the Participant's Employer Account and Matching Account that accrued before such Breaks in Service. Accordingly, as set forth in 8.2, the Employer shall not be required to restore a Forfeiture upon such reemployment. Unless the Adoption Agreement specifies the Rule of Parity, both the Participant's pre-break service and post-break service shall count for purposes of determining the nonforfeitable interest in the Participant's post-break Employer Account and Matching Account. If the Adoption Agreement specifies the Rule of Parity and the Participant's pre-break Years of Service are disregarded under that rule, then the Participant's pre-break Years of Service shall not count for purposes of determining the nonforfeitable interest in the Participant's post-break Employer Account and Matching Account. As provided in 8.2, separate accounts shall be maintained for the Participant's pre-break and post-break Employer Account and Matching Account and such accounts shall share in Fund Earnings. If a Participant does not have 5 consecutive Breaks in Service (6 or more consecutive Breaks in Service if the Alternative Maternity/Paternity Rule applies), both the Participant's pre- break and post-break Years of Service shall count in determining the nonforfeitable interest in both the pre-break and post-break Employer Account and Matching Account balance. However, unless the Adoption Agreement s edifies the "Alternative to the Buy Back Rule" (as described in section 8.2(b)), a Participant's pre-break Employer Account and Matching Account balance shall be zero unless the Participant repays any distribution as provided in section 8.2(a). 3.8 Service Exclusions for Vesting Purposes. 3.8(a) Standard Option - An Employee shall be credited with all Years of Service for vesting purposes (to the extent such service is not disregarded under section 3.7 and section 8.2). 3.8(b) Alternative - The Employer may specify in the Adoption Agreement service which is expressly excluded for vesting purposes. SECTION 4. PARTICIPATION 4.1 General Rule. Each Eligible Employee shall become a Participant in this Plan on the Entry Date which coincides with or immediately follows the date on which the Eligible Employee satisfies the Participation Requirement (provided he or she is an Eligible Employee on such Entry Date). 4.2 Special Rules. 4.2(a) Pre-Existing Plan. Any Employee who was a participant in the Pre-Existing Plan on the date immediately preceding the Effective Date or who would have become a participant in the Pre- Existing Plan on the Effective Date shall become a Participant under this Plan on such Effective Date. However, no contributions shall be made by or on behalf of such Participant unless the Participant is otherwise entitled to a contribution under section 5. 4.2(b) Reemployment Before Satisfying Participation Requirement. If an Employee separates from service prior to satisfying the Participation Requirement and is thereafter reemployed, all employment completed by such Employee prior to such separation shall be aggregated with such Employee's employment completed after reemployment for purposes of satisfying the Participation Requirement unless such prior employment is excluded under the rules set forth in section 3. 4.2(c) Reemployment After Satisfying Participation Requirement. If an Employee satisfies the Participation Requirement before he or she separates from service and the Employee thereafter is reemployed, the Employee shall become a Participant on the later of (1) the first day he or she completes an Hour of Service as an Eligible Employee upon reemployment or (2) the first Entry Date following the date on which he or she satisfies the Participation Requirement. However, any such Employee whose prior service is disregarded under section 3 shall be treated as a new Employee for participation purposes. 4.2(d) Status Change. If the status of an Eligible Employee for whom no Account is maintained changes to that of an Employee (other than an Eligible Employee) and such person's status thereafter changes back to that of an Eligible Employee, such person shall become a Participant on the later of (1) the date the status changes back to that of an Eligible Employee or (2) the first Entry Date which coincides with or immediately follows the date on which he or she satisfies the Participation Requirement. 4.3 Participant Information. Each Participant shall file with the Plan Administrator such personal information and data as the Plan Administrator deems necessary for the orderly administration of this Plan. 4.4 No Employment Rights. This Plan is not a contract of employment and participation in this Plan shall not give any Employee or former Employee the right to be retained in the employ of the Employer or any Affiliate or, upon termination of such employment, to have any interest or right in the Fund other than as expressly provided in this Plan. SECTION 5. CONTRIBUTIONS 5.1 Profit Sharing Plan. If this Plan is adopted as a Profit Sharing Plan, the Employer Contribution made by the Employer and each Participating Affiliate for each Plan Year shall equal such amount, if any, as the Board determines in its discretion that the Employer and each Participating Affiliate shall contribute for such year. Employer Contributions under this section 5.1 shall be made 5.1 (a) Standard Option - from Net Profits or 5.1(b) Alternative - if so specified in the Adoption Agreement, without regard to Net Profits. Notwithstanding any such election, the Employer intends that this Plan shall be a "profit-sharing plan" for purposes of the Code and ERISA. 5.2 Money Purchase Pension Plan. If this Plan is adopted as a Money Purchase Pension Plan, the Employer Contribution made by the Employer and each Participating Affiliate for each Plan Year shall be an amount equal to the sum of the contribution for each Active Participant as determined under the formula specified in the Adoption Agreement. The Forfeitures for each Plan Year shall be 5.2(a) Standard Option - applied to reduce the Employer Contribution for such Plan Year or 5.2(b) Alternative - if so specified in the Adoption Agreement, allocated to the Employer Account of each Active Participant in accordance with section 6.3(b). Notwithstanding any such election, the Employer intends that this Plan shall be a "money purchase pension plan" for purposes of the Code and ERISA. 5.3 401(k) Plan. 5.3(a) General. If this Plan is adopted as a 401(k) Plan, the contributions made by the Employer and each Participating Affiliate shall be determined in accordance with the elections made by the Employer in the Adoption Agreement and the rules set forth in this section 5.3. Contributions made under this section 5.3 other than Elective Deferrals and Employee Contributions shall be made 5.3(a)(1) Standard Option - from Net Profits or 5.3(a)(2) Alternative - if so specified in the Adoption Agreement, without regard to Net Profits. Elective Deferrals and Employee Contributions shall be made without regard to Net Profits. Notwithstanding any such election, the Employer intends that this Plan shall be a "profit-sharing plan" for purposes of the Code and ERISA. 5.3(b) Matching Contributions. If the Employer specifies in the Adoption Agreement that Matching Contributions shall be made to the Plan, the Employer and each Participating Affiliate shall make a Matching Contribution for each eligible Participant based on the Employee Contributions and Elective Deferrals made by or on behalf of such eligible Participant in such amount and as of each Allocation Date as specified in the Adoption Agreement. Notwithstanding the foregoing, 5.3(b)(1) for Plan Years beginning on or after the Final Compliance Date, no Matching Contribution shall be made on account of a Participant's Elective Deferrals or Employee Contributions which are Excess Elective Deferrals under section 7.3, Excess Contributions under section 7.4 or Excess Aggregate Contributions under section 7.5, and 5.3(b)(2) for Plan Years beginning before the Final Compliance Date, no Matching Contribution shall be made on account of such excess amounts unless specified in the formula for Matching Contributions set forth in the Adoption Agreement. 5.3(c) Qualified Matching Contributions. If the Employer specifies in the Adoption Agreement that Qualified Matching Contributions s shall be made to the Plan, the Employer and each Participating Affiliate shall make a Qualified Matching Contribution for each eligible Participant based on the Employee Contributions and Elective Deferrals made by or on behalf of such eligible Participant in such amount and as of each Allocation Date as specified in the Adoption Agreement. Qualified Matching Contributions shall be subject to the following special rules: 5.3(c)(1) the Participant may not elect to receive such contributions in cash until distributed from the Plan; 5.3(c)(2) such contributions shall be completely nonforfeitable when made; 5.3(c)(3) such contributions shall be subject to the same distribution and withdrawal restrictions applicable to Elective Deferrals set forth in section 9.2(b); 5.3(c)(4) for Plan Years beginning on and after the Final Compliance Date, no Qualified Matching Contribution shall be made on account of a Participant's Elective Deferrals or Employee Contributions which are Excess Elective Deferrals under section 7.3, Excess Contributions under section 7.4 or Excess Aggregate Contributions under section 7.5; and 5.3(c)(5) for Plan Years beginning before the Final Compliance Date, no Qualified Matching Contribution shall be made on account of such excess amounts unless specified in the formula for Qualified Matching Contributions set forth in the Adoption Agreement. 5.3(d) Qualified Nonelective Contribution. If the Employer specifies in the Adoption Agreement that Qualified Nonelective Contributions shall be made to the Plan, the Employer and each Participating Affiliate shall make Qualified Nonelective Contributions for each eligible Participant in such amount and as of each Allocation Date specified in the Adoption Agreement. In addition, in lieu of distributing Excess Contributions as provided in section 7.4(d) or Excess Aggregate Contributions as provided in section 7.5(d), the Employer and each Participating Affiliate may contribute on behalf of each Participant who is a Nonhighly Compensated Employee on the last day of each Plan Year such amount, if any, as the Employer and each Participating Affiliate determine in their discretion to contribute for such Plan Year to satisfy the ADP limit of section 7.4(b) or the ACP limit of section 7.5(b), or both, pursuant to the regulations under Code section 401(k) and Code section 401(m). Qualified Nonelective Contributions shall be subject to the following special rules: 5.3(d)(1) the Participant may not elect to receive such contributions in cash until distributed from the Plan; 5.3(d)(2) such contributions shall be completely nonforfeitable when made; and 5.3(d)(3) such contributions shall be subject to the same distribution and withdrawal restrictions applicable to Elective Deferrals set forth in section 9.2(b). 5.3(e) Discretionary Employer Contribution. If the Employer specifies in the Adoption Agreement that discretionary Employer Contributions shall be made, the Employer Contribution made by the Employer and each Participating Affiliate for each Plan Year shall equal such amount, if any, as the Board determines in its discretion that the Employer and each Participating Affiliate shall contribute for such year. 5.3(f) Elective Deferrals. If the Employer specifies in the Adoption Agreement that Elective Deferrals may be made, each Participant who is an Eligible Employee may elect pursuant to a cash or deferred election that the Employer and each Participating Affiliate make Elective Deferrals to the Plan on the Participant's behalf in lieu of cash compensation for each pay period ending on any date on or after he or she becomes a Participant and on which he or she is an Eligible Employee in such amounts as specified in the Adoption Agreement. All Elective Deferrals shall be made exclusively through payroll withholding and shall be transferred by the Employer or Participating Affiliate to the Trustee as soon as practicable after the date such Elective Deferrals are withheld. 5.3(g) Employee Contributions. If the Employer specifies in the Adoption Agreement that Employee Contributions may be made, each Participant who is an Eligible Employee may elect to make Employee Contributions to the Plan for each pay period ending on any date on or after he or she becomes a Participant and on which he or she is an Eligible Employee in such amounts as specified in the Adoption Agreement. All Employee Contributions shall be made exclusively through payroll withholding and shall be transferred by the Employer or Participating Affiliate to the Trustee as soon as practicable after the date such Employee Contributions are withheld. 5.3(h) Election Rules and Limitations. 5.3(h)(1) General. The Plan Administrator from time to time shall establish and shall communicate in writing to Participants who are Eligible Employees such reasonable nondiscriminatory deadlines, rules and procedures for making the elections described in this 5.3 as the Plan Administrator deems appropriate under the circumstances for the proper administration of this Plan. A Participant's election shall be made on an Election Form and no election shall be effective unless such Election Form is properly completed and timely filed in accordance with such established deadlines, rules and procedures. The Plan Administrator shall have the right at any time unilaterally to reduce the amount or percentage of Elective Deferrals or Employee Contributions elected under this section 5.3 if the Plan Administrator determines that such reduction is necessary to satisfy the limitations under section 7 of the Plan. 5.3(h)(2) Commencement of Election. A Participant's initial election to make Elective Deferrals or Employee Contributions under this section 5.3 for any period of employment may be effective as early as the Entry Date on which he or she becomes a Participant in the Plan. If a Participant does not make a proper election to make Elective Deferrals or Employee Contributions as of such Entry Date, the Participant may thereafter make an election (i)Standard Option - effective on any date or (ii)Alternative - effective only as of the dates specified in the Adoption Agreement. A Participant's election shall remain in effect until revised or terminated in accordance with this section 5.3(h). 5.3(h)(3) Revision of Election. An election, once effective, can thereafter be revised by a Participant (i)Standard Option - effective on any date or (ii)Alternative - effective only as of the dates specified in the Adoption Agreement. 5.3(h)(4) Termination of Election. A Participant shall have the right to completely terminate an election under this section 5.3 at any time, and any such termination shall become effective as of the first day of the first pay period following the date he or she timely files a properly completed Election Form terminating such election. Any Participant whose status as an Eligible Employee terminates shall be deemed to have completely terminated his or her election, if any, under this section 5.3 as of the date the Participant's status as such so terminates. 5.3(h)(5) Resumption after termination. A Participant whose election terminates may thereafter elect to resume contributions under this section 5.3 (i)Standard Option - effective as of any date, or (ii)Alternative - effective only as of the dates specified in the Adoption Agreement. 5.3(h)(6) Effective Dates of Elections. A Participant's initial, revised or resumed election shall be effective only if he or she is an Eligible Employee on the effective date of such elections set forth in this section 5.3(h). Elective Deferrals and Employee Contributions made pursuant to a Participant's elections shall be withheld from Compensation which otherwise would be paid on pr after the effective date of such election and while he or she is an Eligible Employee. Under no circumstances shall a Participant's Elective Deferral election apply to defer Compensation which has been paid to the Participant or which he or she is currently eligible to receive (in cash or otherwise) at his or her discretion. 5.3(i) Application of Forfeitures. The Forfeitures attributable to Matching Contributions and Employer Contributions shall be 5.3(i)(1) Standard Option - applied to reduce the Matching Contributions, Qualified Matching Contributions and Qualified Nonelective Contributions, if any, in accordance with section 6.3(c)(2)(ii)(A) or 5.3(i)(2) Alternative - if so specified in the Adoption Agreement, (i) allocated to the Employer Account or Matching Account, as applicable, of each Active Participant in accordance with section 6.3(c)(2)(ii)(B)(1), or (ii) for a nonstandardized Plan, allocated in accordance with the formula specified in the Adoption Agreement. 5.4 Target Benefit Pension Plan. 5.4(a) General. If this Plan is adopted as a Target Benefit Pension Plan, the Employer Contribution made by the Employer and each Participating Affiliate for each Plan Year shall be an amount equal to the sum of the contributions required to fund each Active Participant's "Target Benefit" specified in the Adoption Agreement. The Forfeitures for each Plan Year shall be applied to reduce the Employer Contribution for such Plan Year. Such contribution shall be determined as of the last day of such Plan Year under the individual level premium funding method, using the interest rate and mortality table specified in the Adoption Agreement, the Participant's age on his or her last birthday and the assumption of a constant rate of future Compensation, in accordance with the following: 5.4(a)(1) Step 1. If the Participant has not reached the Plan's Normal Retirement Age, calculate the present value of the "Target Benefit" specified in the Adoption Agreement by multiplying the "Target Benefit" by the product of (1) the applicable factor from Table l(a) or (b), whichever is appropriate, in Exhibit A to the Adoption Agreement and (2) the applicable factor from Table 111(a) or (b), whichever is appropriate, in Exhibit A to the Adoption Agreement. It the Participant is at or beyond the Plan's Normal Retirement Age, calculate the present value of the "Target Benefit" specified in the Adoption Agreement by multiplying the "Target Benefit" by the applicable factor from Table IV(a) or (b), whichever is appropriate, in Exhibit A to the Adoption Agreement. 5.4(a)(2) Step 2. Calculate the excess, if any, of the amount determined in Step 1 over the theoretical reserve. 5.4(a)(3) Step 3. Amortize the result in Step 2 by multiplying it by the applicable factor from Table 11 in Exhibit A to the Adoption Agreement. For the Plan Year in which the Participant attains Normal Retirement Age and for subsequent Plan Years, the applicable factor is 1.0. 5.4(b) Theoretical Reserve. For purposes of this section 5.4, the theoretical reserve is determined as follows: 5.4(b)(1) A Participant's theoretical reserve as of the last day of the first Plan Year in which the Participant participates in the Plan, and as of the last day of the first Plan Year after any Plan Year in which the Plan either did not satisfy the safe harbor in section 1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or was not a Prior Safe Harbor Plan, is zero. In all other cases, in the first Plan Year in which this theoretical reserve provision is adopted or made effective, if later, as specified in the Adoption Agreement ("year 1"), the initial theoretical reserve is determined as follows: (i) Calculate as of the last day of the Plan Year immediately preceding year 1 the present value of the "Target Benefit", using the actuarial assumptions, the provisions of the Plan, and the Participant's Average Annual Compensation as of such date; provided, however, for a Participant who is beyond Normal Retirement Age in year 1, the straight life annuity factor used for such determination shall be the factor applicable for such Normal Retirement Age. (ii) Calculate as of the last day of the Plan Year immediately preceding year 1 the present value of future Employer Contributions, i.e., the contributions due each Plan Year using the actuarial assumptions, the provisions of the Plan (disregarding those provisions of the Plan providing for the limitations of Code section 415 or the minimum contributions under Code section 416), and the Participant's Average Annual Compensation as of such date, beginning with year 1 through the end of the Plan Year in which the Participant attains Normal Retirement Age. (iii) Subtract the amount determined in clause (ii) from the amount determined in clause (i). 5.4(b)(2) Accumulate the initial theoretical reserve in section 5.4(b)(1) and the Employer Contribution (as limited by Code section 415, but without regard to any required minimum contributions under Code section 416) for each Plan Year beginning in year 1 up through the last day of the current Plan Year (excluding contributions, if any, made for the current Plan Year) using the Plan's interest assumption in effect for each such year. In any Plan Year following the Plan Year in which the Participant attains Normal Retirement Age, the accumulation is calculated assuming an interest rate of 0%. 5.4(b)(3) The calculations in this section 5.4(b) shall be made as of the last day of each Plan Year, on the basis of the Participant's age on his or her last birthday and the interest rate in effect on the last day of the prior Plan Year. 5.4(c) Past Service Credits. If the Plan is adopted as a standardized Plan, upon initial adoption of this Plan or upon a Plan amendment which is effective on or after the Final Compliance Date, no more than 5 years of credit shall be granted for service completed before the effective date of such adoption or amendment, and any such past service credit shall be granted on a uniform basis to all Participants in the Plan on such effective date. 5.4(d) TRA 86 Amendment. A Participant's Account balance shall not be reduced as a result of an amendment to this Plan or a Pre- Existing Plan to satisfy the requirements of TRA 86. To the extent that contributions actually made on a Participant's behalf for Plan Years beginning after December 31, 1988 exceed the contributions that would have been required under the formula as effective for such years as a result of the amendment of this Plan or a Pre-Existing Plan to satisfy TRA 86, such excess shall be applied to offset contributions required to such Participant's Account for Plan Years beginning after the date such TRA 86 amendment is adopted or, if later, the date such TRA 86 amendment is effective consistent with ERISA 204(h). 5.4(e) Special Definitions and Rules. The special definitions and rules in this section 5.4(e) shall apply for purposes of determining the Employer Contributions under a Target Benefit Pension Plan. 5.4(e)(1) Cumulative Disparity Limit. For a Plan with a Unit Benefit Formula, a Participant's Cumulative Disparity Limit is equal to 35 minus (1) the number of the Participant's Years of Participation under this Plan during which this Plan did not satisfy the safe harbor for target benefit plans in section 1.401 (a)(4)-8(b)(3) of the Federal Income Tax Regulations or was not a Prior Safe Harbor Plan, and (2) the number of years during which the Participant participated in one or more qualified plans or simplified employee pension plans ever maintained by the Employer (other than years counted in clause (1) or counted toward a Participant's total Years of Projected Participation). The Cumulative Disparity Limit shall be determined taking into account only those Years of Participation in this Plan beginning after December 31, 1988 when this Plan had an integrated benefit formula and those years of participation in such other qualified plans and simplified employee pension plans beginning after December 31, 1988 during which the Participant actually received an allocation under an integrated defined contribution plan (other than a target benefit pension plan), during which the Participant was eligible to receive a benefit under an integrated defined benefit pension plan or an integrated target benefit pension plan), or during which the Participant received an allocation or accrued a benefit under a plan which imputed permitted disparity pursuant to section 1.401(a)-7 of the Federal Income Tax Regulations. 5.4(e)(2) Cumulative Disparity Reduction. For a Plan with a Fixed Benefit Formula, the Excess Benefit Percentage will further be reduced as set forth in this section 5.4(e)(2) for a Participant with more than 35 "cumulative disparity years." A Participant's "cumulative disparity years" consist of the sum of (1) the Participant's total Years of Projected Participation, (2) the Participant's Years of Participation during which this Plan did not satisfy the safe harbor for target benefit plans in regulations section 1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or was not a Prior Safe Harbor Plan, and (3) the number of years during which the Participant participated in one or more qualified plans or simplified employee pension plans ever maintained by the Employer (other than years in clause (1) or (2) above); provided that the cumulative disparity years shall be determined taking into account only those Years of Participation in this Plan beginning after December 31, 1988 when this Plan had an integrated benefit formula and those years of participation in such other qualified plans and simplified employee pension plans beginning after December 31, 1988 during which the Participant actually received an allocation under an integrated defined contribution plan (other than a target benefit pension plan), during which the Participant was eligible to receive a benefit under an integrated defined benefit pension plan (or an integrated target benefit pension plan), or during which the Participant received an allocation or accrued a benefit under a plan which imputed permitted disparity pursuant to section 1.401 (a)-7 of the Federal Income Tax Regulations. If this Cumulative Disparity Reduction applies, the Excess Benefit Percentage will be reduced as follows: (A)Subtract the Participant's Base Benefit Percentage from the Participant's Excess Benefit Percentage (after modification as required in the Adoption Agreement for less than 35 Years of Projected Participation). (B)Multiply the results determined in (A) by a fraction (not less than 0), the numerator of which is 35 minus the sum of the years in clauses (2) and (3) of this Section 5.4(e)(2), and the denominator of which is 35. (C)The Participant's Excess Benefit Percentage is equal to the sum of the result in (B) and the Participant's Base Benefit Percentage, as otherwise modified in the Adoption Agreement. 5.4(e)(3) Current Stated Benefit. Each Participant's Current Stated Benefit will be the product of (1) the amount derived from the formula specified in the Adoption Agreement, and (2) a fraction, the numerator of which is the Participant's number of Years of Participation from the latest Fresh-Start Date (if any) through and including the later of the year in which the Participant attains Normal Retirement Age or the current Plan Year, and the denominator of which is the Participant's total Years of Projected Participation. If this Plan has not had a Fresh-Start Date, such fraction will equal 1.0 for all Participants. In any event, for those Participants who first participated in the Plan after the latest Fresh-Start Date, such fraction will equal 1.0. For purposes of determining the numerator of the fraction described in clause (2), only those current and prior years during which a Participant was eligible to receive a contribution under the Plan will be taken into account. 5.4(e)(4) Fresh-Start Date. Fresh-Start Date means the last day of a Plan Year preceding a Plan Year for which provisions that would affect the amount of the Current Stated Benefit are amended. If applicable, the latest Fresh-Start Date of the Plan shall be designated in the Adoption Agreement. 5.4(e)(5) Frozen Accrued Stated Benefit. A Participant's Frozen Accrued Stated Benefit is determined as of the Plan's latest Fresh-Start Date as if the Participant terminated employment with the Employer as of that date, without regard to any amendment made to the Plan after that date except as permitted under regulations. A Participant's Frozen Accrued Stated Benefit is equal to the amount of the Current Stated Benefit in effect on the latest Fresh-Start Date that a Participant has accrued as of that date, assuming that such Current Stated Benefit accrues ratably from the year in which the Participant first participated in this Plan (or, if later, the immediately preceding Fresh-Start Date under this Plan) through and including the Plan Year in which the Participant attains Normal Retirement Age. The amount of the Current Stated Benefit in effect on the latest Fresh-Start Date that a Participant is assumed to have ratably accrued is determined by multiplying the Plan's Current Stated Benefit in effect on that date by a fraction, the numerator of which is the number of Years of Participation from the later of the Participant's first Year of Participation in this Plan or the immediately preceding Fresh-Start Date (if any) through and including the year that contains the latest Fresh-Start Date, and the denominator of which is the number of Years of Participation from the later of the Participant's first Year of Participation in this Plan or the immediately preceding Fresh-Start Date (if any) through and including the later of the year in which the Participant attains Normal Retirement Age or the current Plan Year. For purposes of this paragraph, only those Years of Participation during which a Participant was eligible to receive a contribution under the Plan will be taken into account. If this Plan has had a preceding Fresh-Start Date, each Participant's Frozen Accrued Stated Benefit as of the latest Fresh-Start Date will equal the sum of the amount of the Current Stated Benefit in effect on the latest Fresh-Start Date that a Participant is assumed to have ratably accrued as of that date under the preceding paragraph, and the Frozen Accrued Stated Benefit determined as of the preceding Fresh-Start Date(s). If (1) the Current Stated Benefit formula in effect on the latest Fresh-Start Date was not expressed as a straight life annuity for all Participants, and/or (2) the Normal Retirement Age for any Participant on the latest Fresh-Start Date was greater than the Normal Retirement Age for that Participant under the Current Stated Benefit formula in effect after the latest Fresh-Start Date, the Frozen Accrued Stated Benefit will be converted to an actuarially equivalent straight life annuity commencing at the Participant's Normal Retirement Age under the Current Stated Benefit formula in effect after the latest Fresh-Start Date, using the actuarial assumptions in effect under the Current Stated Benefit formula in effect on the latest Fresh-Start Date. Notwithstanding the above, if in the immediately preceding Plan Year this Plan did not satisfy the safe harbor for target benefit plans in section 1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or was not a Prior Safe Harbor Plan, the Frozen Accrued Stated Benefit for any Participant in the Plan, determined for the next Plan Year during 9 which section 1.401 (a)(4)-8(b)(3) of the Federal Income Tax Regulations is satisfied until the year following the next Fresh-Start Date, if any, will be zero. 5.4(e)(6) Maximum Excess Allowance. The Maximum Excess Allowance is equal to the lesser of the Base Benefit Percentage or (1) for a Plan with a Unit Benefit Formula, the Applicable Factor determined from Table A or Table B in Exhibit B to the Adoption Agreement, and (2) for a Plan with a Fixed Benefit Formula, 35 times the Applicable Factor determined from Table A or Table B in Exhibit B to the Adoption Agreement. 5.4(e)(7) Overall Permitted Disparity Limit. If for any Plan Year this Plan benefits any Participant who also benefits under another qualified plan or simplified employee pension plan maintained by the Employer that provides for permitted disparity (or imputes permitted disparity), the Current Stated Benefit for all Participants under this Plan will be equal to the Excess Benefit Percentage set forth in the Adoption Agreement multiplied times (1) for a Plan with a Unit Benefit Formula, the Participant's total Average Annual Compensation times the Participant's total Years of Projected Participation under the Plan up to the maximum total Years of Projected Participation specified in the Adoption Agreement, and (2) for a Plan with a Fixed Benefit Formula, the Participant's total Average Annual Compensation (prorated for years less than 35). If this paragraph is applicable, this Plan will have a Fresh- Start Date on the last day of the Plan Year preceding the Plan Year in which this paragraph is first applicable. In addition, if in any subsequent Plan Year this Plan no longer benefits any Participant who also benefits under another plan of the Employer, this Plan will have a Fresh-Start Date on the last day of the Plan Year preceding the Plan Year in which this paragraph is no longer applicable. 5.4(e)(8) Prior Safe Harbor Plan. Prior Safe Harbor Plan means a Plan adopted and in effect on September 19, 1991, that satisfied the applicable nondiscrimination requirements for target benefit plans on that date and in all prior periods (taking into account no amendments to the Plan after September 19, 1991, other than amendments necessary to satisfy Code section 401(1)). 5.4(e)(9) Year of Participation - means each Year of Service (as determined in the same manner as a Year of Service for vesting purposes) completed after the Participant first becomes a Participant in this Plan or the Pre-Existing Plan. 5.4(e)(10) Years of Projected Participation. For purposes of determining a Participant's Current Stated Benefit, a Participant's total Years of Projected Participation under the Plan is the sum of the Participant's total number of Years of Participation under this Plan for the years this Plan consecutively satisfies the safe harbor for target benefit plans in section 1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or was a Prior Safe Harbor Plan , if applicable, projected through the later of the end of the Plan Year in which the Participant attains Normal Retirement Age or the end of the current Plan Year. For purposes of determining a Participant's total Years of Projected Participation, only those current and prior years during which a Participant was eligible to receive a contribution under the Plan will be taken into account. 5.5 Rollover Contributions. 5.5(a) Standard Option - An Eligible Employee may contribute on his or her own behalf (or elect a direct transfer of) a Rollover Contribution to the Fund, provided (1) such contribution shall be made (or transferred) in cash or in a form which is acceptable to the trustee,(2) such contribution shall be made in accordance with such rules as the Plan Administrator and the Trustee deem appropriate under the circumstances, and (3) if so specified in the Adoption Agreement, no Rollover Contribution may be made prior to the Entry Date on which the Eligible Employee becomes a Participant in this Plan. 5.5(b) Alternative - The Employer may specify in the Adoption Agreement that no Rollover Contributions may be made. 5.6 No Employee or Matching Contributions. Unless this Plan is adopted as a 401(k) Plan which permits Employee Contributions, no nondeductible employee contributions or matching contributions (as defined in Code section 401(m)) shall be made to this Plan after the Plan Year in which this Plan is adopted by the Employer. Any nondeductible employee contributions and matching contributions made under a Pre-Existing Plan or under this Plan (in accordance with the preceding sentence) for Plan Years beginning after December 31, 1986 shall be subject to the nondiscrimination limitations under Code section 401(m) as set forth in section 7.5. 5.7 No Deductible Voluntary Employee Contributions. No voluntary deductible employee contributions shall be made to this Plan for a taxable year beginning after December 31, 1986. Any voluntary deductible employee contributions made under a Pre- Existing Plan prior to such date shall be maintained in a separate account under this Plan. Such account shall be nonforfeitable at all times and shall share in the Fund Earnings in the same manner as described in section 6.2. No part of such account shall be used to purchase life insurance. Subject to section 10, Joint and Survivor Annuity Requirements (if applicable), a Participant may withdraw any part of the Participant's voluntary deductible employee contribution account by making a written application to the Plan Administrator, 5.8 General Rules Applicable to All Contributions. 5.8(a) Limitations on Contributions. The contributions made under this section 5 and the allocation of those contributions under section 6 shall be subject to the limitations set forth in the Adoption Agreement, this section 5 and section 7. 5.8(b) Code section 415. The contributions for any Plan Year shall not (based on the Employer's understanding of the facts at the time the contribution is made) exceed the total amount allocable for such year among the Accounts of all Participants in light of the restrictions in Code section 415 as set forth in section 7.2. If a suspense account as described in section 7.2(b) is in existence at any time during a particular Limitation Year (1) no Employer Contribution shall be made for such Limitation Year if (based on the Employer's understanding of the facts at the time the contribution is made) the allocation of the amount in such suspense account would be precluded by Code section 415 for such Limitation Year and (2) if this Plan is adopted as a Money Purchase Pension Plan or a Target Benefit Pension Plan, the Employer Contribution required under this section 5 shall be reduced by the amount in such suspense account. 5.8(c) Code section 416. If this Plan is a Top-Heavy Plan (as defined in section l2) for any Plan Year, the minimum allocation required under Code section 416 shall be made in accordance with section 12. 5.8(d) Leased Employees. Contributions or benefits which are provided by a leasing organization on behalf of a Participant who is a Leased Employee and which are attributable to services performed by such Participant for the Employer or a Participating Affiliate shall be credited against the contribution, if any, due to be allocated to such Participant under this Plan in accordance with Code section 414(n). 5.8(e) Owner-Employees. 5.8(e)(1) General. If this Plan provides contributions or benefits for one or more Owner-Employees who control the Employer or a Participating Affiliate, then (i) if such Owner-Employee, or Owner-Employees, also control one or more other trades or businesses, (A) this Plan and the plans established for such other trades or businesses shall, when viewed as a single plan, satisfy the applicable requirements of Code section 401(a) and Code section 401(d) for the employees of the Employer or the Participating Affiliate and such other trades or businesses, and (B) the employees of such other trades or businesses shall be included in a plan which satisfies the applicable requirements of Code section 401(a) and Code section 401(d) and which provides contributions and benefits which are at least as favorable as those provided under this Plan for such Owner-Employees, or (ii) it such Owner-Employee is covered as an owner- employee (within the meaning of Code section 401(c)(3)) under the plans of two or more other trades or businesses which such Owner- Employee does not control, then the contributions or benefits provided under this Plan must be at least as favorable as those provided for such Owner-Employee under the most favorable plan of such other trade or business. 5.8(e)(2) Control. For purposes of this section 5.8(e), an Owner-Employee, or two or more such Owner-Employees, shall be considered to control a trade or business if such Owner- Employee, or such Owner-Employees together, (i) own the entire interest in an unincorporated trade or business, or (ii) in the case of a partnership, own more than 50% of either the capital interest or the profits interest in such partnership. Such Owner-Employee, or such Owner-Employees, shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which is controlled by such Owner-Employee, or such Owner-Employees, within the meaning of clause (ii). SECTION 6. ALLOCATIONS TO ACCOUNTS 6.1 Establishment and Maintenance of Accounts. An Account shall be established and maintained for each Participant under the Plan and the Plan Administrator shall establish reasonable and nondiscretionary procedures under which (a) any Forfeitures, insurance premium payments, loans, withdrawals, distributions and other charges properly allocable to such Account shall be debited from such Account and (b) any insurance contract dividends, insurance contract surrender proceeds, loan repayments and other amounts properly allocable to such Account (other than amounts described in section 6.2 and section 6.3) shall be credited to such Account. 6.2 Allocation of Fund Earnings. 6.2(a) General. As of each Valuation Date the fair market value of the Fund and the Fund Earnings for the period which ends on such Valuation Date shall be determined. Such Fund Earnings shall be allocated (and posted) among all Accounts in the proportion that the balance in each such Account (determined in accordance with section 6.2(b)) bears to the total balance in all such Accounts in order that each Account shall proportionately benefit from any earnings or appreciation in the value of the Fund assets in which such Account is invested or proportionately suffer any losses or depreciation in the value of the Fund assets in which such Account is invested. Subject to section 13, each Participant shall have a ratable interest in all assets of the Fund. 6.2(b) Allocation Procedures. The Plan Administrator shall establish nondiscretionary allocation procedures for purposes of the allocation of Fund Earnings under section 6.2(a), which procedures shall be set forth in writing with the records of this Plan. If so specified in such procedures, the balance in each Account shall be determined after adjusting for all or a portion of the contributions and other amounts credited to or debited from such Account since the preceding Valuation Date. Further, if so provided in such allocation procedures, Fund Earnings shall not be allocated to any Forfeiture or to the balance in any suspense account described in section 7.2(b). 6.3 Allocation of Contributions and Forfeitures. Subject to the limitations in section 7, the Forfeitures (and any amount deemed to be a Forfeiture under the terms of this Plan) and the contributions shall be allocated (and posted) in accordance with the following rules: 6.3(a) Profit Sharing Plan. 6.3(a)(1) Nonintegrated. If this Plan is adopted as a Profit Sharing Plan and the nonintegrated allocation formula is specified in the Adoption Agreement, the Forfeitures and the Employer Contribution for each Plan Year shall be allocated (and posted) as of the last day of such Plan Year to the Employer Account of each Active Participant in the same ratio that each Active Participant's Compensation for such Plan Year bears to the total Compensation of all Active Participants for such Plan Year. 6.3(a)(2) Integrated. If this Plan is adopted as a Profit Sharing Plan and the integrated allocation formula is specified in the Adoption Agreement, the Forfeitures and the Employer Contribution shall be allocated (and posted) as of the last day of each Plan Year to the Employer Account of each Active Participant in accordance with the following: (i) Step One - First, the lesser of (A) the sum of the Employer Contribution and Forfeitures for such Plan Year or (B) the Integration Amount for such Plan Year shall be allocated to the Employer Account of each Active Participant in the same ratio that the sum of the total Compensation and Excess Compensation of each Active Participant for such Plan Year bears to the sum of the total Compensation and Excess Compensation of all Active Participants for such Plan Year. (ii) Step Two - Second, the remaining Employer Contribution and the Forfeitures, it any, for such Plan Year shall be allocated to the Employer Account of each Active Participant (whether or not he or she had Excess Compensation) in the same ratio that each Active Participant's total Compensation for such Plan Year bears to the total Compensation of all Active Participants for such Plan Year. (iii)Special Definitions - For purpose of this 6.3(a)(2), (A) "Integration Amount" means the product of (1) the total Compensation and the total Excess Compensation of all Active Participants and (2) the Integration Percentage specified in the Adoption Agreement, but in no event shall the Integration Percentage exceed the Maximum Disparity Rate for any Plan Year beginning after December 31, 1988. (B) "Excess Compensation" means the amount, if any, of a Participant's Compensation for such Plan Year which exceeds the Integration Level for such Plan Year. (iv) Top-Heavy. If this Plan is a Top-Heavy Plan for any Plan Year, the allocation formula in section 12.3(h)(1) shall apply in lieu of the formula in this section 6.3(a)(2) for such Plan Year. 6.3(b) Money Purchase Pension Plan. If this Plan is adopted as a Money Purchase Pension Plan, the Forfeitures and the Employer Contribution actually made under section 5.2 (as adjusted, if applicable, in accordance with section 12.3(h)(2) for a Top-Heavy Plan) shall be allocated (and posted) as of the last day of each Plan Year to the Employer Account of each Active Participant in accordance with the formula specified in the Adoption Agreement. If Forfeitures are applied to reduce the Employer Contribution and the Forfeitures available under section 8.2(e) for any Plan Year exceed the contribution specified in the Adoption Agreement for such Plan Year, such excess shall be held in a separate account and shall be applied in full as a Forfeiture to offset such contributions in the future until such account is exhausted under this section 6.3(b). If Forfeitures are to be allocated to Active Participants, such Forfeitures shall be allocated (and posted) to the Employer Account of each Active Participant in the same ratio that such Active Participant's Compensation for such Plan Year bears to the total Compensation of all such Active Participants for such Plan Year. 6.3(c) 401(k) Plan. If this Plan is adopted as a 401(k) Plan, Forfeitures and contributions made under section 5.3 shall be allocated (and posted) in accordance with the following: 6.3(c)(1) Elective Deferrals and Employee Contributions. Elective Deferrals made on a Participant's behalf for the period ending on each Valuation Date shall be credited to the Participant's Elective Deferral Account as of such Valuation Date and the Employee Contributions made by a Participant for such period shall be credited to the Participant's Employee Account as of such Valuation Date. 6.3(c)(2) Matching Contributions and Qualified Matching Contributions. (i) Allocation. Matching Contributions and Qualified Matching Contributions made on a Participant's behalf shall be credited to the Participant's Matching Account and Qualified Matching Account, respectively, (A)Standard Option - as of the last day of each Plan Year or (B)Alternative - only as of each Allocation Date specified in the Adoption Agreement. (ii) Forfeitures. Forfeitures attributable to Matching Accounts shall be allocated or applied in accordance with the following rules; provided, no Forfeitures attributable to Excess Aggregate Contributions under section 7.5(d) shall be allocated to the Account of any Highly Compensated Employee: (A) Forfeitures to Reduce Matching Contribution (Standard Option). Forfeitures attributable to Matching Accounts shall be applied to reduce the Matching Contributions for the applicable Allocation Date (as specified in 8.2 and the Adoption Agreement). If the Forfeitures exceed the Matching Contribution specified in the Adoption Agreement for any Allocation Date, such excess shall be held in a separate account and shall be applied in full as a Forfeiture to offset Matching Contributions as of the next Allocation Date (and succeeding Valuation Dates) until such account is exhausted under this section 6.3(c)(2). (B) Forfeitures to be Allocated (Alternative). If so specified in the Adoption Agreement, Forfeitures attributable to Matching Accounts shall be allocated (and posted) (I) as of the last day of such Plan Year to the Matching Account of each Active Participant in the same ratio that such Active Participant's Compensation for such Plan Year bears to the total Compensation of all such Active Participants for such Plan Year, or (II) in accordance with the formula specified in the Adoption Agreement for a nonstandardized Plan. 6.3(c)(3) Qualified Nonelective Contributions. Qualified Nonelective Contributions made on behalf of a Participant shall be credited to the Participant's Qualified Nonelective Account (i) Standard Option - as of the last day of each Plan Year or (ii) Alternative - only as of each Allocation Date specified in the Adoption Agreement. 6.3(c)(4) Discretionary Employer Contribution. (i) Allocation. As of the last day of each Plan Year, the Employer Contribution, it any, for such Plan Year shall be allocated (and posted) to the Employer Account of each Active Participant (A) Standard Option - in the nonintegrated method described in section 6.3(a)(1). (B) Alternative - if so specified in the Adoption Agreement, in the integrated method described in 6.3(a)(2). (ii) Forfeitures. Forfeitures attributable to Employer Accounts shall be allocated or applied in accordance with the following: (A) Standard Option. Forfeitures attributable to Employer Accounts shall be allocated (and posted) as of the last day of each Plan Year to the Employer Account of each Active Participant in the same manner as the Employer Contribution under section 6.3(c)(4)(i). (B) Alternative. If so specified in the Adoption Agreement, Forfeitures attributable to Employer Accounts shall be (I) applied to reduce Matching Contributions, Qualified Matching Contributions and Qualified Nonelective Contributions for the applicable Allocation Date (as specified in section 8.2 and the Adoption Agreement) and succeeding Allocation Dates, if necessary, or (II) allocated (and posted) in accordance with the formula specified in the Adoption Agreement for a nonstandardized Plan. 6.3(d) Target Benefit Pension Plan. If this Plan is adopted as a Target Benefit Pension Plan, the Forfeitures and the Employer Contribution actually made under section 5.4 for each Plan Year shall be allocated (and posted) as of the last day of each Plan Year to the Employer Account of each Active Participant as specified in the Adoption Agreement. The Forfeitures for each Plan Year shall be applied to reduce the Employer Contribution for such Plan Year. If Forfeitures for any Plan Year exceed the Employer Contributions determined under section 5.4 for such Plan Year, such excess shall be held in a separate account and shall be applied in full to offset Employer Contributions in the future until such account is exhausted under this section 6.3(d). 6.3(e) Top Heavy Minimum Allocation. It this Plan is a Top-Heavy Plan (as defined in section 12), the minimum allocation required to be made under this Plan under section 12.3, if any, shall be allocated (and posted) as of the last day of the Plan Year (1) to the Employer Account of each Participant who is not an Active Participant but for whom a minimum allocation is required under section 12.3 and (2) to each Active Participant for whom a minimum allocation is required to be made in this Plan under section l2.3 to the extent such minimum allocation is not otherwise satisfied by the allocation under this section 6.3. If this Plan is adopted as a Profit Sharing Plan, the minimum allocation may be made by reallocating the Employer Contribution and Forfeitures allocated under section 6.3(a) in a manner which satisfies this section 6.3(e) or by contributing an additional amount which will be allocated in accordance with this section 6.3(e). If this Plan is adopted as a Money Purchase Pension Plan, a Target Benefit Pension Plan or a 401(k) Plan, an additional Employer Contribution shall be made to satisfy this section 6.3(e). 6.3(f) Rollover Contributions. Rollover Contributions made by a Participant during the period ending on each Valuation Date shall be credited to the Participant's Rollover Contribution Account as of such Valuation Date. 6.4 Allocation Report. The Plan Administrator shall maintain records of the allocations and adjustments made to Accounts under this section 6 and shall at least annually prepare and forward to each such Participant and Beneficiary a statement which shows the new balance in such person's Account. 6.5 Allocation Corrections. If an error or omission is discovered in any Account, then as of the first Valuation Date in the Plan Year in which the error or omission is discovered, the Plan Administrator shall make (and post) an adjustment to such Account as the Plan Administrator deems necessary to remedy in an equitable manner such error or omission. SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS 7.1 Effective Date. Except as otherwise expressly provided, this section 7 shall be effective retroactive to Plan Years beginning on or after January 1, 1987. 7.2 Limitations on Annual Additions Under Code section 415. 7.2(a) Special Definitions. For purposes of this section 7.2, the terms defined in this section 7.2(a) shall have the meanings shown opposite such terms. 7.2(a)(1) Annual Additions - means for each Participant for any Limitation Year (i) the sum of the employer contributions, forfeitures, and nondeductible employee contributions creditable (without regard to the application of this section 7.2) to the Participant's account under this Plan or under any other defined contribution plan (including a Master or Prototype Plan and any defined benefit plan which provides for employee contributions) maintained by the Employer for such Limitation Year; and for this purpose, any Excess Amount allocated under section 7.2(b), any Excess Elective Deferrals under section 7.3 (unless such excess is distributed by the deadline set forth in section 7.3(d)), any Excess Contributions under section 7.4 and any Excess Aggregate Contributions under section 7.5 shall be considered Annual Additions for such Limitation Year; (ii) amounts allocated on behalf of such Participant after March 31, 1984 to an individual medical account (as defined in Code section 415(l)(2)) which is part of a pension or annuity plan maintained by the Employer; and (iii) amounts derived from contributions paid or accrued after December 31, 1985 in taxable years ending after such date which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code section 419A(d)(3)) under a welfare benefit fund (as described in Code section 419(e)) maintained by the Employer; and (iv) allocations under a simplified employee pension (as defined in Code section 408(k). 7.2(a)(2) Compensation - means for a Self-Employed Individual, such individual's Earned Income, and for each other Employee (i) Standard Option - compensation reportable on Form W- 2 as defined in 2.1 0(a)(1), or (ii)Alternative - if so specified in the Adoption Agreement, (A) compensation subject to withholding as defined in section 2.10(a)(2)(i), or (B) the Employee's wages, salaries, fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan to the extent that the amounts are includable in gross income during the Limitation Year (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits and reimbursements or other expense allowances under a nonaccountable plan as described in section 1.62-2(c) of the Federal Income Tax Regulations). Compensation shall not include the following: (I) Employer contributions to a plan of deferred compensation which are not includable in the Participant's gross income for the taxable year in which contributed, or Employer contributions under any simplified employee pension plan, or any distributions from a plan of deferred compensation; (II) amounts realized from the exercise of a non- qualified stock option, or when restricted stock (or property) held by the Participant either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (III) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (IV) other amounts which receive special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code 403(b) (whether or not the contributions are actually excludable from the gross income of the Participant). For purposes of applying the limitations of this section 7.2, an Employee's Compensation for Limitation Years beginning on and after the Final Compliance Date shall not include any Compensation which is accrued for such Limitation Year. However, for purposes of applying the limitations of this section 7.2 to a Participant in a defined contribution plan who is permanently and totally disabled (as defined in Code section 22(e)(3)), the term "Compensation" shall mean the compensation such Participant would have received for the Limitation Year if the Participant had been paid at the Participant's rate of Compensation (as defined in this section 7.2(a)(2)) paid immediately before becoming permanently and totally disabled, and, further, such imputed compensation for the disabled Participant may be taken into account only if the Participant is not a Highly Compensated Employee and contributions made on behalf of such Participant are nonforfeitable when made. 7.2(a)(3) Defined Benefit Fraction - means a fraction, (i) the numerator of which shall be the sum of the Participant's Projected Annual Benefits under all defined benefit plans (whether or not terminated) maintained by the Employer, and (ii) the denominator of which shall be the lesser of (A) 125% of the dollar limitation determined for the Limitation Year under Code section 415(b) and section 415(d) or (B) 140% of the Participant's Highest Average Compensation, including any adjustments under Code section 415(b). However, if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986 and which individually and in the aggregate satisfied the requirements of Code section 415 for all Limitation Years beginning before January 1, 1987, the denominator of such fraction shall be not less than 125% of the sum of the annual benefits under such plans which the Participant had accrued as of the end of the last Limitation Year beginning before January 1, 1987 disregarding any changes in the terms and conditions in the plan after May 5, 1986. Notwithstanding the foregoing, "100%" shall be substituted for "l 25%" in any Limitation Year for which this Plan is a Top-Heavy Plan (as defined in section 12) unless otherwise specified in the Adoption Agreement. 7.2(a)(4) Defined Contribution Dollar Limitation - means for each Limitation Year the greater of (i) $30,000 or (ii) one-fourth of the defined benefit dollar limitation under Code section 415(b)(1) as in effect for such Limitation Year. 7.2(a)(5) Defined Contribution Fraction - means a fraction, (i) the numerator of which shall (subject to the adjustment rules set forth below) be the sum of the Annual Additions credited to the Participant's accounts under all defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior Limitation Years (including the Annual Additions attributable to the Participant's nondeductible employee contributions to all defined benefit plans, whether or not terminated) maintained by the Employer and the Annual Additions attributable to all welfare benefit funds (as described in Code section 419(e)) and all individual medical accounts (as described in Code section 415(i)(2)) maintained by the Employer and (ii) the denominator of which shall be the sum of the Maximum Aggregate Amounts for the current and all prior Limitation Years of service with the Employer (without regard to whether a defined contribution plan was maintained by the Employer). The numerator of such fraction shall be adjusted if the Participant was a participant as of the first day of the first Limitation Year beginning after December 31, 1986 in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986 and the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. The adjustment shall be made by taking an amount equal to the product of (A) the excess of the sum of the fractions over 1.0, times (B) the denominator of this fraction, and by permanently subtracting such product from the numerator of this fraction. The adjustment shall be calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1987 and disregarding any changes in the terms and conditions of the Plan made after May 5, 1986 but using the Code section 415 limitation applicable to the first Limitation Year beginning on or after January 1, 1987. The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all employee contributions as an Annual Addition. 7.2(a)(6) Employer - means the Employer that adopts this Plan and all members of a controlled group of corporations (as defined in Code section 414(b) as modified by Code section 415(h)), all commonly controlled trades or businesses (as defined in Code section 414(c) as modified by Code section 415(h)) or affiliated service groups (as defined in Code section 414(m)) of which the adopting Employer is a part and any other entity required to be aggregated with the Employer pursuant to the regulations under Cede section 414(o). 7.2(a)(7) Excess Amount - means the excess of a Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount. 7.2(a)(8) Highest Average Compensation - means the Participant's average Compensation for the three consecutive Plan Years of employment with the Employer (without regard to whether such Plan Years were before the Effective Date) that produces the highest average. 7.2(a)(9) Limitation Year - means (i)Standard Option - the Plan Year or (ii) Alternative - the alternative 12 consecutive month period specified in the Adoption Agreement. All qualified plans maintained by the Employer must use the same Limitation Year. If the Limitation Year is amended to a different 12 consecutive month period, the new Limitation Year must begin on a date within the Limitation Year in which the amendment is made. 7.2(a)(10) Master or Prototype Plan - means a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. 7.2(a)(11) Maximum Aggregate Amount - means for any Limitation Year the lesser of (i) 125% of the dollar limitation determined under Code section 415(c)(1)(A) or (ii) 35% of the Participant's Compensation for such year. Notwithstanding the foregoing, "l00%" shall be substituted for 125% in any Limitation year for which this Plan is a Top-Heavy Plan (as defined in section 12) unless otherwise specified in the Adoption Agreement. 7.2(a)(12) Maximum Permissible Amount - means the lesser of (i) the Defined Contribution Dollar Limitation or (ii) 25% of a Participant's Compensation for the Limitation Year; provided, (A) the compensation limitation referred to in clause (ii)shall not apply to any contribution for medical benefits (within the meaning of Code section 401(h) or section 419A(f)(2)) which is otherwise treated as an Annual Addition under Code section 415(l)(1) or section 419(A)(d)(2); and (B) if a short Limitation Year is created because of an amendment changing the Limitation Year to a different 12 consecutive month period, the Maximum Permissible Amount shall not exceed the Defined Contribution Dollar Limitation multiplied by a fraction, the numerator of which shall be the number of months in the short Limitation Year and the denominator of which shall be 12. 7.2(a)(13) Projected Annual Benefit - means the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which a Participant would be entitled under the terms of a defined benefit plan assuming: (i) the Participant will continue employment until normal retirement age under the plan (or current age, if later), and (ii) the Participant's Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the plan will remain constant for all future Limitation Years. 7.2(b) Limitation If No Other Plans. If a Participant does not participate in, and has never participated in, another qualified plan maintained by the Employer or a welfare benefit fund (as described in Code section 419(e)) or individual medical account (as described in Code section 415(1)(2)) maintained by the Employer which provides an Annual Addition as defined in section 7.2(a)(1) or a simplified employee pension (as defined in Code section 408(k)) maintained by the Employer, the amount of Annual Additions which actually may be credited to the Account of any Participant for any Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation set forth in this Plan. It the Employer Contribution that would otherwise be credited to the Participant's Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Permissible Amount, such amount shall be reduced so that the Annual Additions actually credited for the Limitation Year shall equal the Maximum Permissible Amount. If pursuant to section 7.2(f) or as a result of the allocation of Forfeitures a Participant's Annual Additions under this Plan would result in an Excess Amount, such Excess Amount shall be disposed of as follows: 7.2(b)(1) Profit Sharing Plan. If this Plan is adopted as a Profit Sharing Plan, (i) such Excess Amount shall be deemed a Forfeiture which shall be allocated and reallocated as provided in section 6.3(a) subject to the restrictions of this section 7.2 among the Employer Accounts of the remaining Active Participants until such amount has been allocated in its entirety; and (ii) if the restrictions in this section 7.2 apply before such amount has been reallocated in its entirety, as the final allocation step such unallocable Excess Amount shall be transferred to a suspense account. 7.2(b)(2) Money Purchase Pension Plan or Target Benefit Pension Plan. If this Plan is adopted as a Money Purchase Pension Plan or Target Benefit Pension Plan, (i) Standard Option - such Excess Amount shall be held unallocated in a suspense account which shall be applied to offset future Employer Contributions for Active Participants in the next Limitation Year (and in each succeeding Limitation Year if necessary). (ii)Alternative - it so specified in the Adoption Agreement, (A) for any Participant who is an Active Participant at the end of the Limitation Year, such Excess Amount shall be held unallocated in a suspense account which shall be applied to offset the Employer Contribution for such Active Participant in the next Limitation Year (and in each succeeding Limitation Year if necessary); and (B) for any Participant who is not an Active Participant at the end of such Limitation Year, such Excess Amount shall be held unallocated in a suspense account which shall be applied to offset future Employer Contributions for all remaining Active Participants in the next Limitation Year (and in each succeeding Limitation Year if necessary). 7.2(b)(3) 401(k) Plan. If this Plan is adopted as a 401(k) Plan, any Elective Deferrals and Employee Contributions made by the Participant during the Limitation Year (and, to the extent required under regulations, gains attributable to such Employee Contributions) shall be refunded to the extent such refund would reduce the Excess Amount and, if an Excess Amount still exists after such refund, (i) any such Excess Amount which is attributable to discretionary Employer Contributions shall be disposed of in the same manner as an Excess Amount under a Profit Sharing Plan as described in section 7.2(b)(1), and (ii) any such Excess Amount which is attributable to a Matching Contribution, Qualified Nonelective Contribution or Qualified Matching Contribution shall be held unallocated in a suspense account which shall be used to offset future Matching Contributions, Qualified Nonelective Contributions or Qualified Matching Contributions in the next Limitation Year (and in each succeeding Limitation Year if necessary). 7.2(b)(4) Suspense Account. A suspense account established pursuant to this section 7.2(b) shall not be subject to any allocation of Fund Earnings under section 6.2, and the balance of such account shall be returned to the Employer in the event this Plan is terminated prior to the date such account has been allocated in its entirety as a Forfeiture. In no event shall Excess Amounts be distributed to Participants or former Participants. 7.2(c) Limitation If Other Defined Contribution Master or Prototype Plan. This section 7.2(c) applies if, in addition to this Plan, a Participant is covered under another defined contribution Master or Prototype Plan maintained by the Employer or a welfare benefit fund (as described in Code section 419(e)) or an individual medical account (as described in Code section 415(l)(2)) maintained by the Employer which provides for an Annual Addition as defined in section 7.2(a)(1) or a simplified employee pension (as defined in Code section 408(k)) maintained by the Employer during any Limitation Year. The Annual Additions which may be credited to a Participant's Account under this Plan for any such Limitation Year shall not exceed the Maximum Permissible Amount reduced by the Annual Additions credited to a Participant's account under such other defined contribution Master or Prototype Plan and welfare benefit funds for the same Limitation Year. 7.2(c)(1) If for any Limitation Year (1) the Employer also maintains another defined contribution Paired Plan, (2) the Employer does not maintain any other defined contribution Master or Prototype Plan (other than such Paired Plan) and (3) a Participant's Annual Additions under such Paired Plans would result in an Excess Amount for such Limitation Year, the allocation adjustment required to satisfy the limitations of Code 415 shall be made under such Plans in the following order: (i) Standard Option - first, under the Profit Sharing Plan, if any; second under the Money Purchase Pension Plan, if any; third under the Target Benefit Pension Plan, if any; and finally, under the 401(k) Plan, if any; or (ii) Alternative - in the alternative order specified in the Adoption Agreement. 7.2(c)(2) If the Annual Additions with respect to any Participant under such other defined contribution Master or Prototype Plan (other than a defined contribution Paired Plan) and welfare benefit funds maintained by the Employer are less than the Maximum Permissible Amount and the Employer Contribution that would otherwise be contributed or allocated to the Participant's Account under this Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated shall be reduced so that the Annual Additions under all such plans and funds for the Limitation Year shall equal the Maximum Permissible Amount. 7.2(c)(3) If the Annual Additions with respect to the Participant under such other defined contribution Master and Prototype Plan (other than a defined contribution Paired Plan) and welfare benefit funds in the aggregate are equal to or greater than the Maximum Permissible Amount, no amount shall be credited to the Participant's Account under this Plan for the Limitation Year. 7.2(c)(4) If pursuant to section 7.2(f) or as a result of the allocation of Forfeitures a Participant's Annual Additions under this Plan and such other defined contribution Master or Prototype Plan (other than a Paired Plan) and welfare benefit funds would result in an Excess Amount for any Limitation Year, (i) the Excess Amount shall be deemed to consist of the Annual Additions last allocated and the Annual Additions attributable to a welfare benefit fund or an individual medical account shall be deemed to have been allocated prior to all other Annual Additions, and (ii) if an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of such other Master or Prototype Plan, then the Excess Amount attributed to this Plan shall be the product of (A) the total Excess Amount allocated as of such date, times (B) a fraction, the numerator of which shall be the Annual Additions allocated to the Participant for the Limitation Year as of such date under this Plan and the denominator of which is the total Annual Additions allocated to the Participant for the Limitation Year as of such date under this and all such other defined contribution Master or Prototype Plans. 7.2(c)(5) Any Excess Amount attributed to this Plan will be disposed of in the manner described in section 7.2(b). 7.2(d) Limitation If Other Defined Contribution Plan. If any Participant is covered under another qualified defined contribution plan maintained by the Employer which is not a Master or Prototype Plan, the Annual Additions which may be credited to the Participant's Account under this Plan for any Limitation Year shall be limited 7.2(d)(1) Standard Option - as specified in section 7.2(c) as though the other plan was a Master or Prototype Plan or 7.2(d)(2) Alternative - under the alternative method specified in the Adoption Agreement for limiting the Annual Additions under this Plan. 7.2(e) Limitation If Other Defined Benefit Plan. If the Employer maintains, or at any time maintained, a qualified defined benefit plan (other than a defined benefit Paired Plan) covering any Participant in this Plan, the sum of the Participant's Defined Benefit Fraction and Defined Contribution Fraction shall not exceed 1.0 in any Limitation Year. The Annual Additions which may be credited to any Participant's Account under this Plan for any Limitation Year shall be limited as specified in the Adoption Agreement. If the Employer maintains a defined benefit Paired Plan, any adjustments to satisfy the requirements of Code section 415(e) shall be made only under such defined benefit Paired Plan. 7.2(f) Compensation for Determination of Maximum Permissible Amount. Prior to determining a Participant's actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount for a Participant on the basis of a reasonable estimation of the Participant's Compensation for the Limitation Year, and, if applicable, a reasonable estimation of the amount of elective deferrals (within the meaning of Code section 402(g)(3)) that the Participant may make for the Limitation Year, uniformly determined for all similarly situated Participants. As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for the Limitation Year shall be determined on the basis of the Participant's actual Compensation for the Limitation Year. 7.3 Individual Limitation on Elective Deferrals Under Code section 402(g). 7.3(a) General. A Participant's Elective Deferrals under this Plan and all other qualified plans, contracts and arrangements maintained by the Employer or an Affiliate during any taxable year of the Participant shall not exceed the dollar limitation under Code section 402(g) in effect at the beginning of such taxable year. 7.3(b) Elective Deferrals. For purposes of the dollar limitation under Code section 402(g) and this section 7.3, the term "Elective Deferrals" shall include all employer contributions made on behalf of a Participant pursuant to an election to defer under any qualified cash or deferred arrangement as described in Code section 401(k), any simplified employee pension cash or deferred arrangement as described in Code section 402(h)(1)(B), any plan described under Code section 501(c)(18), and any salary reduction agreement for the purchase of an annuity contract under Code section 403(b). However, the term shall not include Elective Deferrals which are properly distributed to the Participant from this Plan under section 7.2 or such other plans or arrangements to correct for excess annual additions. 7.3(c) Excess Elective Deferrals. For purposes of this section 7.3, the term "Excess Elective Deferrals" means for each Participant the Elective Deferrals that are includable in gross income under Code section 402(g) to the extent the Participant's Elective Deferrals for a taxable year exceed the dollar limitations under Code section 402(g) for such taxable year. 7.3(d) Distribution of Excess Elective Deferrals. Notwithstanding any other provision of this Plan restricting the timing of distributions, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 of any calendar year to Participants (1) whose Excess Elective Deferrals for the preceding taxable year were assigned to this Plan and (2) who claim (or are deemed to have claimed) such allocable Excess Elective Deferrals for such taxable year in accordance with the claims procedure set forth in section 7.3(f). 7.3(e) Determination of Income or Loss. A corrective distribution of Excess Elective Deferrals under this section 7.3 shall include the income or loss allocable to such Excess Elective Deferrals for the Participant's taxable year in which such excess occurred and, if so specified in the Adoption Agreement, for the period between the end of such taxable year and the date of distribution ("gap period"). The income or loss for such taxable year and gap period, if applicable, shall be determined in accordance with the regulations under Code section 402(g). In lieu of using the safe harbor method or the alternative method in the regulations for allocating such income or loss, the Plan Administrator may use any reasonable method for computing such income or loss, provided that such method does not violate Code section 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to Participant's Accounts. 7.3(f) Claims Procedure. 7.3(f)(1) General. A Participant may assign to this Plan any Excess Elective Deferral made during a taxable year by filing a claim with the Plan Administrator on or before (i)Standard Option - March 1 or (ii)Alternative - the alternative date for filing such claims specified in the Adoption Agreement, Unless otherwise provided in administrative procedures established by the Plan Administrator, such claim shall be in writing, shall specify the dollar amount of the Participant's Excess Elective Deferrals assigned to this Plan for such taxable year, and shall be accompanied by the Participant's written statement that such amounts, if not distributed to such Participant, will exceed the limit imposed on the Participant by Code section 402(g) for the taxable year in which the deferral occurred. 7.3(f)(2) Deemed Claim. A Participant automatically shall be deemed to have filed a claim under this section 7.3(f) to the extent that such Excess Elective Deferrals occurred solely as a result of Elective Deferrals under this Plan and any other plans of the Employer and the Affiliates, unless the Employer specifies in the Adoption Agreement that such Excess Elective Deferrals shall be distributed from one or more of such other plans. 7.4 Limitations on Elective Deferrals for Highly Compensated Employees under Code section 401(k). 7.4(a) Special Definitions. For purposes of this section 7.4, the terms defined in this section 7.4(a) shall have the meanings shown opposite such terms. 7.4(a)(1) Actual Deferral Percentage - means for each Plan Year for each Participant who is an Eligible Employee at any time during such Plan Year the ratio (expressed as a percentage and determined in accordance with section 7.4(c)) of Employer Contributions made on behalf of such Participant for such Plan Year to such Participant's Compensation for such Plan Year. The Actual Deferral Percentage of a Participant who is an Eligible Employee, but does not make an Elective Deferral and does not receive an allocation of a Qualified Nonelective Contribution or a Qualified Matching Contribution, shall be zero. 7.4(a)(2) ADP (or Average Actual Deferral Percentage) - means for each Plan Year separately for the group of Participants who are Highly Compensated Employees during such Plan Year and for the group of Participants who are Nonhighly Compensated Employees during such Plan Year, the average (expressed as a percentage) of the Actual Deferral Percentages of the Participants in each such group who are Eligible Employees at any time during such Plan Year. 7.4(a)(3) Employer Contributions - means for purposes of determining a Participant's Actual Deferral Percentage for each Plan Year, the sum of (i) the Elective Deferrals made pursuant to the Participant's deferral election, including Excess Elective Deferrals (as defined in section 7.3(c)) of Highly Compensated Employees, but excluding Excess Elective Deferrals of Nonhighly Compensated Employees that arise solely from Elective Deferrals made under this Plan or any other plans of the Employer and the Affiliates, and excluding Elective Deferrals that are taken into account in the ADP test described in section 7.5(b) (provided the ADP test is satisfied both with and without exclusion of such Elective Deferrals), and (ii) at the election of the Employer, Qualified Nonelective Contributions and Qualified Matching Contributions. 7.4(a)(4) Excess Contributions - means for each Plan Year for each Highly Compensated Employee the excess of the aggregate amount of Employer Contributions actually taken into account in computing the Average Deferral Percentage of such Highly Compensated Employee for such Plan Year over the maximum amount of such contributions permitted for such Plan Year under the ADP limit as set forth in section 7.4(b) (determined by reducing Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions made on behalf of Highly Compensated Employees in order of their Actual Deferral Percentages, beginning with the highest of such percentages). 7.4(a)(5) Highly Compensated Employee - means any Employee who is either a "highly compensated active employee" or a "highly compensated former employee" as described below. (i) A "highly compensated active employee" means any Employee who performs services for the Employer or any Affiliate during the "determination year" and who, during the "look-back year": (A) received compensation from the Employer or any Affiliate in excess of $75,000 (as adjusted pursuant to Code section 415(d)); (B) received compensation from the Employer or any Affiliate in excess of $50,000 (as adjusted pursuant to Code section 415(d)) and was a member of the "top-paid group" for such year; or (C) was an officer of the Employer or any Affiliate and received compensation during such year that is greater than 50% of the dollar limitation in effect under Code section 415(b)(1)(A). The term "highly compensated employee" shall also include: (I) an Employee who is both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year" and is one of the 100 Employees who received the most compensation from the Employer or any Affiliate during the determination year; and (II) an Employee who is a 5% owner at any time during the look-back year or determination year. If no officer has satisfied the compensation requirement of clause (C) above during either a determination year or look-back year, the highest paid officer for each such year shall be treated as a Highly Compensated Employee. (ii) A "highly compensated former employee" means any Employee who separated (or was deemed to have separated) from service prior to the determination year, performs no services for the Employer or any Affiliate during the determination year, and was a highly compensated active employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. (iii) For purposes of this definition, the "determination year" shall mean the Plan Year and the "look-back year" shall mean the 12-month period immediately preceding the determination year. (iv) If an Employee is, during a determination year or look- back year, a Family Member of either a 5% owner who is an active or former Employee or a Highly Compensated Employee who is one of the 10 most Highly Compensated Employees ranked on the basis of compensation paid by the Employer during such year ("top-ten Highly Compensated Employee"), then the Family Member and the 5% owner or top-ten Highly Compensated Employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of such compensation and contributions or benefits of the Family Member and the 5% owner or top-ten Highly Compensated Employee. (v) The determination of who is a Highly Compensated Employee, including the determination of the number and identity of Employees in the top-paid group, the top 100 Employees, the number of Employees treated as officers and the compensation that is considered, shall be made in accordance with Code section 414(q) including any available operational transition rules and any elections provided in the regulations under Code section 414(q) and specified in the Adoption Agreement. 7.4(b) ADP Limit. The ADP for Highly Compensated Employees for any Plan Year shall not exceed 7.4(b)(1) the ADP for Nonhighly Compensated Employees for such Plan Year multiplied by 1.25, or 7.4(b)(2) the ADP for Nonhighly Compensated Employees for such Plan Year multiplied by 2, provided that the ADP for Highly Compensated Employees does not exceed the ADP for Nonhighly Compensated Employees by more than 2 percentage points. 7.4(c) Special Rules. 7.4(c)(1) Other Plans. The Actual Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to participate in more than one cash or deferred arrangement maintained by the Employer or an Affiliate shall be determined by treating all such arrangements as a single arrangement. If a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, all such arrangements ending with or within the same calendar year shall be treated as a single arrangement. Notwithstanding the foregoing, plans which are mandatorily disaggregated under regulations under Code section 401(k) shall be treated as separate. 7.4(c)(2) Aggregation. In the event that this Plan satisfies the requirements of Code section 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code section only if aggregated with this Plan, then this section 7.4 shall be applied by determining the Actual Deferral Percentages and ADP as if all such plans were a single plan. For Plan Years beginning on and after the Final Compliance Date, such plans may be aggregated only if they have the same plan years and are not mandatorily disaggregated under regulations under Code section 401(k). 7.4(c)(3) Family Members. For purposes of determining the Actual Deferral Percentage of a Participant who is a 5% owner or one of the 10 most highly paid Highly Compensated Employees and who is an Eligible Employee at any time during the Plan Year, the Employer Contributions and Compensation of such Participant shall include the Employer Contributions and Compensation of his or her Family Members, and such Family Members shall be disregarded as separate Participants in determining the ADP both for Nonhighly Compensated Employees and for Highly Compensated Employees. 7.4(c)(4) Timing. For purposes of determining the Actual Deferral Percentages for any Plan Year, Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions shall be considered made for such Plan Year only if such contributions are allocated as of a date within such Plan Year and are actually paid to the Fund by the last day of the 12 month period immediately following such Plan Year. 7.4(c)(5) Records. The Plan Administrator shall maintain records which are sufficient to demonstrate that the Plan complied with the ADP limits, including the extent to which Qualified Nonelective Contributions and Qualified Matching Contributions are taken into account to satisfy such ADP limits. 7.4(c)(6) Other Requirements. The determination and treatment of the Elective Deferrals and Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 7.4(d) Distribution of Excess Contributions. 7.4(d)(1) General. Notwithstanding any other provision of this Plan restricting the timing of distributions, Excess Contributions for any Plan Year, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of the immediately following Plan Year to Participants on whose behalf such Excess Contributions were made. If such Excess Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess occurred, a 10% excise tax shall be imposed under Code section 4979 on the Employer with respect to such excess. Such distributions shall be made to such Participants on the basis of the respective portions of the Excess Contributions attributable to each such Participant. Excess Contributions shall be allocated to Participants who are subject to the Family Member aggregation rules under Code section 414(q)(6) in the manner prescribed by the regulations under Code section 401(k). 7.4(d)(2) Determination of Income or Loss. A corrective distribution of Excess Contributions under this section 7.4 shall include the income or loss allocable to such Excess Contributions for the Plan Year in which such excess occurred and, if so specified in the Adoption Agreement, for the period between the end of such Plan Year and the date of distribution ("gap period"). The income or loss for such Plan Year and gap period, if applicable, shall be determined in accordance with the regulations under Code section 401(k). In lieu of using the safe harbor method or the alternative method in the regulations for allocating such income or loss, the Plan Administrator may use any reasonable method for computing such income or loss, provided that such method does not violate Code section 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to Participant's Accounts. 7.4(d)(3) Order for Determining Excess Contributions. Excess Contributions shall be determined after first determining Excess Elective Deferrals under section 7.3. The Excess Contributions which would otherwise be distributed to the Participant shall be reduced, in accordance with regulations, by the Excess Elective Deferrals distributed to the Participant under section 7.3. 7.4(d)(4) Accounting for Excess Contributions. Excess Contributions shall be distributed proportionately from the Participant's Elective Deferral Account and Qualified Matching Account in the same ratio that such Participant's Elective Deferrals and Qualified Matching Contributions for the Plan Year in which such Excess Contributions were made bears to the sum of the Participant's Elective Deferrals and Qualified Matching Contributions for such Plan Year. Excess Contributions shall be distributed from the Participant's Qualified Nonelective Account only to the extent that such Excess Contributions exceed the balance in the Participant's Elective Deferral Account and Qualified Matching Account. Notwithstanding the foregoing, Excess Contributions may be distributed from the applicable subaccounts in accordance with procedures established by the Plan Administrator provided such procedures do not result in discrimination in favor of Highly Compensated Employees which would be prohibited under Code section 401(a)(4). 7.4(e) Recharacterization. If the Employer specifies in the Adoption Agreement that Excess Contributions may be recharacterized, a Participant may elect to treat Excess Contributions as an amount distributed to the Participant and then contributed as an Employee Contribution to the Plan. Any such Excess Contribution which is so recharacterized as an Employee Contribution shall remain nonforfeitable and shall thereafter be subject to the same distribution restrictions applicable to Elective Deferrals under section 9.2(b). Excess Contributions shall not be recharacterized by a Participant to the extent that such amounts, in combination with other Employee Contributions, would exceed any limits on Employee Contributions set forth in the Plan or in the Adoption Agreement. Any such recharacterization must occur no later than 2 1/2 months after the end of the Plan Year in which such Excess Contribution occurred and shall be deemed to occur no earlier than the date on which the last Highly Compensated Employee is informed in writing of the amount recharacterized and the consequences of such recharacterization. Any Excess Contributions which are so recharacterized shall be taxable to the Participant for the taxable year in which the Participant would have received such amount in cash but for the deferral election. 7.5 Limitations on Employee Contributions and Matching Contributions under Code section 401(m). 7.5(a) Special Definitions. For purposes of this section 7.5, the terms defined in this section 7.5(a) shall have the meanings shown opposite such terms. 7.5(a)(1) Aggregate Limit - means the sum of (i) 125% of the greater (or lesser, if it would result in a larger Aggregate Limit) of (A) the ADP for Nonhighly Compensated Employees under the plan subject to Code section 401(k) for the plan year or (B) the ACP for Nonhighly Compensated Employees under the plan subject to Code section 401(m) for the plan year beginning with or within the plan year of the plan which is subject to Code section 401(k) and (ii)the lesser of (A) 200% of such ADP or ACP or (B) two plus the lesser (or greater, if it would result in a larger Aggregate Limit) of such ADP or ACP 7.5(a)(2) ACP (or Average Contribution Percentage) - means for each Plan Year separately for the group of Participants who are Highly Compensated Employees during such Plan Year and for the group of Participants who are Nonhighly Compensated Employees during such Plan Year, the average (expressed as a percentage) of the Contribution Percentages of the Participants in each such group who are Eligible Employees at any time during such Plan Year. 7.5(a)(3) Contribution Percentage - means for each Plan Year for each Participant who is an Eligible Employee at any time during such Plan Year, the ratio (expressed as a percentage and determined in accordance with section 7.5(c)) of such Participant's Contribution Percentage Amount for such Plan Year to such Participant's Compensation for such Plan Year. The Contribution Percentage of a Participant who is eligible to, but does not, make Employee Contributions or Elective Deferrals and who, as a result of such failure to make such contributions, does not receive an allocation of a Matching Contribution or Qualified Matching Contribution shall be zero. 7.5(a)(4) Contribution Percentage Amount - means for each Plan Year for each Participant who is an Eligible Employee at any time during such Plan Year the sum of (i) the Employee Contributions, Matching Contributions and Qualified Matching Contributions (to the extent not taken into account for purposes of the ADP test described in section 7.4) made on behalf of such Participant for such Plan Year, other than Matching Contributions which are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they relate are Excess Elective Deferrals, Excess Contributions or Excess Aggregate Contributions, (ii) the Forfeitures allocated to such Participant's Account for such Plan Year which are attributable to Matching Contributions and Excess Aggregate Contributions, (iii) at the election of the Employer, the Qualified Nonelective Contributions made on behalf of such Participant for such Plan Year (to the extent not taken into account for purposes of the ADP test described in section 7.4), and (iv) at the election of the Employer, Elective Deferrals (provided the ADP limit described in section 7.4 is met both including and excluding the Elective Deferrals that are used to meet the ACP limit). 7.5(a)(5) Employee Contribution - means for purposes of determining a Participant's Contribution Percentage Amount any contributions made by the Participant which are included in gross income for the taxable year in which made and which are maintained in a separate account to which earnings and losses are allocated. 7.5(a)(6) Excess Aggregate Contribution - means for each Plan Year for each Highly Compensated Employee the excess of the aggregate Contribution Percentage Amounts actually taken into account in computing the ACP of such Highly Compensated Employee for such Plan Year over the maximum Contribution Percentage Amounts permitted for such Plan Year under the ACP limit as set forth in section 7.5(b) (determined by reducing contributions and Forfeitures on behalf of Highly Compensated Employees in order of their Contribution Percentages, beginning with the highest of such percentages). 7.5(a)(7) Matching Contribution - means for purposes of determining a Participant's Contribution Percentage Amount any Employer contribution made to this Plan or any other defined contribution plan on account of an Employee Contribution or Elective Deferral made by or on behalf of the Participant under a plan maintained by the Employer. 7.5(b) ACP Limit. The ACP for Participants who are Highly Compensated Employees for any Plan Year shall not exceed 7.5(b)(1) the ACP for Participants who are Nonhighly Compensated Employees for such Plan Year multiplied by 1.25, or 7.5(b)(2) the ACP for Participants who are Nonhighly Compensated Employees for such Plan Year multiplied by 2, provided that the ACP for Participants who are Highly Compensated Employees does not exceed the ACP for Participants who are Nonhighly Compensated Employees by more than 2 percentage points. 7.5(c) Special Rules. 7.5(c)(1) Multiple Use. For Plan Years beginning after the Final Compliance Date, if (i) one or more Highly Compensated Employees participates both in a plan with a qualified cash or deferred arrangement which is subject to the ADP limitations under Code section 401(k) as described in section 7.4 and in a plan which is subject to the ACP limitations under Code section 401(m) as described in this section 7.5, (ii) the sum of the ADP of the eligible Highly Compensated Employees in the plan subject to Code section 401(k) and the ACP of the eligible Highly Compensated Employees in the plan subject to Code section 401(m) exceeds the Aggregate Limit, and (iii) both the ADP and the ACP of the eligible Highly Compensated Employees in such plans exceed 125% of the ADP or ACP respectively of the eligible Nonhighly Compensated Employees in such plans, then the Contribution Percentages of the Highly Compensated Employees who participate in both such plans shall be reduced (beginning with the highest of such percentages) so that the Aggregate Limit for such plans is not exceeded. Any such reduction shall be treated as an Excess Aggregate Contribution. The determination of the limitations under this special rule shall be made after any corrections required to meet the ADP limits and the ACP limits and in accordance with the regulations under Code section 401(m). 7.5(c)(2) Other Plans. The Contribution Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to participate in more than one plan maintained by the Employer or an Affiliate to which "employee contributions" (within the meaning of Code section 401(m)) or "matching contributions" (as described in Code section 401(m)(4)) are made shall be determined by treating all such plans as one plan. If a Highly Compensated Employee participates in two or more such plans that have different plan years, all such plans ending with or within the same calendar year shall be treated as a single plan. Notwithstanding the foregoing, plans which are mandatorily disaggregated under regulations under Code section 401 (m) shall be treated as separate. 7.5(c)(3) Aggregation. In the event that this Plan satisfies the requirements of Code section 410(b) only if aggregated with one or more other plans, or it one or more other plans satisfy the requirements of such Code sections only if aggregated with this Plan, then this section 7.5 shall be applied by determining the Contribution Percentages and ACP as if all such plans were a single plan. For Plan Years beginning on and after the Final Compliance Date, such plans may be aggregated only if they have the same plan years and they are not mandatorily disaggregated under regulations under Code section 401(m). 7.5(c)(4) Family Members. For purposes of determining the Contribution Percentage of a Participant who is a 5% owner or one of the 10 most highly paid Highly Compensated Employees, the Contribution Percentage Amounts and Compensation of such Participant shall include the Contribution Percentage Amounts and Compensation of his or her Family Members, and such Family Members shall be disregarded as separate Participants in determining the ACP both for Participants who are Nonhighly Compensated Employees and for Participants who are Highly Compensated Employees. 7.5(c)(5) Timing. For purposes of determining the ACP for any Plan Year, Employee Contributions shall be considered made in the Plan Year in which they are actually contributed to the Fund and Matching Contributions (and, if applicable, Qualified Matching Contributions and Qualified Nonelective Contributions) shall be considered made for such Plan Year only if such contributions are allocated as of a date within such Plan Year and are actually paid to the Fund by the last day of the 12-month period immediately following such Plan Year. 7.5(c)(6) Records. The Plan Administrator shall maintain records which are sufficient to demonstrate that the Plan complied with the ACP limits, including the extent to which Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions are taken into account to satisfy such ACP limits. 7.5(c)(7) Other Requirements. The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 7.5(d) Distribution of Excess Aggregate Contributions. 7.5(d)(1) General. Notwithstanding any other provision of this Plan restricting the timing of distributions, Excess Aggregate Contributions for any Plan Year, plus any income and minus any loss allocable thereto, shall be forfeited (if otherwise forfeitable under the Plan) or distributed (if not forfeitable) from the Accounts of Participants on whose behalf such Excess Aggregate Contributions were made no later than the last day of the immediately following Plan Year. If such Excess Aggregate Contributions are distributed more than 2 1/2 months after the last day of the Plan Year in which such excess occurred, a 10% excise tax shall be imposed under Code section 4979 on the Employer with respect to such excess. Excess Aggregate Contributions shall be allocated to Participants who are subject to the Family Member aggregation rules under Code section 414(q)(6) in the manner prescribed by the regulations under Code section 401(m). 7.5(d)(2) Determination of Income or Loss. A corrective distribution of Excess Aggregate Contributions under this section 7.5 shall include the income or loss allocable to such Excess Aggregate Contributions for the Plan Year in which such excess occurred and, if so specified in the Adoption Agreement, for the period between the end of such Plan Year and the date of distribution ("gap period"). The income or loss for such Plan Year and gap period, if applicable, shall be determined in accordance with the regulations under Code section 401(m). In lieu of using the safe harbor method or the alternative method in the regulations for allocating such income or loss, the Plan Administrator may use any reasonable method for computing such income or loss, provided that such method does not violate Code section 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income or loss to Participant's Accounts. 7.5(d)(3) Order for Determining Excess Aggregate Contributions. Excess Aggregate Contributions shall be determined after first determining Excess Elective Deferrals under section 7.3 and then determining Excess Contributions under section 7.4. 7.5(d)(4) Accounting for Excess Aggregate Contributions. Excess Aggregate Contributions shall be forfeited (if otherwise forfeitable) or distributed (if not forfeitable) to the Highly Compensated Employee from the Participant's Employee Account, Matching Account, Qualified Matching Account, Qualified Nonelective Account and Elective Deferral Account in the same ratio that the contributions made on the Participant's behalf to such account (to the extent such contributions are used in the ACP test) for the Plan Year in which such Excess Aggregate Contributions were made bears to the total of all such contributions. Notwithstanding the foregoing, Excess Aggregate Contributions may be distributed from the applicable subaccounts in accordance with procedures established by the Plan Administrator provided such procedures do not result in discrimination in favor of Highly Compensated Employees which would be prohibited under Code section 401(a)(4). 7.5(d)(5) Allocation of Forfeitures. Amounts forfeited by Highly Compensated Employees under this section 7.5 shall be allocated or applied in accordance with section 6.3(c)(2); provided, no Forfeitures arising under this section 7.5 shall be allocated to the Account of any Highly Compensated Employee. SECTION 8. VESTING AND FORFEITURES 8.1 Determination of Nonforfeitable Percentage. 8.1 (a) Fully Vested Accounts. Each Rollover Account, Employee Account, Elective Deferral Account, Qualified Matching Account and Qualified Nonelective Account shall be completely nonforfeitable at all times. 8.1(b) Death, Disability and Retirement. The Employer Account and Matching Account of each Participant who reaches Early Retirement Age or Normal Retirement Age while an Employee shall become completely nonforfeitable on such date. The Employer Account and Matching Account of each Participant who dies while an Employee or who becomes Disabled while an Employee 8.1(b)(1) Standard Option - shall become completely nonforfeitable on such date. 8.1(b)(2) Alternative - if so specified in the Adoption Agreement, shall be determined in accordance with the vesting schedule under section 8.1(c). 8.1(c) Other Separation From Service. Subject to section l2.4, the nonforfeitable percentage of the Employer Account and Matching Account of a Participant other than a Participant described in section 8.1(b) shall be based on the Participant's Years of Service and on the following vesting schedule: 8.1(c)(1) Standard Option - the full and immediate vesting schedule. 8.1(c)(2) Alternative - the alternative vesting schedule specified in the Adoption Agreement; provided, however, if the Participation Requirement (or the requirement to receive an allocation of Employer contributions under a 401(k) Plan) consists of a minimum period of service which exceeds one year, the full and immediate vesting schedule shall automatically apply notwithstanding any election to the contrary in the Adoption Agreement. 8.1(d) Employee Contribution Withdrawals. No Forfeiture shall occur solely as a result of a Participant's withdrawal of Employee Contributions. 8.2 Forfeiture and Special Reemployment Rules. 8.2(a) Buy Back Rule (Standard Option). 8.2(a)(1) Forfeiture. The forfeitable portion, if any, of the Employer Account and Matching Account of a Participant who separates from service shall become a Forfeiture on the earlier of (i) the date as of which the Participant receives (or is deemed to receive under section 8.2(c)) a distribution of the Participant's entire nonforfeitable Account balance derived from Employer Contributions, or (ii) the date he or she has 5 consecutive Breaks in Service (6 consecutive Breaks in Service if the Alternative Maternity/Paternity Rule applies). If a Participant elects to have distributed less than the entire nonforfeitable balance of the Participant's Employer Account and Matching Account, the part of such accounts that shall be treated as a Forfeiture is the total forfeitable portion of such Accounts multiplied by a fraction, the numerator of which is the amount of the distribution from the Participant's Employer Account or Matching Account and the denominator of which shall be the total nonforfeitable balance of the Participant's Employer Account or Matching Account at the time of the distribution. Any such Forfeiture shall be allocated or applied in accordance with section 6 on the Valuation Date specified in section 8.2(e). 8.2(a)(2) Reemployment. If a Participant receives a distribution and resumes employment covered under this Plan before the Participant has 5 consecutive Breaks in Service (6 consecutive Breaks in Service if the Alternative Maternity/Paternity Rule applies), the Employer shall restore to the Participant's Employer Account and Matching Account an amount equal to the dollar amount of the Forfeitures from such accounts if the Participant repays to the Plan an amount equal to the dollar amount of the distributions from the Participant's Employer Account and Matching Account in accordance with this section 8.2(a). Such repayment must be made before the earlier of (a) 5 years after the first date on which the Participant is subsequently reemployed by the Employer or a Participating Affiliate or (b) the date the Participant incurs 5 consecutive Breaks in Service (6 consecutive Breaks in Service if the Alternative Maternity/ Paternity Rule applies) following the date of the distribution. If a Participant whose nonforfeitable Account balance is zero is deemed to receive a distribution under section 8.2(c) and he or she resumes employment covered under this Plan before he or she has 5 consecutive Breaks in Service (6 consecutive Breaks in Service if the Alternative Maternity/Paternity Rule applies), the forfeitable portion of the Participant's Employer Account and Matching Account shall automatically be restored by the Employer upon the Participant's reemployment. Any amount restored by the Employer under this section 8.2(a) shall be restored upon repayment from the sources specified in section 8.2(d). Such restored or repaid amount shall not be treated as an Annual Addition under section 7.2 and shall be credited to the Participant's Employer Account and Matching Account in the same proportion as the distribution was made from such accounts. 8.2(b) Automatic Restoration (Alternative). This section 8.2(b) shall apply if the Employer specifies the use of the "Alternative to the Buy Back Rule" in the Adoption Agreement. 8.2(b)(1) Forfeiture. The forfeitable portion, if any, of the Employer Account and Matching Account of a Participant who separates from service shall become a Forfeiture on the earlier of (i) the date as of which payment of the nonforfeitable percentage of the Participant's Account derived from Employer contributions begins or is deemed to begin under section 8.2(c) or (ii) the date he or she has 5 consecutive Breaks in Service (6 consecutive Breaks in Service if the Alternative Maternity/Paternity Rule applies) and such Forfeiture shall be allocated or applied in accordance with section 6 on the allocation date specified in section 8.2(e) unless he or she is reemployed on or before such allocation date. 8.2(b)(2) Reemployment. If a Participant is reemployed before the Participant incurs 5 consecutive Breaks in Service (6 consecutive Breaks in Service if the Alternative Maternity/ Paternity Rule applies) but after the date of a Forfeiture under section 8.2(b)(1), the Employer shall restore to such Participant as of the last day of the Plan Year in which he or she is reemployed an amount equal to the dollar amount of such Forfeiture. Any amount restored by the Employer under this section 8.2(b) shall be restored from the sources specified in section 8.2(d). Such restored amount shall not be treated as an Annual Addition under section 7.2 for such Plan Year. The restored amount, together with any remaining balance of the nonforfeitable portion of the Employer Account and Matching Account attributable to the Participant's service prior to reemployment, shall be maintained thereafter as separate special subaccounts of the Participant's Employer Account and Matching Account (until such time as it becomes completely nonforfeitable or again becomes a Forfeiture), and the dollar amount of the Participant's nonforfeitable percentage in each such special subaccount thereafter shall be determined in accordance with Formula A unless Formula B is specified in the Adoption Agreement: (i)Formula A (Standard Option): X = P (AB + D) - D (ii)Formula B (Alternative): X = P (AB + (R x D)) - (R x D) For purposes of these formulas: X = The current dollar amount, if any, of the nonforfeitable percentage in the Participant's special subaccount; P = The Participant's current nonforfeitable percentage as determined under section 8.1; AB = Such dollar amount, if any, as evidenced by the last balance posted to the Participant's special subaccount; D = The dollar amount previously paid to the Participant under section 9 from the Participant's original Employer Account or Matching Account, as applicable; and R = The ratio of AB to the dollar amount, if any, posted to the Participant's Employer Account or Matching Account, as applicable, immediately after the distribution. 8.2(c) Deemed Distribution. If the nonforfeitable portion of a Participant's Account balance derived from Employer and Employee contributions is zero, the Participant shall be deemed to have received a distribution of the nonforfeitable portion of the Participant's Account upon the Participant's separation from service. A Participant's nonforfeitable Account balance derived from Employee contributions shall not include accumulated deductible employee contributions within the meaning of Code section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989. 8.2(d) Restoration Sources. Any amount restored under this section 8.2 shall be restored from the following sources in the following order: first, from Forfeitures occurring in the Plan Year in which such amounts are restored, if any; second, from Employer Contributions for such Plan Year, if any; third from Fund Earnings for such Plan Year; and finally, from additional Employer Contributions. However, at the election of the Employer, such amounts shall be restored entirely from additional Employer Contributions. 8.2(e) Date Forfeitures Applied or Allocated. Any amounts which become a Forfeiture under this section 8.2 shall be allocated or applied as of the allocation date specified in section 6 which coincides with or immediately follows the date such Forfeiture occurs, except that the Employer may specify in the Adoption Agreement that Forfeitures which are applied to reduce Employer Contributions, Matching Contributions, Qualified Matching Contributions or Qualified Nonelective Contributions shall be so applied as of the allocation date for such contributions which immediately follows the last day of the Plan Year in which such Forfeiture occurs. 8.2(f) In-service Distributions. The provisions of this section 8.2(f) shall apply if the Plan permits in-service distribution under section 9.2. If a distribution is made at a time when a Participant has a nonforfeitable right to less than 100% of his or her Employer Account or Matching Account and the Participant may increase the nonforfeitable percentage in such Account: 8.2(f)(1) A separate special subaccount of the Participant's Employer Account and Matching Account shall be established to record the Participant's interest in such accounts as of the time of the distribution; and 8.2(f)(2) At any relevant time the Participant's nonforfeitable portion of each such special subaccount shall be determined in accordance with the formula specified in section 8.2(b). SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES 9.1 After Separation From Service. Subject to the rules in this section 9, section l0, Benefit Payment Forms - Joint and Survivor Annuity Requirements, and section 11, Minimum Distribution Requirements, the nonforfeitable portion of each Participant's Account (as determined in accordance with section 8) shall not be payable to such Participant before he or she separates from service with the Employer and all Affiliates. 9.1(a) Timing. A Participant who has separated from service with the Employer and all Affiliates 9.1 (a)(1) Standard Option - may request a distribution of the nonforfeitable portion of his or her Account as soon as practicable after such separation from service. 9.1 (a)(2) Alternative - if so specified in the Adoption Agreement, may not request a distribution of the nonforfeitable portion of his or her Account until Normal Retirement Age, Early Retirement Age or Disability, whichever is earlier. 9.1(b) Reemployment. Except as required in section 11, no payment shall be made under this section 9.1 it the Participant who separates from service is reemployed as an Employee before payment is made. If a Participant is reemployed as an Employee after payment of the nonforfeitable portion of the Participant's Account has begun but before the entire balance attributable to such nonforfeitable portion has been paid (or applied to purchase an annuity), payments to the Participant from such balance shall be terminated on the date he or she is so reemployed and no further payments shall be made to the Participant until he or she is subsequently entitled to such payments in accordance with the terms of this Plan. 9.1(c) $3500 Cashout. The nonforfeitable portion of a Participant's Account shall be distributed in a single sum to such Participant (or to the Participant's Beneficiary in the event of the Participant's death) as soon as administratively practicable following the Participant's separation from service with the Employer and all Affiliates for any reason if the nonforfeitable portion of such Account is (and at the time of any prior distribution was) $3500 or less. Any such distributions made on or after January 1, 1993 shall be made in accordance with any applicable rules regarding the period for providing notices under Code section 402(f) and for making direct rollover elections under Code section 401(a)(31). 9.1(d) Claim. Except as provided in this section 9 and section 11, no payment shall be made until a written claim for such payment is filed with the Plan Administrator on an Election Form. The Plan Administrator shall process each such claim in accordance with the claims procedure described in the summary plan description for this Plan. If no such claim is submitted and the Participant does not defer payment pursuant to section 9.1(e), payment may be made as soon as the benefit is not immediately distributable (within the meaning of section 9.3) and shall, in any event, begin no later than 60 days following the end of the Plan Year in which 9.1 (d)(1) the Participant separates from service as an Employee, 9.1(d)(2) the Participant reaches age 65 or Normal Retirement Age, if earlier, or 9.1(d)(3) occurs the 10th anniversary of the year in which the Participant commenced participation in the Plan, whichever occurs last. 9.1(e) Election to Defer Payment. If a Participant has separated from service with the Employer and all Affiliates and the nonforfeitable portion of the Participant's Account is (or at the time of any prior distribution was) more than $3500, the Participant may defer distribution of that nonforfeitable portion, but in no event beyond 9.1(e)(1) Standard Option - the Participant's Required Beginning Date (as defined in section 11). 9.1(e)(2) Alternative - if so specified in the Adoption Agreement, the later of the Participant's Normal Retirement Age or age 62. The failure of a Participant and his or her Spouse, if applicable, to consent to a distribution or make a written request to defer payment while a benefit is immediately distributable (within the meaning of section 9.3) shall be deemed to be an election to defer commencement of payment of any benefit under this section 9 until the benefit is no longer immediately distributable or, if section 9.1(e)(1) applies, until the Required Beginning Date. Nothing in this section 9.1(e) shall prevent the Plan Administrator from paying in the normal form a benefit which is not immediately distributable without regard to whether the Participant and his or her Spouse consent to such distribution, unless the Participant has requested a deferral pursuant to section 9.1(e)(2). 9.1(f) Early Retirement Age. If the Early Retirement Age includes both an age and service requirement, any Participant who separates from service before satisfying such age requirement, but after the Participant has satisfied the service requirement, may request a distribution of the nonforfeitable portion of his or her Account upon satisfaction of such age requirement. 9.1(g) Death. In the event of the Participant's death, the nonforfeitable portion of the Participant's Account shall be payable to the Participant's Beneficiary as soon as administratively practicable after the Participant's death. 9.2 Before Separation From Service. Subject to the rules in this section 9, section 10, Joint and Survivor Annuity Requirements, and section 11, Minimum Distribution Requirements, the nonforfeitable portion of a Participant's Account may be paid to the Participant before he or she separates from service with the Employer and all Affiliates if so specified in the Adoption Agreement or by the Board in accordance with section 9.2(b)(2) or section 9.2(e). 9.2(a) Money Purchase Pension Plan or target Benefit Pension Plan. If this Plan is adopted as a Money Purchase Pension Plan or a Target Benefit Pension Plan, 9.2(a)(1) Standard Option - except as provided in section 9.2(d) or (e), no distributions shall be made before a Participant separates from service with the Employer and all Affiliates, or 9.2(a)(2) Alternative - if so specified in the Adoption Agreement, a Participant may request a distribution of all or a portion of the nonforfeitable portion of the Participant's Account on or after he or she reaches Normal Retirement Age without regard to whether he or she has separated from service. 9.2(b) 401(k) Plan. 9.2(b)(1) Distribution Restrictions. If this Plan is adopted as a 401(k) Plan, then, except as provided in this section 9.2(b), a Participant's Elective Deferral Account, Qualified Nonelective Account and Qualified Matching Account shall not be distributable to the Participant or the Participant's Beneficiary earlier than upon the Participant's separation from service with the Employer and all Affiliates, death, or Disability. 9.2(b)(2) Termination of Plan or Disposition of Assets or Subsidiary. Notwithstanding section 9.2(b)(1) and subject to the Participant and spousal consent rules in section 9.3 and section 10, the Employer may, by action of its Board, make lump sum distributions (within the meaning of Code section 401(k)(10)(B)(ii)) of a Participant's Account, including the Participant's Elective Deferral Account, Qualified Nonelective Account and Qualified Matching Account in accordance with Code section 401(k) by reason of (i) the termination of the Plan without the establishment of another defined contribution plan (other than an employee stock ownership plan as defined in Code section 4975(e) or Code section 409 or a simplified employee pension as defined in Code section 408(k)); (ii) the disposition by the Employer or a Participating Affiliate to an unrelated entity of substantially all of the assets (within the meaning of Code section 409(d)(2)) used by the Employer or such Participating Affiliate in a trade or business of the Employer or a Participating Affiliate, if the transferor continues to maintain this Plan after such disposition, but such distributions shall be made only with respect to a Participant who continues employment with the entity acquiring such assets; or (iii) the disposition by the Employer or a Participating Affiliate which is a corporation to an unrelated entity of interest in a subsidiary (within the meaning of Code section 409(d)(3)), if the transferor continues to maintain this Plan after such disposition, but such distributions shall be made only with respect to a Participant who continues employment with such former subsidiary. 9.2(b)(3) Hardship Distribution. (i) General. If the Employer specifies in the Adoption Agreement that hardship distributions shall be permitted, a Participant may request a hardship distribution before he or she separates from service from the Participant's Elective Deferral Account (and, if applicable, from the nonforfeitable portion of the other subaccounts of such Account specified in the Adoption Agreement). The Plan Administrator shall grant such request if, and to the extent that, the Plan Administrator determines that such distribution is "necessary" to satisfy an "immediate and heavy financial need" of the Participant as determined in accordance with this section 9.2(b)(3). Any such request shall be made in writing, shall set forth in detail the nature of such hardship and the amount of the distribution needed as a result of such hardship, and shall include adequate documentation of the type of financial need and the amount of the need. If the Plan Administrator grants such request, such application shall be processed and such distribution shall be made in a single sum as soon as administratively practicable. (ii) Safe Harbor Test for Financial Need. An "immediate and heavy financial need" shall mean one or more of the following, as specified in the Adoption Agreement, (A) expenses for medical care described in Code section 213(d) incurred by the Participant or the Participant's spouse or dependents (as defined in Code section 152) and amounts necessary for such individuals to obtain such care, (B) the purchase of (but not the mortgage payments for) a principal residence of the Participant, (C) the payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant or the Participant's spouse, children or dependents (as defined in Code section l52), (D) the prevention of the eviction of the Participant from the Participant's principal residence or the foreclosure on the mortgage of the Participant's principal residence, or (E) such other events as the Internal Revenue Service deems to constitute an "immediate and heavy financial need" under Code section 401(k). (iii) Safe Harbor Test for Distribution Necessary to Satisfy Need. A distribution shall be deemed to be "necessary" to satisfy an immediate and heavy financial need only if all of the following requirements are satisfied: (A) the distribution is not in excess of the amount of such need, including any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from such withdrawal; (B) the Participant has obtained all distributions (other than hardship distributions) and all nontaxable loans currently available under this Plan and all other plans maintained by the Employer or an Affiliate; (C) the Participant's Elective Deferrals and Employee Contributions under this Plan and elective deferrals and employee contributions under all other plans maintained by the Employer or an Affiliate shall be suspended for the 12-month period following the date of receipt of such hardship distribution; and (D) the Participant's Elective Deferrals under this Plan and elective deferrals under all other plans maintained by the Employer or an Affiliate for the Participant's taxable year immediately following the taxable year in which such hardship distribution was made shall not exceed the applicable dollar limitation under Code section 402(g) for such following taxable year less the amount of the Participant's Elective Deferrals under this Plan and elective deferrals under all such other plans for the taxable year in which such hardship distribution was made. (iv) Account Limitations. For Plan Years beginning after December 31, 1988, no hardship distribution shall be made under this section 9.2(b)(3) to a Participant from (A)the Participant's Qualified Nonelective Account, (B)the Participant's Qualified Matching Account, or (C)the Fund Earnings allocated to the Participant's Elective Deferral Account except to the extent of amounts credited to such Accounts as of the end of the last Plan Year ending before July 1, 1989. 9.2(b)(4) Distributions on or after Age 59 1/2. If the Employer specifies in the Adoption Agreement that distributions shall be permitted on or after age 59 1/2, a Participant may request a distribution of all or a portion of the nonforfeitable portion of the subaccounts of the Participant's Account specified in the Adoption Agreement at any time on or after he or she reaches age 59 1/2. Any such request shall be made in writing on an Election Form and such distribution shall be made in a single sum as soon as practicable in accordance with such reasonable nondiscretionary procedures as the Plan Administrator deems appropriate under the circumstances for the proper administration of the Plan. 9.2(b)(5) Employer Account and Matching Account. If so specified in the Adoption Agreement, a Participant may request in accordance with reasonable and nondiscriminatory procedures a distribution of all or a portion of the nonforfeitable portion of the Participant's Employer Account and Matching Account after a fixed number of years, the attainment of a stated age or upon the occurrence of some prior event as specified in the Adoption Agreement. 9.2(c) Profit Sharing Plan. It this Plan is adopted as a Profit Sharing Plan, then, if so specified in the Adoption Agreement, a Participant may request in accordance with reasonable and nondiscriminatory procedures a distribution of all or a portion of the nonforfeitable portion of the Participant's Account after a fixed number of years, the attainment of a stated age or upon the occurrence of some prior event as specified in the Adoption Agreement. 9.2(d) Withdrawals from Employee Account. 9.2(d)(1) Standard Option. A Participant may request a withdrawal of all or a portion of the Participant's Employee Account at any time. Any such request shall be made in writing on an Election Form and such withdrawal shall be made in a single sum as soon as administratively practicable in accordance with such reasonable nondiscretionary procedures as the Plan Administrator deems appropriate under the circumstances for the proper administration of this Plan. 9.2(d)(2) Alternative. The Employer may specify in the Adoption Agreement that withdrawals from Employee Accounts shall not be permitted before the nonforfeitable portion of a Participant's Account otherwise becomes distributable under this section 9 or under section 11 or may specify other rules and conditions under which such withdrawals may be made. Notwithstanding the foregoing, any portion of a Participant's Employee Account which is attributable to recharacterized Excess Contributions under section 7.4(e) may only be withdrawn in accordance with the rules set forth in section 9.2(b) applicable to an Elective Deferral Account. 9.2(e) Plan Termination. If this Plan is terminated under section 14.6 and if the Board so specifies in its written action effecting such termination, distribution of the nonforfeitable portion of each Account shall be made as soon as administratively practical after the Plan is terminated subject to the rules in section 9.2(b) and to Code section 411. 9.3 Consent. 9.3(a) General. If the nonforfeitable portion of a Participant's Account exceeds (or at the time of any prior distribution exceeded) $3500, and such Account is "immediately distributable", the Participant and the Participant's Spouse, if any, (or where the Participant has died, the surviving Spouse, if any) must consent to any distribution from such Account. The consent of the Participant and the Participant's Spouse shall be obtained in writing within the 90 day period ending on the Annuity Starting Date (as defined in section 10.1). The Plan Administrator shall notify the Participant and the Participant's Spouse of the right to defer any distribution until the Participant's Account is no longer "immediately distributable". Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Code section 417(a)(3) and shall be provided no less than 30 days and no more than 90 days prior to the Annuity Starting Date. 9.3(b) Exceptions. Notwithstanding the foregoing, only the Participant need consent to the commencement of a distribution in the form of a Qualified Joint and Survivor Annuity while the Participant's Account is immediately distributable. Furthermore, if payment in the form of a Qualified Joint and Survivor Annuity is not required with respect to the Participant pursuant to section 10, only the Participant need consent to the distribution from an Account that is immediately distributable. The consent of the Participant and the Participant's Spouse shall not be required to the extent that a distribution is required to satisfy Code section 401(a)(9), section 401(k), section 401(m), section 402(g) or section 415. In addition, upon termination of this Plan if the Plan is not required to offer an annuity option (purchased from a commercial provider), the nonforfeitable portion of the Participant's Account shall, without the Participant's consent, be distributed to the Participant unless the Employer or an Affiliate maintains another defined contribution plan (other than an employee stock ownership plan as defined in Code section 4975(e)(7)), in which event, the Account of a Participant who does not consent to an immediate distribution shall be transferred to such other plan. 9.3(c) Immediately Distributable. An Account is "immediately distributable" if any part of the Account could be distributed to the Participant (or the surviving Spouse) before the Participant reaches (or would have reached if not deceased) the later of Normal Retirement Age or age 62. 9.3(d) Accumulated Deductible Employee Contributions. For purposes of determining the applicability of the consent requirements under this section 9.3 to distributions made before the first day of the first Plan Year beginning after December 31, 1988, the nonforfeitable portion of the Participant's Account shall not include amounts attributable to accumulated deductible employee contributions within the meaning of Code section 72(o)(5)(B). 9.4 Form of Distribution. All distributions (including distributions before separation from service under section 9.2 but excluding corrective distributions under section 7) shall be made in the form specified in section 10. 9.5 Minimum Distributions. The Plan shall satisfy the minimum distribution requirements of Code section 401(a)(9) as set forth in section 11. 9.6 Missing Person. In the event that an Account becomes payable under this Plan pursuant to section 9.1(c), section 9.1(d) or section 9.1(e) and the Plan Administrator is unable to locate the Participant or his or her Beneficiary after sending written notice to the last known mailing address and to the United States Social Security Administration, such Participant or Beneficiary shall be presumed dead and such Account shall become a Forfeiture on the third anniversary of the date such Account first became payable under this Plan. However, the amount of such Forfeiture shall be paid to such missing Participant or Beneficiary in the event that such person files a claim for such benefit while this Plan remains in effect and demonstrates to the satisfaction of the Plan Administrator that such person in fact is such missing Participant or Beneficiary. 9.7 No Estoppel of Plan. No person is entitled to any benefit under this Plan except and to the extent expressly provided under this Plan. The fact that payments have been made from this Plan in connection with any claim for benefits under this Plan does not (1) establish the validity of the claim, (2) provide any right to have such benefits continue for any period of time, or (3) prevent this Plan from recovering the benefits paid to the extent that the Plan Administrator determines that there was no right to payment of the benefits under this Plan. Thus, if a benefit is paid under this Plan and it is thereafter determined by the Plan Administrator that such benefit should not have been paid (whether or not attributable to an error by the Participant, the Plan Administrator, the Employer or any other person), then the Plan Administrator may take such action as the Plan Administrator deems necessary or appropriate to remedy such situation, including without limitation by (1) deducting the amount of any overpayment theretofore made to or on behalf of such Participant from any succeeding payments to or on behalf of such Participant under this Plan or from any amounts due or owing to such Participant by the Employer or any Affiliate or under any other plan, program or arrangement benefiting the employees or former employees of the Employer or any Affiliate, or (2) otherwise recovering such overpayment fro whoever has benefited from it. If the Plan Administrator determines that an underpayment of benefits has been made, the Plan Administrator shall take such action as it deems necessary or appropriate to remedy such situation. However, in no event shall interest be paid on the amount of any underpayment other than the investment gains (or losses) credited to the Participant's Account pending payment. 9.8 Administration. All distributions shall be made in accordance with such uniform and nondiscriminatory administrative and operational procedures for Account distributions as the Plan Administrator deems Appropriate under the circumstances for the proper administration of the Plan. SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR ANNUITY REQUIREMENTS 10.1 Application and Special Definitions. This section 10 shall apply to a Participant who is vested at the time of death or at the time of a distribution from the Participant's Account in any portion of the Participant's Account, whether such portion is attributable to Employer contributions, Employee contributions, or both. For purposes of this section 10, the terms defined in this section 10.1 shall have the meanings shown opposite such terms. 10.1(a) Annuity Starting Date - means the first day of the first period for which an amount is paid as an annuity or any other form. 10.1(b) Earliest Retirement Age - means 10.1(b)(1) if distributions are permitted only upon separation from service, the earliest age at which the Participant could separate from service and receive a distribution; 10.1(b)(2) if distributions are permitted before separation from service, the earliest age at which such distribution could be made; or 10.1(b)(3) if clauses (1) and (2) do not apply, the Early Retirement Age. 10.1(c) Election Period - means 10.1(c)(i) for a Qualified Preretirement Survivor Annuity, the period which begins on the earlier of (i) the first day of the Plan Year in which the Participant attains age 35 or (ii) the date such Participant separates from service and ends on the date of the Participant's death and 10.1(c)(2) for a Qualified Joint and Survivor Annuity or a Life Annuity, the 90 day period ending on the Annuity Starting Date. Notwithstanding the foregoing, a Participant who has not yet reached age 35 (and who will not reach age 35 as of the end of the current Plan Year) may make a special Qualified Election to waive the Qualified Preretirement Survivor Annuity for the period beginning on the date of such election and ending on the first day of the Plan Year in which the Participant will reach age 35. Such election shall not be valid unless the Participant receives a written explanation of the Qualified Preretirement Survivor Annuity in such terms as are comparable to the explanation required under section 10.4. Qualified Preretirement Survivor Annuity coverage shall be automatically reinstated as of the first day of the Plan Year in which the Participant reaches age 35. Any new waiver on or after such date shall be subject to the full requirements of this section 10. 10.1(d) Life Annuity - means a nontransferable immediate annuity payable for the life of the Participant, which is the amount of benefit which can be purchased with such Participant's Vested Account Balance as of the Annuity Starting Date. 10.1(e) Qualified Election - means a Participant's selection to waive the Qualified Joint and Survivor Annuity or the Qualified Preretirement Survivor Annuity which election shall not be effective unless (1) the election designates a specific Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) and, for an election to waive a Qualified Joint and Survivor Annuity, the particular form of benefit payment, which designations cannot be changed without the Spouse's consent (or the Spouse expressly permits designations by the Participant without any further spousal consent); (2) such Participant's Spouse consents in writing to such election on an Election Form; (3) such consent acknowledges the effect of such election; and (4) such consent is witnessed by a notary public; provided, (i) if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Spouse or the Spouse cannot be located or because of such other circumstances as may be described in the regulations under Code section 417, a Participant's election shall be deemed to be a Qualified Election; (ii) a Spouse's written consent under this section 10.1(e) shall be irrevocable as to such Spouse and shall be binding only as against such Spouse; (iii) no consent shall be valid unless the Participant received notice as provided in section 10.4; (iv) a consent that permits designations by the Participant without any further spousal consent must acknowledge that the Spouse has the right to limit consent to a specific Beneficiary, and, if applicable, a specific form of benefit payment, and that the Spouse voluntarily elects to relinquish either or both of such rights; and (v) a Participant may revoke (without the consent of his or her Spouse) an election to waive the Qualified Joint and Survivor Annuity or the Qualified Preretirement Survivor Annuity on an Election Form at any time prior to the date as of which the Participant's Account becomes payable under section 9. 10.1(f) Qualified Joint and Survivor Annuity - means a nontransferable immediate annuity payable for the life of the Participant which is the amount of benefit which can be purchased with the Participant's Vested Account Balance on the Annuity Starting Date with a survivor annuity payable for the life of the Participant's surviving Spouse which is 10.1(f)(1) Standard Option - 50% or 10.1(f)(2) Alternative - such greater percentage (not to exceed 100%) specified in the Adoption Agreement of the amount of the annuity which is payable during the joint lives of the Participant and such Spouse. 10.1(g) Qualified Preretirement Survivor Annuity - means a nontransferable annuity payable for the life of the surviving Spouse, which is the amount of benefit which can be purchased with 10.1(g)(1) Standard Option - 100% of the Participant's Vested Account Balance as of the Annuity Starting Date or 10.1(g)(2) Alternative - such lesser percentage (not less than 50%) specified in the Adoption Agreement of such Participant's Vested Account Balance (determined by allocating the portion of such balance which is attributable to employee contributions proportionately to such annuity and to the remainder of such balance). 10.1(h) Vested Account Balance - means the nonforfeitable portion of a Participant's Account derived from Employer contributions and Employee contributions (including Rollover Contributions), whether vested before or upon death, including the proceeds of insurance contracts, if any, on the Participant's life and reduced, if applicable, for outstanding loans in accordance with section 13.3(d)(1)(iv). 10.2 Distribution to Participant. Unless a Participant waives the Qualified Joint and Survivor Annuity and elects an optional method of distribution (as described in section 10.6) on an Election Form pursuant to a Qualified Election within the Election Period, any distribution of such Participant's Vested Account Balance shall be paid in the form of (a) a Qualified Joint and Survivor Annuity for each such married Participant and his or her Spouse or (b) a Life Annuity for each such unmarried Participant. A Participant may elect that such annuity be distributed upon attainment of the Earliest Retirement Age. 10.3 Distribution to Surviving Spouse. Unless a Participant waives the Qualified Preretirement Survivor Annuity and elects an optional method of distribution (as described in section 10.6) on an Election Form pursuant to a Qualified Election within the Election Period, such Participant's Vested Account Balance shall, in the event of the Participant's death before the Participant's Annuity Starting Date, be applied to purchase a Qualified Preretirement Survivor Annuity for the surviving Spouse. If the Qualified Preretirement Survivor Annuity is less than 100%, the remaining portion of the Participant's Vested Account Balance shall be payable to the Participant's Beneficiary under section 9. The surviving Spouse may elect that such Qualified Preretirement Survivor Annuity be distributed to such Spouse within a reasonable period following the death of the Participant. Notwithstanding the foregoing, a surviving Spouse entitled to a Qualified Preretirement Survivor Annuity may elect in writing after the Participant's death to have the Participant's Vested Account Balance distributed in an optional form of benefit in accordance with section 10.6. 10.4 Notice Requirements. 10.4(a) Qualified Joint and Survivor Annuity and Life Annuity. The Plan Administrator shall no less than 30 days and no more than 90 days before the Annuity Starting Date provide each Participant with a written explanation of the Qualified Joint and Survivor Annuity and the Life Annuity, which explanation shall describe 10.4(a)(1) the terms and conditions of such annuity; 10.4(a)(2) the Participant's right to make a Qualified Election to waive such annuity and the effect of such election; 10.4(a)(3) the rights of the Participant's Spouse, if any; 10.4(a)(4) the right to revoke such election and the effect of such a revocation; and 10.4(a)(5) the relative values of the various optional forms of benefits under the Plan. 10.4(b) Qualified Preretirement Survivor Annuity. The Plan Administrator shall provide to each Participant within the "applicable period" for such Participant a written explanation of the Qualified Preretirement Survivor Annuity which includes the type of information described in section 10.4(a). The "applicable period" for a Participant is 10.4(b)(1) the period beginning on the first day of the Plan Year in which such Participant attains age 32 and ending with the close of the Plan Year preceding the Plan Year in which the Participant attains age 35, 10.4(b)(2) a reasonable period ending after he or she becomes a Participant, or 10.4(b)(3) a reasonable period ending after this section l0 applies to such Participant, whichever period ends last. However, if a Participant separates from service before he or she reaches age 35, such notice shall be provided within the two year period beginning one year before the Participant's separation from service and ending one year after such separation and if such Participant is subsequently reemployed, the applicable period for such Participant shall be redetermined under section 10.4(b)(1) through section 10.4(b)(3). For purposes of section 10.4(b)(2) and section 10.4(b)(3), a "reasonable period" is the two year period which begins one year prior to the occurrence of the event and ends one year after the occurrence of the event. 10.5 Safe Harbor Rules. 10.5(a) Application. If so specified in the Adoption Agreement, the provisions in this section 10.5 shall apply in lieu of section 10.1 through section 10.4 to (1) a Participant in a Profit Sharing Plan or a 401(k) Plan, and (2) to any distribution made on or after the first day of the first Plan Year beginning after December 31, 1988 from or under a separate account attributable solely to accumulated deductible employee contributions (as defined in Code section 72(o)(5)(B)) and maintained on behalf of a Participant in a Money Purchase Pension Plan or Target Benefit Pension Plan provided that the conditions specified in section 10.5(b) are satisfied. 10.5(b) Conditions. In order to fit within this safe harbor (1) the Participant does not or cannot elect payments in the form of a Life Annuity with respect to the Participant's Vested Account Balance; (2) on the death of a Participant, the Participant's Vested Account Balance shall be paid to the Participant's surviving Spouse, or if there is no surviving Spouse or if the surviving Spouse has consented in a manner conforming to a Qualified Election, to the Participant's Beneficiary; and (3) with respect to a Participant in a Profit Sharing Plan or a 401(k) Plan, the Plan is not a direct or indirect transferee of a defined benefit plan, money purchase pension plan, target benefit pension plan, stock bonus plan, or profit sharing plan which is subject to the survivor annuity requirements of Code section 401 (a)(11) and Code section 417 ("Transferee Plan"), or the Plan maintains separate bookkeeping accounts for such Participant's Transferee Plan benefits and all other benefits of the Participant under the Plan and gains, losses, withdrawals, contributions, forfeitures, and other credits or charges are allocated on a reasonable and consistent basis between the Transferee Plan benefits (which are subject to the survivor annuity requirements in section 10.1 through section 10.4) and the other Plan benefits (which are subject to the safe harbor rule in this section 10.5). 10.5(c) Surviving Spouse. The surviving Spouse may elect to have distribution of the Vested Account Balance commence within the 90-day period following the date of the Participant's death. The Vested Account Balance shall be adjusted for Fund Earnings occurring after the Participant's death in accordance with section 6.2 in the same manner that Accounts are adjusted for other types of distributions. 10.5(d) Waiver of Spousal Benefit. The Participant may waive the spousal death benefit described in this section l0.5 at any time; provided, no such waiver shall be effective unless it satisfies the conditions described in section 10.1(e) (other than the notification requirement referred to in such section) that would apply to the Participant's Qualified Election to waive the Qualified Preretirement Survivor Annuity. 10.5(e) Vested Account Balance. For purposes of this section 10.5, Vested Account Balance shall mean, (1) in the case of a Money Purchase Pension Plan or Target Benefit Pension Plan, the Participant's separate account balance attributable solely to accumulated deductible employee contributions within the meaning of Code section 72(o)(5)(B) and (2) in the case of a Profit Sharing Plan or 401(k) Plan, the Participant's Vested Account Balance as defined in section 10.1(h), excluding the portion of such Vested Account Balance which is attributable to Transferee Plan benefits described in section l0.5(b). 10.6 Optional Forms. 10.6(a) General. If a Participant properly and timely waives the Qualified Joint and Survivor Annuity as described in section l0.2 or to the extent the safe harbor rules of section 10.5 apply to a distribution, such distribution shall be made in the form specified in this section 10.6 as selected by the Participant (or his or her Beneficiary in the event of the Participant's death). 10.6(b) Before Separation From Service. Any distribution made pursuant to section 9.2 shall, subject to section 10.2, be made in a single sum. 10.6(c) After Separation From Service. 10.6(c)(1) Standard Option. The optional benefit form available to any Participant after separation from service with the Employer and all Affiliates or to his or her Beneficiary in the event of the Participant's death shall be a single sum. 10.6(c)(2) Alternative. If specified in the Adoption Agreement, the following optional benefit forms shall be available to any Participant (or to his or her Beneficiary in the event of the Participant's death): (I) Single Sum - by payment in a single sum. (ii) Installments - by payment in annual installments (or more frequent installments) over a specified period in accordance with the minimum distribution rules in section l1. (iii) Annuity - in the form of an annuity contract under which the amount of benefits shall be that which can be provided by applying the nonforfeitable portion of such Participant's Account to the applicable settlement option or annuity purchase rate under such contract; or (iv) Other Forms - under one of the optional forms of distribution, if any, under the Pre-Existing Plan or a plan described in section 14.5 which are required to be preserved under Code section 411(d)(6). Such optional forms shall be described in the Adoption Agreement and, unless otherwise specified in the Adoption Agreement, such other forms shall apply to the Participant's entire Account balance. Notwithstanding the foregoing, if the Plan Administrator separately accounts for benefits under a Pre-Existing Plan or a plan described under section 14.5 or, if applicable, under section 10.5, the optional forms may be limited to such separate accounts. 10.6(d) No Method Selected. If the safe harbor rules of section 10.5 apply to a distribution, but the Participant or the Participant's Spouse or Beneficiary fails to specify the method of distribution, then any distribution made to such Participant, Spouse or Beneficiary shall be made in a single sum. 10.6(e) Single Sum. A distribution made on account of a Participant's death or separation from service with the Employer and all Affiliates which is made in more than one payment shall be deemed to be a single sum distribution for purposes of this Plan if the additional payment or payments are necessary to reflect allocations completed following the Participant's death or separation from service. 10.6(f) In Kind Distributions. A distribution shall be made in kind only to the extent provided in the Adoption Agreement and only to the extent an "in kind" distribution is permissible under ERISA. 10.7 Annuity Contracts. Any annuity contract distributed by the Plan to a Participant or a Beneficiary shall be nontransferable and the terms of such contract shall comply with the applicable requirements of this Plan and the Code. 10.8 Transitional Rules. 10.8(a) Any living Participant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the previous sections of this section l0 must be given the opportunity to elect to have such sections apply (1) if such Participant is credited with at least one Hour of Service under this Plan or a predecessor plan in a Plan Year beginning on or after January 1, 1976, and (2) such Participant had at least 10 years of vesting service when he or she separated from service. 10.8(b) Any living Participant not receiving benefits on August 23, 1984, who was credited with at least one Hour of Service under this Plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a Plan Year beginning on or after January 1, 1976, must be given the opportunity to have his or her benefits paid in accordance with section 10.8(d). 10.8(c) The respective opportunities to elect (as described in section 10.8(a) and (b) above) must be afforded to the appropriate Participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to such Participants. 10.8(d) Any Participant who has elected pursuant to section 10.8(b) and any Participant who does not elect under section 10.8(a) or who meets the requirements of section 10.8(a) except that such Participant does not have at least 10 years of vesting service when he or she separates from service, shall have his or her benefits distributed in accordance with all of the following requirements if benefits would have been payable in the form of a life annuity: 10.8(d)(1) If benefits in the form of a life annuity become payable to a married Participant who: (i) begins to receive payments under the Plan on or after Normal Retirement Age; or (ii) dies on or after Normal Retirement Age while still working for the Employer; or (iii) begins to receive payments on or after the "qualified early retirement age"; or (iv) separates from service on or after attaining Normal Retirement Age (or the "qualified early retirement age") and after satisfying the eligibility requirements for the payment of benefits under the Plan and thereafter dies before beginning to receive such benefits; then such benefits shall be received under this Plan in the form of a Qualified Joint and Survivor Annuity, unless the Participant has elected otherwise during the election period. The election period must begin at least 6 months before the Participant attains "qualified early retirement age" and end not more than 90 days before the commencement of benefits. Any such election shall be in writing and may be changed by the Participant at any time. 10.8(d)(2) A Participant who is employed after attaining the qualified early retirement age shall be given the opportunity to elect, during the election period, to have a survivor annuity payable on death. The election period begins on the later of (i) the 90th day before the Participant attains the "qualified early retirement age", or (ii) the date on which participation begins, and ends on the date the Participant separates from service. Any such election shall be in writing and may be changed by the Participant at any time. If the Participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the Spouse under the Qualified Joint and Survivor Annuity if the Participant had retired on the day before the Participant's death. 10.8(d)(3) For purposes of this section 10.8(d), "qualified early retirement age" means the latest of: (i) the earliest date under the Plan on which the Participant may elect to receive retirement benefits, (ii) the first day of the 120th month beginning before the Participant reaches Normal Retirement Age, or (iii)the date the Participant begins participation. 10.9 Direct Rollovers. 10.9(a) General. This section 10.9 applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this section 10, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly by the Plan to an Eligible Retirement Plan specified by the Distributee in a direct rollover in accordance with Code section 401(a)(31). 10.9(b) Definitions. 10.9(b)(1) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code section 401(a)(9); and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities), 10.9(b)(2) Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a), that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. 10.9(b)(3) Distributee. A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code section 414(p), are Distributees with regard to the interest of the spouse or former spouse. SECTION 11, MINIMUM DISTRIBUTION REQUIREMENTS 11.1 General. Subject to section 10, Benefit Payment Forms - Joint and Survivor Annuity Requirements, the requirements of this section 11 shall apply to any distribution of a Participant's Account and shall take precedence over any inconsistent provisions of this Plan. Unless otherwise specified, the provisions of this section 11 shall apply to calendar years beginning after December 31, 1984. All distributions required under this section 11 shall be determined and made in accordance with the proposed regulations under Code section 401(a)(9), including the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the proposed regulations. 11.2 Special Definitions. 11.2(a) Applicable Calendar Year - means the first Distribution Calendar Year, and if life expectancy is being recalculated, each succeeding calendar year. 11.2(b) Applicable Life Expectancy - means the life expectancy (or joint and last survivor expectancy) calculated using the attained age of the Participant (or Designated Beneficiary) as of the Participant's (or Designated Beneficiary's) birthday in the Applicable Calendar Year reduced by one for each calendar year which has elapsed since the date life expectancy was first calculated. If life expectancy is being recalculated, the Applicable Life Expectancy shall be the life expectancy as so recalculated. 11.2(c) Designated Beneficiary - means the individual who is designated as the Beneficiary under this Plan in accordance with Code section 401(a)(9) and the regulations under such Code section. 11.2(d) Distribution Calendar Year - means a calendar year for which a minimum distribution is required. For distributions beginning before the Participant's death, the first Distribution Calendar Year shall be the calendar year immediately preceding the calendar year which contains the Participant's Required Beginning Date. For distributions beginning after the Participant's death, the first Distribution Calendar Year shall be the calendar year in which distributions are required to begin pursuant to section 11.6. 11.2(e) Life Expectancy - means the life expectancy (or joint and last survivor expectancy) as computed by use of the expected return multiples in Tables V and VI of section 1.72-9 of the Federal Income Tax Regulations. Unless otherwise elected by the Participant (or Spouse, in the case of distributions described in section 11.6(b)(2)) by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the Participant (or Spouse) and shall apply to all subsequent years. The life expectancy of a nonspouse Beneficiary may not be recalculated. 11.2(f) Participant's Benefit - means the nonforfeitable portion of a Participant's Account determined as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year ("valuation calendar year") increased by the amount of any contributions or forfeitures allocated to the Account as of dates in the valuation calendar year after such Valuation Date and decreased by distributions made in the valuation calendar year after such Valuation Date. If any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the Required Beginning Date, the amount of the minimum distribution made in the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year. 11.2(g) Required Beginning Date. 11.2(g)(1) General Rule. The Required Beginning Date of a Participant who reaches age 70 1/2 after December 31, 1987 is the first day of April of the calendar year following the calendar year in which the Participant reaches age 70 1/2. 11.2(g)(2) Age 70 1/2 Before 1988. The Required Beginning Date of a Participant who reaches age 70 1/2 before January 1, 1988 shall be, (i) for a Participant who is not a 5% owner, the first day of April of the calendar year following the calendar year in which occurs the later of retirement or reaching age 70 1/2; or (ii) for a Participant who is a 5% owner during any year beginning after December 31, 1979, the first day of April following the later of: (A) the calendar year in which the Participant reaches age 70 1/2, or (B) the earlier of the calendar year with or within which ends the Plan Year in which the Participant becomes a 5% owner, or the calendar year in which the Participant retires. 11.2(g)(3) Age 70 1/2 During 1988. The Required Beginning Date of a Participant who is not a 5% owner, who reaches age 70 1/2 during 1988 and who has not retired before January 1, 1989 shall be April 1, 1990. The Required Beginning Date of a Participant who is a 5% owner or who retired before January 1, 1989 and who reaches age 70 1/2 during 1988 shall be determined in accordance with section 11.2(g)(1). 11.2(g)(4) 5% Owner. A Participant shall be treated as a 5% owner for purposes of this section 11.2(g) if such Participant is a 5% owner as defined in Code section 416(i) (determined in accordance with Code section 416 but without regard to whether the Plan is top-heavy) at any time during the Plan Year ending with or within the calendar year in which such individual attains age 66 1/2 or any subsequent Plan Year. Once distributions have begun to a 5% owner under this section 11, they must continue to be distributed, even if the Participant ceases to be a 5% owner in a subsequent year. 11.3 Required Beginning Date. The entire nonforfeitable interest of a Participant must be distributed or begin to be distributed no later than the Participant's Required Beginning Date. Such distribution shall be made 11.3(a) in the form of a Qualified Joint and Survivor Annuity as described in section 10.2, or 11.3(b) if the Qualified Joint and Survivor Annuity is properly waived or to the extent the safe harbor rules in section 10.5 apply, in the optional benefit form in section 10.6 selected by the Participant. Notwithstanding the foregoing, even if installment distributions are not otherwise available as an optional benefit form, a Participant who has not separated from service with the Employer and all Affiliates as of the Required Beginning Date (or as of the end of any Distribution Calendar Year thereafter) may elect to receive the minimum distribution amount for each such Distribution Calendar Year as described in section 11.5. 11.4 Limits on Distribution Periods. As of the first Distribution Calendar Year, distributions (if not made in a single sum) may only be made over one of the following periods (or a combination thereof): 11.4(a) the life of the Participant, 11.4(b) the life of the Participant and a Designated Beneficiary, 11.4(c) a period certain not extending beyond the life expectancy of the Participant, or 11.4(d) a period certain not extending beyond the joint and last survivor expectancy of the Participant and a Designated Beneficiary. 11.5 Determination of Amount to be Distributed Each Year. If the Participant's interest is to be distributed in other than a single sum, the following minimum distribution rules shall apply on or after the Required Beginning Date: 11.5(a) Individual Account. 11.5(a)(1) General. If a Participant's Benefit is to be distributed over (i) a period not extending beyond the life expectancy of the Participant or the joint life and last survivor expectancy of the Participant and the Participant's Designated Beneficiary or (ii) a period not extending beyond the life expectancy of the Designated Beneficiary, the amount required to be distributed for each calendar year, beginning with distributions for the first Distribution Calendar Year, must at least equal the quotient obtained by dividing the Participant's Benefit by the Applicable Life Expectancy. 11.5(a)(2) Incidental Death Benefit Rules. (i) For calendar years beginning before January 1, 1989, if the Participant's Spouse is not the Designated Beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the Participant. (ii) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first Distribution Calendar Year, shall not be less than the quotient obtained by dividing the Participant's Benefit by the lesser of (A) the Applicable Life Expectancy or (B) if the Participant's Spouse is not the Designated Beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed regulations. Distributions after the death of the Participant shall be distributed using the Applicable Life Expectancy in section 11.5(a)(1) as the relevant divisor without regard to section 1.401(a)(9)-2 of the proposed regulations. 11.5(a)(3) Timing. The minimum distribution required for the Participant's first Distribution Calendar Year must be made on or before the Participant's Required Beginning Date. The minimum distribution for subsequent Distribution Calendar Years, including the minimum distribution for the Distribution Calendar Year in which the Participant's Required Beginning Date occurs, must be made on or before December 31 of that Distribution Calendar Year. 11.5(b) Annuity Contracts. If the Participant's Benefit is distributed in the form of an annuity purchased from an insurance company, distributions under such annuity shall be made in accordance with the requirements of Code section 401(a)(9). 11.6 Death Distribution Provisions. 11.6(a) Distribution Beginning Before Death. If the Participant dies after distribution of his or her nonforfeitable interest has begun, the remaining portion of such nonforfeitable interest shall continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. 11.6(b) Distribution Beginning After Death. If the Participant dies before distribution of his or her nonforfeitable interest begins, distribution of the Participant's entire nonforfeitable interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death except to the extent that an election is made to receive distributions in accordance with (1) or (2) below: 11.6(b)(1) if any portion of the Participant's nonforfeitable interest is payable to a Designated Beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the Designated Beneficiary and shall commence on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; 11.6(b)(2) if the Designated Beneficiary is the Participant's surviving Spouse, distributions may be made over the period described in clause (1) above but the required commencement date may be deferred until the later of (i) December 31 of the calendar year immediately following the calendar year in which the Participant died or (ii) December 31 of the calendar year in which the Participant would have reached age 70 1/2. If the Participant has not made an election pursuant to this section 11.6(b) by the time of the Participant's death, the Participant's Designated Beneficiary must elect the method of distribution no later than the earlier of (A) December 31 of the calendar year in which distributions would be required to begin under this section 11.6, or (B) December 31 of the calendar year which contains the fifth anniversary of the date of death of the Participant. If the Participant has no Designated Beneficiary, or if the Designated Beneficiary does not elect a method of distribution, distribution of the Participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. 11.6(c) Special Rules. 11.6(c)(1) For purposes of section 11.6(b), if the surviving Spouse dies after the Participant, but before payments to such Spouse begin, the provisions of section 11.6(b), with the exception of section 11.6(b)(2), shall be applied as if the surviving Spouse were the Participant. 11.6(c)(2) For purposes of this section 11.6, any amount paid to a child of the Participant shall be treated as if it had been paid to the surviving Spouse if the amount becomes payable to the surviving Spouse when the child reaches the age of majority. 11.6(c)(3) For the purposes of this section 11.6, distribution of a Participant's interest shall be considered to begin on the Participant's Required Beginning Date (or, if section 11.6(c)(1) above is applicable, the date distribution is required to begin to the surviving Spouse pursuant to section 11.6(b)). If distribution in the form of an annuity irrevocably commences to the Participant before the Required Beginning Date, the date distribution is considered to begin shall be the date distribution actually commences. 11.7 Special Pre-TEFRA Distribution Election. 11.7(a) General Rule. Subject to section 10, Benefit Payment Forms - Joint and Survivor Annuity Requirements, the nonforfeitable percentage of the Account of any Participant (including a "5% owner" as described in section 11.2(g)(4)) who has in effect a Special Pre-TEFRA Distribution Election (as described in section 11.7(b)) shall be paid only to the Participant, or in the case of the Participant's death, only to his or her beneficiary in accordance with the method of distribution specified in such election without regard to the distribution rules set forth in section 11.1 through section 11.6. 11.7(b) Special Pre-TEFRA Distribution Election. For purposes of this section 11.7, a Special Pre-TEFRA Distribution Election means a designation in writing, signed by the Participant or his or her beneficiary, made before January 1, 1984 by a Participant in this Plan or a Participant in a Pre-Existing Plan who had accrued a benefit under such plan as of December 31, 1983 which designation specifies 11.7(b)(1) a distribution method which was permissible under Code section 401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of 1984, 11.7(b)(2) the time at which such distribution will commence, 11.7(b)(3) the period over which such distribution will be made, and 11.7(b)(4) if such designation is to be effective for a beneficiary, the beneficiaries of the Participant in order of priority. A distribution to be made upon the death of a Participant shall not be covered under this section 11.7(b) unless the information in the designation with respect to such distribution satisfies the requirements of this section 11.7(b). 11.7(c) Current Distributions. Any distribution which began before January 1, 1984 and continues after such date shall be deemed to be made pursuant to a Special Pre-TEFRA Distribution Election if the method of distribution was set forth in writing and such method satisfies the requirements of section 11.7(b)(1) through (4). 11.7(d) Revocation. A Participant who made a Special Pre- TEFRA Distribution Election shall have the right to revoke such election by completing and filing a distribution Election Form under section 9. Furthermore, any change (other than the mere substitution or addition of a beneficiary not originally designated in such election which does not directly or indirectly alter the period over which distributions are to be made) to a Special Pre-TEFRA Distribution Election shall be deemed to be a revocation of such election. Upon revocation, any subsequent distribution shall be made in accordance with Code section 401(a)(9). If a designation is revoked subsequent to the date distributions are required to begin, the Plan must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been distributed to satisfy Code section 401(a)(9), but for the Special Pre-TEFRA Distribution Election. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in section 1.401(a)(9)-2 of the proposed regulations. If an amount is transferred or rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 of section 1.401(a)(9)-l of the proposed regulations shall apply. SECTION 12. TOP-HEAVY PLAN RULES 12.1 Application. The rules set forth in this section 12 shall supersede any provisions of this Plan or the Adoption Agreement which are inconsistent with these rules as of the first day of the first Plan Year beginning after December 31, 1983 during which the Plan is or becomes a Top-Heavy Plan and such rules shall continue to supersede such provisions for so long as the Plan is a Top-Heavy Plan unless the Code permits such rules to cease earlier or requires them to remain in effect for a longer period. 12.2 Special Definitions. For purposes of this section 12, the terms defined in this section 12.2 shall have the meanings shown opposite such terms. 12.2(a) Determination Date - means 12.2(a)(1) for the first Plan Year of a Plan which is adopted as a new Plan under the Adoption Agreement, the last day of such Plan Year, and 12.2(a)(2) for any subsequent Plan Year, the last day of the immediately preceding Plan Year, and 12.2(a)(3) for any plan year of each other qualified plan maintained by the Employer or an Affiliate which is part of a Permissive Aggregation Group or a Required Aggregation Group, the date determined under this section 12.2(a) as if the term "Plan Year" means the plan year for each such qualified plan. 12.2(b) Key Employee - means any Employee or former Employee (and the Beneficiaries of such Employee) (as determined in accordance with Code 416(i)(1)) who at any time during the Plan Year or any of the 4 immediately preceding Plan Years was 12.2(b)(1) an officer of the Employer or an Affiliate whose compensation for such Plan Year exceeds 50% of the dollar limitation under Code section 415(b)(1)(A), 12.2(b)(2) an owner (or considered to be an owner within the meaning of Code section 318) of one of the 10 largest interests in the Employer or an Affiliate whose compensation for such Plan Year exceeds the 100% of the dollar limitation under Code section 415(c)(1)(A); provided that the value of such Employee's ownership interest is more than one half of one percent, 12.2(b)(3) a 5% owner of the Employer or an Affiliate, or 12.2(b)(4) a 1% owner of the Employer or an Affiliate whose compensation for such Plan Year exceeds $150,000. For purposes of this section 12.2(b), an Employee's compensation means compensation within the meaning of Code section 415(c)(3) (as defined in section 7.2(a)(2)) but including amounts contributed by the Employer or an Affiliate pursuant to a salary reduction agreement which are excluded from gross income under Code section 125, section 402(e)(3), section 402(h) or section 403(b). 12.2(c) Permissive Aggregation Group - means a Required Aggregation Group and any other qualified plan or plans (as described in Code section 401(a)) maintained by the Employer or an Affiliate which, when considered with the Required Aggregation Group, would continue to satisfy the requirements of Code section 401(a)(4) and Code section 410. 12.2(d) Required Aggregation Group - means (1) each qualified plan (as described in code section 401(a)) maintained by the Employer or an Affiliate in which at least one Key Employee participates or participated at any time during the 5 year period ending on the Determination Date (without regard to whether such plan has terminated) and (2) any other qualified plan maintained by the Employer or an Affiliate which enables any such plan to satisfy the requirements of Code section 401(a)(4) or Code section 410. 12.2(e) Top-Heavy Plan - means this Plan if, for any Plan Year beginning after December 31, 1983, either 12.2(e)(1) this Plan is not part of a Required Aggregation Group or a Permissive Aggregation Group and the Top-Heavy Ratio for this Plan exceeds 60%; 12.2(e)(2) this Plan is part of a Required Aggregation Group but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Required Aggregation Group exceeds 60%; or 12.2(e)(3) this Plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. 12.2(f) Top-Heavy Ratio. 12.2(f)(1) If the Employer or an Affiliate maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer or an Affiliate has never maintained a defined benefit plan under which benefits have been accrued for a Participant in this Plan during the 5 year period ending on the Determination Date, "Top-Heavy Ratio" means for this Plan alone or for the Required Aggregation Group or Permissive Aggregation Group, as appropriate, a fraction, the numerator of which shall be the sum of the account balances of all Key Employees as of the Determination Date under this and all other such defined contribution plans and the denominator of which shall be the sum of the account balances of all employees as of the Determination Date under this and all other such defined contribution plans. 12.2(f)(2) If the Employer or an Affiliate maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer or an Affiliate maintains or has ever maintained one or more defined benefit plans under which benefits have been accrued for a Participant in this Plan during the 5 year period ending on the Determination Date, "Top-Heavy Ratio" means for the Required Aggregation Group or the Permissive Aggregation Group, as appropriate, a fraction, the numerator of which shall be the sum of the account balances for all Key Employees as of the Determination Date under this and all other such defined contribution plans and the sum of the present value of the accrued benefits for all Key Employees as of the Determination Date under all defined benefit plans maintained by the Employer or an Affiliate and the denominator of which shall be the sum of the account balances for all employees as of the Determination Date under this and all other such defined contribution plans and the sum of the present value of the accrued benefits for all employees as of the Determination Date under all defined benefit plans maintained by the Employer or an Affiliate. 12.2(f)(3) The following rules shall apply for purposes of calculating the Top-Heavy Ratio: (i) The value of any account balance and the present value of any accrued benefit shall be determined as of the most recent Top-Heavy Valuation Date that falls within, or ends with, the 12 month period ending on the Determination Date (or, if plans are aggregated, the Determination Dates that fall within the same calendar year), except as provided under the regulations under Code section 416 for the first and second years of a defined benefit plan; (ii) The value of any account balance and the present value of any accrued benefit shall include the value of any distributions made during the 5 year period ending on such Determination Date and any contributions due but as yet unpaid as of the Determination Date which are required to be taken into account on that date under Code section 416; (iii) The present value of an accrued benefit under a defined benefit plan shall be determined in accordance with the interest rate and mortality assumptions specified in the Adoption Agreement or, if this Plan and such defined benefit plan are Paired Plans, as specified in the Adoption Agreement for such defined benefit Paired Plan; (iv) The account balance or accrued benefit of a Participant who is not a Key Employee for the current Plan Year but who was a Key Employee in a prior Plan Year or who has not performed an Hour of Service for the Employer or any Affiliate at any time during the 5 year period ending on the Determination Date shall be disregarded; (v) Deductible employee contributions shall be disregarded; (vi) The calculation of the Top-Heavy Ratio and the extent to which contributions, distributions, rollovers, and transfers are taken into account shall be determined in accordance with Code section 416; and (vii) If the Employer maintains more than one defined benefit plan, the accrued benefit of a Participant other than a Key Employee shall be determined under the method, if any, that uniformly applies for accrual purposes under all such defined benefit plans maintained by the Employer or an Affiliate, or if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Code section 411(b)(1)(C). 12.2(g) Top-Heavy Valuation Date - means for this Plan, the last day of each Plan Year and for each other qualified plan maintained by the Employer or an Affiliate, 12.2(g)(1) Standard Option - the most recent valuation date for such plan or 12.2(g)(2) Alternative - the valuation date specified in the Adoption Agreement. 12.3 Minimum Allocation. 12.3(a) General. Except as otherwise provided in this section 12.3, for any Plan Year in which this Plan is a Top-Heavy Plan, the "minimum allocation" for each Participant who is not a Key Employee means an allocation of Employer Contributions and Forfeitures made in accordance with section 12.3(d) which shall not be less than the lesser of 12.3(a)(1) 3% of such Participant's Compensation for such Plan Year or, 12.3(a)(2) if the Employer or an Affiliate has no defined benefit plan which uses this Plan to satisfy the requirements of Code section 401(a)(4) or Code section 410, the largest percentage of the Employer Contributions and Forfeitures allocated on behalf of any Key Employee (expressed as a percentage of the first $200,000 of Compensation) for such Plan Year. 12.3(b) Defined Benefit Paired Plan. If this Plan is adopted in combination with a defined benefit Paired Plan, the Employer and the Participating Affiliates shall make a contribution under this Plan (or, if this Plan is adopted in combination with another defined contribution Paired Plan, under any combination of defined contribution Paired Plans) for each Participant who is an Eligible Employee at any time during such Plan Year who is also a Participant in the defined benefit Paired Plan equal to at least 5% (or such greater percentage as is specified in the adoption agreement for the defined benefit Paired Plan) of Compensation for such Plan Year unless the Employer elects under such defined benefit Paired Plan to provide the minimum benefit accrual under such defined benefit Paired Plan. If this section 12.3(b) applies and the Employer has not elected to provide the minimum benefit accrual under the defined benefit Paired Plan, the minimum allocation required under this section 12.3(b) for Plan Years beginning on and after the Final Compliance Date shall, subject to the ordering rules in section 12.3(c), be made under this Plan without regard to whether the Participant also benefits under the defined benefit Paired Plan. Further, if this Plan and the defined benefit Paired Plan do not benefit the same participants for such Plan Year, the minimum allocation described in section 12.3(a) shall, subject to the ordering rules in section 12.3(c), be made under this Plan for each Participant described in section 12.3(d)(1) and the minimum benefit accrual shall be made for each participant in the defined Benefit Paired Plan in accordance with the terms of such Paired Plan. 12.3(c) Defined Contribution Paired Plan. If this Plan is adopted in combination with one or more defined contribution Paired Plans, the minimum allocation required under this section 12.3, if any, shall be made under such Paired Plans in the following order: 12.3(c)(1) Standard Option - First, under the Money Purchase Pension Plan, if any; second, under the Target Benefit Pension Plan, if any; third, under the Profit Sharing Plan, if any; and finally, under the 401(k) Plan, if any. 12.3(c)(2) Alternative - in the order specified in the Adoption Agreement, 12.3(d) Participants Entitled to Allocation. The minimum allocation required for any Plan Year under this section 12.3 12.3(d)(1) shall be made for each Participant who is not a Key Employee and who is employed as an Eligible Employee (or on an authorized leave of absence as an Eligible Employee) on the last day of such Plan Year, without regard to the number of Hours of Service actually completed by such Participant in such Plan Year; and 12.3(d)(2) shall not apply to any Participant (i) who is covered under any other plan or plans maintained by the Employer or an Affiliate and the Employer has specified in the Adoption Agreement that the minimum allocation or the minimum benefit required under Code section 416 for any Plan Year for which this Plan is a Top-Heavy Plan shall be made under such other plan or plans or (ii) to the extent such Participant receives such minimum allocation or minimum benefit under this Plan or any other plans maintained by the Employer or an Affiliate. Notwithstanding section 12.3(d)(2), if this Plan is adopted as a nonstandardized Plan that intends to satisfy the safe harbor in the Code section 401(a)(4) regulations, the minimum allocation required under section 12.3 for Plan Years beginning on and after the Final Compliance Date must be made for each Participant described in section 12.3(d)(1) without regard to whether the Participant also benefits under another plan, but only to the extent that such minimum allocation is not otherwise received under this Plan. 12.3(e) Nonforfeitability. The minimum allocation required under this section 12.3 (to the extent required to be nonforfeitable under Code section 416(b)) shall not be forfeited under Code section 411(a)(3)(B) or Code section 411(a)(3)(D). 12.3(f) Compensation. For purposes of computing the minimum allocation under this section 12.3, the term "Compensation" shall mean Compensation within the meaning of Code section 415(c)(3) as described in section 7.2(a)(2). 12.3(g) Multiple Plans. If the Employer or an Affiliate also maintains another plan, the Employer shall specify in the Adoption Agreement how the minimum allocation, if any, required under Code section 416 will be satisfied and, if the Employer or an Affiliate maintains or has maintained a defined benefit plan, the method of satisfying Code section 416(h). 12.3(h) Integrated Plans. 12.3(h)(1) Profit Sharing Plan. If this Plan is adopted as a integrated Profit Sharing Plan, the following allocation formula shall apply in lieu of the formula in section 6.3(a)(2) for each Plan Year in which such Plan is a Top-Heavy Plan. The Forfeitures and the Employer Contribution shall be allocated (and posted) as of the last day of such Plan Year to the Employee Account of each Active Participant and each other Participant for whom a minimum allocation is required to be made under this section 12.3 in accordance with the following: Step One - First, the lesser of (A) the sum of the Employee Contribution and Forfeitures for such Plan Year or (B) the product of the Top-Heavy Percentage and the total Compensation of all such Participants shall be allocated i the same ratio that each such Participant's total Compensation for such Plan Year bears to the total Compensation of all such Participants for such Plan Year. Step Two - Second, the lesser of (A) the remaining Employer Contribution and Forfeitures for such Plan Year o (B) the product of the Top-Heavy Percentage (or the Maximum Disparity Rate, if less) and the total Excess Compensation of all such Participants shall be allocated in the same ratio that each such Participant's Excess Compensation for such Plan Year bears to the total Excess Compensation of all such Participants for such Plan Year. Step Three - Third, the lesser of (A) the remaining Employer Contribution and Forfeitures for such Plan Year or (B) the Integration Amount shall be allocated in the same ratio that the sum of the total Compensation and Excess Compensation of each such Participant for such Plan Year bears to the sum of the total Compensation and Excess Compensation of all such Participants for such Plan Year. Step Four - Finally the remaining Employer Contribution and Forfeitures for such Plan Year shall be allocated in the same ratio that each such Participant's total Compensation for such Plan Year bears to the total Compensation of all such Participants for such Plan Year. 12.3(h)(2) Money Purchase Pension Plan. If this Plan is adopted as an integrated Money Purchase Pension Plan, (i) the "Base Contribution Percentage" specified in the Adoption Agreement, if less than the Top-Heavy Percentage, shall be increased to equal the Top-Heavy Percentage and (ii) the Employer Contribution required under section 5.2 (as adjusted in (i) above) shall be made for each Active Participant and each other Participant for whom an allocation is required to be made under this section 12.3. 12.3(h)(3) Special Definitions. For purposes of this section 12.3(h), (i) "Excess Compensation" means the amount, if any, of a Participant's Compensation for such Plan Year which exceeds the Integration Level for such Plan Year. (ii) "Integration Amount" means the product of (1) the total Compensation and the total Excess Compensation of all such Participants and (2) the excess, if any, of the Integration Percentage specified in the Adoption Agreement over the Top-Heavy Percentage. (iii) "Top-Heavy Percentage" means 3% or such greater percentage required under this section 12.3 or specified in the Adoption Agreement. 12.4 Vesting Schedule. For any Plan Year in which this Plan is a Top-Heavy Plan, the Top-Heavy vesting schedule specified in the Adoption Agreement automatically shall apply to all benefits under the Plan within the meaning of Code section 411(a)(7) (other than benefits which are attributable to Employee Contributions or Rollover Contributions or other contributions which are nonforfeitable when made), including benefits accrued before the effective date of Code section 416 and before this Plan became a Top-Heavy Plan, unless the regular vesting schedule is at least as favorable as such Top-Heavy vesting schedule. However, the provisions of this section 12.4 shall not apply to the Account balance of any Participant who does not complete an Hour of Service after the Plan first becomes a Top-Heavy Plan and such Participant's Account balance attributable to Employer contributions and Forfeitures shall be determined without regard to this section 12.4. Further, no change in the vesting schedule as a result of a change in this Plan's status to a Top-Heavy Plan or to a plan which is not a-Top-Heavy Plan shall deprive a Participant of the nonforfeitable percentage of the Participant's Account balance accrued to the date of the change, and any such change to the vesting schedule shall be subject to the provisions of section 14.3(c). 12.5 401(k) Plan. Notwithstanding any contrary provision, the following rules shall apply if this Plan adopted as a 401(k) Plan: 12.5(a) Qualified Nonelective Contributions shall be treated as Employer contributions for purposes of satisfying the minimum allocation under section 12.3. 12.5(b) Matching Contributions allocated to the Account of a Key Employee shall be treated as Employer contributions for purposes of determining the amount of the minimum allocation required under section 12.3. The Plan may use Matching Contributions allocated on behalf of a non-Key Employee to satisfy the minimum allocation under section 12.3; provided, however, that for Plan Years beginning on and after the Final Compliance Date, such contributions shall not be treated as Matching Contributions for purposes of satisfying the limitations of section 7.4 and section 7.5 but shall instead be subject to the general nondiscrimination rules of Code section 401(a)(4). 12.5(c) Elective Deferrals allocated to the Account of a Key Employee shall be treated as Employer contributions for purposes of determining the amount of the minimum allocation required under section 12.3. However, for Plan Years beginning on and after the Final Compliance Date, Elective Deferrals allocated on behalf of non-Key Employees shall not be treated as Employer contributions for purposes of satisfying the minimum allocation required under section 12.3. SECTION 13. INSURANCE, INDIVIDUALLY DIRECTED INVESTMENTS AND PARTICIPANT LOANS 13.1 Insurance Contracts. 13.1(a) Elections and Existing Life Insurance Contracts. 13.1(a)(1) Standard Option. No Participant shall have the right to elect to have the Trustee purchase an insurance contract on his or her life for his or her Account under this Plan; however, any life insurance contract purchased under the terms of a Pre- Existing Plan, which is acceptable to the Trustee, shall continue to be held by the Trustee for the benefit of the Participant subject to the conditions of this section 13.1. 13.1(a)(2) Alternative. If so specified in the Adoption Agreement each Participant who is an Eligible Employee may elect (subject to this section 13.1) to have the Trustee purchase an insurance contract on his or her life for his or her Account under the Plan by completing and filing an Election Form with the Plan Administrator. 13.1(b) Premiums. The aggregate annual premiums on any life insurance contracts held for a Participant's Account under this Plan shall be subject to the following limitations: 13.1(b)(1) Ordinary Life. If the life insurance contracts are ordinary whole life insurance contracts which are contracts with both nondecreasing death benefits and nonincreasing premiums, such premiums shall be less than one half of the aggregate Employer Contributions plus Forfeitures credited to the Participant's Employer Account and Matching Account. 13.1(b)(2) Term and Universal Life. If the life insurance contracts are term life insurance contracts, universal life insurance contracts and any other life insurance contracts (other than whole life), then such premiums shall not exceed one fourth of the aggregate Employer Contributions plus Forfeitures credited to the Participant's Employer Account and Matching Account. 13.1(b)(3) Combination. If the life insurance contracts either combine features of ordinary whole life and other life insurance or consist of ordinary whole life and other life insurance contracts, the sum of one half of the ordinary whole life premiums plus all other life insurance premiums shall not exceed one fourth of the aggregate Employer Contributions plus Forfeitures credited to the Participant's Employer Account and Matching Account. 13.1(c) Owner and Beneficiary. The Trustee shall apply for and be the owner of each life insurance contract held under this Plan and also shall be named as the beneficiary of each such life insurance contract. In the event of the Participant's death prior to the date as of which the Participant's Account becomes payable under the Plan, the Trustee, as beneficiary, shall pay the entire proceeds of such life insurance contracts to the Participant's Account which shall then be distributed to the surviving Spouse or, if applicable, to the Participant's Beneficiary in accordance with section 10. Under no circumstances shall the Fund retain any part of the proceeds of any life insurance contracts. In the event of a conflict between the terms of the Plan and the terms of any life insurance contracts held under this Plan, the Plan provisions shall control. 13.1(d) Allocations. Any dividends or credits earned on a life insurance contract held under this Plan shall be allocated to the Account of the Participant for whom the contract was purchased and may be applied to pay the annual premium on such life insurance contract. The amount of the annual premium on each such insurance contract shall be charged against the Account of the insured Participant. The value of any such insurance contract shall be deemed to be zero for the purposes of allocating the Employer Contribution, Forfeitures or the Fund Earnings for any Plan Year as provided in section 6. 13.1(e) Distribution to Participant. Subject to section 10, Joint and Survivor Annuity Requirements, the life insurance contracts held as part of a Participant's Account shall be distributed in kind to the Participant upon retirement or other termination of employment as an Employee for reasons other than death (1) if such Account is completely nonforfeitable or (2) if the cash surrender value of such contracts is equal to or less than the nonforfeitable portion of the Participant's Account. If neither one of these conditions is satisfied and the Participant does not elect to purchase the life insurance contracts under section 13.1 (f), the Trustee shall surrender such contracts, add the proceeds to the Participant's Account and distribute the nonforfeitable percentage of the Participant's Account in accordance with section 10. 13.1(f) Termination of Insurance Election. A Participant may direct the Trustee to stop making premium payments on a life insurance contract held as part of The Participant's Account and to surrender such contract or to sell such contract to the Participant by completing and filing an Election Form with the Plan Administrator. If the Participant purchases the contract, he or she shall prepare and deliver to the Trustee all papers needed to properly effect that purchase and shall pay to the Trustee an amount equal to the cash surrender value of the contract at the time of the purchase. The amount paid either by the Participant for the purchase or by the insurance company in connection with the surrender of a contract shall be credited to the Participant's Account as of the date payment is made to the Trustee. A Participant automatically shall be deemed to have directed the Trustee to stop premium payments and to surrender a life insurance contract immediately before a premium due date if the premium due on that date would exceed the premium payment limits in section 13.1(b). 13.2 Individually Directed Investments. 13.2(a) General. 13.2(a)(1) Standard Option. No Participant or Beneficiary may direct the investment of such individual's Account, 13.2(a)(2) Alternative. If so specified in the Adoption Agreement, a Participant or a Beneficiary may elect how such individual's Account shall be invested between the investment alternatives available under the Plan from time to time. The Plan Administrator shall furnish to each Participant and Beneficiary sufficient information to make informed decisions with regard to investment alternatives and, if this Plan is intended to satisfy ERISA section 404(c), information which satisfies the requirements of the regulations under ERISA section 404(c). An individual's investment direction shall apply (i) Standard Option - to the individual's entire Account or (ii) Alternative - only to the portion of the individual's Account specified in the Adoption Agreement. 13.2(b) Election Rules. The Plan Administrator from time to time shall establish and shall communicate in writing to such individuals such reasonable restrictions and procedures for making individual investment elections as the Plan Administrator deems appropriate under the circumstances for the proper administration of this Plan. Such restrictions and procedures shall be applied on a uniform and nondiscriminatory basis to all similarly situated individuals and, if this Plan is intended to satisfy ERISA section 404(c), shall be in accordance with the regulations under ERISA section 404(c). 13.2(c) No Election. The Account of an individual for whom no investment election is in effect under this section 13.2, either because such individual failed to make a proper election or terminated an election under this section 13.2 shall be invested as designated by the Plan Administrator. 13.3 Participant Loans. This section 13.3 shall apply only if the Employer specifies in the Adoption Agreement that loans shall be permitted. However, if loans are not permitted in the Adoption Agreement, any outstanding loans made under the terms of the Pre- Existing Plan shall be subject to this section 13.3. 13.3(a) Administration and Procedures. The Plan Administrator shall establish objective nondiscriminatory written procedures for the administration of the loan program under this section 13.3 (which written procedures, together with any written amendments to such procedures, hereby are expressly incorporated by reference as a part of this Plan), including, but not limited to, 13.3(a)(1) the class of Participants and Beneficiaries who are eligible for a loan; 13.3(a)(2) the identity of the person or position authorized to administer the loan program; 13.3(a)(3) the procedures for applying for a loan; 13.3(a)(4) the basis on which loans will be approved or denied; 13.3(a)(5) the limitations, if any, on the types and amounts of loans offered; 13.3(a)(6) the procedures for determining a reasonable rate of interest; 13.3(a)(7) the types of collateral which may be used as security for a loan; and 13.3(a)(8) the events constituting default and the steps that will be taken to preserve Plan assets in the event of such default. 13.3(b) No Loans to Certain Owners and Family Members. No loan shall b e made under this Plan to a Participant or Beneficiary who is 13.3(b)(1) an Owner-Employee, 13.3(b)(2) an employee or officer of an Employer or an Affiliate which is an electing small business corporation within the meaning of Code section 1361 ("S Corporation") who owns (or is considered to own within the meaning of Code section 31 B(a)(1)) on any day during any taxable year of such corporation for which it is an S Corporation more than 5% of the outstanding stock of such corporation, or 13.3(b)(3) a member of the family (as defined in Code section 267(c)(4) of a Participant or Beneficiary described in clause (1) or (2). 13.3(c) General Conditions. If loans are made available after October 18, 1989 to any Participant or Beneficiary who is a "party in interest" (as defined in ERISA section 3(14)) with respect to the Plan, then loans shall be made available to all Participants and Beneficiaries who are parties in interest with respect to the Plan. All loans which are made under this Plan shall comply with the following requirements under Code section 4975(d)(1) and ERISA section 408(b)(1): 13.3(c)(1) such loans shall be made available to Participants and Beneficiaries who are eligible for a loan on a reasonably equivalent basis; 13.3(c)(2) such loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Employees; 13.3(c)(3) such loans shall be made in accordance with specific provisions regarding such loans set forth in the Plan and the written procedures described in section 13.3(a); 13.3(c)(4) such loans shall bear a reasonable rate of interest; and 13.3(c)(5) such loans shall be adequately secured. 13.3(d) Other Conditions. All loans made under this Plan shall be subject to the following conditions: 13.3(d)(1) If the loan is secured by any portion of the Participant's Account and section 10.5 does not apply to any portion of the Participant's Account, the Participant's Spouse, if any, must consent in writing to the granting of such security interest or to any increase in the amount of security no earlier than the beginning of the 90 day period before such loan is made; provided (i) such consent must be in writing before a notary public and must acknowledge the effect of such loan; (ii) such consent shall be irrevocable and shall be binding against the person, if any, identified as the Participant's spouse at the time of such consent and any individual who may subsequently become the Participant's Spouse; (iii) a new consent shall be required in the event of any renegotiation, extension, renewal, or other revision of such a loan; and (iv) if a valid spousal consent has been obtained, then, notwithstanding any other provision of this Plan, the portion of the Participant's vested Account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining (and may reduce) the amount of the Account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the Participant's vested Account balance (determined without regard to the preceding sentence) is parable to the surviving Spouse, then the vested Account balance shall be adjusted by first reducing the vested Account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving Spouse. 13.3(d)(2) The loan shall provide for the repayment of principal and interest in substantially level installments with payments not less frequently than quarterly over a period of 5 years or less unless such loan is classified as a "home loan" (as described in Code section 72(p)); 13.3(d)(3) If the loan is secured by any portion of the Participant's Account, such Account balance shall not be reduced as a result of a default until a distributable event occurs under the Plan; and 13.3(d)(4) The Participant or Beneficiary shall agree to such other terms and conditions as are required under the written procedures described in section 13.3(a). 13.3(e) Crediting of Loan Payments. 13.3(e)(1) Account Asset (Standard Option). The loan to a Participant whose loan request is granted under this section 13.3 shall be made from, and shall be an asset of, the Participant's Account and all principal and interest payments on such loan shall be credited exclusively to the Participant's Account. 13.3(e)(2) Fund Asset (Alternative). If the Employer specifies in the Adoption Agreement that loans shall be treated as an asset of the Fund or, if any loan which was made under a Pre-Existing Plan was treated as an asset of the Fund, such loans shall be treated under this Plan as a general Fund investment and an asset of the Fund, and all principal and interest payments on such loan shall be credited exclusively to the Fund as a general Fund investment. 13.3(f) Limitations on Amounts. The principal amount of any loan (when added to the outstanding principal balance of any outstanding loans made under this Plan or under any other plan which is tax exempt under Code section 401 and which is maintained by the Employer or an Affiliate) to the Participant shall not exceed the lesser of (1) and (2) below: 13.3(f)(1) Dollar Limit - $50,000 reduced by the excess, if any, of (i) the highest outstanding principal balance of previous loans to the Participant from the Plan (and any other plan maintained by the Employer or an Affiliate) during the one year period ending immediately before the date such current loan is made, over (ii) the current outstanding principal balance of such previous loans on the date such current loan is made, or 13.3(f)(2) Account Limit (i) Standard Option - 50% of the nonforfeitable interest in the Participant's Account at the time the loan is made or (ii) Alternative - if so specified in the Adoption Agreement, the greater of $10,000 or the amount specified in section 13.3(f)(2)(i), but in no event more than the nonforfeitable interest in the Participant's Account. An assignment or pledge of any portion of the Participant's interest in the Plan and a loan, pledge or assignment with respect to any insurance contract purchased under the Plan shall be treated as a loan for purposes of the limitations in this section 13.3(f). 13.3(g) Failure to Repay. If (1) the terms of the loan provide that it shall become due and payable in full if the Participant's or Beneficiary's obligation to repay the loan has been discharged through a bankruptcy or any other legal process or action which did not actually result in payment in full and (2) such loan is not actually repaid in full, such loan shall be canceled on the Fund's books and records and the amount otherwise distributable to such Participant or Beneficiary under this Plan shall be reduced by the principal amount of the loan plus accrued but unpaid interest due as determined without regard to whether the loan had been discharged through a bankruptcy or any other legal process or action which did not actually result in payment in full. The Plan Administrator shall have the power to direct the Trustee to take such action as the Plan Administrator deems necessary or appropriate to stop the payment of an Account to or on behalf of a Participant who fails to repay a loan (without regard to whether the obligation to repay such loan had been discharges through a bankruptcy or any other legal process or action) until the Participant's Account has been reduced by the principal plus accrued but unpaid interest due (without regard to such discharge) on such loan or to distribute the note which evidences such loan in full satisfaction of that portion of such Account which is represented by the value of such note. Notwithstanding the foregoing, in the event of default, foreclosure on the note and execution of the Plan's security interest in the Account shall not occur until a distributable event occurs under this Plan and interest shall continue to accrue only to the extent permissible under applicable law. 13.3(h) Distributions. In the event the Participant's Account becomes distributable before the loan is repaid in full, then the vested Account balance shall be adjusted by first reducing the vested Account balance by the amount of the security interest in the Account and then determining the benefit payable. Nothing shall preclude the Trustee from canceling the Plan's security interest in the Account and distributing the note in lieu of any other Plan assets in full satisfaction of that portion of the Participant's Account represented by the value of the outstanding balance of the loan or the amount which would have been outstanding but for a discharge in bankruptcy or through any other legal process. SECTION 14. ADOPTION, AMENDMENT, WITHDRAWAL AND CONVERSION, MERGER, ASSET TRANSFERS AND TERMINATION 14.1 Adoption. 14.1(a) General. Subject to the terms and conditions of this Plan, the Trust Agreement and the Adoption Agreement, any sole proprietorship, partnership or corporation may adopt this Plan by completing and executing the Adoption Agreement. The Plan as adopted by the Employer shall be effective for all purposes (other than as a "prototype plan") as of the Effective Date. However, the status of the Plan as a "prototype plan" shall be conditioned upon acceptance of the Adoption Agreement by the Prototype Sponsor and, upon such acceptance, such status as a "prototype plan" shall be effective retroactive to the Effective Date except as provided in section 14.4. 14.1(b) Pre-Existing Plan. If this Plan is adopted as an amendment and restatement of a Pre-Existing Plan, (1) the Trust Agreement shall be substituted for the trust or other funding arrangement under the Pre-Existing Plan, (2) the assets held under such trust or other funding arrangement shall become assets of the Fund, (3) an Account shall be established for each person who is a participant or beneficiary in the Pre-Existing Plan, and (4) the dollar value assigned to such participant's or beneficiary's Pre-Existing Plan account or accounts shall be credited to such person's Account under this Plan (or to one or more subaccounts under such Account). All optional forms of benefit available under the Pre-Existing Plan which must be preserved under Code section 411(d)(6) shall be available to the Participant under this Plan. Further, such optional forms shall be described in the Adoption Agreement and shall apply to the Participant's entire Account balance. Notwithstanding the foregoing, if the Employer so specifies in the Adoption Agreement and separately accounts for the benefits attributable to the Pre- Existing Plan as described in section 14.5(c) or, if applicable, section 10.5, the optional forms which must be preserved may be limited to such separate accounts. 14.1(c) Participating Affiliates. If this Plan is adopted as a standardized Plan, each Affiliate shall automatically become a Participating Affiliate effective as of the later of the Effective Date or the date such entity first becomes an Affiliate. If this Plan is adopted as a nonstandardized Plan, an Affiliate of the Employer may adopt the Employer's Plan effective as of any date on or after the Effective Date. An Affiliate's execution of the Adoption Agreement (or a separate signature page to the Adoption Agreement) shall evidence the Participating Affiliate's adoption of the Plan and the effective date of such adoption. In adopting this Plan, each Participating Affiliate is deemed to have authorized the Employer to effect all actions under this Plan on its behalf, including but not limited to the powers reserved to the Employer under this section 14 and the power to enter into such agreements with the Trustee or others as may be necessary or appropriate under the Plan. 14.2 Amendment. 14.2(a) Prototype Sponsor. Subject to the restrictions of section 14.3, the Prototype Sponsor shall have the right at any time and from time to time to amend this Plan in any respect whatsoever in writing. To the extent required under the procedures and rules in effect for master and prototype plans at the time of any such amendment, notice of such amendment shall be given to the Employer by the Prototype Sponsor as soon as practicable under the circumstances. 14.2(b) Employer. Subject to the restrictions of section 14.3, the Employer shall have no right to amend this Plan except (1) by entering into a new Adoption Agreement with the Prototype Sponsor, (2) by adding such language to the Adoption Agreement as is necessary to allow the Plan to continue to satisfy the requirements of Code section 415 or Code section 416 because of the required aggregation of multiple plans, (3) by adopting certain model amendments published by the Internal Revenue Service which specifically provide that such adoption would not cause the Plan to be treated as an individually designed plan, or (4) by withdrawing this Plan as a prototype and converting it into an individually designed plan as provided in section 14.4. 14.3 Certain Amendment Restrictions. 14.3(a) General. No amendment to the Plan shall be made which would (1) deprive a Participant of the nonforfeitable percentage of his or her Account balance accrued to the later of the effective date of the amendment or the date the amendment is adopted, or (2) decrease a Participant's Account balance or eliminate an optional form of benefit except to the extent permissible under Code section 412(c)(8), section 401(a)(4) and section 411(d)(6) and the regulations under those sections. 14.3(b) Change in Service Calculation Method. It an amendment changes the method of calculating service, each Employee who had any service credit under such prior method shall be credited with any service for any computation period during which such amendment was effective in accordance with the rules in section 3. 14.3(c) Change in Vesting Schedule. It an amendment directly or indirectly affects the computation of a Participant's nonforfeitable percentage of his or her Account or it the Plan's vesting schedule changes as a result of a change in the Plan's status as a Top-Heavy Plan (as described in section 12.4), each Participant with at least 3 years of service with the Employer or an Affiliate may elect, within a reasonable period after the adoption of the amendment, to have the nonforfeitable percentage of his or her Account computed under this Plan without regard to such amendment. In the case of a Participant who does not have at least one Hour of Service in any Plan Year beginning after December 31, 1988, the preceding sentence shall be applied by substituting 5 years of service for 3 years of service. The period during which the election may be made shall commence with the date the amendment is adopted and shall end on the later of 14.3(c)(1) 60 days after the amendment is adopted; 14.3(c)(2) 60 days after the amendment becomes effective; or 14.3(c)(3) 60 days after the Participant is issued written notice of the amendment by the Plan Administrator. Furthermore, if an amendment changes the Plan's vesting schedule, the nonforfeitable percentage (determined as of the later of the date the amendment is adopted or the date it becomes effective) of the employer-derived Account balance of each Employee who is a Participant as of such date shall not be less than the percentage computed under the Plan without regard to such amendment. 14.4 Withdrawal as a Prototype and Conversion to Individually Designed Plan. 14.4(a) Voluntary Conversion. The Employer may voluntarily withdraw this Plan as a "prototype plan" and convert it to an individually designed plan by written notice filed with the Trustee and the Prototype Sponsor. For purposes of this section 14.4, such withdrawal shall be effective with respect to the Employer's plan and the Trustee as of the effective date of such withdrawal, but such withdrawal shall not relieve the Employer of any responsibilities or liabilities to the Prototype Sponsor until 60 days after the date the Prototype Sponsor receives written notice of such withdrawal unless the Prototype Sponsor agrees in writing to an earlier effective date for such withdrawal. 14.4(b) Involuntary Conversion. The Employer shall be deemed to have withdrawn this Plan as a "prototype plan " and converted it to an individually designed plan effective as of the earlier of the date 14.4(b)(1) the Internal Revenue Service or a court determines that this Plan fails to meet the requirements of Code section 401; 14.4(b)(2) the Trustee ceases to maintain a brokerage account for the Plan with the Prototype Sponsor or with an approved subsidiary of the Prototype Sponsor; 14.4(b)(3) the Prototype Sponsor notifies the Employer in writing that the Prototype Sponsor for reasons sufficient to the Prototype Sponsor has terminated its sponsorship of its prototype plan program or of this Plan for the Employer; or 14.4(b)(4) the Employer amends any provision of this Plan or the Adoption Agreement (other than in accordance with section 14.2(b)(1) through (3)) including an amendment because of a waiver of the minimum funding requirement under Code section 412(d), 14.4(c) Effect of Withdrawal and Conversion. If this Plan is withdrawn as a prototype and converted to an individually designed Plan under this section 14.4, the Employer as of the effective date of such withdrawal shall assume the right and responsibility to amend the Plan under section 14.2(a) and thereafter only the Employer shall make amendments to this Plan; provided, (1) no such amendment shall affect the Trustee's rights or duties under this Plan without the Trustee's prior written consent and (2) any such amendment shall be subject to the restrictions of section 14.3. 14.5 Merger, Consolidation or Asset Transfers. 14.5(a) General. In the case of any Plan merger or consolidation with, or transfer of assets or liabilities to or from, any other employee benefit plan, each person for whom an Account then is maintained shall be entitled to receive a benefit from such plan, if it is then terminated, which is equal to or greater than the benefit such person would have been entitled to receive immediately before such merger, consolidation or transfer, it this Plan then had been terminated. 14.5(b) Authorization. The Plan Administrator may authorize the Trustee to accept a transfer of assets from or transfer Fund assets to the trustee, custodian or insurance company of any other plan which satisfies the requirements of Code section 401(a) in connection with a merger or consolidation with, or other transfer of assets and liabilities to or from any such plan, provided that the transfer will not affect the qualification of this Plan under Code section 401(a) and the assets to be transferred are acceptable to the Trustee. 14.5(c) Separate Account. The Plan Administrator may establish separate bookkeeping accounts for any assets transferred to the Trustee under this section 14.5 and shall establish such separate bookkeeping accounts if required under this Plan. If separate accounts are maintained with respect to transferred assets, no contributions or Forfeitures under this Plan shall be credited to such separate accounts, but such accounts shall share in the Fund Earnings on the same basis as each other Account under section 6.2. Any individual for whom an Account is established under this section 14.5 shall become a Participant in this Plan as of the effective date of the merger, consolidation or asset transfer; however, no contributions shall be made by or on behalf of such individual under this Plan unless such individual is otherwise entitled to such contributions under the terms of this Plan. 14.5(d) Code section 411(d)(6) Protected Benefits. All optional forms of benefit available under the transferor plan which must be preserved under Code section 411(d)(6) shall be available to the Participant under this Plan unless such transfer meets the requirements of Code section 414(i) and the Participant has made an elective transfer which satisfies the requirements set forth in Q&A-3(b) of section 1.411(d)-4 of the Federal Income Tax Regulations. Further, such optional forms shall be described in the Adoption Agreement and, generally, shall apply to the Participant's entire Account balance. Notwithstanding the foregoing, if the Employer so specifies in the Adoption Agreement and separately accounts for such transferred assets, the optional forms which must be preserved may be limited to such separate account. 14.6 Termination. 14.6(a) Right to Terminate. The Employer may terminate or partially terminate this Plan or discontinue contributions to this Plan at any time by written action of the Board filed with the Trustee and the Prototype Sponsor. The Employer reserves the right to terminate the participation in this Plan by any Participating Affiliate at any time by written action. Furthermore, a Participating Affiliate's participation in this Plan automatically shall terminate if (and at such time as) its status as an Affiliate terminates for any reason whatsoever (other than through a merger or consolidation into another Participating Affiliate). However, a Participating Affiliate's termination of participation in this Plan shall not be deemed to be a termination or partial termination of the Plan except to the extent required under the Code. Upon complete termination of this Plan, any unallocated amounts (other than amounts in a Code section 415 suspense account described in section 7.2(b)) shall be allocated in accordance with the Plan terms but, if the Plan terms do not address the allocation of such amounts, they shall be allocated in a nondiscriminatory manner prior to distribution of Plan assets. 14.6(b) Full Vesting Upon Termination. If this Plan is terminated or partially terminated under this section 14.6 or if there is a complete discontinuance of contributions under this Plan, the Account of each affected Employee of the Employer or an Affiliate shall become nonforfeitable on the effective date of such termination or partial termination or complete discontinuance of contributions, as the may be. In the event of a complete termination of this Plan or a complete discontinuance of contributions, each other Account (except to the extent otherwise nonforfeitable under the terms of this Plan) shall become a Forfeiture and shall be allocated as such under section 6.3 as of the effective date of such complete termination or complete discontinuance as if such date was the last day of a Plan Year. SECTION 15. ADMINISTRATION 15.1 Named Fiduciaries. The Plan Administrator and the Employer (if the Plan Administrator is not the Employer) shall be the Named Fiduciaries responsible to the extent of their powers and responsibilities assigned in the Plan for the control, management and administration of the Plan. The Plan Administrator, the Employer and the Trustee (other than Smith Barney Corporate Trust Company) shall be the Named Fiduciaries responsible to the extent of their respective powers and responsibilities assigned to them in the Trust Agreement for the safekeeping, control, management, investment and administration of the assets of the Fund. Any power or responsibility for the control, management or administration of the Plan or the Fund which is not expressly assigned to a Named Fiduciary under the Plan or the Trust Agreement, or with respect to which the proper assignment is in doubt, shall be deemed to have been assigned to the Employer as a Named Fiduciary. One Named Fiduciary shall have no responsibility to inquire into the acts and omissions of another Named Fiduciary in the exercise of powers or the discharge of responsibilities assigned to such other Named Fiduciary under the Plan or the Trust Agreement. Any person may serve in more than one fiduciary capacity under the Plan or the Trust Agreement and a fiduciary may be a Participant provided such individual otherwise satisfies the requirements of section 4. A Named Fiduciary, by written instrument filed by the Plan Administrator with the records of the Plan, may designate a person who is not a Named Fiduciary to carry out any of its responsibilities under the Plan or Trust Agreement, other than the responsibilities of the Trustee for the safekeeping, control, management, investment and administration of the assets of the Fund, except to the extent the Trustee's responsibility for investment decisions is delegated to the Employer, the Plan Administrator, or an investment manager. 15.2 Administrative Powers and Duties. Except to the extent expressly reserved under the Plan or the Trust Agreement to the Employer, the Board, or the Trustee, the Plan Administrator shall have the exclusive responsibility and complete discretionary authority to control the operation, management and administration of the Plan, with all powers necessary to enable it properly to carry out such responsibilities, including (but not limited to) the power to construe the Plan, the related Adoption Agreement, and the Trust Agreement, to determine eligibility for benefits and to resolve all interpretative, equitable or other questions that arise under the Plan or the Trust Agreement, The decisions of the Plan Administrator on all matters within the scope of its authority shall be final and binding. To the extent a discretionary power or responsibility under the Plan or Trust Agreement is expressly assigned to a person other than the Plan Administrator, such person shall have complete discretionary authority to carry out such power or responsibility and such person's decisions on all matters within the scope of such person's authority shall be final and binding. 15.3 Agent for Service of Process. The agent for service of process for this Plan shall be the person who is identified as the agent for service of process in the summary plan description for this Plan. Neither the Prototype Sponsor nor any of its affiliates shall be the agent for service of process for the Plan. 15.4 Reporting and Disclosure. All records regarding the operation, management and administration of this Plan shall be maintained by the Plan Administrator. The Plan Administrator shall satisfy any federal or state requirement to report and disclose any information regarding this Plan to any federal or state department or agency, or to any Participant or Beneficiary. SECTION 16. MISCELLANEOUS 16.1 Spendthrift Clause and Qualified Domestic Relations Orders. Except to the extent permitted by law, no Account, benefit, payment or distribution under this Plan or Trust Agreement shall be subject to attachment, garnishment, levy execution or any claim or legal process of any creditor of a Participant or Beneficiary, and no Participant or Beneficiary shall have any right to alienate, commute, anticipate or assign all or any part of such individual's Account, benefit, payment or distribution under this Plan or Trust Agreement. The preceding sentence also shall apply to the creation, alienation, assignment, or recognition of a right to any benefit payable with respect to a Participant pursuant to a domestic relations order unless such order is determined to be a qualified domestic relations order ("QDRO") within the meaning of Code section 414(p) and such order is entered on or after January 1, 1985. The Plan Administrator shall establish uniform and nondiscriminatory procedures regarding the determination of whether a domestic relations order constitutes a QDRO, the timing of distributions made pursuant to a QDRO and the treatment of any separate account established under this Plan pursuant to a QDRO. Unless otherwise expressly specified in such procedures, (1) the Plan Administrator shall treat a domestic relations order entered before January 1, 1985 as a QDRO in accordance with Code section 414(p) and (2) a distribution may be made to an alternate payee pursuant to a QDRO prior to the earliest date that a distribution could be made to a Participant under the terms of this Plan and prior to a Participant's "earliest retirement age" under Code section 414(p). The determinations and the distributions made by, or at the direction of, the Plan Administrator under this section 16.1 shall be final and binding on the Participant and on all other persons interested in such order, 16.2 Benefits Supported Only by Trust Fund. Any person having any claim for any benefit under this Plan shall look solely to the assets of the Fund for the satisfaction of that claim. In no event shall the Prototype Sponsor, the Trustee, the Plan Administrator, the Employer or a Participating Affiliate or any of their employees, officers, directors or their agents be liable in their individual capacities to any person whomsoever for the payment of any benefits under this Plan. 16.3 Discrimination. The Plan Administrator shall administer the Plan in a manner which it deems equitable under the circumstances for all similarly situated Employees, Participants, Spouses and Beneficiaries; provided, the Plan Administrator shall not permit discrimination in favor of Highly Compensated Employees of the Employer or any Participating Affiliate which would be prohibited under Code section 401(a). 16.4 Claims. Any payment to a Participant or Beneficiary or the legal representative or heirs-at-law of any such person made in accordance with the provisions of this Plan shall to the extent of such payment be in full satisfaction of all claims under this Plan against the Trustee, Plan Administrator, a Named Fiduciary, the Employer and any Participating Affiliate, any of whom may require such person, such person's legal representative or heirs-at-law, as a condition precedent to such payment, to execute a receipt and release in such form as shall be determined by the Trustee, Plan Administrator, a Named Fiduciary, the Employer or a Participating Affiliate, as the case may be. 16.5 Nonreversion. Except as provided in section 7.2(b) and in this section 16.5, neither the Employer nor any Participating Affiliate shall have any present or prospective right, claim, or interest in the Fund or in any Employer contribution made to the Trustee. To the extent permitted by the Code and ERISA, the Employer contributions described in this section 16.5, less any losses on such contributions, shall be returned by the Trustee to the Employer or to any Participating Affiliate upon the written direction of the Plan Administrator in the event that: 16.5(a) an Employer contribution is made by a mistake of fact, provided such return is effected within one year after the payment of such contribution; 16.5(b) a final judicial or Internal Revenue Service determination is made that this Plan fails to satisfy the requirements of Code section 401 with respect to its initial qualification (provided, if the Employer is not entitled to rely on the Prototype Sponsor's opinion letter, the application for the initial qualification of the Plan is made on or before the date prescribed by law for filing the Employer's return for the taxable year in which the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe), in which event all Employer contributions made before such judicial or administrative determination (whichever last occurs) plus any earnings and minus any losses shall be returned within one year after such determination, all such contributions being hereby conditioned upon this Plan satisfying all applicable requirements under Code section 401 from and after its adoption; or 16.5(c) a deduction for an Employer contribution is disallowed under Code section 404, in which event such contribution shall be returned within one year after such disallowance, all such contributions being hereby conditioned upon being deductible under Code section 404. 16.6 Exclusive Benefit. The corpus or income of the Fund shall not be diverted to or used for any purpose other than the exclusive benefit of Participants or Beneficiaries. 16.7 Expenses. Any expenses of the Fund which are properly allocable to an individual's Account (including, but not limited to, expenses related to an individual's investment directions, annuity contract purchases and other transactional fees for processing distributions) may be charged directly against such individuals Account it so provided in the administrative procedures established by the Plan Administrator. 16.8 Section 16 of Securities Exchange Act of 1934. If this Plan is invested in employer securities and this Plan permits employees of the Employer who are subject to the reporting requirements of section 16 of the Securities Act of 1934, as amended ("Act") to receive awards, then notwithstanding any other provision of this Plan, the provisions of this Plan that set forth the formula or formulas that determine the amount, price or timing of awards to such persons and any other provisions of this Plan of the type referred to in section 16b-3(c)(2)(ii) of the Act shall not be amended more than once every six months, other than to comport with changes in the Code, ERISA, or the rules thereunder. Further, to the extent required, the employees described in the preceding sentence shall be subject to such withdrawal, investment and other restrictions necessary to satisfy Rule 16b-3 under the Act. This section 16.8 is intended to comply with Rule 16b-3 under the Act and shall be effective only to the extent required by such rule and shall be interpreted and administered in accordance with such rule. 16.9 Arbitration. Any claims or controversies with the Prototype Sponsor related to this Plan are subject to arbitration in accordance with the arbitration provisions of the Smith Barney Qualified Retirement Plan and IRA Client Agreement or any successor to such agreement, which provisions hereby are expressly incorporated herein by reference. APPENDIX ONE TO THE SMITH BARNEY PROTOTYPE DEFINED CONTRIBUTION PLAN OBRA'93 ANNUAL COMPENSATION LIMIT The Plan is amended by adding the following to the end of section 2.10: 2.10(h) OBRA `93 Annual Compensation Limit. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the Plan shall not exceed the OBRA `93 annual compensation limit. The OBRA `93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA `93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA'93 annual compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA'93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA'93 annual compensation limit is $150,000. Waiver of 30-Day Notice Period [Note to Employer: The following amendment will apply only to distributions from a Profit Sharing Plan or 401(k) Plan that are not subject to the qualified joint and survivor annuity rules of Code section 401(a)(11) and Code section 417. In order for this amendment to apply to a Plan, the Employer must have selected Option IX.D.3 in the Adoption Agreement and the distribution must satisfy the Safe Harbor Rules in section 10.5.] The Plan is amended by adding the following to the end of section 9.3: 9.3(e) Waiver of 30-Day Notice Period. If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: 9.3(e)(1) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and 9.3(e)(2) the Participant, after receiving the notice, affirmatively elects a distribution. EX-10 10 EXHIBIT 10.10 EXHIBIT 10.10 OshKosh B'Gosh, Inc. 112 Otter Avenue Oshkosh, Wisconsin 54901-5008 CREDIT AGREEMENT as of November 3, 1999 Firstar Bank, BankBoston, N.A. National Association, individually and as Co-Agent individually and as Agent 100 Federal Street 777 East Wisconsin Avenue Boston, Massachusetts 02110 Milwaukee, Wisconsin 53202 Harris Trust and Savings Bank, Bank One, NA individually and as Co-Agent individually and as Co-Agent 111 West Monroe Street 111 East Wisconsin Avenue Chicago, Illinois 60690 Milwaukee, Wisconsin 53202 The Banks named in Appendix A hereto Ladies/Gentlemen: OshKosh B'Gosh, Inc., a Delaware corporation with its principal offices located in the City of Oshkosh, Wisconsin (the "Company"), hereby agrees with each of you (collectively the "Banks" and individually a "Bank"), Firstar Bank, National Association, as Agent (the "Agent") and Harris Trust and Savings Bank, Bank One, NA and BankBoston, N.A., as Co-Agents (the "Co- Agents"), as follows: ARTICLE I LOANS AND NOTES 1.1 Revolving Credit. From time to time prior to November 3, 2002 or the earlier termination in full of the Commitments (in either case the "Termination Date"), the Company may obtain loans from each of the Banks ("Revolving Credit Loans"), pro rata according to each Bank's Percentage Interest, up to an aggregate principal amount equal to the amount by which (i) $75,000,000 (the "Aggregate Revolver Commitment" and as to each Bank's respective Percentage Interest thereof, its "Revolver Commitment"), as terminated or reduced pursuant to section 1.8, exceeds (ii) the sum of (A) the aggregate amount of Letter of Credit Obligations, and (B) the aggregate amount of outstanding Swingline Loans (as defined in Section 1.3 below). The Revolver Commitment and Percentage Interest of each Bank therein is set forth in Appendix A hereto. The failure of any one or more of the Banks to lend in accordance with its Revolver Commitment shall not relieve the other Banks of their several obligations hereunder, but no Bank shall be liable in respect to the obligation of any other Bank hereunder or be obligated in any event to lend in excess of its Revolver Commitment. Subject to all of the terms and conditions hereof the Company may repay such Loans and reborrow hereunder from time to time prior to the Termination Date. Each Revolving Credit Loan shall be in a minimum amount of $1,000,000 or any multiple of $100,000 in excess of such amount (except that any Adjusted LIBOR Rate Loan shall be in a minimum amount of $5,000,000 or any multiple of $250,000 in excess of such amount). Revolving Credit Loans from each Bank shall be evidenced by a single promissory note of the Company (each a "Revolving Credit Note", and collectively with the Term Notes (as defined in section 1.2 below) and the Swingline Note (as defined in Section 1.3 below), sometimes called the "Notes") in the form of Exhibit 1.1 annexed hereto, payable to the order of the lending Bank. Outstanding Revolving Credit Loans and Swingline Loans shall be reduced to zero dollars ($0) at least for sixty (60) consecutive days each calendar year. Effective on the date of this Agreement, the Commitments of the Banks party to the Credit Agreement dated June 24, 1994, as amended (the "1994 Credit Agreement"), among the Company, such Banks and Firstar Bank, N.A., as agent for such Banks, shall automatically terminate without further action on the part of the Company or any of such Banks. 1.2 Term Loan. At any time on or prior to May 22, 2000 (the "Drawdown Period"), the Company may obtain one or more Loans (collectively, the "Term Loan") from each of the Banks, pro rata according to each Bank's Percentage Interest, up to an aggregate principal amount of $125,000,000 (the "Term Loan Commitment" and as to each Bank's respective Percentage Interest thereof, its "Term Loan Commitment"). Each advance of the Term Loan from all of the Banks shall be in a minimum principal amount of $5,000,000, except that the final advance of the Term Loan which utilizes the entire remaining portion of the Term Loan Commitment may be in any minimum amount. The Term Loan Commitment shall terminate at the expiration of the Drawdown Period as to any portion thereof which has not been advanced to the Company on or prior to such date and any such unused portion of the Term Loan Commitment may not thereafter be borrowed by the Company. Repayments of the Term Loan may not be reborrowed hereunder. Each Bank's Term Loan Commitment shall be evidenced by a single promissory note (a "Term Note" and, collectively with the Revolving Credit Notes and the Swingline Note (as defined in Section 1.3 below), sometimes called the "Notes"), payable to the order of the lending Bank in a principal amount equal to such Bank's Term Loan Commitment, dated as of the Closing Date, in substantially the form set forth in Exhibit 1.2 attached hereto. 1.3 Swingline Credit. (a) Swingline Commitment. From time to time prior to the Termination Date, the Company may obtain Swingline Loans ("Swingline Loans") from the Agent (in such capacity, the "Swingline Lender") up to an aggregate amount of $5,000,000 at any time outstanding, repay such Swingline Loans and reborrow hereunder; provided, however, that the Swingline Lender shall not advance any Swingline Loan if (i) any Default or Event of Default has occurred and is continuing, or (ii) after giving effect thereto, the aggregate amount of outstanding Revolving Credit Loans would thereby exceed the maximum amount permitted by section 1.1. Each Swingline Loan shall be in a multiple of $1,000 and the Swingline Loans shall be evidenced by a single promissory Note of the Company (the "Swingline Note", and collectively with the Revolving Credit Notes and the Term Notes, sometimes called the "Notes") in the form of Exhibit 1.3 annexed hereto, payable to the order of the Swingline Lender. (b) Refunding Revolving Credit Loans. In its sole and absolute discretion, the Swingline Lender may at any time after the occurrence and during the continuance of a Default or Event of Default, on behalf of the Company (which hereby irrevocably authorizes the Swingline Lender to act on its behalf for such purpose), request each Bank to make a Revolving Credit Loan in an amount equal to such Bank's Percentage Interest of the Swingline Loans outstanding on the date such notice is given. Each Bank shall make the proceeds of its requested Revolving Credit Loan available to the Swingline Lender, in immediately available funds, at the office of the Swingline Lender specified herein before 11:00 a.m. (Milwaukee time) on the Business Day following the day such notice is given. The proceeds of such Revolving Credit Loans shall be immediately applied to repay the outstanding Swingline Loans. (c) Participations. If any Bank refuses or otherwise fails to make a Revolving Credit Loan when requested by the Swingline Lender pursuant to section 1.3(b) above, such Bank will, by the time and in the manner such Revolving Credit Loan was to have been funded to the Swingline Lender, purchase from the Swingline Lender an undivided participating interest in the outstanding Swingline Loans in an amount equal to its Percentage Interest of the aggregate principal amount of Swingline Loans that were to have been repaid with such Revolving Credit Loans. Each Bank that so purchases a participation in a Swingline Loan shall thereafter be entitled to receive its Percentage Interest of each payment of principal received on the Swingline Loan and of interest received thereon accruing from the date such Bank funded to the Swingline Lender its participation in such Swingline Loan. 1.4 Notes. The Notes shall be executed by the Company and delivered to the Banks on or prior to the Closing Date. Although the Notes shall be expressed to be payable in the full amounts specified above, the Company shall be obligated to pay only the amounts actually disbursed to or for the account of the Company, together with interest on the unpaid balance of sums so disbursed which remains outstanding from time to time, at the rates and on the dates specified herein and in the Notes, together with the other amounts provided herein and therein. 1.5 Letters of Credit. (a) Issuance; Bank Participations. Firstar Bank, National Association and such other Bank or Banks as the Company may from time to time designate with the consent of the Agent and such Bank or Banks (each an "LOC Bank") shall from time to time when so requested by the Company issue standby and commercial letters of credit, respectively (each a "Letter of Credit" and collectively the "Letters of Credit") for the account of the Company up to an aggregate face amount of $45,000,000; provided, however, that the LOC Bank shall not issue any Letter of Credit if (i) any Default or Event of Default has occurred and is continuing, or (ii) after giving effect thereto, the aggregate amount of outstanding Revolving Credit Loans would thereby exceed the maximum amount permitted by Section 1.1. All outstanding letters of credit issued pursuant to the 1994 Credit Agreement shall automatically be deemed to be Letters of Credit issued pursuant to this section 1.5(a). Each LOC Bank hereby grants to each other Bank, and each other Bank hereby agrees to take, a pro rata participation in each Letter of Credit issued hereunder and all rights (including rights to reimbursement from the Company under paragraph (c) below) and obligations associated therewith in accordance with the Percentage Interest of each Bank. In the event of any drawing on a Letter of Credit which is not reimbursed by or on behalf of the Company, each Bank shall pay to the appropriate LOC Bank a proportionate amount of such drawing equal to its Percentage Interest therein. Each LOC Bank shall divide the proceeds of any reimbursement of a drawing on a Letter of Credit with the other Banks that have made payment to the LOC Bank pursuant to the foregoing sentence, pro rata according to the respective contributions of such other Banks. (b) Cash Collateral. In the event that any Letter of Credit remains outstanding beyond the fifteenth day prior to the Termination Date, the Company shall upon demand of the Required Banks (or the Agent acting with the consent of the Required Banks) either (i) pay to the Agent the sum of the largest draft which could then or thereafter be drawn under such Letter of Credit, which sum the Agent may hold for the account of the Company, without interest, for the purpose of paying any draft presented, with the excess, if any, to be returned to the Company upon termination or expiration of such Letter of Credit or (ii) deliver a back-up letter of credit to the Agent securing the Company's reimbursement obligations with respect to such Letter of Credit in form and substance acceptable to the Agent and from a creditworthy financial institution acceptable to the Agent. (c) Standby Letter of Credit Fees. The Company agrees to pay to the Agent for the pro rata benefit of the Banks a letter of credit fee in respect of each standby Letter of Credit at a per annum rate equal to the Applicable Margin on the undrawn face amount of such standby Letter of Credit. Such fees shall be payable quarterly in arrears on the first day of each calendar quarter. (d) Reimbursement. The Company hereby unconditionally promises to pay to the appropriate LOC Bank upon demand, without defense, setoff or counterclaim, the amount of each drawing under Letters of Credit issued by such LOC Bank plus interest on the foregoing from the date due at the Prime Rate. (e) Reliance on Documents. Delivery to the LOC Banks of any documents complying on their face with the requirements of any Letter of Credit shall be sufficient evidence of the validity, genuineness and sufficiency thereof and of the good faith and proper performance of drawers and users of such Letter of Credit, their agents and assignees; and the LOC Banks may rely thereon without liability or responsibility with respect thereto, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged. (f) Non-Liability for Other Matters. The LOC Banks shall not be liable to the Company for (i) honoring any requests for payment under any Letter of Credit which strictly comply on their face with the terms of such Letter of Credit, (ii) any delay in giving or failing to give any notice, (iii) errors, delays, misdeliveries or losses in transmission of telegrams, cables, letters or other communications or documents or items forwarded in connection with any Letter of Credit or any draft, (iv) accepting and relying upon the name, signature or act of any party who is or purports to be acting in strict compliance with the terms of any Letter of Credit; or (v) any other action taken or omitted by the LOC Banks in good faith in connection with any Letter of Credit or any draft; except only that an LOC Bank shall be liable to the Company to the extent of damages suffered by the Company determined by final judgment in a court of competent jurisdiction to have been caused by (A) the LOC Bank's willful misconduct or gross negligence or (B) the LOC Bank's willful and wrongful failure to pay under any Letter of Credit after the presentation to it of documents strictly complying with the terms and conditions of the Letter of Credit. (g) Obligations Absolute. The Company's and the other Banks' obligations to reimburse any LOC Bank for a drawing made on a Letter of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under any and all circumstances whatsoever; provided, however, that payment of such drawing by the LOC Bank shall not have constituted gross negligence or willful misconduct of such LOC Bank. 1.6 Use of Proceeds. The Company represents, warrants and agrees that: (a) The proceeds of the Loans made hereunder will be used solely for the following purposes: (i) proceeds of Revolving Credit Loans shall be used for general corporate purposes; and (ii) proceeds of the Term Loan shall be used to finance the repurchase of the Company's outstanding common stock. (b) No part of the proceeds of any Loan made hereunder will be used to "purchase" or "carry" any "margin stock" or to extend credit to others for the purpose of "purchasing" or "carrying" any "margin stock" (as such terms are defined in the Regulation U of the Board of Governors of the Federal Reserve System), and the assets of the Company and its Subsidiaries do not include, and neither the Company nor any Subsidiary has any present intention of acquiring, any such security. 1.7 Commitment Fee. The Company shall pay to the Agent for the account of the Banks, pro rata according to their respective Percentage Interests, a commitment fee computed at a rate per annum equal to the Applicable Margin on the difference existing from time to time between (a) the Aggregate Commitment, and (b) the outstanding unpaid principal balance of Revolving Credit Loans and the Term Loan. Such commitment fees shall accrue during the period from the Closing Date to and including the Termination Date and be payable quarterly in arrears on the last day of each calendar month. 1.8 Termination or Reduction. The Company shall have the right, upon five Business Days' prior written notice to each Bank, to ratably reduce in part the Aggregate Revolver Commitment, provided, however, that (i) each partial reduction of the Aggregate Revolver Commitment shall be in the amount of $1,000,000 or an integral multiple thereof, and (ii) no reduction shall reduce the Aggregate Revolver Commitment to an amount less than the sum of (A) the aggregate principal amount of outstanding Revolving Credit Loans, (B) the aggregate principal amount of outstanding Swingline Loans, and (C) the aggregate amount of outstanding Letter of Credit Obligations. Subject to the limitations of the preceding sentence, the Aggregate Revolver Commitment may be terminated in whole at any time upon five Business Days' prior written notice to each Bank. The Company shall also have the right, upon five (5) Business Days' notice to each Bank, to ratably reduce in part the Term Loan Commitment at any time prior to the end of the Drawdown Period, provided, however, that (i) each partial reduction of the Term Loan Commitment shall be in the amount of $1,000,000 or an integral multiple thereof, and (ii) no reduction shall reduce the Term Loan Commitment to an amount less than the outstanding principal balance of the Term Loan. ARTICLE II ADMINISTRATION OF CREDIT 2.1 Elective Rates of Interest on Loans. The unpaid principal balance of the Notes may be comprised of Variable Rate Loans and/or Adjusted LIBOR Rate Loans as elected by the Company from time to time in accordance with the procedures set forth below; provided, however, that each Adjusted LIBOR Rate Loan must be in a minimum amount of $5,000,000 and in increments of $250,000 above that amount; provided, further, that no election of an Adjusted LIBOR Rate Loan shall become effective if any Default or Event of Default has occurred and is continuing; and provided, further, that no more than ten (10) different Interest Periods for Adjusted LIBOR Rate Loans may be outstanding at any one time. Each notice of election of an Adjusted LIBOR Rate Loan shall be irrevocable. Swingline Loans shall at all times bear interest at the Variable Rate or, at the Company's election, such other rate quoted to the Company by the Swingline Lender when a Swingline Loan is requested. 2.2 Borrowing Procedure. The Company will request a Loan hereunder by written notice in the form of Exhibit 2.2 annexed hereto, or by telephonic notice (which notice shall be confirmed in writing if the Agent so requests), which notices will be irrevocable, to the Agent not later than 11:00 a.m., Milwaukee time, on the proposed Borrowing Date, or, in the case of an Adjusted LIBOR Rate Loan, not less than two Business Days before the proposed Borrowing Date. In the event of any inconsistency between the telephonic notice and the written confirmation thereof, the telephonic notice will control. Each such request will be effective upon receipt by the Agent and will specify (i) the amount of the requested Loan; (ii) the proposed Borrowing Date; (iii) whether such Loan will bear interest at the Variable Rate or at the Adjusted LIBOR Rate; and (iv) in the case of an Adjusted LIBOR Rate Loan, the Interest Period therefor. Upon its receipt of such notice from the Company, the Agent shall promptly give notice to the other Banks, each of which shall have its respective portion of the requested Loan available to the Agent in Milwaukee in immediately available funds not later than 2:00 p.m., Milwaukee time, on the Borrowing Date. Out of the funds received from each Bank for the making of the Loans hereunder, the Agent will make a Loan to the Company in such amount on behalf of such Banks. Notes and other required documents delivered to the Agent for the account of each Bank shall be promptly delivered to such Bank, or in accordance with instructions received from it, together with copies of such other documents received in connection with the borrowing as such Bank shall request. Unless the Agent shall have been notified by telephone, confirmed promptly thereafter in writing, by a Bank not later than 1:00 p.m., Milwaukee time, on a Borrowing Date that such Bank will not make available to the Agent such Bank's pro rata share of a requested Loan, the Agent may assume that such Bank has made such amount available to the Agent and, in reliance upon such assumption, make available to the Company on such Borrowing Date a corresponding amount. If and to the extent that such Bank, without giving such notice, shall not have so made such amount available to the Agent, such Bank and the Company severally agree to repay the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Agent made such amount available to the Company to the date such amount is repaid to the Agent, at (i) in the case of the Company, the rate applicable to such Loan, and (ii) in the case of such Bank, the Federal Funds Rate for each of the first three days (or fraction thereof) after the date of demand and the Variable Rate for each day (or fraction thereof) thereafter. 2.3 Conversion. The Company may elect from time to time, subject to the terms and conditions of the Notes and this Agreement, to convert all or a portion of a Variable Rate Loan into an Adjusted LIBOR Rate Loan or to convert all or a portion of an Adjusted LIBOR Rate Loan into a Variable Rate Loan; provided, however, that any conversion of an Adjusted LIBOR Rate Loan will occur on the last day of the Interest Period applicable thereto. 2.4 Automatic Conversion. A Variable Rate Loan will continue as a Variable Rate Loan unless and until converted into an Adjusted LIBOR Rate Loan. At the end of the applicable Interest Period for an Adjusted LIBOR Rate Loan, such Adjusted LIBOR Rate Loan will automatically be converted into a Variable Rate Loan unless the Company shall have given the Agent notice in accordance with Section 2.5 requesting that, at the end of such Interest Period, all or a portion of such Adjusted LIBOR Rate Loan be continued as an Adjusted LIBOR Rate Loan for an additional Interest Period. 2.5 Conversion and Continuation Procedure. The Company will give the Agent written notice in the form of Exhibit 2.5 annexed hereto, or telephonic notice (confirmed in writing if the Agent so requests), which notices will be irrevocable, of each conversion of a Variable Rate Loan or continuation of an Adjusted LIBOR Rate Loan not later than 10:00 a.m., Milwaukee time, on a Business Day which is not less than two Business Days before the date of the requested conversion or continuation, specifying (i) the requested date (which must be a Business Day) of such conversion or continuation; (ii) the amount of the Loan to be converted or continued; (iii) whether such Loan currently bears interest at the Variable Rate or the Adjusted LIBOR Rate; and (iv) the duration of the Interest Period to be applicable thereto. 2.6 Basis for Determining Interest Rate Inadequate or Unfair. If with respect to an Interest Period for any Adjusted LIBOR Rate Loan: (a) any Bank determines in good faith (which determination will be binding and conclusive on the Company) that by reason of circumstances affecting the London interbank market adequate and reasonable means do not exist for ascertaining the applicable Adjusted LIBOR Rate; or (b) any Bank reasonably determines (which determination will be binding and conclusive on the Company) that the Adjusted LIBOR Rate will not adequately and fairly reflect the cost of maintaining or funding such Adjusted LIBOR Rate Loan for such Interest Period, or that the making or funding of Adjusted LIBOR Rate Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the opinion of such Bank materially affects Adjusted LIBOR Rate Loans; then, [a] such Bank will promptly notify the Company thereof, and [b] so long as such circumstances continue, such Bank will not be under any obligation to make any new Adjusted LIBOR Rate Loan so affected. 2.7 Changes in Law Rendering Certain Loans Unlawful. In the event that any Regulatory Change should make it (or, in the good faith judgment of a Bank, should raise substantial questions as to whether it is) unlawful for such Bank to make, maintain or fund an Adjusted LIBOR Rate Loan, (i) such Bank will promptly notify each of the other parties hereto; (ii) the obligation of such Bank to make Adjusted LIBOR Rate Loans shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness; and (iii) upon such notice, any outstanding Adjusted LIBOR Rate Loan made by such Bank will automatically convert into a Variable Rate Loan to the extent that it is unlawful for such Bank to maintain such outstanding Adjusted LIBOR Rate Loan. 2.8 Increased Costs. If any Regulatory Change, (a) shall subject any Bank to any tax, duty or other charge with respect to any of its Loans or any Letter of Credit hereunder, or shall change the basis of taxation of payments to any Bank of the principal or interest on its Loans or Letters of Credit hereunder, or any other amounts due under this Agreement in respect of such Loans, or its obligation to make Loans or issue Letters of Credit hereunder (except for changes in the rate of tax on the overall net income of such Bank); (b) shall impose, modify or make applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of the Adjusted LIBOR Rate), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank; or (c) shall impose on any Bank any other condition affecting its Loans or Letters of Credit hereunder; and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D or any other analogous law, rule or regulation, to impose a cost on) such Bank of making or maintaining any Loans or issuing Letters of Credit hereunder, or to reduce the amount of any sum received or receivable by such Bank under this Agreement and any document or instrument related hereto; then upon notice from such Bank (which notice shall be sent to the Agent and the Company and shall be accompanied by a statement setting forth in reasonable detail the basis of such increased cost or other effect on the Loans or Letters of Credit), the Company shall pay directly to such Bank, on demand, such additional amount or amounts as will compensate such Bank for such increased cost or such reduction. 2.9 Discretion of Banks as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its Loans hereunder in any manner it sees fit. 2.10 Capital Adequacy. If any Regulatory Change affects the treatment of any Loan or Letter of Credit hereunder of a Bank as an asset or other item included for the purpose of calculating the appropriate amount of capital to be maintained by such Bank or any corporation controlling such Bank and has the effect of reducing the rate of return on such Bank's or such corporation's capital as a consequence of the obligations of such Bank hereunder to a level below that which such Bank or such corporation could have achieved but for such Regulatory Change (taking into account such Bank's or such corporation's policies with respect to capital adequacy) by an amount deemed in good faith by such Bank to be material, then the Company shall pay to such Bank, on demand, such additional amount or amounts as will compensate such Bank or such corporation, as the case may be, for such reduction Such Bank shall submit, to the Agent and the Company, a statement as to the amount of such compensation, prepared in good faith and in reasonable detail. Each of the Banks represents to the Company that, as of the date hereof, it is not aware of any fact or circumstance that would give rise to a claim for compensation under this section 2.10. 2.11 Limitation on Prepayment. A Variable Rate Loan may be prepaid at the option of the Company in whole or in part at any time without premium or penalty. An Adjusted LIBOR Rate Loan may be prepaid at any time at the option of the Company; provided, however, that prepayment prior to the last day of the Interest Period applicable thereto will require the payment by Company of the amount (if any) required by section 2.12. All prepayments shall be accompanied by interest accrued on the amount prepaid through the date of prepayment. In case of prepayment of less than all of the outstanding principal amount of the Term Notes, all prepayments made shall be in multiples of $1,000,000, and shall be applied upon the principal installments of the Term Notes in the inverse order of their maturities. 2.12 Funding Losses. The Company hereby agrees that upon demand by any Bank (which demand shall be sent to the Agent and the Company and shall be accompanied by a statement setting forth in reasonable detail the basis for the calculations of the amount being claimed) the Company will indemnify such Bank against any loss or expense which such Bank may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain Adjusted LIBOR Rate Loans and any loss of anticipated return), as reasonably determined by such Bank, as a result of (i) any payment, prepayment or conversion of any Adjusted LIBOR Rate Loan on a date other than the last day of an Interest Period for such Loan whether not required by any other provisions of this Agreement, or (ii) any failure of the Company to obtain an Adjusted LIBOR Rate Loan on a Borrowing Date or to convert a Variable Rate Loan to an Adjusted LIBOR Rate Loan or to continue an Adjusted LIBOR Rate Loan at the end of any Interest Period, as specified by the Company in a notice to the Agent as set forth above. 2.13 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Bank pursuant to Sections 2.6, 2.7, 2.8, 2.10 and 2.12 shall be rebuttably presumptive evidence of the correctness of the determinations and statements and shall be conclusive absent manifest error. The provisions of section 2.8, 2.10 and 2.12 shall survive the obligation of the Banks to extend credit under this Agreement and the repayment of the Loans; provided that the Company shall not be under any obligation to compensate any Bank under Section 2.8 or 2.10 above with respect to increased costs or reductions arising from any period prior to the date that is three months prior to the date of such request if such Bank knew or could reasonably have been expected to be aware of the circumstances giving rise to such increased costs or reductions and of the fact that such circumstances would in fact result in a claim for increased compensation by reason of such increased costs or reductions; provided further that the foregoing limitation shall not apply to any increased costs or reductions arising out of the retroactive application of any law, regulation, rule, guideline or directive as aforesaid within such three-month period. 2.14 Obligation of Banks to Mitigate; Replacement of Bank. (a) Each Bank agrees that, as promptly as practicable after the officer of such Bank responsible for administering the Loans of such Bank becomes aware of the occurrence of an event or the existence of a condition that would entitle such Bank to receive payments under Section 2.8, 2.10 or 2.12, it will, to the extent not inconsistent with the internal policies of such Bank and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitment of such Bank or the affected Loans of such Bank through another lending office of such Bank, or (ii) take such other measures as such Bank may deem reasonable, if as a result thereof the additional amounts which would otherwise be required to be paid to such Bank pursuant to Section 2.8, 2.10 or 2.12 would be materially reduced and if, as determined by such Bank in its sole discretion, the making, issuing, funding or maintaining of such Commitment or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitment or Loans or the interests of such Bank. (b) If the Company receives a notice from a Bank pursuant to Section 2.6, 2.7, 2.8, 2.10 or 2.12, so long as (i) no Default or Event of Default shall have occurred and be continuing and the Company has obtained a commitment from one or more of the Banks or another financial institution acceptable to the Company and the Agent to purchase at par such Bank's Loans, Commitment and other obligations and to assume all obligations of the Bank to be replaced, (ii) at such time the Bank to be replaced is not an LOC Bank with respect to any Letters of Credit outstanding and (iii) such Bank to be replaced is unwilling to withdraw the notice delivered to the Company, upon 30 days' prior written notice to such Bank and Agent, the Company may require the Bank giving such notice to assign all of its Loans, Commitment and other obligations to such other financial institution; provided that, prior to or concurrently with such replacement, the Company has paid to the Bank giving such notice all amounts under Sections 2.8, 2.10 and 2.12 through such date of replacement. 2.15 Computations of Interest. All computations of interest and other amounts due under the Notes and fees and other amounts due under this Agreement will be based on a 360-day year using the actual number of days occurring in the period for which such interest, fees or other amounts are payable. 2.16 Payments. Interest on all Loans will be due and payable (i) in the case of a Variable Rate Loan, monthly beginning on the last Business Day of the month in which the Company obtains such Variable Rate Loan and on the last Business Day of each month thereafter; (ii) in the case of an Adjusted LIBOR Rate Loan, on the last Business Day of the applicable Interest Period; and (iii) in the case of any Loan, at the respective maturity of such Loan, whether by acceleration or otherwise. All payments and prepayments of principal, interest and fees (other than Agent's Fees) under this Agreement and the Notes shall be made to the Agent prior to 1:00 p.m., Milwaukee time, in immediately available funds for the ratable account of the Banks and the holders of the Notes then outstanding, as appropriate. All payments and prepayments of principal and all payments of interest, fees and other amounts payable hereunder shall be made by the Company without counterclaim or setoff and free and clear of, and without any deduction or withholding for, any taxes or other payments. 2.17 Application of Payments. The Agent shall promptly distribute to each such Bank or holder pro rata the amount of principal, interest or fees (other than Agent's Fees) received by the Agent for the account of such holder. Any payment to the Agent for the account of a Bank or a holder of a Note under this Agreement shall constitute a payment by the Company to such Bank or holder of the amount so paid to the Agent, and any Notes or portions thereof so paid shall not be considered outstanding for any purpose after the date of such payment to the Agent. 2.18 Pro Rata Treatment. In the event that any Bank shall receive from the Company or any other source (other than the sale of a participation to another commercial lender in the ordinary course of business) any payment (other than a payment of Agent's fees) of, on account of, or for any obligation of the Company hereunder or under the Notes (whether pursuant to the exercise of any right of set off, banker's lien, realization upon any security held for or appropriated to such obligation, counterclaim or otherwise) other than as above provided, then such Bank shall immediately purchase, without recourse and for cash, an interest in the obligations of the same nature held by the other Banks so that each Bank shall thereafter have a percentage interest in all of such obligations equal to the percentage interest which such Bank held in the Notes outstanding immediately before such payment; provided, that if any payment so received shall be recovered in whole or in part from such purchasing Bank, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. The Company specifically acknowledges and consents to the preceding sentence. 2.19 Interest Following Event of Default. From and after the occurrence and during the continuance of an Event of Default, the unpaid principal amount of all Loans and all other amounts due and unpaid under this Agreement and the Notes will bear interest until paid computed at a rate equal to 2% per annum in excess of the rate or rates otherwise payable hereunder (the "Default Rate"). 2.20 Deposits; Set Off. If any Event of Default occurs hereunder, each Bank may offset and apply any such security toward the payment of the Note or Notes held by such Bank, whether or not such Note or Notes, or any part thereof, shall then be due. Promptly upon its charging any account of the Company pursuant to this section, such Bank shall give the Company notice thereof. ARTICLE III CONDITIONS OF BORROWING Without limiting any of the other terms of this Agreement, none of the Banks shall be required to make any Loan to the Company hereunder or issue any Letter of Credit unless each of the following conditions has been satisfied: 3.1 Representations. The representations and warranties contained in Article IV hereof continue to be true and correct in all material respects on the date of such Loan and no Default or Event of Default hereunder shall have occurred and be continuing. 3.2 Insurance Certificate. Prior to the initial Loan the Banks shall have received satisfactory evidence that the Company maintains hazard and liability insurance coverage reasonably satisfactory to the Banks. 3.3 Form U-1. Prior to the initial Loan the Company shall have executed and delivered to the Agent a Federal Reserve Form U-l provided for in Regulation U of the Board of Governors of the Federal Reserve System, and the statements made therein shall be such, in the reasonable opinion of the Banks, as to permit the transactions contemplated hereby without violation of Regulation U. 3.4 Counsel Opinion. Prior to the initial Loan the Banks shall have received from Company's counsel satisfactory opinions as to such matters relating to the Company and its Subsidiaries, the validity and enforceability of this Agreement, the Loans to be made hereunder and the other documents required by this Article III as the Banks shall reasonably require. The Company shall execute and/or deliver to the Banks or their respective counsel such documents concerning its corporate status and the authorization of such transactions as may be requested. 3.5 Proceedings Satisfactory. All proceedings taken in connection with the transactions contemplated by this Agreement, and all instruments, authorizations and other documents applicable thereto, shall be satisfactory in form and substance to the Banks and their respective counsel. 3.6 Violation of Environmental Laws. In the reasonable opinion of the Banks there shall not exist any uncorrected violation by the Company or any Subsidiary of an Environmental Law or any condition which requires, or may require, a cleanup, removal or other remedial action by the Company or any Subsidiary under any Environmental Laws costing $2,500,000 or more in the aggregate. 3.7 Closing Fee. The Agent shall have received the closing fee required pursuant to the fee letter of even date herewith between the Company and the Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce the Banks to make the Loans as provided herein, the Company represents and warrants to the Banks as follows, except as set forth in a letter (the "Information and Exceptions Letter") delivered to the Banks not later than three (3) Business Days prior to the date of this Agreement. 4.1 Organization. The Company and each of its Subsidiaries is a corporation duly organized and existing in good standing under the laws of the jurisdiction under which it was incorporated, and has all requisite power and authority, corporate or otherwise, to conduct its business and to own its properties. Set forth in the Information and Exceptions Letter is a complete and accurate list of all of its Subsidiaries, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, the percentage of the outstanding shares of each class of capital stock owned (directly or indirectly) by the Company and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase, and similar rights. All of the outstanding stock of all of the Subsidiaries has been legally and validly issued, is fully paid and non-assessable except as provided by section 180.0622(2)(b) of the Wisconsin Business Corporation Law and its predecessor statute, as judicially interpreted, and is owned by the Company or one or more other Subsidiaries free and clear of all pledges, liens, security interests and other charges or encumbrances. The Company is duly licensed or qualified to do business in all jurisdictions in which such qualification is required, and failure to so qualify could have a material adverse effect on the property, financial condition or business operations of the Company. 4.2 Authority. The execution, delivery and performance of this Agreement, the Notes and the documents required by Article III (the "Collateral Documents") are within the corporate powers of the Company, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the stockholders of the Company, (ii) violate any provision of the articles of incorporation or by-laws of the Company or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Company or any Subsidiary; (iii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iv) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Company or any Subsidiary pursuant to, any indenture or other agreement or instrument under which the Company or any Subsidiary is a party or by which it or its properties may be bound or affected. This Agreement constitutes, and each of the Notes and each of the Collateral Documents when executed and delivered hereunder will constitute, legal, valid and binding obligations of the Company or other signatory enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally. 4.3 Investment Company Act of 1940. Neither the Company nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.4 Employee Retirement Income Security Act. All Plans are in compliance in all material respects with the applicable provisions of ERISA. Neither the Company nor any Subsidiary has incurred any material "accumulated funding deficiency" within the meaning of section 302(a)(2) of ERISA in connection with any Plan. There has been no Reportable Event for any Plan, the occurrence of which would have a materially adverse effect on the Company or any Subsidiary, nor has the Company or any Subsidiary incurred any material liability to the Pension Benefit Guaranty Corporation under section 4062 of ERISA in connection with any Plan. The Unfunded Liabilities of all Plans do not in the aggregate exceed $2,500,000. 4.5 Financial Statements. The audited consolidated and consolidating balance sheets of the Company and its Subsidiaries as of December 31, 1998, and the consolidated and consolidating statements of income and cash flow of the Company and its Subsidiaries for the year ended on that date, as prepared by the Company and certified by Ernst & Young and heretofore furnished to the Banks, present fairly the financial condition of the Company and such Subsidiaries as of that date, and the results of their operations for the fiscal year ended on that date. Since December 31, 1998, there has been no material adverse change in the property, financial condition or business operations of the Company and its Subsidiaries, taken as a whole. 4.6 Liens. The Company and each Subsidiary has good and marketable title to all of its assets, real and personal, free and clear of all liens, security interests, mortgages and encumbrances of any kind, except Permitted Liens. To the best of the Company's knowledge and belief, all owned and leased buildings and equipment of the Company and its Subsidiaries are in good condition, repair and working order in all material respects and conform in all material respects to all applicable laws, regulations and ordinances. 4.7 Contingent Liabilities. Neither the Company nor any Subsidiary has any guarantees or other contingent liabilities outstanding (including, without limitation, liabilities by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), except those permitted by section 5.7 hereof. 4.8 Taxes. Except as expressly disclosed in the financial statements referred to in section 4.5 above, neither the Company nor any Subsidiary has any material outstanding unpaid tax liability (except for taxes which are currently accruing from current operations and ownership of property, which are not delinquent), and no tax deficiencies have been proposed or assessed against the Company or any Subsidiary. The most recent completed audit of the Company's federal income tax returns was for the Company's income tax year ending December 31, 1989, and all taxes shown by such returns (together with any adjustments arising out of such audit, if any) have been paid. 4.9 Absence of Litigation. Neither the Company nor any Subsidiary is a party to any litigation or administrative proceeding, nor so far as is known by the Company is any litigation or administrative proceeding threatened against it or any Subsidiary, which in either case (i) challenges the Company's execution, delivery or performance of this Agreement, the Notes, or any of the Collateral Documents, (ii) could, if adversely determined, cause any material adverse change in the property, financial condition or the conduct of the business of the Company and its Subsidiaries taken as a whole, (iii) asserts or alleges the Company or any Subsidiary violated Environmental Laws, (iv) asserts or alleges that Company or any Subsidiary is required to cleanup, remove, or take remedial or other response action due to the disposal, depositing, discharge, leaking or other release of any hazardous substances or materials, or (v) asserts or alleges that Company or any Subsidiary is required to pay all or a portion of the cost of any past, present or future cleanup, removal or remedial or other response action which arises out of or is related to the disposal, depositing, discharge, leaking or other release of any hazardous substances or materials by Company or any Subsidiary, except with respect to violations, cleanups, removals and other remedial and response actions referred to clauses (iii), (iv) and (v) above which will cost the Company and its Subsidiaries less than $2,500,000 in the aggregate. 4.10 Absence of Default. No event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company or any Subsidiary the right to accelerate the maturity of any indebtedness of the Company or any Subsidiary for borrowed money, in each case in excess of $1,000,000. Neither the Company nor any Subsidiary is in default under any other lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance with which could materially adversely affect its property, financial condition or business operations. 4.11 No Burdensome Agreements. Neither the Company nor any Subsidiary is a party to any agreement, instrument or undertaking, or subject to any other restriction, (i) which materially adversely affects the property, financial condition or business operations of the Company and its Subsidiaries taken as a whole, or (ii) under or pursuant to which the Company or any Subsidiary is or will be required to place (or under which any other person may place) a lien upon any of its properties securing indebtedness either upon demand or upon the happening of a condition, with or without such demand, other than Permitted Liens. 4.12 Trademarks, etc. The Company and its Subsidiaries possess adequate trademarks, trade names, copyrights, patents, permits, service marks and licenses, or rights thereto, for the present and planned future conduct of their respective businesses substantially as now conducted, without any known conflict with the rights of others which might result in a material adverse effect on the Company and its Subsidiaries taken as a whole. 4.13 Partnerships; Joint Ventures. Neither the Company nor any Subsidiary is a member of any partnership or joint venture except as permitted under section 5.4. 4.14 Full Disclosure. No information, exhibit or report furnished by the Company or any Subsidiary to any Bank in connection with the negotiation or execution of this Agreement contained any material misstatement of fact as of the date when made or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading as of the date when made. 4.15 Fiscal Year. The fiscal year of the Company and each Subsidiary ends on the Saturday which is closest to December 31 of each year. 4.16 Environmental Conditions. To the Company's knowledge after reasonable investigation, there are no conditions existing currently or likely to exist during the term of this Agreement which would subject the Company or any Subsidiary to damages, penalties, injunctive relief or cleanup costs under any Environmental Laws or which require or are likely to require cleanup, removal, remedial action or other response pursuant to Environmental Laws by the Company or any Subsidiary, except for such matters which will cost the Company and its Subsidiaries less than $2,500,000 in the aggregate. 4.17 Environmental Judgments, Decrees and Orders. Neither the Company nor any Subsidiary is subject to any judgment, decree, order or citation related to or arising out of Environmental Laws and neither the Company nor any Subsidiary has been named or listed as a potentially responsible party by any governmental body or agency in a matter arising under any Environmental Laws, except for such matters which will cost the Company and its Subsidiaries less than $2,500,000 in the aggregate. 4.18 Year 2000. The Company has conducted a review of its material computer systems and equipment containing embedded microchips to determine whether they are Year 2000 Compliant (as defined below). The Company has plans in place to complete all system upgrades or reprogramming necessary to make its material computer systems and equipment containing embedded microchips Year 2000 Compliant, and to complete the testing thereof, by the Closing Date. The Company has received confirmation from what it believes to be all of its significant vendors and customers as to whether their systems are Year 2000 Compliant and has taken necessary steps to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remedy their own year 2000 issues. The aggregate cost to the Company of such reprogramming, system upgrades and testing, and the reasonably foreseeable consequences of year 2000 to the Company, (including, without limitation, reprogramming errors and failure of others' systems or equipment), will not result in a material adverse effect on the business, operations or financial condition of the Company. For purposes of the foregoing, "Year 2000 Compliant" shall mean the ability of the system to provide all of the following functions: (a) Handle date information before, during and after January 1, 2000, including but not limited to accepting date input, providing date output, and performing calculations on dates or portions of dates; (b) Function accurately and without interruption before, during and after January 1, 2000, without any change in operations associated with the advent of the new century; (c) Respond to two-digit, year-date input in a way that resolves the ambiguity as to century in a disclosed, defined and predetermined manner; and (d) Store and provide output of date information in ways that are unambiguous as to century. ARTICLE V NEGATIVE COVENANTS While any part of the credit granted to the Company is available and while any part of the principal of or interest on any Note remains unpaid or any Letter of Credit Obligation remains outstanding, the Company shall not do any of the following, or permit any Subsidiary to do any of the following, without the prior written consent of the Required Banks: 5.1 Restriction of Indebtedness. Create, incur, assume or have outstanding any indebtedness for borrowed money or the deferred purchase price of any asset (including obligations under Capitalized Leases), except: (a) the Notes issued under this Agreement; (b) outstanding indebtedness in respect of industrial revenue bond financing shown on the financial statements referred to in section 4.5 above, provided that such indebtedness shall not be renewed, extended or increased; (c) additional long-term indebtedness incurred pursuant to an offering of long-term notes, bonds or similar obligations of the Company; provided that, simultaneously with the closing of such debt offering, the Term Loan shall be prepaid by an amount equal to the net proceeds to the Company of such long-term indebtedness; (d) indebtedness described in clause (v) of the definition of Permitted Liens in section 9.1, provided such indebtedness does not exceed an aggregate of $5,000,000 outstanding at any one time; (e) unsecured indebtedness which is subordinated to the prior payment of the Company's obligations under this Agreement and the Notes in a manner satisfactory to the Banks; (f) indebtedness in respect of Capitalized Leases, provided that the aggregate lease payments thereunder do not exceed $1,000,000 in any fiscal year of the Company; and (g) other indebtedness not exceeding $5,000,000 in aggregate principal amount at any time outstanding. 5.2 Restriction on Liens. Create or permit to be created or allow to exist any mortgage, pledge, encumbrance or other lien upon or security interest in any property or asset now owned or hereafter acquired by the Company or any Subsidiary, except Permitted Liens. 5.3 Sale and Leaseback. Enter into any agreement providing for the leasing by the Company or a Subsidiary of property which has been or is to be sold or transferred by the Company or a Subsidiary to the lessor thereof, or which is substantially similar in purpose to property so sold or transferred, except for agreements relating to sales of property not exceeding $5,000,000 (in gross sales proceeds to the Company) in the aggregate. 5.4 Acquisitions and Investments. Acquire any other business or make any loan, advance or extension of credit to, or investment in, any other person, corporation or other entity (including without limitation Subsidiaries, partnerships and joint ventures), including investments acquired in exchange for stock or other securities or obligations of any nature of the Company or any Subsidiary, except: (a) investments in (i) bank repurchase agreements; (ii) savings accounts or certificates of deposit in a financial institution of recognized standing; (iii) obligations issued or fully guaranteed by the United States; (iv) prime commercial paper maturing within 90 days of the date of acquisition by the Company or a Subsidiary; and (v) other short-term fixed income investments of high credit quality selected by the Company; (b) loans and advances made to employees and agents in the ordinary course of business, such as travel and entertainment advances and similar items; (c) investments in the Company by a Subsidiary; (d) credit extended to customers in the ordinary course of business; (e) other investments outstanding on December 31, 1998, and shown on the financial statements referred to in section 4.5 above, provided that such investments shall not be increased; (f) investments by the Company (whether by making a capital contribution, acquiring an equity interest or making a loan or other extension of credit) in a wholly-owned Subsidiary or by a wholly-owned Subsidiary in another wholly-owned Subsidiary; provided that if and when the aggregate investment of the Company or another wholly-owned Subsidiary in a wholly-owned Subsidiary exceeds $5,000,000, such wholly-owned Subsidiary shall guaranty all Loans, Reimbursement Obligations and other obligations of the Company under this Agreement by executing and delivering a guaranty, in the form of Exhibit 5.4 attached hereto, and the Agent shall receive such certificates and opinions of counsel as the Agent shall reasonably request relating to the corporate existence and authority of such Subsidiary and the validity and enforceability of such guaranty; (g) additional acquisitions and investments in present and future Subsidiaries and joint ventures, provided that all such acquisitions and investments (valued at original cost without regard to subsequent increases or decreases in the value thereof) shall not exceed (i) $15,000,000 in the aggregate and (ii) $5,000,000 with respect to any single entity; and (h) for purposes of this Section 5.4, the amount of any investment made with property other than cash shall be equal to the fair market value of such property as reasonably determined by the board of directors of the Company. 5.5 Liquidation; Merger; Disposition of Assets. Liquidate or dissolve; or merge with or into or consolidate with or into any other corporation or entity except a merger of a wholly-owned Subsidiary into the Company or another wholly-owned Subsidiary; or sell, lease, transfer or otherwise dispose of all or any substantial part of its property, assets or business (other than sales made in the ordinary course of business), or any stock of any Subsidiary, except for sales, leases, transfers or other dispositions to wholly-owned Subsidiaries to the extent permitted by Section 5.4 (f) above. 5.6 Accounts Receivable. Discount or sell with recourse, or sell for less than the face amount thereof, any of its notes or accounts receivable, whether now owned or hereafter acquired. 5.7 Contingent Liabilities. Guarantee or become a surety or otherwise contingently liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) for any obligations of others, except (i) pursuant to the deposit and collection of checks and similar items in the ordinary course of business, and (ii) other contingent liabilities in respect of obligations not exceeding an aggregate of $5,000,000 outstanding at any one time. 5.8 Affiliates. Suffer or permit any transaction with any Affiliate, except on terms not less favorable to the Company or Subsidiary than would be usual and customary in similar transactions with non-affiliated persons. 5.9 Dividends and Redemptions. Pay or declare any dividend, or make any other distribution on account of any shares of any class of its stock, or redeem, purchase or otherwise acquire directly or indirectly, any shares of any class of its stock, except for: (a) dividends payable in shares of stock of the Company; (b) dividends paid to the Company by a wholly- owned Subsidiary and dividends paid to a wholly-owned Subsidiary by a wholly-owned Subsidiary of such Subsidiary; (c) redemptions of stock of the Company made with the proceeds of sales of stock of the Company occurring within 30 days of the date of any such redemption; (d) repurchases of up to $125,000,000 in aggregate fair market value of the Company's common stock made on or before May 22, 2000; and (e) cash dividends paid by the Company consistent with past practices, provided that immediately after giving effect to any such dividend payment no Default or Event of Default shall exist. ARTICLE VI AFFIRMATIVE COVENANTS While any part of the credit granted to the Company is available and while any part of the principal of or interest on any Note remains unpaid or any Letter of Credit Obligation is outstanding, and unless waived in writing by the Required Banks, the Company shall: 6.1 Financial Status. Maintain: (a) At the end of each fiscal quarter occurring in each period set forth in the table below, a Consolidated Fixed Charge Coverage Ratio for the four consecutive fiscal quarters then ended of at least the amount set forth opposite such period: Period Fixed Charge Coverage Ratio Closing Date through the day before Fiscal Year End 2001 1.75 : 1.0 Fiscal Year End 2001 through the day before Fiscal Year End 2002 2.00 : 1.0 Fiscal Year End 2002 through the day before Fiscal Year End 2003 2.25 : 1.0 Fiscal Year End 2003 and thereafter 2.50 : 1.0 (b) At the end of each fiscal quarter, a Consolidated Interest Coverage Ratio for the four consecutive fiscal quarters then ended of at least 3.00 to 1.0. (c) At the end of each fiscal quarter set forth in the table below, a Consolidated Debt to EBITDA Ratio for the four consecutive fiscal quarters then ended not greater than the applicable amount set forth below for such fiscal quarter: 1999 2000 2001 2002 2003 2004 Fiscal Quarters 1, 2, 3 N/A 3.50 3.00 2.50 2.25 2.00 Fiscal Year End 2.75 2.50 2.25 2.00 1.75 N/A 6.2 Insurance. Maintain insurance in such amounts and against such risks as is customary by companies engaged in the same or similar businesses and similarly situated. 6.3 Corporate Existence; Obligations. Do, and cause each Subsidiary to do, all things necessary to: (i) maintain its corporate existence (except for mergers permitted by section 5.5) and all rights and franchises necessary or desirable for the conduct of its business; (ii) comply in all material respects with all applicable laws, rules, regulations and ordinances, and all restrictions imposed by governmental authorities, including those relating to environmental standards and controls; and (iii) pay, before the same become delinquent and before penalties accrue thereon, all taxes, assessments and other governmental charges against it or its property, and all of its other liabilities, except to the extent and so long as the same are being contested in good faith by appropriate proceedings in such manner as not to cause any material adverse effect upon its property, financial condition or business operations, with adequate reserves provided for such payments. 6.4 Business Activities. Continue to carry on its business activities in substantially the manner such activities are conducted on the date of this Agreement and not make any material change in the nature of its business. 6.5 Properties. Keep and cause each Subsidiary to keep its properties (whether owned or leased) in good condition, repair and working order, ordinary wear and tear and obsolescence excepted, and make or cause to be made from time to time all necessary repairs thereto (including external or structural repairs) and renewals and replacements thereof consistent with the exercise of its reasonable business judgment. 6.6 Accounting Records; Reports. Maintain and cause each Subsidiary to maintain a standard and modern system for accounting in accordance with generally accepted principles of accounting consistently applied throughout all accounting periods and consistent with those applied in the preparation of the financial statements referred to in section 4.5; and furnish to the Agent such information respecting the business, assets and financial condition of the Company and its Subsidiaries as any Bank may reasonably request and, without request, furnish to the Agent: (a) Within 45 days after the end of each of the first three quarters of each fiscal year of the Company (i) consolidated and consolidating balance sheets of the Company and all of its Subsidiaries as of the close of such quarter and of the comparable quarter in the preceding fiscal year; and (ii) consolidated and consolidating statements of income and cash flow of the Company and all of its Subsidiaries for such quarter and for that part of the fiscal year ending with such quarter and for the corresponding periods of the preceding fiscal year; all in reasonable detail and certified as true and correct (subject to audit and normal year-end adjustments) by the chief financial officer of the Company; and (b) As soon as available, and in any event within 90 days after the close of each fiscal year of the Company, a copy of the audit report for such year and accompanying consolidated and consolidating financial statements of the Company and its Subsidiaries, as prepared by independent public accountants of recognized standing selected by the Company and reasonably satisfactory to the Required Banks, which audit report shall be accompanied by an opinion of such accountants, in form reasonably satisfactory to the Required Banks, to the effect that the same fairly present the financial condition of the Company and its Subsidiaries and the results of its and their operations as of the relevant dates thereof; and (c) As soon as available, copies of all reports or materials submitted or distributed to shareholders of the Company or filed with the Securities and Exchange Commission or other governmental agency having regulatory authority over the Company or any Subsidiary or with any national securities exchange; and (d) Promptly, and in any event within 10 days after an officer of the Company has actual knowledge thereof a statement of the chief financial officer of the Company describing: (i) any Default or Event of Default hereunder, or any other event which, either of itself or with the lapse of time or the giving of notice or both, would constitute a default under any other material agreement to which the Company or any Subsidiary is a party, together with a statement of the actions which the Company proposes to take with respect thereto; (ii) any pending or threatened litigation or administrative proceeding of the type described in section 4.9; and (iii) any fact or circumstance which is materially adverse to the property, financial condition or business operations of the Company and its Subsidiaries taken as a whole; and (e) (i) Promptly, and in any event within 30 days, after an officer of the Company acquires actual knowledge that any material Reportable Event with respect to any Plan has occurred, a statement of the chief financial officer of the Company setting forth details as to such Reportable Event and the action which the Company proposes to take with respect thereto, together with a copy of any notice of such Reportable Event given to the Pension Benefit Guaranty Corporation if a copy of such notice is available to the Company, (ii) promptly after the filing thereof with the Internal Revenue Service, copies of each annual report with respect to each Plan administered by the Company and (iii) promptly after receipt thereof, a copy of any notice (other than a notice of general application) the Company, any Subsidiary or any member of the Controlled Group may receive from the Pension Benefit Guaranty Corporation or the Internal Revenue Service with respect to any Plan administered by the Company. The financial statements referred to in (a) and (b) above shall be accompanied by a certificate by the chief financial officer of the Company demonstrating compliance with the covenants in section 6.1 during the relevant period and stating that, as of the close of the last period covered in such financial statements, no condition or event had occurred which constitutes a Default hereunder or which, after notice or lapse of time or both, would constitute a Default hereunder (or if there was such a condition or event, specifying the same). The audit report referred to in (b) above shall be accompanied by a certificate by the accountants who prepared the audit report, as of the date of such audit report, stating that in the course of their audit, nothing has come to their attention suggesting that a condition or event has occurred which constitutes a Default hereunder or which, after notice or lapse of time or both, would constitute a Default hereunder (or if there was such a condition or event, specifying the same); but such accountants shall not be liable for any failure to obtain knowledge of any such condition or event. The Agent shall promptly furnish to each of the Banks (i) copies of the certificates delivered to the Agent pursuant to this paragraph, and (ii) copies of any statements delivered to the Agent pursuant to section 6.6(d) or (e) above. 6.7 Inspection of Records. Permit representatives of the Banks at their own expense to visit and inspect any of the properties and examine any of the books and records of the Company and its Subsidiaries at any reasonable time and as often as may be reasonably desired. 6.8 Compliance with Environmental Laws. Timely comply in all material respects, and cause each Subsidiary to comply in all material respects, with all applicable Environmental Laws. 6.9 Environmental Audit. Permit, at its expense, at the request of the Required Banks, an Environmental Audit solely for the benefit of the Banks, to be conducted by the Banks or an independent agent selected by the Banks, but only in the event of a circumstance or condition of the nature described in section 6.10 below which, in the reasonable judgment of the Required Banks, will cost the Company $2,500,000 or more in the aggregate. This provision shall not relieve the Company or any Subsidiary from conducting its own Environmental Audits or taking any other steps necessary to comply with Environmental Laws. 6.10 Orders, Decrees and Other Documents. Provide to the Agent, immediately upon receipt, copies of any correspondence, notice, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a circumstance or condition which requires or may require a financial contribution by the Company or any Subsidiary or a cleanup, removal, remedial action, or other response by or on the part of the Company or any Subsidiary under Environmental Laws or which seeks damages or civil, criminal or punitive penalties from the Company or any Subsidiary for an alleged violation of Environmental Laws; provided, however, such documentation need not be delivered to the Agent unless and until the circumstances or conditions referred to therein will, individually or in the aggregate with any other such matters, likely result in costs to the Company and its Subsidiaries of $1,000,000 or more. ARTICLE VII DEFAULTS 7.1 Defaults. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) The Company shall fail to pay (i) any interest due on any Note, or any other amount payable hereunder (other than a principal payment on any Note or a Reimbursement Obligation) by five days after the same becomes due; or (ii) any principal amount due on any Note or any Reimbursement Obligation when due; (b) The Company shall default in the performance or observance of any agreement, covenant, condition, provision or term contained in Article V (other than section 5.8) or section 6.1 of this Agreement; (c) The Company shall default in the performance or observance of any of the other agreements, covenants, conditions, provisions or terms in this Agreement or any Collateral Document and such default continues for a period of thirty days after written notice thereof is given to the Company by any of the Banks; (d) Any representation or warranty made by the Company herein or any certificate delivered pursuant hereto, or any financial statement delivered to any Bank hereunder, shall prove to have been false in any material respect as of the time when made or given; (e) The Company or any Subsidiary shall fail to pay as and when due and payable (whether at maturity, by acceleration or otherwise) all or any part of the principal of or interest on any indebtedness of or assumed by it, or of the rentals due under any lease or sublease, or of any other obligation for the payment of money, in each case where such payments aggregate $1,000,000 or more, and such default shall not be cured within the period or periods of grace, if any, specified in the instruments governing such obligations; or default shall occur under any evidence of, or any indenture, lease, sublease, agreement or other instrument governing such obligations, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such indebtedness or other obligation or the termination of such lease or sublease, unless the Company or such Subsidiary shall be contesting such default in good faith by appropriate proceedings; (f) A final judgment which, together with all other outstanding final judgments against the Company and its Subsidiaries, or any of them, exceeds an aggregate of $100,000 shall be entered against the Company or any Subsidiary and shall remain outstanding and unsatisfied, unbonded, unstayed or uninsured after 60 days from the date of entry thereof; (g) The Company or any Subsidiary shall: (i) become insolvent; or (ii) be unable, or admit in writing its inability to pay its debts as they mature; or (iii) make a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its property; or (iv) become the subject of an "order for relief" within the meaning of the United States Bankruptcy Code; or (v) become the subject of a creditor's petition for liquidation, reorganization or to effect a plan or other arrangement with creditors; or (vi) apply to a court for the appointment of a custodian or receiver for any of its assets; or (vii) have a custodian or receiver appointed for any of its assets (with or without its consent); or (viii) otherwise become the subject of any insolvency proceedings or propose or enter into any formal or informal composition or arrangement with its creditors; (h) This Agreement, any Note or any Collateral Document shall, at any time after their respective execution and delivery, and for any reason, cease to be in full force and effect or be declared null and void, or be revoked or terminated, or the validity or enforceability thereof or hereof shall be contested by the Company, or the Company shall deny that it has any or further liability or obligation thereunder or hereunder, as the case may be; (i) Any Reportable Event, which the Required Banks determine in good faith to constitute grounds for the termination of any Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Plan, shall have occurred, or any Plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan, and in case of any event described in the preceding provisions of this subsection (i) the Required Banks determine in good faith that the aggregate amount of the Company's liability to the Pension Benefit Guaranty Corporation under ERISA shall exceed $1,000,000 and such liability is not covered, for the benefit of the Company, by insurance; or (j) A Change of Control. 7.2 Termination of Aggregate Commitment and Acceleration of Obligations. Upon the occurrence of any Event of Default: (a) As to any Event of Default (other than an Event of Default under section 7.1(g)) and at any time thereafter, and in each case, the Required Banks (or the Agent with the written consent of the Required Banks) may, by written notice to the Company, immediately terminate the obligation of the Banks to make Loans and issue Letters of Credit hereunder and declare the unpaid principal balance of the Notes, together with all interest accrued thereon, to be immediately due and payable; and the unpaid principal balance of such Notes and all unreimbursed amounts drawn on Letters of Credit, together with all interest accrued thereon and all accrued fees and other amounts due hereunder, shall thereupon be due and payable without further notice of any kind, all of which are hereby waived, and notwithstanding anything to the contrary herein or in the Notes contained; (b) As to any Event of Default under section 7.1(g), the obligation of the Banks to make Loans and issue Letters of Credit hereunder shall immediately terminate and the unpaid principal balance of all Notes and all unreimbursed amounts drawn on Letters of Credit, together with all interest accrued thereon and all accrued fees and other amounts due hereunder, shall immediately and forthwith be due and payable, all without presentment, demand, protest, or further notice of any kind, all of which are hereby waived, notwithstanding anything to the contrary herein or in the Notes contained; (c) As to each Event of Default, the Banks shall have all the remedies for default provided by the Collateral Documents, as well as applicable law. (d) In the event that the unpaid principal balance of the Notes becomes immediately due and payable pursuant to this section 7.2, the Company shall pay to the appropriate LOC Bank the sum of the largest drafts which could then or thereafter be drawn under all outstanding Letters of Credit, which sum the LOC Bank may hold for the account of the Company, without interest, for the purpose of paying any draft presented, with the excess, if any, to be returned to the Company upon termination or expiration of such Letters of Credit. ARTICLE VIII THE AGENT 8.1 Appointment and Powers. Each of the Banks hereby appoints Firstar Bank, National Association as Agent for the Banks hereunder, and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers as are specifically delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The duties of the Agent shall be entirely ministerial; the Agent shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, the Notes or any related document, or to enforce such performance, or to inspect the property (including the books and records) of the Company or any of its subsidiaries; and the Agent shall not be required to take any action which exposes the Agent to personal liability (unless indemnification with respect to such action satisfactory to the Agent in its sole discretion is provided to the Agent by the Required Banks) or which is contrary to this Agreement or the Notes or applicable law. Firstar Bank, National Association agrees to act as Agent upon the express terms and conditions contained in this Article VIII. Each of the Banks hereby appoints Harris Trust and Savings Bank, BankBoston, N.A. and Bank One, NA (Main Office Chicago) as Co-Agents hereunder, but such Co-Agents shall not have any duties or responsibilities under this Agreement. 8.2 Responsibility. The Agent (i) makes no representation or warranty to any Bank and shall not be responsible to any Bank for any oral or written recitals, reports, statements, warranties or representations made in or in connection with this Agreement or any Note; (ii) shall not be responsible for the due execution, legality, validity, enforceability, genuineness, sufficiency, collectability or value of this Agreement or any Note or any other instrument or document furnished pursuant thereto; (iii) may treat the payee of any Note as the owner thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent; (iv) may execute any of its duties under this Agreement by or through employees, agents and attorneys in fact and shall not be answerable for the default or misconduct of any such employee, agent or attorney in fact selected by it with reasonable care; (v) may (but shall not be required to) consult with legal counsel (including counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with advice of such counsel, accountants or experts; (vi) shall be entitled to rely upon any note, notice, consent, waiver, amendment, certificate, affidavit, letter, telegram, telex, cable or other document or communication believed by it to be genuine and signed or sent by the proper party or parties, and may rely on statements contained therein without further inquiry or investigation. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the Notes, except for its or their own gross negligence or willful misconduct. 8.3 Agent's Indemnification. The Banks agree to indemnify and reimburse the Agent (to the extent not reimbursed by the Company), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent as such in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement to the extent that the Agent is not reimbursed for such expenses by the Company. 8.4 Rights as a Lender. With respect to its Commitment and the Notes issued to it, Firstar Bank, National Association, in its individual capacity as a Bank, shall have, and may exercise, the same rights and powers under this Agreement and the Notes payable to it as any other Bank has under this Agreement and Notes, and the terms "Bank" and "Banks", unless the context otherwise requires, shall include Firstar Bank, National Association in its individual capacity as a Bank. Firstar Bank, National Association and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of banking or trust business with, the Company or any of its Subsidiaries and any person, firm or corporation who may do business with or own securities of the Company or any Subsidiary, all as if it were not the Agent, and without any duty to account therefor to the Banks. 8.5 Credit Investigation. Each of the Banks severally represents and warrants to each of the other Banks and to the Agent that it has made its own independent investigation and evaluation of the financial condition and affairs of the Company and its Subsidiaries in connection with such Bank's execution and delivery of this Agreement and the making of its Loans and has not relied on any information or evaluation provided by any other Bank or the Agent in connection with any of the foregoing (other than information provided by the Company to the Agent for transmittal to the Banks in connection with the foregoing); and each Bank represents and warrants to each other Bank and to the Agent that it shall continue to make its own independent investigation and evaluation of the credit-worthiness of the Company and its Subsidiaries while the Commitments and/or the Notes are outstanding. 8.6 Compensation. The Agent shall receive such compensation for its services as Agent under this Agreement as may be agreed from time to time by the Company and the Agent. ARTICLE IX MISCELLANEOUS 9.1 Accounting Terms; Definitions. Except as otherwise provided, all accounting terms shall be construed in accordance with generally accepted accounting principles consistently applied and consistent with those applied in the preparation of the financial statements referred to in section 4.5, and financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. As used herein: (a) the term "Adjusted LIBOR Rate" means, for any Interest Period with respect to an Adjusted LIBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: Adjusted LIBOR Rate = LIBOR Rate + Applicable Margin 1 - LIBOR Reserve Requirement (b) the term "Adjusted LIBOR Rate Loan" means all or part of any Loan which bears interest at or by reference to the Adjusted LIBOR Rate. (c) the term "Affiliate" means, with respect to any Person, any other Person, which, directly or indirectly, controls, is controlled by, or is under common control with, such Person. (d) the term "Aggregate Commitment" means the sum of the Aggregate Revolver Commitment plus the Term Loan Commitment. (e) the term "Applicable Margin" means, at any time, the percent per annum specified below for Adjusted LIBOR Rate Loans, Commitment Fees and standby Letter of Credit fees, as the case may be, at the level corresponding to the Consolidated Debt to EBITDA Ratio of the Company for the four consecutive fiscal quarters most recently ended, as shown by the financial statements delivered pursuant to Sections 6.6(a) and 6.6(b): Applicable Margin Consolidated Debt Standby to Adjusted LIBOR Commitment Letter of Credit Level EBITDA Ratio Rate Loans Fees Fees 1 >/=2.00% 1.50% 0.275% 1.225% 2 >/=1.50<2.00 1.25% 0.250% 1.000% 3 >/=1.00<1.50 1.00% 0.225% 0.775% 4 <1.00 0.75% 0.200% 0.550% The Applicable Margin shall, in each case, be determined and adjusted if necessary on the fifth Business Day after receipt by the Agent of the financial statements of the Company for each fiscal quarter or fiscal year (as the case may be) delivered pursuant to Sections 6.6(a) and 6.6(b) (each a "Calculation Date"). Each determination of the Applicable Margin shall be effective from one Calculation Date until the next Calculation Date. Notwithstanding the foregoing, however, (i) the Applicable Margin shall be at Level 1 at all times until the end of the Drawdown Period, (ii) for the period from the day after the end of the Drawdown Period until delivery of the annual audited financial statements for the Company's fiscal year ending December 30, 2000, the Applicable Margin shall be set at the level corresponding to the Consolidated Debt to EBITDA Ratio as of the Company's 1999 fiscal year-end, calculated as if the Term Loan outstanding at the end of the Drawdown Period had been outstanding at such 1999 fiscal year end, and (iii) the Applicable Margin shall be at Level 1 at all times during the continuation of an Event of Default or during any failure by the Company to deliver financial statements by the deadlines set forth in Sections 6.6(a) and 6.6(b). (f) the term "Borrowing Date" means each date (which must be a Business Day) on which Loans are made to the Company or on which any Loan bearing interest at one rate is converted into a Loan bearing interest at another rate or is continued. (g) the term "Business Day" means any date other than a Saturday, Sunday or other day on which banks in the States of Wisconsin, Illinois, or Massachusetts are required or authorized to close; provided, however, that for purposes of determining the applicable Interest Period for an Adjusted LIBOR Rate Loan, references to Business Day will include only those days on which dealings in United States Dollar deposits are carried out by United States financial institutions in the London interbank market. (h) the term "Capitalized Lease" means any lease which is capitalized on the books of the lessee, or should be so capitalized under generally accepted accounting principles. (i) the term "Change of Control" means any event or series of events resulting in the Members of the Wyman and Hyde Families failing to own, directly or indirectly, with full power to vote or to direct the voting of an aggregate of more than fifty percent (50%) of the voting power of the Class B Common Stock of the Company (or any class or series having equivalent rights, powers and preferences). As used herein, the term "Members of the Wyman and Hyde Families" means the descendants of Earl W. Wyman, their spouses and children, together with any and all trusts of which they are beneficiaries; partnerships, limited partnerships or limited liability partnerships in which they, or entities 100% owned by them, are partners; limited liability companies in which they, or entities 100% owned by them, are members; or charitable not-for- profit foundations of which they have voting control. (j) the term "Closing Date" means November 3, 1999 or such other date agreed to by the Company and the Banks on which the first advance of the Term Loan is made hereunder. (k) the term "Commitment" means, with respect to each Bank, its Revolver Commitment plus its Term Loan Commitment. (l) the term "Consolidated Debt to EBITDA Ratio" means, for any period, the relationship, expressed as a numerical ratio; between: (1) Consolidated Total Debt as of the end of such period, and (2) EBITDA for such period, all as determined in accordance with generally accepted accounting principles applied on a consolidated basis to the Company and its Subsidiaries. (m) the term "Consolidated Fixed Charge Coverage Ratio" means, for any period, the relationship, expressed as a numerical ratio, between: (1) EBITDA of the Company and its Subsidiaries for such period, and (2) the sum of (A) net interest expense on indebtedness of the Company and its Subsidiaries (including the interest component of Capitalized Leases) for such period, (B) scheduled principal payments on indebtedness of the Company and its Subsidiaries during such period, and (C) the principal component of required payments in respect of Capitalized Leases during such period, all as determined in accordance with generally accepted accounting principles applied on a consolidated basis to the Company and its Subsidiaries. (n) the term "Consolidated Interest Coverage Ratio: means, for any period, the relationship, expressed as a numerical ratio, between: (1) EBIT of the Company and its Subsidiaries for such period, and (2) net interest expense on indebtedness of the Company and its Subsidiaries (including the interest component of Capitalized Leases) for such period, all as determined in accordance with generally accepted accounting principles applied on a consolidated basis to the Company and its Subsidiaries. (o) the term "Consolidated Net Earnings" means: (1) all revenues and income derived from operations in the ordinary course of business (excluding extraordinary gains and profits upon the disposition of investments and fixed assets), Minus: (2) all expenses and other proper charges against income (including payment or provision for all applicable income and other taxes, but excluding extraordinary losses and losses upon the disposition of investments and fixed assets), all as determined in accordance with generally accepted accounting principles as applied on a consolidated basis to the Company and its Subsidiaries. (p) the term "Consolidated Total Debt" means all of the following determined on a consolidated basis with respect to the Company and its Subsidiaries in accordance with generally accepted accounting principles: (i) indebtedness for borrowed money, (ii) obligations representing the deferred purchase price of property or services other than (x) accounts payable arising in the ordinary course of business on terms customary in the trade and (y) obligations related to employee benefit plans and deferred compensation plans of the Company, (iii) obligations evidenced by notes, bonds, acceptances, or other instruments or arising in connection with letters of credit issued for the account of the Company or a Subsidiary, (iv) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by the Company or a Subsidiary and (v) Capitalized Leases. (q) the term "Controlled Group" means a controlled group of corporations as defined in Section 1563 of the Internal Revenue Code of 1986, as amended, of which the Company is a part. (r) the term "Default" means any condition or event which with the passage of time or the giving of notice or both would constitute an Event of Default. (s) the term "EBIT" means, for any period, Consolidated Net Earnings of the Company for such period plus the sum of the following (all to the extent deducted in arriving at such Consolidated Net Earnings for such period): (A) net interest expense on indebtedness of the Company and its Subsidiaries (including the interest component of Capitalized Leases) for such period, and (B) payment or provision for income and other taxes for such period, all as determined in accordance with generally accepted accounting principles applied on a consolidated basis to the Company and its Subsidiaries. (t) the term "EBITDA" means, for any period, Consolidated Net Earnings of the Company for such period plus the sum of the following (all to the extent deducted in arriving at such Consolidated Net Earnings for such period): (A) depreciation, amortization and all other non-cash deductions arising in the normal course of operations and shown on the Company's financial statements for such period, (B) net interest expense on indebtedness of the Company and its Subsidiaries (including the interest component of Capitalized Leases) for such period and (C) payment or provision for income and other taxes for such period, all as determined in accordance with generally accepted accounting principles as applied on a consolidated basis to the Company and its Subsidiaries. (u) the term "Eligible Assignee" means (a) a Bank; (b) an Affiliate of a Bank; and (c) any other Person approved by the Agent, each LOC Bank and the Company (such approval not to be unreasonably withheld or delayed); provided that (i) the Company's consent shall not be required during the existence and continuation of an Event of Default, (ii) approval by the Company shall be deemed given if no objection is received by the assigning Bank and the Agent from the Company within five Business Days after notice of such proposed assignment has been received by the Company; and (iii) neither the Company nor an Affiliate of the Company shall qualify as an Eligible Assignee. (v) The term "Environmental Audit" means a review for the purpose of determining whether the Company and each Subsidiary complies with Environmental Laws and whether there exists any condition or circumstance which requires or will require a cleanup, removal, or other remedial action under Environmental Laws on the part of the Company or any Subsidiary including, but not limited to, some or all of the following: (1) on site inspection including review of site geology, hydrogeology, demography, land use and population; (2) taking and analyzing soil borings and installing ground water monitoring wells and analyzing samples taken from such wells; (3) taking and analyzing of air samples and testing of underground tanks; (4) reviewing plant permits, compliance records and regulatory correspondence, and interviewing enforcement staff at regulatory agencies; (5) reviewing the operations, procedures and documentation of the Company and its Subsidiaries; and (6) interviewing past and present employees of the Company and its Subsidiaries. (w) The term "Environmental Laws" means all federal, state and local laws including rules of common law, statutes, regulations, ordinances, codes, rules and other governmental restrictions and requirements relating to the discharge of air pollutants, water pollutants or process waste water or otherwise relating to the environment or hazardous substances including, but not limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Toxic Substances Control Act, the Hazardous Materials Transportation Act, regulations of the Environmental Protection Agency, regulations of the Nuclear Regulatory Agency, and regulations of any state department of natural resources or state environmental protection agency now or at any time hereafter in effect. (x) the term "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be in effect from time to time. (y) the term "Federal Funds Rate" means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight federal funds transactions conducted by brokers in federal funds, as published for such day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it. In the case of a day which is not a Business Day, the Federal Funds Rate for such day shall be the Federal Funds Rate for the preceding Business Day. (z) the term "Interest Period" means with respect to each Adjusted LIBOR Rate Loan, the period commencing on the applicable Borrowing Date and ending one, two or three months thereafter, as specified by the Company in the related notice of borrowing pursuant to Section 2.2, and with respect to a Variable Rate Loan converted to an Adjusted LIBOR Rate Loan, or in the case of a continuation of an Adjusted LIBOR Rate Loan for an additional Interest Period, the period commencing on the date of such conversion or continuation and ending one, two or three months thereafter, as specified by the Company in the related notice pursuant to Section 2.5, provided that: (1) any Interest Period which would otherwise end on a day which is not a Business Day will be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period will end on the immediately preceding Business Day; (2) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in a calendar month at the end of such Interest Period) will, subject to clause (3) below, end on the last Business Day of a calendar month; and (3) in no event may any Interest Period extend beyond the Termination Date (with respect to Revolving Credit Loans) or the maturity of the Term Loan. (aa) the term "Letter of Credit Obligations" means the aggregate undrawn face amounts of all outstanding Letters of Credit and all unpaid Reimbursement Obligations. (bb) the term "LIBOR Rate" means, for any Interest Period with respect to an Adjusted LIBOR Rate Loan, the per annum rate of interest determined by the Agent to be the arithmetic average (rounded upward, if necessary, to the nearest 1/100 of 1%) of the offered rates for deposits in United States Dollars for the applicable Interest Period which appear on the Telerate Screen Page 3750 (or such other page of Telerate or such other service on which the appropriate information may be displayed), on the electronic communications terminals in the Agent's money center, as of 11 a.m., London time, on the Business Day which is two Business Days before the applicable Borrowing Date ("Calculation Date"), except as provided below. If fewer than two offered rates appear for the applicable Interest Period or if the appropriate screen is not accessible as of such time, or if the Agent determines that such offered rates will not adequately and fairly reflect the Banks' cost of funding or maintaining such Adjusted LIBOR Rate Loan for such Interest Period, the term "LIBOR Rate" shall mean the per annum rate of interest determined by the Agent to be the average (rounded up, if necessary, to the nearest 1/100 of 1%) of the rates at which deposits in U.S. dollars are offered to the Agent by four major banks in the offshore interbank market, as selected by the Agent ("Reference Banks"), at approximately 12:00 noon, Milwaukee time, on the Calculation Date for the applicable Interest Period and in an amount equal to the principal amount of the applicable Adjusted LIBOR Rate Loan. The Agent will request the principal offshore office of each of such Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, the applicable rate will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the applicable rate will be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Agent, at approximately 1:00 p.m., New York City time, on the Calculation Date for Loans in United States Dollars to leading European banks for the applicable Interest Period and in an amount equal to the principal amount of the applicable Adjusted LIBOR Rate Loan. (cc) the term "LIBOR Reserve Requirement" means, for any Interest Period with respect to an Adjusted LIBOR Rate Loan, the stated maximum rate of all reserve requirements (including all basic, supplemental, marginal, emergency and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements during such Interest Period) that is specified on the first day of such Interest Period by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board of Governors) applicable to the class of banks of which any Bank is a member. (dd) the term "Loans" means Revolving Credit Loans, the Term Loan and Swingline Loans. (ee) the term "Multiemployer Plan" means a multiemployer pension plan within the meaning of the Multiemployer Pension Plan Amendment Act, as amended from time to time. (ff) the term "Notes" shall mean, collectively, the Revolving Credit Notes, the Term Notes and the Swingline Note. (gg) the term "Percentage Interests" shall mean the respective interests of the Banks in the Aggregate Commitment and the outstanding principal amount of Loans made under this Agreement, as set forth on Appendix A, subject to adjustment from time to time on account of assignments made pursuant to Section 9.11. (hh) the term "Permitted Liens" means: (i) liens outstanding on December 31, 1998, and shown or reflected on the financial statements referred to in section 4.5 above; (ii) liens on property financed with the proceeds of industrial revenue bonds permitted by Section 5.1(b) given to secure indebtedness evidenced by such bonds and other obligations of the Company directly relating thereto; (iii) liens for taxes, assessments or governmental charges, and liens incident to construction, which are either not delinquent or are being contested in good faith by the Company or a Subsidiary by appropriate proceedings which will prevent foreclosure of such liens, and against which adequate reserves have been provided; and easements, restrictions, minor title irregularities and similar matters which have no adverse effect as a practical matter upon the ownership and use of the affected property by the Company or any Subsidiary; (iv) liens or deposits in connection with worker's compensation or other insurance or to secure customs' duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to secure performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule as a condition to the transaction of business or the exercise of any right, privilege or license; or other liens or deposits of a like nature made in the ordinary course of business; provided that the aggregate amount of liabilities (including interest and penalties, if any) of the Company secured by any stay or appeal bond shall not exceed $10,000,000 at any one time outstanding; and (v) purchase money liens on property (other than inventory) acquired in the ordinary course of business, to finance or secure a portion of the purchase price thereof, and liens on property acquired existing at the time of acquisition; provided that in each case such lien shall be limited to the property so acquired and the liability secured by such lien does not exceed either the purchase price or the fair market value of the asset acquired and the indebtedness secured by such lien is permitted by Section 5.1(d). (ii) the term "Person" means any individual, partnership, joint venture, firm, corporation, association, trust, limited liability company or other enterprise (whether or not incorporated), or any government or political subvision or any agency, department or instrumentality thereof. (jj) the term "Plan" means any employee pension benefit plan subject to Title IV of ERISA maintained by the Company, any of its Subsidiaries, or any member of the Controlled Group, or any such plan to which the Company, any of its Subsidiaries, or any member of the Controlled Group is required to contribute on behalf of any of its employees. (kk) the term "Prime Rate" means the rate of interest announced by the Agent as its prime or reference rate for interest rate calculations, as such rate may change from time to time. The Prime Rate may not be the lowest interest rate charged by the Agent. (ll) the term "Regulatory Change" means any change enacted or issued after the date of this Agreement of any (or the adoption after the date of this Agreement of any new) federal or state law, regulation, interpretation, direction, policy or guideline, or any court decision, which affects the treatment of any extensions of credit of the Banks. (mm) the term "Reimbursement Obligations" means all obligations of the Company to reimburse each LOC Bank for all drawings under Letters of Credit. (nn) the term "Reportable Event" means a reportable event as that term is defined in Title IV of ERISA. (oo) the term "Required Banks" means Banks holding at least 66 2/3% of the Aggregate Commitment, or if the Aggregate Commitment has been terminated, Banks holding at least 66 2/3% of the aggregate principal amount of all Loans and Letter of Credit Obligations outstanding hereunder. (pp) The term "Revolver Commitment" is defined in section 1.1. (qq) the term "Subsidiary" means a corporation, partnership or other entity of which the Company owns, directly or through another Subsidiary, at the date of determination, more than 50% of the outstanding stock (or other shares of beneficial interest) having ordinary voting power for the election of directors, irrespective of whether or not at such time stock of any other class or classes might have voting power by reason of the happening of any contingency, or holds at least a majority of partnership or similar interests, or is a general partner with control over such partnership under the terms of the applicable partnership agreement. (rr) The term "Term Loan Commitment" is defined in section 1.2. (ss) the term "Unfunded Liabilities" means, with regard to any Plan, the excess of the current value of the Plan's benefits guaranteed under ERISA over the current value of the Plan's assets allocable to such benefits. (tt) the term "Variable Rate" means the rate per annum equal to the Prime Rate. (uu) the term "Variable Rate Loan" means any Loan which bears interest at or by reference to the Variable Rate. 9.2 Expenses; Indemnity. (a) The Company shall pay or reimburse each Bank and the Agent for (i) all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses, including the fees and expenses of in-house counsel) paid or incurred by the Agent or such Bank in connection with the negotiation, preparation, execution, delivery, and administration of this Agreement, the Notes, the Letters of Credit, the Collateral Documents and any other document required hereunder or thereunder, including without limitation any amendment, supplement, modification or waiver of or to any of the foregoing; provided that such costs and expenses of each Bank (other than the Agent) in connection with the negotiation, preparation and delivery of this Agreement, the Notes, the Letters of Credit, the Collateral Documents and any other document required hereunder or thereunder shall not exceed $2500; (ii) all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses, including the fees and expenses of in-house counsel) paid or incurred by the Agent or such Bank before and after judgment in enforcing, protecting or preserving its rights under this Agreement, the Notes, the Letters of Credit, the Collateral Documents and any other document required hereunder or thereunder, including without limitation the enforcement of rights against, or realization on, any collateral or security therefor or in defending against any claim made against the Agent or such Bank by the Company, any Subsidiary or any third party as a result of or in any way relating to any matter referred to in subsection (i) or (ii) of this section; and (iii) any and all recording and filing fees and any and all stamp, excise, intangibles and other taxes, if any, (including, without limitation, any sales, occupation, excise, gross receipts, franchise, general corporation, personal property, privilege or license taxes, but not including taxes levied upon the net income of the Agent such or Bank by the federal government or the state (or political subdivision of a state) where the Agent or such Bank's principal office is located), which may be payable or determined to be payable in connection with the negotiation, preparation, execution, delivery, administration or enforcement of this Agreement, the Notes, the Letters of Credit, the Collateral Documents or any other document required hereunder or thereunder or any amendment, supplement, modification or waiver of or to any of the foregoing, or consummation of any of the transactions contemplated hereby or thereby, whether such taxes are levied by reason of the acts to be performed by the Company hereunder or are levied upon the Agent, a Bank, the Company, the property of a Bank or otherwise, including all costs and expenses incurred in contesting the imposition of any such tax, and any and all liability with respect to or resulting from any delay in paying the same, whether such taxes are levied upon the Agent, such Bank, the Company or otherwise. (b) The Company agrees to indemnify each Bank against any and all losses, claims, damages, liabilities and expenses, (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Bank arising out of, in any way connected with, or as a result of (i) any acquisition or attempted acquisition of the Company's stock or of the stock or assets of another person or entity by the Company or any Subsidiary, (ii) the use of any of the proceeds of any Loans made hereunder by the Company or any Subsidiary for the making or furtherance of any such acquisition or attempted acquisition, (iii) the construction or operation of any facility owned or operated by the Company or any Subsidiary, or resulting from any pollution or other environmental condition on the site of, or caused by, any such facility, (iv) the negotiation, preparation, execution, delivery, administration, and enforcement of this Agreement, the Notes, the Letters of Credit, the Collateral Documents and any other document required hereunder or thereunder, including without limitation any amendment, supplement, modification or waiver of or to any of the foregoing or the consummation or failure to consummate the transactions contemplated hereby or thereby, or the performance by the parties of their obligations hereunder or thereunder, (v) any claim, litigation, investigation or proceedings related to any of the foregoing, whether or not any Bank is a party thereto; provided, however, that such indemnity shall not apply to any such losses, claims, damages, liabilities or related expenses arising from (A) any unexcused breach by such Bank of its obligations under this Agreement or any Collateral Document, (B) any prior commitment made by such Bank to a person other than the Company or any Subsidiary which would be breached by the performance of such Bank's obligations under this Agreement or (C) gross negligence or willful misconduct of such Bank. (c) The foregoing agreements and indemnities shall remain operative and in full force and effect regardless of termination of this Agreement, the consummation of or failure to consummate either the transactions contemplated by this Agreement or any amendment, supplement, modification or waiver, the repayment of any Loans made hereunder, the termination of the Letter of Credit Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any of the Notes or any Collateral Document, or any other document required hereunder or thereunder, any investigation made by or on behalf of any Bank, the Company or any Subsidiary, or the content or accuracy of any representation or warranty made under this Agreement, any Collateral Document or any other document required hereunder or thereunder. (d) The foregoing indemnities shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated by this Agreement, the repayment of the Loans made hereunder, the invalidity or unenforceability of any term or provision of this Agreement or any of the Notes, any investigation made by or on behalf of the Bank or the Company, and the content of accuracy of any representation or warranty made under this Agreement. 9.3 Amendments, Etc. No waiver, amendment, settlement or compromise of any of the rights of any Bank under this Agreement, any Note or any of the Collateral Documents shall be effective for any purpose unless it is in a written instrument executed and delivered by the parties authorized to act by this section 9.3. Subject to the provisions of this section 9.3, the Required Banks (or the Agent with the written consent of the Required Banks) and the Company may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to this Agreement, the Notes, or the Collateral Documents or changing in any manner the rights of the Banks or the Company hereunder or thereunder or waiving any Event of Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Banks: (a) Extend the maturity of any Note or reduce the principal amount thereof, or change the date of any principal installment due on any Note or reduce the rate or amount or change the time of payment of interest or fees payable on any Note or otherwise under this Agreement. (b) Amend the definition of Required Banks. (c) Extend the Termination Date, or increase the amount of the Commitment of any Bank hereunder, or permit the Company to assign its rights under this Agreement. (d) Alter the provisions of section 2.18 of this Agreement. (e) Amend any provision of this Agreement requiring a pro rata sharing among the Banks. (f) Amend this section 9.3. No amendment of any provision of this Agreement relating to the Agent, any LOC Bank or the Swingline Lender shall be effective without the written consent of the Agent, such LOC Bank, or the Swingline Lender, respectively. 9.4 Securities Act of 1933. Each Bank represents that it is acquiring the Notes payable to it without any present intention of making a sale or other distribution of such Notes, provided each Bank reserves the right to sell its Notes or participations therein. 9.5 No Agency. Except as expressly provided herein, nothing in this Agreement and no action taken pursuant hereto shall cause any Bank to be treated as the agent of any other Bank, or shall be deemed to constitute the Banks a partnership, association, joint venture or other entity. 9.6 Successors. The provisions of this Agreement shall inure to the benefit of any holder of one or more of the Notes, and shall inure to the benefit of and be binding upon any successor to any of the parties hereto. No delay on the part of any Bank or any holder of any of the Notes in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein specified are cumulative and are not exclusive of any rights or remedies which the Banks or the holder of any of the Notes would otherwise have. 9.7 Survival. All agreements, representations and warranties made herein shall survive the execution of this Agreement, the making of the Loans hereunder and the execution and delivery of the Notes. 9.8 Wisconsin Law. This Agreement and the Notes issued hereunder shall be governed by and construed in accordance with the internal laws of the State of Wisconsin, except to the extent superseded by federal law. 9.9 Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. 9.10 Notices. All communications or notices required under this Agreement shall be deemed to have been given on the date when deposited in the United States mail, postage prepaid, and addressed as follows (unless and until any of such parties advises the other in writing of a change in such address): (a) if to the Company, with the full name and address of the Company as shown on this Agreement below; and (b) if to any of the Banks with the full name and address of such Bank as shown in Appendix A, to the attention of the officer of the Bank executing the form of acceptance of this Agreement. 9.11 Assignment; Participations. (a) Assignments. Each Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Commitment); provided, however, that: (1) each such assignment shall be to an Eligible Assignee; (2) except in the case of an assignment to another Bank or an Affiliate of such Bank or an assignment of all of a Bank's rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Bank) and an integral multiple of $1,000,000 in excess thereof; (3) each such assignment by a Bank shall be of a constant, and not varying, percentage of all of its rights and obligations under this Agreement and the Notes; and (4) the parties to such assignment shall deliver to the Agent for its acceptance a processing fee from the assignor of $3,500. Upon execution, delivery, and acceptance of such assignment, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Bank hereunder and the assigning Bank shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section 9.11(a), the assignor, the Agent and the Company shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. (b) Participations. Each Bank may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Agreement (including all or a portion of its Commitment, its Notes and its Loans); provided, however, that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Article II, inclusive, and the right of set-off contained in Section 2.20, and (iv) the Company shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, and such Bank shall retain the sole right to enforce the obligations of the Company relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Commitment). (c) Nonrestricted Assignments. Notwithstanding any other provision set forth in this Agreement, any Bank may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any operating circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder. (d) Information. Any Bank may furnish any financial information concerning the Company in the possession of such Bank from time to time to assignees and participants (including financial institutions that are prospective assignees and participants). 9.12 Entire Agreement; No Agency. This Agreement and the other documents referred to herein contain the entire agreement between the Banks and the Company with respect to the subject matter hereof, superseding all previous communications and negotiations, and no representation, undertaking, promise or condition concerning the subject matter hereof shall be binding upon the Banks unless clearly expressed in this Agreement or in the other documents referred to herein. Nothing in this Agreement or in the other documents referred to herein and no action taken pursuant hereto shall cause the Company to be treated as an agent of any Bank, or shall be deemed to constitute the Banks and the Company a partnership, association, joint venture or other entity. 9.13 No Third Party Benefit. This Agreement is solely for the benefit of the parties hereto and their permitted successors and assigns. No other person or entity shall have any rights under, or because of the existence of, this Agreement. 9.14 Consent to Jurisdiction. The Company hereby consents to the jurisdiction of any state or federal court situated in Milwaukee County, Wisconsin, and waives any objection based on lack of personal jurisdiction, improper venue or forum non conveniens, with regard to any actions, claims, disputes or proceedings relating to this Agreement, any Note, any of the Collateral Documents, or any other document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. Nothing herein shall affect the right of the Banks, or any of them, to serve process in any manner permitted by law, or limit the right of any Banks, or any of them, to bring proceedings against the Company or its property or assets in the competent courts of any other jurisdiction or jurisdictions. 9.15 Waiver of Jury Trial. The Company and the Banks hereby jointly and severally waive any and all right to trial by jury in any action or proceeding relating to this Agreement, any Note, any of the Collateral Documents, or any other document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. The Company and the Banks each represent that this waiver is knowingly, willingly and voluntarily given. [Remainder of Page Intentionally Left Blank] If the foregoing is satisfactory to you, please sign the form of acceptance below and return a signed counterpart hereof to the Company. When this instrument has been executed and delivered by all of the Banks, it will evidence a binding agreement between the Banks and the Company. Very truly yours, OSHKOSH B'GOSH, INC. Address: 112 Otter Avenue Oshkosh, WI 54901-5008 By (CORPORATE SEAL) Name: Title: [Bank signature pages follow] The foregoing Agreement is hereby confirmed and accepted as of the date thereof. FIRSTAR BANK, NATIONAL ASSOCIATION, as the Agent and as a Bank By: Name: Title: BANK ONE, NA (Main Office Chicago) as Co-Agent and as a Bank Name: Title: BANKBOSTON, N.A. as Co-Agent and as a Bank By: Name: Title: HARRIS TRUST AND SAVINGS BANK as Co-Agent and as a Bank By: Name: Title: LASALLE BANK NATIONAL ASSOCIATION By: Name: Title: M&I MARSHALL & ILSLEY BANK By: Name: Title: And By: Name: Title: U.S. BANK, NATIONAL ASSOCIATION By: Name: Title: WELLS FARGO HSBC TRADE BANK N.A. By: Name: Title: EXHIBIT 1.1 (Form of Revolving Credit Note) REVOLVING CREDIT NOTE $ , 19 FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Delaware corporation, promises to pay to the order of ________________________________________________, the principal sum of __________________ Dollars ($_______________) at the main office of Firstar Bank, National Association in Milwaukee, Wisconsin, on the Termination Date (as defined in the Credit Agreement referred to below). The unpaid principal balance hereof shall bear interest, payable on the dates and at the rate or rates set forth in the Credit Agreement referred to below. Principal of and interest on this Note shall be payable in lawful money of the United States of America. This Note constitutes one of the Revolving Credit Notes issued under a Credit Agreement dated as of [__________], as amended from time to time, among the undersigned and Firstar Bank, National Association, for itself and as Agent, and the other Banks party thereto, to which Agreement reference is hereby made for a statement of the terms and conditions on which Loans in part evidenced hereby were or may be made, and for a description of the conditions upon which this Note may be prepaid, in whole or in part, or its maturity accelerated. This Note shall be construed in accordance with laws of the State of Wisconsin, except to the extent superseded by federal law. The undersigned waives presentment, protest, and notice of dishonor and agrees, in the event of default hereunder, to pay all costs and expenses of collection, including reasonable attorneys' fees. OSHKOSH B'GOSH, INC. By: Vice President of Finance (CORPORATE SEAL) EXHIBIT 1.2 (Form of Term Note) PROMISSORY NOTE $_______________ [_________________] FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Delaware corporation, promises to pay to the order of [____________________________________] the principal sum of _______________________________ Dollars ($_____________), at the main office of Firstar Bank, National Association, in Milwaukee, Wisconsin, payable in four (4) equal annual installments of _______________ Dollars ($__________) each, payable on the [____________] day of each [____________] commencing [__________, 2000] and a final installment of all unpaid principal and accrued interest on ______________, 2004. The unpaid principal balance hereof shall bear interest, payable on the dates and at the rate or rates provided for in the Credit Agreement referred to below. Principal and interest on this Note shall be payable in lawful money of the United States. This Note constitutes one of the Term Notes issued under a Credit Agreement dated as of [__________________] among the undersigned, Firstar Bank, National Association, for itself and as Agent, and the other Banks party thereto, to which Credit Agreement reference is hereby made for a statement of the terms and conditions on which Loans in part evidenced hereby were made and for a description of the terms and conditions upon which this Note may be prepaid, in whole or in part, or its maturity accelerated. This Note shall be construed in accordance with laws of the State of Wisconsin, except to the extent superseded by federal law. The undersigned waives presentment, protest, and notice of dishonor and agrees, in the event of default hereunder, to pay all costs and expenses of collection, including reasonable attorneys' fees. OSHKOSH B'GOSH, INC. By: Vice President of Finance EXHIBIT 1.3 (Form of Swingline Note) SWINGLINE NOTE $5,000,000 __________, 1999 FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Delaware corporation, promises to pay to the order of Firstar Bank, National Association, without setoff or counterclaim, the principal sum of (a) Five Million Dollars ($5,000,000) or, if less, (b) the aggregate unpaid principal amount of all Swingline Loans made to the undersigned pursuant to section 1.3 of the Credit Agreement referred to below, at the Main Office of Firstar Bank, National Association, in Milwaukee, Wisconsin, on the Termination Date (as defined in the Credit Agreement referred to below). This Note shall bear interest payable on the dates and at the rate or rates set forth in the Credit Agreement referred to below. All amounts payable under this Note and the Credit Agreement shall be payable in lawful money of the United States of America. This Note constitutes the Swingline Note issued under a Credit Agreement dated as of ____________, 1999 (the "Credit Agreement"), among the undersigned, Firstar Bank, National Association, for itself and as Agent, and the Banks from time to time party thereto, to which Credit Agreement reference is hereby made for a statement of the terms and conditions on which Swingline Loans evidenced hereby were or may be made, and for a description of the conditions upon which this Note may be prepaid, in whole or in part, or its maturity accelerated. This Note shall be construed in accordance with laws of the State of Wisconsin, except to the extent superseded by federal law. The undersigned waives presentment, protest, and notice of dishonor and agrees, in the event of default hereunder, to pay all costs and expenses of collection, including reasonable attorneys' fees. OSHKOSH B'GOSH, INC. By: Vice President of Finance EXHIBIT 2.2 LOAN REQUEST _______________, ____ Firstar Bank, National Association 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Re: Credit Agreement Dated as of ____________________ (the "Agreement") Gentlemen: The undersigned hereby applies to you, as Agent, for [Revolving Credit Loans] [a Term Loan] under the above Agreement to be made on ____________, ____ in the aggregate principal amount of $_______________. The undersigned hereby certifies as follows: (a) All of the representations and warranties set forth in Article IV of such Agreement continue to be true on the date hereof. (b) At the date hereof, no Default or Event of Default under said Agreement has occurred and is continuing. (c) There has been no material adverse change in the business, operations or financial condition of the undersigned or any of its Subsidiaries since the date of the most recent audited financial statements of the Company delivered pursuant to the Agreement. The loans will bear interest at the: [check appropriate box] [_____] Variable Rate [_____] Adjusted LIBOR Rate If the loans will bear interest at the Adjusted LIBOR Rate, the Interest Period shall be ____ months (one, two or three months). Capitalized definitional terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement. Very truly yours, OSHKOSH B'GOSH, INC. By: Vice President of Finance EXHIBIT 2.5 CONVERSION/CONTINUATION REQUEST _______________, ____ Firstar Bank, National Association 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Re: Credit Agreement Dated as of __________, 19__ (the "Agreement") Gentlemen: The undersigned elects to convert/continue the following portion of the outstanding Loans under the Agreement: 1 The type of Loans to be converted/continued is currently: [check appropriate box] [_____] Variable Rate Loans [_____] Adjusted LIBOR Rate Loans 2 The amount of Loans to be converted/continued: $_________________________ 3 The type of Loans into which the current loans shall be converted: [check appropriate box] [_____] Variable Rate Loans [_____] Adjusted LIBOR Rate Loans 4 Date of Conversion/Continuation: ________________ 5 Duration of Interest Period: _____ months [one, two or three months] (applicable only to Adjusted LIBOR Rate Loans). 6 The amount of the Adjusted LIBOR Rate Loans into which such loans are converted/continued: $_____________________ (applicable only to Adjusted LIBOR Rate Loans) 7 Capitalized definitional terms used and not otherwise defined herein shall have the meanings ascribed to them in the Agreement. Very truly yours, OSHKOSH B'GOSH, INC. By: Vice President of Finance EXHIBIT 5.4 (Form of Corporate Guaranty) CORPORATE GUARANTY AGREEMENT THIS AGREEMENT is made as of __________________, ____, by _______________________________, a _______________ corporation (hereinafter called "Guarantor"). R E C I T A L S : A. The Banks listed in Appendix I to the Credit Agreement (as defined below) (the "Creditors") have required, as a condition to making certain credit available to OshKosh B'Gosh, Inc., a Delaware corporation (whether one or more, hereinafter called "Debtor") that the Guarantor guarantee the Obligations (as hereinafter defined) on the terms stated herein. B. It is necessary for the business purposes of the Guarantor that Debtor obtain such credit from the Creditors. The Guarantor is a direct or indirect wholly-owned subsidiary of the Debtor. C. The term "Obligations" includes any and all debts, obligations, and liabilities of Debtor to Creditors, heretofore, now, or hereafter made, incurred, or created, under that certain Credit Agreement by and between Debtor and Creditors, dated November 3, 1999 (the "Credit Agreement"). C O V E N A N T S : IN CONSIDERATION OF these premises and any credit or financial accommodation now or hereafter granted by Creditors to any Debtor, it is agreed that: 1. The Guarantor hereby (a) unconditionally guarantees the full and prompt payment and performance of the Obligations when due, whether by acceleration or otherwise, or (if earlier) at the time Debtor becomes the subject of bankruptcy or other insolvency proceedings; (b) agrees to pay all costs, expenses and reasonable attorneys' fees incurred by Creditors in enforcing this Agreement and the Obligations and realizing on any collateral for either; and (c) agrees to pay to the Creditors the amount of any payments made to Creditors or another in connection with any of the Obligations which are recovered from Creditors by a trustee, receiver, Creditors or other party pursuant to applicable law. 2. This is a guarantee of payment, and not of collection. The Creditors shall not be obligated to: (a) take any steps whatsoever to collect from, or to file any claim of any kind against, the Debtor, any guarantor, or any other person or entity liable for payment or performance of any of the Obligations; or (b) take any steps whatsoever to protect, accept, obtain, enforce, take possession of, perfect its interest in, foreclose or realize on collateral or security, if any, for the payment or performance of any of the Obligations or any guarantee of any of the Obligations; or (c) in any other respect exercise any diligence whatever in collecting or attempting to collect any of the Obligations by any means. 3. The Guarantor's liability for payment and performance of the Obligations shall be absolute and unconditional; the Guarantor unconditionally and irrevocably waives each and every defense which, under principles of guarantee or suretyship law, would otherwise operate to impair or diminish such liability; and nothing whatever except actual full payment and performance to the Creditors of the Obligations (and all other debts, obligations and liabilities of Guarantor under this Agreement) shall operate to discharge the Guarantor's liability hereunder. Without limiting the generality of the foregoing, the Creditors shall have the exclusive right, which may be exercised from time to time without diminishing or impairing the liability of the Guarantor in any respect, and without notice of any kind to the Guarantor, to: (a) extend any additional credit to Debtor; (b) accept any collateral, security or guarantee for any Obligations or any other credit; (c) determine how, when and what application of payments, credits and collections, if any, shall be made on the Obligations and any other credit and accept partial payments; (d) determine what, if anything, shall at any time be done with respect to any collateral or security; subordinate, sell, transfer, surrender, release or otherwise dispose of all or any of such collateral or security; and purchase or otherwise acquire any such collateral or security at foreclosure or otherwise; and (e) with or without consideration grant, permit or enter into any waiver, amendment, extension, modification, refinancing, indulgence, compromise, settlement, subordination, discharge or release of: (i) any of the Obligations and any agreement relating to any of the Obligations, (ii) any obligations of any guarantor or other person or entity liable for payment or performance of any of the Obligations, and any agreement relating to such obligations and (iii) any collateral or security or agreement relating to collateral or security for any of the foregoing. 4. The Guarantor hereby unconditionally waives (a) presentment, notice of dishonor, protest, demand for payment and all notices of any kind, including without limitation: notice of acceptance hereof; notice of the creation of any of the Obligations; notice of nonpayment, nonperformance or other default on any of the Obligations; and notice of any action taken to collect upon or enforce any of the Obligations; (b) any subrogation to the rights of the Creditors against the Debtor and any other claim against the Debtor which arises as a result of payments made by the Guarantor pursuant to this Agreement, until the Obligations have been paid or performed in full and such payments are not subject to any right of recovery; (c) any claim for contribution against any co-guarantor, until the Obligations have been paid or performed in full and such payments are not subject to any right of recovery; and (d) any setoffs or counterclaims against Creditors which would otherwise impair the Creditors' rights against the Guarantor hereunder. 5. Guarantor has made an independent investigation and evaluation of the financial condition of the Debtor and the value of any collateral, and has not relied (and will not rely) on any information or evaluation provided by Creditors regarding such condition or value. 6. Guarantor represents and warrants that: (a) The execution, delivery and performance of this Agreement by the Guarantor are within the corporate powers of the Guarantor, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the stockholders of the Guarantor which has not been obtained, (ii) violate any provision of the articles of incorporation or by-laws of the Guarantor or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Guarantor or any subsidiary of the Guarantor; (iii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority, or (iv) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Guarantor or any subsidiary of the Guarantor pursuant to, any indenture or other agreement or instrument under which the Guarantor or any subsidiary of the Guarantor is a party or by which it or any of its properties may be bound or affected. (b) This Agreement constitutes the legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except that such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of Creditors' rights generally. (c) The financial statements of the Guarantor furnished to the Creditors fairly present the financial condition of the Guarantor for the periods shown therein, and since the dates covered by the most recent of such financial statements, there has been no material adverse change in the Guarantor's assets or the conduct of its business. Except as expressly shown on such financial statements, the Guarantor owns all of its assets free and clear of all liens except liens in favor of the Creditors; is not a party to any litigation, nor is any litigation threatened to the knowledge of the Guarantor which would, if adversely determined, cause any material adverse change in its business or assets; and has no delinquent tax liabilities, nor have any tax deficiencies been proposed against it. 7. The Guarantor shall provide to the Creditors such information regarding the financial condition of the Guarantor as the Creditors may reasonably request from time to time. 8. This Agreement shall inure to the benefit of the Creditors and their successors and assigns, including every holder or owner of any of the Obligations, and shall be binding upon the Guarantor and Guarantor's successors and assigns. This is a continuing guarantee and shall continue in effect until the Creditors shall have received written notice of termination from Guarantor; provided that this guarantee shall continue in effect thereafter with respect to all Obligations which arise or are committed for prior to Creditors' receipt of such notice of termination (including all subsequent extensions and renewals thereof, including extensions and renewals at increased rates, and all subsequently accruing interest and other charges thereon) until all such Obligations and all obligations of Guarantor hereunder shall be paid or performed in full and such payments are not subject to any right of recovery. 9. This Agreement constitutes the entire agreement between the Creditors and Guarantor with respect to the subject matter hereof, superseding all previous communications and negotiations, and no representation, understanding, promise or condition concerning the subject matter hereof shall be binding upon Creditors unless expressed herein. This Agreement shall be governed by the internal laws of the State of Wisconsin. 10. The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of Creditors generally, if the obligations of the Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of the Guarantor's liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Guarantor or the Creditors, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. 11. The Guarantor hereby consents to the exclusive jurisdiction of any state or federal court situated in Milwaukee County, Wisconsin, and waives any objection based on lack of personal jurisdiction, improper venue or forum non conveniens, with regard to any actions, claims, disputes or proceedings relating to this Agreement, or any document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. Nothing herein shall affect the right of the Creditors to serve process in any manner permitted by law, or limit the right of the Creditors to bring proceedings against the Guarantor or its property or assets in the competent courts of any other jurisdiction or jurisdictions. 12. The Guarantor hereby waives any and all right to trial by jury in any action or proceeding relating to this Agreement, or any document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. The Guarantor represents that this waiver is knowingly, willingly and voluntarily given. By: Title: (CORPORATE SEAL) Attest: Title: APPENDIX A Schedule of Banks Bank Address for Notice Revolver Term Loan Percentage Interest Commitment Amount Commitment Amount Firstar Bank, National Mr. Jeffrey J. Janza $15,000,000 $25,000,000 20% Assocation Vice President Firstar Bank, N.A. Agent 777 East Wisconsin Avenue Milwaukee, WI 53202 (414) 765-6999 (414) 765-4632 FAX jeff.janza@firstar.com Bank One, NA Mr. Anthony F. Maggiore $11,250,000 $18,750,000 15% (Main Office Chicago) Managing Director Bank One, NA Co-Agent 111 East Wisconsin Avenue Milwaukee, WI 53202 (414) 765-3111 (414) 765-2625 FAX tony.maggiore@mail.bankone.com Harris Trust and Mr. George M. Dluhy $11,250,000 $18,750,000 15% Savings Bank Vice President Harris Trust and Savings Bank Co-Agent Midwest Group - Tenth floor West 111 West Monroe Street Chicago, IL 60603 (312) 461-7788 (312) 293-5040 FAX george.dluhy@harrisbank.com BankBoston, N.A. Mr. Peter L. Griswold $11,250,000 $18,750,000 15% Director - Retail Group Co-Agent 100 Federal Street Mail Stop 010905 Boston, MA 02110 (617) 434-8312 (617) 434-0630 FAX plgriswold@bkb.com Kathleen A. Dimock Vice President (617) 434-3830 kdimock@bkb.com Wells Fargo HSBC Mr. Peter Loeffler $7,500,000 $12,500,000 10% Trade Bank N.A. Vice President 1445 Ross Avenue Suite 450 Dallas, TX 75202 (214) 740-1565 (214) 220-2166 loefflep@wellsfargo.com LaSalle Bank National Mr. James A. Meyer $7,500,000 $12,500,000 10% Association First Vice President LaSalle Bank, N.A. 411 East Wisconsin Avenue Milwaukee, WI 53202 (414) 224-0380 (414) 224-0071 FAX james.meyer@abnamro.com U.S. Bank, Mr. Michael M. Fordney $5,625,000 $9,375,000 7.5% Senior Vice President National Association 201 West Wisconsin Avenue Milwaukee, WI 53259 (920) 830-1646 (920) 830-7814 FAX michael.fordney@usbank.com M&I Marshall & Ilsley Mr. Ronald J. Carey $5,625,000 $9,375,000 7.5% Bank Vice President M&I Marshall & Ilsley Bank 770 North Water Street Milwaukee, WI 53202 (414) 765-7439 (414) 765-7625 FAX ron.carey@micorp.com
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