-----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, HlppNol6jZrGiiP+NMeUykU8ceOfHwxYR2+vNnu593/o3sHUyETMHrQCCIg39Gr8 pXMA/oUM16EWVNc4kCBEAQ== 0000916641-00-000352.txt : 20000327 0000916641-00-000352.hdr.sgml : 20000327 ACCESSION NUMBER: 0000916641-00-000352 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESKIMO PIE CORP CENTRAL INDEX KEY: 0000787520 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 540571720 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-19867 FILM NUMBER: 578208 BUSINESS ADDRESS: STREET 1: 901 MOOREFIELD PARK DR CITY: RICHMOND STATE: VA ZIP: 23236 BUSINESS PHONE: 8045608400 MAIL ADDRESS: STREET 1: 901 MOOREFIELD PARK DR CITY: RICHMOND STATE: VA ZIP: 23236 10-K405 1 ESKIMO PIE CORPORATION ================================================================================ 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 December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission file number 0-19867 ________________________ ESKIMO PIE CORPORATION (Exact name of registrant as specified in its charter) Virginia 54-0571720 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 901 Moorefield Park Drive Richmond, VA 23236 (Address of principal executive offices, including zip code) ___________ Registrant's phone number, including area code: (804) 560-8400 ____________ Securities registered pursuant to section 12(g) of the Act: ESKIMO PIE CORPORATION COMMON STOCK, $1.00 par value, and Preferred Stock Purchase Rights ___________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes X No ___ --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, 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] There were 3,479,964 shares of the Registrant's Common Stock outstanding on March 20, 2000. The aggregate market value held by non-affiliates on March 20, 2000 was approximately $29 million. DOCUMENTS INCORPORATED BY REFERENCE Certain information in the Registrant's Proxy Statement for the Annual Meeting to be held on May 3, 2000 is incorporated by reference into Part III herein. ================================================================================ INDEX Part I
Page Item 1. Business................................................... 1 Item 2. Properties................................................. 5 Item 3. Legal Proceedings.......................................... 6 Item 4. Submission of Matters to a Vote of Security Holders........ 6 Executive Officers of the Registrant....................... 7 Part II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters........................................ 8 Item 6. Selected Financial Data.................................... 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 10 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 16 Item 8. Financial Statements and Supplementary Data................ 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................... 33 Part III Item 10 Directors and Executive Officers of the Registrant......... 33 Item 11. Executive Compensation..................................... 33 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................. 33 Item 13. Certain Relationships and Related Transactions............. 33 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................................... 34
________________________________ Trademarks and service marks of the Company are italicized where they appear herein. NutraSweet(R) is the registered trademark of Monsanto Company, Chicago, Illinois. Welch's(R) is the registered trademark of Welch Foods Inc., a Cooperative ("Welch's"), Concord, Massachusetts. Nabisco(R), OREO(R) and SnackWell's(R) are the registered trademarks of Nabisco Brands Company ("Nabisco"), San Francisco, California. Weight Watchers(R) and Smart Ones(R) are the registered trademarks of Weight Watchers International, Inc. ("Weight Watchers"), Jericho, New York. All Rights Reserved. Market share and product distribution data were obtained from ACNielsen, a nationally recognized market research firm based in Schaumburg, Illinois, which provides the Company with scanner-based product movement data from U.S. grocery stores. Forward Looking Statements: Statements contained in this Annual Report on Form 10-K regarding the Company's future plans and performance are forward looking statements within the meaning of the federal securities laws. These statements are based upon management's current expectations and beliefs about future events and their effect upon the Company. There can be no assurance that future developments affecting the Company will mirror those currently anticipated by management. Actual results may vary materially from those included in the forward looking statements. These forward looking statements involve risks and uncertainties, including but not limited to, the highly competitive nature of the frozen dessert market and the level of consumer interest in the Company's products, product costing, the weather, the performance of management, the Company's relationships with its licensees and licensors and government regulation. For a more complete discussion of these risks and uncertainties, see "Other Factors Affecting the Business of the Company" beginning on page 3 hereof. The Company assumes no duty to update any forward looking statements. PART I ITEM 1. BUSINESS Introduction Eskimo Pie Corporation (the Company) created the frozen novelty industry in 1921 with the invention of the Eskimo Pie ice cream bar. Today, the Company markets a broad range of frozen novelties, ice cream and sorbet products under the Eskimo Pie, RealFruit, Welch's, Weight Watchers Smart Ones, SnackWell's and OREO brand names. These nationally branded products are generally manufactured by a select group of licensed dairies who purchase the necessary flavors, ingredients and packaging directly from the Company. The Company also sells a full line of quality flavors and ingredients for use in dairy and frozen dessert products outside of those used in its nationally licensed brands business and manufactures soft serve yogurt and premium ice cream products for sale to the foodservice industry. The Company's strengths include national brand recognition, quality products and the management of complex sales and distribution networks. The Company's growth has come primarily as a result of the development and introduction of Eskimo Pie brand frozen dessert products, the development and marketing of frozen dessert products under the licensing of other well-known national brands under sublicensing arrangements, and the use of a select group of quality- oriented licensee manufacturers who provide a cost effective means to manufacture and distribute the Company's products. In September 1999, the Company announced that its Board of Directors had authorized management to actively pursue all strategic alternatives to maximize shareholder value, including a sale of the Company as a whole or one or more sales of the Company's strategic assets. The Company is a Virginia corporation with executive offices at 901 Moorefield Park Drive, Richmond, Virginia 23236. Licensing Strategy The Company has granted licenses to seven dairies who purchase packaging and ingredients from the Company for use in the manufacture and distribution of the Eskimo Pie and other branded novelties and ice cream products. Licensees are selected based upon their reputation for product quality and manufacturing and distribution capabilities. The licensees produce, store and distribute products in accordance with specific quality control standards which ensure uniform formulations, taste and appearance across all licensee territories. The Company regularly inspects the licensees' production and storage facilities and monitors finished products for adherence to the Company's quality standards. Each licensee operates within geographic territorial boundaries under agreements which generally include three year terms subject to termination by the Company for quality control violations, failure to meet minimum volume requirements or material changes in the Company's ownership or the licensee's business. These agreements provide for six to twelve month transition periods in the event of termination. Beginning in 1999, licensees were contractually required to contribute to trade promotion spending and to make separate quarterly payments to the Company for licensing fees. These licensing fees amounted to $1,040,000 in 1999 and are expected to total to $1,040,000 annually, through 2001. Certain key ingredients (such as chocolate coatings and powders) and wrappers used by the Company's licensees in the manufacture of Eskimo Pie and other licensed frozen novelties and ice cream products are produced at Company owned facilities located in New Berlin, Wisconsin and Bloomfield, New Jersey. Other products sold within the licensing system are purchased from approved vendors and "drop shipped" directly to licensee production facilities. Products sold under "drop shipped" arrangements include cartons, ice cream sandwich wafers and proprietary ingredients used in the manufacture of sublicensed brand products. As a result of the Company's licensing strategy, the seven licensee dairies account for approximately 60% of the Company's net sales. The licensing strategy allows the Company to select a strong customer base which it actively monitors to minimize the impact of an unforeseen loss of any of its licensee customers. The loss of one or more licensees could cause some disruption in the Company's operations, although, based upon prior experience with replacing licensees, management believes it could find a suitable replacement within a short period of time. As a result, such customer loss would not have a significant impact on the Company's operations, liquidity or capital resources. The licensing strategy also allows the Company to operate with relatively low capital requirements. The Company's working capital requirements are limited to that necessary to support advertising, sales promotion and administrative activities rather than the much larger amounts that would be required to support the self-manufacture of finished consumer goods. The Company provides significant marketing support for the Eskimo Pie and other licensed brands manufactured and distributed by its licensees. The Company engages in product/concept development, and advertising and sales promotion expense generally includes trade promotion and introductory costs, price-off and feature price promotions, regional consumer promotion, couponing and other trial purchase generating programs and broker commissions. The Company has 13 field sales personnel among the Company's operating divisions, and engages broker representatives in each major U.S. market. Distribution of the Company's finished consumer products is handled by the licensees and distributors in their respective territories. Sublicensing Efforts The Company leverages its licensee and trade relationships and marketing presence by securing the limited rights for nationally recognized brand names such as Welch's, Weight Watchers Smart Ones, SnackWell's and OREO. These rights allow the Company to manage the product development, manufacture, distribution, marketing and sales of branded frozen novelties and ice cream products in exchange for royalty payments to the owners of the brand names. Welch's. Since 1980, the Company has managed the manufacture and marketing ------- of Welch's brand frozen fruit juice bars under an exclusive agreement with Welch Foods Inc. (Welch's). Under the Company's management, the four varieties of Welch's frozen juice bars continue to be leading products in the "All Family" fruit and juice bar category according to ACNielsen. The Company introduced, in selected test markets, two new Welch's products in 1999 which were targeted to attract the attention of a more youthful audience. Weight Watchers. In January 1995, the Company entered into an agreement --------------- with Weight Watchers Food Company whereby it assumed the management of an existing line of frozen novelty products. During 1998, the Company transitioned the Weight Watchers brand to incorporate the Smart Ones trademark consistent with an overall brand repositioning by Weight Watchers International, Inc. There are currently six Weight Watchers Smart Ones products being distributed to retail grocery stores including the new Mocha Java bar which was introduced in the fourth quarter of 1998. Nabisco Brands. In December 1994, the Company entered into an agreement -------------- with Nabisco Brands Company under which it has developed and marketed frozen novelty and packaged ice cream products under the SnackWell's and OREO brand names. The Company currently manages one SnackWell's and two OREO novelty products that are currently distributed to the retail grocery and single serve convenience markets. 2 Master License Agreements between the Company and each respective licensor set forth the Company's rights and obligations in connection with the respective sub-licensed businesses. Although the specific terms vary, each of the Master License Agreements provides for royalty payments or license fees (although the basis and rate are different under each agreement), the length of the agreement (5 to 20 years) and conditions for termination (which may be exercised by either party based on certain conditions). The agreements have been subjected to various renegotiations and amendments from time to time as business conditions have changed. Although each agreement also includes certain threshold performance requirements (such as the requirement to develop a certain number of new products each year, reach certain distribution goals, etc.), there are no guaranteed payments required of the Company by any of the agreements. Failure to comply with the terms of the Master License Agreements may result in termination of the respective agreement (or as is more likely the case, some cure or other renegotiation of terms), but in no case would the Company be required to make specified payments if the Company does not continue to utilize the rights under the respective agreements. Non-licensed Products In addition to products manufactured for use in its licensed and sublicensed businesses, the Company sells various other ingredients to the dairy industry produced at its New Berlin, Wisconsin facility. This business involves blending, cooking and processing basic flavors and fruits to produce products which subsequently are used by the Company's customers to flavor frozen desserts, ice cream novelties and fluid dairy products. This business, which accounts for approximately 20% of the Company's sales, has grown in recent years and provides a positive gross margin contribution although at lower levels than the Company's licensing business. The Company also manufactures soft serve yogurt and premium ice cream mix in a leased facility in Russellville, Arkansas. Soft serve mix is sold under the Eskimo Pie brand name to broad- line foodservice distributors, yogurt shops and other foodservice establishments who, in turn, sell soft serve ice cream and yogurt products to consumers. The sale of soft serve yogurt and ice cream mix, which accounts for approximately 14% of the Company's sales, is managed by a separate sales force working within the Company's wholly owned subsidiary, Sugar Creek Foods, Inc. The Company also manufactures flexible packaging, such as private label ice cream novelty wraps, at its Bloomfield, New Jersey plant. These products are sold to the dairy industry, including many of the Company's licensees. Other Factors Affecting the Business of the Company This document and other information or statements the Company may release from time to time include forward looking statements, within the meaning of federal securities laws, about the Company's future plans and performance. Numerous factors, including but not limited to those discussed below, produce risks and uncertainties that may cause actual results to vary materially from those included in the forward looking statements. Competition. The principal outlet for the Company's licensed and ----------- sublicensed products is retail grocery stores which sell approximately $1.8 billion of frozen novelties annually according to the International Dairy Foods Association. The Company's branded frozen novelties compete with over 300 national, regional and local brands, including the brands of two of the world's largest food conglomerates. The Company also competes with national, regional and local brands of soft serve frozen yogurt and premium ice cream, packaged ice cream and sorbet products. Management believes that the Company has a number of competitive advantages in the frozen dessert market. The Eskimo Pie brand name is one of the most widely recognized names in this market and it is management's belief that consumers identify the Eskimo Pie name with a 3 consistently high quality product. The Company has been an active leader in new product introductions, as evidenced by Eskimo Pie Sweetened with NutraSweet and the numerous sub-licensed products developed in recent years. In addition, the Company's licensing strategy enables it to operate with relatively low capital requirements. Product Costing. The Company purchases raw materials such as sugar and --------------- coconut oil from a number of suppliers. Other materials used by the Company include paper, cartons and chocolate liquor. With the exception of ice cream sandwich wafers, NutraSweet brand aspartame, and the proprietary items required to be purchased from the owners of the sublicensed brands, the Company believes that its raw materials are readily available from a number of sources. Raw material costs may be influenced by fluctuations in the commodity markets. Seasonality. The frozen dessert market is seasonal with sales concentrated ----------- in the summer months. Because the Company supplies packaging and ingredients to manufacturers of its licensed and sublicensed products, the Company has a higher level of sales preceding and during the summer months and a lower level of sales in the first and fourth quarters. Annual sales can be adversely affected by unseasonably cool weather during the summer months. Management. The Company is reliant on the abilities of the management team ---------- led by David B. Kewer, the Company's President and Chief Executive Officer. These personnel have significant experience in their respective functional areas and the loss of these individuals or others could have an adverse effect on the Company's ability to implement its future plans. Licensee Relationships. The nature and extent of the Company's ---------------------- relationships with its licensees are discussed under "Licensing Strategy" above. Licensor Relationships. The Company derives approximately 33% of its ---------------------- revenues from sub-licensed products which, in general, are governed by contractual agreements between the licensor and the Company (as discussed under "Sublicensing Efforts" above). The loss of these sub-licensed brands could have an adverse effect on the Company's business. Year 2000 Matters. See "Management's Discussion and Analysis of Financial ----------------- Condition and Results of Operations - Impact of Year 2000" for a discussion of this issue. Government Regulation. Like other companies in the food industry, the --------------------- Company and its licensees are subject to extensive regulation by various local, state and federal governmental agencies. Pursuant to a wide range of statutes, rules and regulations, such agencies prescribe requirements governing product quality, purity, manufacturing, advertising and labeling. Food products are often subject to "standard of identity" requirements, which are promulgated at both the federal and state level to control the permissible qualitative and quantitative ingredient content of foods and related information that must be provided on food product labels. The Federal Food and Drug Administration ("FDA"), the Federal Trade Commission ("FTC") and many states review product labels and advertising to assure compliance with applicable statutes and regulations. The Company cannot predict the impact of the changes that it may be required to make in the future as a result of other legislation, rules or governmental review. FDA regulations may, in certain instances, affect the ability of the Company, as well as others in the industry, to develop and market new products and to utilize technological innovations in the manufacturing of existing products. Nevertheless, the Company does not currently believe these rules and regulations will have a significant impact on its operations. Trademarks. The licensing of trademarks owned and sublicensed by the ---------- Company, especially the Eskimo Pie brand, is central to the business of the Company. The Company has exclusive rights with respect to these trademarks in the U.S. and, for Eskimo Pie and RealFruit, in Canada and certain other countries around the world. The Company has made federal and various international filings with respect to its significant trademarks and intends to keep these filings 4 current. The Company is not aware of any challenge to the validity of any trademark material to its business in areas where the Company and its licensees are currently conducting operations. Environmental. The Company's operations are subject to rules and ------------- regulations governing air quality, waste disposal and other environmental related matters, as well as other general employee health and safety laws and regulations. Other than as set forth below with respect to the Bloomfield plant, the Company believes that it is in substantial compliance with all such applicable laws and rules. In the third quarter of 1991, the Company learned that small quantities of cleanup solvents, solvent inks and oil were disposed of many years before at its Bloomfield, New Jersey plant. The Company promptly notified regulatory authorities and undertook testing to determine the extent of any contamination. In connection with the consummation of the Company's public offering in March, 1992, the Company's former parent, Reynolds Metals Company ("Reynolds"), entered into an agreement with the Company under which Reynolds will continue to manage environmental testing and remediation activities at the Bloomfield plant. Under the agreement, Reynolds will reimburse the Company for certain cleanup costs (as defined in the agreement), relating to the Bloomfield plant, that may be incurred by the Company in excess of $300,000. The Company recorded a $300,000 liability for these costs in 1992 of which approximately $70,000 remains unused at December 31, 1999. In connection with the Board's decision to explore a possible sale of the Company, management is attempting to accelerate resolution of the Bloomfield environmental issue. As a result of its efforts, management has made certain estimates and recorded an additional liability of $106,000 relating to costs associated with (1) testing and remediation with respect to certain items as to which the Company and Reynolds do not agree on the extent of Reynolds' remediation responsibility under the agreement and (2) expediting the timeframe under which certain testing results are available for review by management, regulatory authorities and potential purchasers of the Company. Except as provided for in the agreement relating to the Bloomfield facility, Reynolds has not otherwise undertaken any responsibility or assumed liability for any environmental obligations of the Company. Employees. At December 31, 1999, the Company employed approximately 105 --------- persons. No employees are currently covered by collective bargaining agreements. The Company believes that its employee relations are good. ITEM 2. PROPERTIES In 1992, the Company acquired an office building in the Moorefield Office Park in Richmond, Virginia. The building consists of approximately 32,496 square feet on 3.4 acres which serves as the Company's executive and administrative offices and as the Company's new product development and quality control facility. Approximately 8,500 square feet of the headquarters building is leased to outside parties at rates consistent with local market conditions. The Company owns its ingredients manufacturing plant in New Berlin, Wisconsin which consists of approximately 73,820 square feet on 4.0 acres. The Company expanded its New Berlin plant by 18,000 square feet in 1990 and purchased certain new equipment at that time. The Company completed $800,000 of capital improvements in the New Berlin facility during 1998 (consisting primarily of equipment additions) in connection with the consolidation of its flavors production at the New Berlin facility which was completed in 1997. The Company also owns its printing and packaging plant in Bloomfield, New Jersey, which consists of approximately 71,583 square feet on 2.0 acres. The Bloomfield plant was expanded and modernized in 1985 with a 35,000 square foot addition. 5 In connection with the March 1, 1994 acquisition of Sugar Creek Foods of Russellville, Inc., the Company's subsidiary, Sugar Creek Foods, Inc., is leasing from the former owner of the business a soft serve yogurt and ice cream mix production facility, consisting of approximately 23,805 square feet, and a packaging facility, consisting of approximately 16,000 square feet, both located in Russellville, Arkansas. In addition, Sugar Creek Foods, Inc. owns a freezer facility, consisting of approximately 5,013 square feet, adjacent to the production facility in Russellville. In 1999, the Company purchased a small parcel of land adjacent to the freezer facility for future potential expansion of the freezer facility. The Company owns virtually all of its equipment and replacement parts for all manufacturing equipment are readily available. ITEM 3. LEGAL PROCEEDINGS The Company is party to ordinary routine litigation incidental to its business, the disposition of which is not expected to have a significant effect on the Company's financial condition or operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 6 EXECUTIVE OFFICERS OF THE REGISTRANT
Present Position and Name (Age) Length of Service Other Business Experience During Past Five Years - ---------- ----------------- ------------------------------------------------ Arnold H. Dreyfuss (71) Chairman of the Board Director since 1992; Chief Executive Officer from September 1996 since September 1996. to February 1998; President of Jupiter Ocean and Racquet Club of Jupiter, Florida; formerly (1982 until 1991) Chairman of the Board and Chief Executive Officer of Hamilton Beach/Proctor-Silex, Inc. Kimberly P. Ferryman (43) Vice President, Corporate Director, Quality Assurance and Product Development Quality Assurance and from March 1994 to February 1995; Senior Product Development Product Development Technologist from November 1988 to February 1994. (All were since February 1995. positions with the Company) Craig L. Hettrich (40) Vice President and Formerly, Vice President, Sales and Marketing for Frionor USA General Manager, from March 1996 to January 1998; Director of National Sales and Foodservice Division various other sales and marketing positions with General Mills - since February 1998. Yoplait/Columbo Division from September 1991 to February 1996. V. Stephen Kangisser (48) Vice President, Sales Vice President, Marketing, May 1996 to July 1998; formerly, Vice since August 1998. President, Sales and Marketing for H.P. Hood, Inc., Boston, Massachusetts from 1993 to 1996; Director of Sales and Marketing and various other positions with Kraft, Inc. from 1974 through 1993. David B. Kewer (45) President and Director since May 1997; President and Chief Operating Officer Chief Executive Officer from March 1997 to February 1998; formerly, President, Willy since March 1998. Wonka Candy Factory, a division of Nestle' USA, Inc., from August 1993 to February 1996; Senior Vice President Marketing and Strategic Planning and various other marketing and sales positions with Nestle' Ice Cream Company from 1988 to 1993. Thomas M. Mishoe, Jr. (47) Chief Financial Officer, Independent Consultant, from August 1995 to February 1996; Chief Vice President, Treasurer Financial and Administrative Officer, Goldome Credit Corporation and Corporate Secretary from May 1993 to May 1995; Senior Manager with Ernst & Young since February 1996. LLP, from 1987 to May 1993. William J. Weiskopf (39) Vice President and National Sales Manager, Flavors, November 1995 to August 1997; General Manager, Regional Sales Manager from May 1994 to November 1995; formerly Flavors Division Account Manager, Food Group for E. T. Horn Company from 1987 to since August 1997. 1994.
7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's Common Stock trades on the Nasdaq National Market tier of The Nasdaq Stock Market under the symbol "EPIE". As of March 20, 2000, there were approximately 500 Shareholders of Record of the Company's Common Stock (including brokers, dealers, banks and other nominees participating in The Depository Trust Company). The high and low sales prices for shares of the Company's Common Stock as reported on The Nasdaq Stock Market and dividends declared per share during the periods indicated are set forth below:
------------------------------------------------------ High Low Dividends - ------------------------------------------------------------------------------------------------ 1999 First Quarter $ 15 $ 6 5/8 $0.05 Second Quarter 10 1/4 6 5/8 0.05 Third Quarter 11 1/2 8 1/8 - Fourth Quarter 10 3/8 7 3/8 - - ------------------------------------------------------------------------------------------------ 1998 First Quarter $ 14 1/4 $ 10 1/8 $0.05 Second Quarter 16 1/4 11 9/16 0.05 Third Quarter 13 5/16 7 3/4 0.05 Fourth Quarter 14 7 1/8 0.05 - ------------------------------------------------------------------------------------------------
The Company's Board of Directors voted not to declare the 1999 third and fourth quarter dividends, in light of the announcement made in September 1999 to pursue all strategic alternatives to maximize shareholder value, including a possible sale of the Company as a whole or one or more sales of the Company's strategic assets. The declaration of dividends is subject to the discretion of the Company's Board of Directors, based on the general business conditions encountered by the Company, as well as the financial condition, earnings and capital requirements of the Company and other factors deemed relevant by the Board. Management believes that the elimination of the dividend will enhance the Company's financial flexibility as it pursues a potential sale of the Company. 8 ITEM 6. SELECTED FINANCIAL DATA
- ----------------------------------------------------------------------------------------------------------------------- For the year ended and as of December 31, 1999/1/ 1998/2/ 1997/3/ 1996/4/ 1995 - ----------------------------------------------------------------------------------------------------------------------- (In thousands, except Per Share Data) Income Statement Data: Net sales $ 66,452 $ 63,492 $ 66,392 $ 74,084 $ 83,975 Operating income (loss) 1,683 1,755 498 (2,009) 8,804 Net income (loss) $ 836 $ 795 $ 108 $ (2,046) $ 5,076 Per Share Data: Basic: Weighted average number of common shares outstanding 3,463,211 3,458,394 3,456,180 3,460,729 3,475,119 Net income (loss) $ 0.24 $ 0.23 $ 0.03 $ (0.59) $ 1.46 ========== ========== ========== ========== ========== Assuming dilution: Weighted average number of common shares outstanding 3,463,211 3,462,677 3,461,867 3,460,729 3,642,624 Net income (loss) $ 0.24 $ 0.23 $ 0.03 $ (0.59) $ 1.42 ========== ========== ========== ========== ========== Cash dividends $ 0.10 $ 0.20 $ 0.20 $ 0.20 $ 0.20 Balance Sheet Data: Cash and cash equivalents $ 1,751 $ 530 $ 3,353 $ 2,143 $ 717 Working capital 3,929 6,345 6,732 6,002 9,193 Total assets 36,486 40,088 41,580 44,440 45,872 Total debt 3,901 9,018 10,335 9,800 9,800 Shareholders' equity 22,796 22,226 22,081 22,470 25,687 - -----------------------------------------------------------------------------------------------------------------------
____________________ /1/ The 1999 results of operations include special charges associated with analysis of strategic alternatives, restructuring and proxy contest activities which aggregate to a loss of $1,808,000 ($1,139,000 after related income tax benefits). Additional discussion is provided in Management's Discussion and Analysis of Financial Condition and Results of Operations and the Notes to Consolidated Financial Statements. /2/ The 1998 results of operations include the recovery of $600,000 of past due rent associated with equipment leased to one of the Company's licensees and $80,000 of incremental expenses associated with the Company's consideration of strategic alternatives which aggregate to a gain of $520,000 ($325,000 after related income tax expense). Additional discussion is provided in Management's Discussion and Analysis of Financial Condition and Results of Operations and the Notes to Consolidated Financial Statements. /3/ The 1997 results of operations include income and expenses associated with restructuring activities which aggregate to a gain of $272,000 ($169,000 after related income tax expense). Additional discussion is provided in Management's Discussion and Analysis of Financial Condition and Results of Operations and the Notes to Consolidated Financial Statements. /4/ The 1996 results of operations include special charges relating to executive severance accruals ($593,000), a loss on the disposal of fixed assets ($725,000) and the disposal of licensee and Company held inventories ($920,000), aggregating to $2,238,000 ($1,482,000 after related income tax benefits). 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- For the year ended December 31, 1999, the Company recorded sales of $66.5 million, which resulted in net income of $836,000 or $0.24 per share. These results compare with net income of $795,000 ($0.23 per share) in 1998 and $108,000 ($0.03 per share) in 1997. The increased profitability reflects an improved sales mix towards more profitable business, renegotiated licensing contracts with the Company's licensees and a continued focus on expense control. The 1999 results include expenses associated with the Company's analysis of strategic alternatives of approximately $1,223,000, restructuring activities of $191,000 and proxy contest expenses of $394,000 which, after related tax effects, reduced net income by $1,139,000 or $0.33 per share. Exclusive of these special charges incurred during 1999, net income would have been $1,975,000 or $0.57 per share. The 1998 results include the recovery of $600,000 of past due rent associated with ice cream making equipment leased to one of the Company's licensee customers as well as approximately $80,000 of incremental expenses associated with the Company's consideration of strategic alternatives. Combined, these two items accounted for additional 1998 net income of approximately $325,000 ($0.09 per share) after related tax effects. The 1997 results include income (offset by certain expenses) associated with restructuring activities which aggregate to a gain of $169,000 ($0.05 per share) after related tax effects. Additional details regarding all of these items are provided below. Net Sales and Gross Profit - -------------------------- Net sales consist of the following:
----------------------------------- For the year ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------------------- Eskimo Pie brand $20,495 $22,038 $23,380 Other licensed brands 21,618 19,610 21,048 ------- ------- ------- Total licensed brands 42,113 41,648 44,428 Flavors and ingredients 13,181 12,040 12,319 Foodservice 9,477 8,127 8,164 Packaging and other revenues 1,681 1,677 1,481 ------- ------- ------- $66,452 $63,492 $66,392 ======= ======= ======= - ----------------------------------------------------------------------------------
The Company's frozen novelty business competes in a mature category which is dominated by two of the world's largest food conglomerates who together account for over one third of the category's sales. Consumer demand for frozen novelty products has been flat in recent years. Packaged ice cream producers continue to seek consumer attention with retail price promotions thus providing extensive price competition to the Company's novelty products. The competitive environment and recent consumption trends have provided challenges to management's attempts to return the Company to its former profitability. 1999 Compared with 1998, Eskimo Pie Brand - ----------------------------------------- 10 Eskimo Pie brand sales decreased 6.3% in 1999 as compared to 1998. Sales of "regular" Eskimo Pie milk and dark chocolate products were flat as compared to 1998. Declines in sales velocity and distribution on flanker items in the Eskimo Pie No Sugar Added product line resulted in overall decline in Eskimo Pie Brand sales. Consumer resistance to price advances caused by escalating dairy ingredient prices in 1997 and 1998 continued to affect ice cream novelty products in 1999. 1999 Compared with 1998, Other Licensed Brands - ---------------------------------------------- Sales of other licensed brand products (RealFruit, Welch's, Weight Watchers Smart Ones, OREO and SnackWell's brands) increased 9.3% in 1999. Welch's brand sales increased 19% in 1999, primarily due to the introduction of the Double Dare product line. While trade acceptance of these new products was very good, consumer takeaway was below expectations. Sales of the regular Welch's fruit juice line were down 5%, following the trend in overall fruit juice bar novelty sales. Sales gains on the base fruit juice bars in western markets were more than offset by declines in eastern markets where the brand experienced significant competitive pressure. Weight Watcher's novelty sales were up 7.5%, continuing its growth from 1998 spurred by the repositioning to the Smart Ones trademark. A new flavor, Mocha Java, was introduced in key consumption markets and added incremental sales volume. Geographic expansion of the line is being considered for the fourth quarter of 2000 to take advantage of the continuing sales momentum and consumer interest in the Smart Ones brand. Nabisco sales increased 4% in 1999. The limited regional introduction of the OREO Big Stuf ice cream sandwich in retail grocery and club store channels more than offset declines in the remainder of the Nabisco product line. The SnackWell brand continued its decline, reflecting the continuing consumer retreat from "good for you" products. In addition, the OREO cookies'n cream cone introduced in 1998 was withdrawn from the market due to a complete interruption of production caused by an explosion at the production facility contracted to produce the product and the inability to locate an alternative producer that could provide product of similar quality. Sales of RealFruit brand sorbet continued to decline in 1999 consistent with segment trends. In 2000, a number of opportunities will be explored to further develop the RealFruit brand. Other licensed brands also include sales of approximately $600,000 to the single serve impulse market. The Company entered the single serve market during 1998 with a range of Eskimo Pie, Welch's and OREO brand novelty products created specifically for this retail channel. 1998 Compared with 1997 - ----------------------- Eskimo Pie brand sales decreased 5.8% for the year due to significant sales declines during the first half of the year, largely due to unseasonably cool and wet weather in some of the Company's strongest (west coast) markets. However, Eskimo Pie brand sales increased by 16.9% in the second half of 1998, as compared with 1997, as a result of increased distribution into the populous northeast markets and increased promotional activity during the later part of the 1998 summer selling season. Sales of other licensed brand products (RealFruit, Welch's, Weight Watchers Smart Ones, OREO and SnackWell's brands) decreased 6.8% in 1998. As is similar to the trends noted with the Eskimo Pie brand, these sales were much stronger in the second half of 1998 (actually showing an 11.3% improvement over 1997) but not enough to offset declines from the first half of the year. Welch's brand sales declined in the first half of 1998, largely due to El Nino weather effects in the west coast markets where the Welch's brand has its strongest consumer acceptance. Welch's brand sales in the second half of 1998 returned to prior year levels. 11 Weight Watchers brand sales increased 17.8% during 1998 largely due to the successful repositioning of this line of products under the Smart Ones trademark. Weight Watchers International, Inc., the owner of the Weight Watchers and Smart Ones trademarks, transitioned its entire line of products to the Smart Ones brand and contributed part of their 1998 earned royalties to the Company's cost of converting to the new trademark. Sales of OREO and SnackWell's brands decreased 13.3% during 1998 as compared with 1997. The decrease is due to the discontinuance of the packaged ice cream products sold under these brands and the continued consumer retreat from "good-for-you" products. However, test market introduction of two new OREO brand novelties provided additional sales volume that reduced the overall decline in OREO and SnackWell's brand sales. Other licensed brands also include approximately $850,000 of 1998 sales from the single serve impulse market. Flavors and Ingredients - ----------------------- Revenue in the Flavors and Ingredients Division increased by 9.5% in 1999, following slight declines in revenue during 1998 and 1997. The Division's improvement was primarily due to the successful implementation of the Company's sales initiative to further penetrate the national frozen dessert and fluid dairy manufacturers. The Flavors Division secured new business during 1999 with four targeted national accounts. Management believes this development of national accounts, coupled with continued support of its regional dairy customers, will position the Division for further growth in the rapidly consolidating dairy industry. Foodservice - ----------- Revenue in the Foodservice Division increased by 17% in 1999, following a relatively flat year in 1998 and a 7% decline in 1997. During 1999, management implemented a strategy to increase sales and profitability, capitalizing on the fact that Eskimo Pie markets the only nationally branded premium soft serve ice cream, in addition to a full range of frozen yogurt and smoothie products. This message has been delivered to distributors and operators using the Company's "The Right Choice System." The Right Choice System is a comprehensive, consultative approach to marketing the Company's soft serve products which features premium quality products, provides operational support and provides merchandising and promotional opportunities to foodservice distributors. Gross Profit - ------------ Gross profit, as a percent of sales, increased 170 basis points in 1999 to 41.8%, as compared to 40.1% in 1998,exclusive of the fourth quarter 1998 benefit of the recovery of $600,000 in past due rental income discussed below. Renegotiated licensing contracts with the Company's licensees provided for increases in fixed royalty licensing fees, which more than offset some margin erosion within the licensed brands. Further margin improvement is attributable to continued focus on expense control and efficiencies at the manufacturing facilities, including the discontinuance of certain unprofitable packaging operations in the first quarter of 1999, as discussed below. The $600,000 of rental income recorded in 1998 arose in connection with an arrangement under which one of the Company's licensee customers had leased ice cream novelty making equipment from the Company which provided rental income based on the "units of production" manufactured on the equipment. Since 1992, the Company had received annual rental payments that, in the aggregate, were less than that required to fully amortize the Company's original investment. The customer acknowledged its past due obligation and agreed to pay $600,000 to bring the lease current at December 31, 1998. As collectibility of the lease payments was not reasonably predictable, no contingent rent had been previously recorded and the $600,000 recovery was recognized in the fourth 12 quarter 1998 as a reduction of cost of goods sold (consistent with the previous rent received on this equipment). During 1998, significant attention was focused on the ice cream industry based on 1998 butterfat prices which increased by approximately 150% from 1997 levels. As a licensing company that does not actually produce finished novelty and packaged ice cream products, the Company was not directly impacted by the increased cost of this commodity. However, as a result of the butterfat cost increases some of the Company's licensees increased the price of the Company's licensed ice cream and novelty products they produce which may have ultimately affected consumer demand and the Company's sale of related components and packaging. The Company is also affected by butterfat pricing in connection with premium soft serve ice cream products sold to the foodservice industry. Butterfat purchases within the Foodservice division traditionally account for less than 1% of consolidated cost of goods sold. In 1999 butterfat pricing returned to 1997 levels. Expenses and Other Income - ------------------------- Advertising and sales promotion for 1999 was consistent with 1998 in absolute dollars, but as a percent of sales, decreased from 25.3% in 1998 to 24.4% in 1999. Management's intent to increase spending under its previously announced Growth and Restructuring Plan was curtailed as a result of the Company's September 1999 announcement of its intention to explore a possible sale of the Company. Selling, general and administrative expenses decreased in 1999 by $144,000 or 1.7% despite bonus payments of approximately $550,000 (as compared to $115,000 in 1998). In 1998, these expenses decreased $1,095,000 or 11.7% after a decrease of $960,000 or 9.3% in 1997. These decreased expenditures are a result of management's continued focus on cost control initiatives. During 1999, the Company incurred $1.8 million of restructuring and other special charges. The Company incurred approximately $1,223,000 in expenses related to the analysis of strategic alternatives, the development of the Company's Growth and Restructuring Plan and management's pursuit of a possible sale of the Company in whole or in parts. $433,000 of these charges relate to partial payments of retention incentives intended to maintain the employment of key personnel during uncertain times. The remaining costs consist primarily of legal, investment banking, and other professional services. The Company undertook two reduction-in-force programs in the first half of the year to reduce overhead expenses, resulting in restructuring charges of approximately $191,000. In March 1999, the Company discontinued certain non-core manufacturing operations and terminated the employment of seven production employees at its Bloomfield, New Jersey packaging plant who were not involved in the production of products for the Company's licensing businesses. As a result, the Company incurred related severance costs of approximately $105,000, all of which has been paid. As a result of this action, profitability in the Packaging Division, exclusive of the severance costs, improved by approximately $350,000 over 1998 results. During the second quarter of 1999, the Company eliminated two vacant positions and terminated the employment of six employees located at the Company's corporate headquarters. The severance costs associated with these terminations totaled approximately $86,000; however, when combined with the savings from the eliminated positions, these actions are anticipated to provide annualized savings of approximately $300,000 per year. The Company incurred approximately $394,000 of proxy contest related expenses, including legal and other professional service fees and administrative expenses associated with the Company's delayed annual meeting of shareholders in 1999. 13 During the third quarter of 1997, the Company consolidated its flavors production in New Berlin, Wisconsin. In connection with the consolidation, the Company discontinued flavors operations in Los Angeles, California, terminated the employment of the plant's 14 employees and sold the plant facility. Included in income from restructuring activities is an approximate $1,000,000 gain from the sale of plant assets offset primarily by approximately $300,000 of employee severance expenses. The Company used a portion of the proceeds from the sale of the Los Angeles facility to complete an expansion of the New Berlin facility. The New Berlin expansion, which cost approximately $800,000, provides the necessary capacity to serve the Company's current and expected business requirements at costs which are lower than operating two plants. During the fourth quarter of 1997, the Company completed a restructuring of its operations into a divisional operating unit alignment. In connection with this restructuring, two senior level employees were terminated with severance benefits of approximately $215,000. In addition, $200,000 of previously incurred severance and other special costs associated with the Company's 1997 restructuring activities were offset against the income recognized from the flavors consolidation. The Company also recorded $593,000 of restructuring charges during the third quarter of 1996, relating to severance commitments associated with a change in executive management. All severance commitments associated with the above restructuring activities had been paid as of December 31, 1998. Seasonality - ----------- The frozen novelty industry is seasonal with sales concentrated in the summer months. Because the Company supplies packaging and ingredients to manufacturers of its licensed and sublicensed products, the Company has a higher level of sales preceding and during the summer months. The following table provides two years of unaudited quarterly financial data:
For the 1999 quarter ended March 31 June 30 Sept 30 Dec 31 - ---------------------------------------------------------------------------------------- (In thousands, except per share data) Net sales $16,129 $22,146 $15,686 $12,491 Gross profit 6,846 10,431 6,862 3,656 Net income (loss) 232 1,399 105 (900) Per share Basic 0.07 0.40 0.03 (0.26) Assuming dilution 0.07 0.40 0.03 (0.26)
For the 1998 quarter ended March 31 June 30 Sept 30 Dec 31 - ---------------------------------------------------------------------------------------- (In thousands, except per share data) Net sales $16,031 $20,114 $15,179 $12,168 Gross profit 6,530 9,062 6,154 4,336 Net income (loss) 201 1,049 65 (520) Per share Basic 0.06 0.30 0.02 (0.15) Assuming dilution 0.06 0.30 0.02 (0.15)
1999 gross profit includes special charges of approximately $1.8 million as discussed under the caption Expenses and Other Income above. These special charges, after related tax benefits, reduced 1999 net income by approximately $1.1 million or $0.33 per share. As discussed under the caption Net Sales and Gross Profit above, the Company recorded $600,000 of past due rental income in the fourth quarter of 1998 and approximately $80,000 of incremental expenses associated with the previously announced decision to explore strategic alternatives. Combined, these two items provided additional net income of $325,000 ($0.09 per share) after related tax effects. LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS - ---------------------------------------------- 14 The Company's utilization of licensees in its national branded novelty business allows it to operate with relatively low capital requirements. The Company's licensing strategy reduces working capital requirements to that necessary to support advertising, sales promotion and administrative activities rather than the much larger amounts that would be required to support the self- manufacture of finished consumer goods. Working capital requirements generally precede the seasonal pattern of the Company's sales. The Company believes that the cash generated from operations and funds available under its credit agreements provide the Company with sufficient funds and the financial flexibility to support its ongoing business. The Company's principal customers are seven licensee dairies, who account for approximately 60% of the Company's net sales. Each licensee operates within geographic territorial boundaries under agreements which generally include three year terms subject to termination by the Company for quality control violations, failure to meet minimum volume requirements or material changes in the Company's ownership or the licensee's business. These agreements provide for six to twelve month transition periods in the event of termination. Beginning in 1999, licensees were required to contribute to trade promotion spending and make separate quarterly payments to the Company for licensing royalty fees which are expected to aggregate to $1,040,000 annually through 2001. The Company's licensing strategy allows it to manage a strong licensee base which it can actively monitor to minimize the impact of an unforeseen loss of any of its licensees. The loss of one or more of these major licensees could cause some disruption in the Company's operations, although, based upon prior experience with replacing major licensees, management believes it could locate a suitable replacement within a short period of time and, as a result, such customer loss would not have a significant impact on the Company's operations, liquidity or capital resources. During the third quarter of 1998, the Company extended its licensing agreement with Welch Foods, Inc. (Welch's). Under the agreement, the Company will continue to provide product development, sales, marketing and production support for the Welch's Fruit Juice Bars which the Company has managed since 1980. The extended licensing agreement continues through the year 2008 and provides for enhanced opportunities for new product development under the Welch's trademark. The Company paid Welch's approximately $800,000 in August 1998 as partial payment against a total of $1,500,000 license fees payable over the term of the license. There are no guaranteed or required payments under the license and certain termination clauses exist which would preclude payment of the balance of the license fees. As partial consideration in connection with the 1994 acquisition of Sugar Creek Foods, the Company issued $3,800,000 in convertible subordinated notes payable to the former Sugar Creek Foods shareholders. These notes became due in February 1999. Payment of the subordinated debt was initially funded under the Company's committed line of credit. By December 31, 1999 the balance on the line of credit had been paid in full, with cash flows provided by the Company's operations. On May 20, 1999, the Company renewed its $10 million committed line of credit, which is now available for general corporate purposes through April 2001. Borrowings under the line bear interest at the lender's overnight money market rate plus 100 basis points. In September 1999, the Company's Board of Directors voted to suspend the quarterly dividend payments indefinitely. The Board's decision to suspend its dividend was made in light of the Company's decision to pursue all strategic alternatives to maximize shareholder value, including a possible sale of the Company as a whole or one or more sales of the Company's strategic assets. Management believes that the elimination of the dividend will enhance the Company's financial flexibility as it pursues a possible sale of the Company. At this time, the Board of Directors has no plans to reinstate the quarterly dividend payments. The declaration of dividends is subject to the discretion of the Company's Board of Directors, based on 15 the general business conditions encountered by the Company, as well as the financial condition, earnings and capital requirements of the Company and other factors deemed relevant by the Board. The Company believes that the annual cash generated from operations and funds available under its credit agreements will provide the Company with sufficient funds and the financial flexibility to support its ongoing business, strategic objectives and debt repayment requirements. IMPACT OF YEAR 2000 Considerable attention was given to the effect of the Year 2000 (Y2K) on various computer systems. This concern stemmed from the inability of certain computerized applications and devices (hardware, software and equipment) to process dates after December 31, 1999. The Company's efforts to address the Y2K Problem consisted of the implementation of new management information systems, review of other internal systems and equipment and inquiries of external trading partners (key licensees, customers, suppliers and service providers). As a result of these efforts, the Company has experienced no significant disruptions in business related to Year 2000 issues. The Company will continue to monitor its mission critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. The Company's implementation of its new management information systems was divided into two phases. One phase of the project was the installation and continued integration of the Company's plant production management system. This phase of the project, which is not critical to the Company's Y2K capabilities, has been slowed as a result of the Company's decision to seek a sale of the Company in whole or in parts. The other phase related to the implementation of newly acquired software was completed prior to the end of the year. This new software is now being used by the Company to run its daily financial operations. Project expenditures relating to the new management information systems of approximately $1.9 million have been capitalized under the provisions of the AICPA's Statement of Position 98-1 and will be amortized to expense over the expected useful life. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company believes that its exposure to market risks is not material. 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED STATEMENTS OF INCOME
For the year ended December 31, 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------- (In thousands, except Per Share Data) Net sales $ 66,452 $ 63,492 $ 66,392 Cost of products sold 38,657 37,410 39,682 ------------------------------------- Gross profit 27,795 26,082 26,710 Advertising and sales promotion expenses 16,195 16,074 17,136 Selling, general and administrative expenses 8,109 8,253 9,348 (Income) expense from restructuring activities 191 - (272) Expense from analysis of strategic alternatives 1,223 - - Expense from proxy contest 394 - - ------------------------------------- Operating income 1,683 1,755 498 Interest (income)/expense and other-net 356 493 508 Gain (loss) on disposal of fixed assets - - 184 ------------------------------------- Income (loss) before income taxes 1,327 1,262 174 Income tax expense 491 467 66 ------------------------------------- Net income $ 836 $ 795 $ 108 ===================================== Per Share Data Basic: Weighted average number of common shares outstanding 3,463,211 3,458,394 3,456,180 Net income $ 0.24 $ 0.23 $ 0.03 ===================================== Assuming dilution: Weighted average number of common shares outstanding 3,463,211 3,462,677 3,461,867 Net income $ 0.24 $ 0.23 $ 0.03 =====================================
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Common Stock Additional Retained (In thousands, except share data) Shares Amount Capital Earnings Total - ----------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1997 3,447,573 $3,448 $4,168 $14,854 $22,470 Net income 108 108 Cash dividends ($0.20 per share) (692) (692) Issuance of common stock 10,429 10 115 125 Compensation from stock option grant 70 70 ---------------------------------------------------------------- Balance at December 31, 1997 3,458,002 3,458 4,353 14,270 22,081 Net income 795 795 Cash dividends ($0.20 per share) (691) (691) Issuance of common stock 595 1 7 8 Compensation from stock option grant 33 33 ---------------------------------------------------------------- Balance at December 31, 1998 3,458,597 $3,459 $4,393 $14,374 $22,226 Net income 836 836 Cash dividends ($0.10 per share) (346) (346) Issuance of common stock 5,452 5 56 61 Compensation from stock option grant 19 19 ---------------------------------------------------------------- Balance at December 31, 1999 3,458,597 $3,464 $4,468 $14,864 $22,796 ================================================================
CONSOLIDATED BALANCE SHEETS 17
As of December 31, 1999 1998 - ------------------------------------------------------------------------------------------------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 1,751 $ 530 Receivables 6,057 6,817 Inventories 4,032 4,897 Prepaid expenses 557 889 ---------------------- Total current assets 12,397 13,133 Property, plant and equipment - net 6,578 7,665 Goodwill and other intangibles 16,598 17,645 Other assets 913 1,645 ---------------------- Total assets $ 36,486 $ 40,088 ====================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 3,208 $ 2,875 Accrued advertising and promotion 2,217 1,728 Accrued compensation and related amounts 1,033 211 Other accrued expenses 1,038 657 Current portion of long term debt 972 1,317 ---------------------- Total current liabilities 8,468 6,788 Long term debt 2,929 3,901 Convertible subordinated notes - 3,800 Postretirement benefits and other liabilities 2,293 3,373 Shareholders' equity: Preferred stock, $1.00 par value; 1,000,000 shares authorized, none issued and outstanding - - Common stock, $1.00 par value; 10,000,000 shares authorized, 3,464,050 issued and outstanding in 1999 and 3,458,597 in 1998 3,464 3,459 Additional capital 4,468 4,393 Retained earnings 14,864 14,374 ---------------------- Total shareholders' equity 22,796 22,226 ---------------------- Total liabilities and shareholders' equity $ 36,486 $ 40,088 ======================
See accompanying notes to consolidated financial statements. 18 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------ (In thousands) Operating activities Net income (loss) $ 836 $ 795 $ 108 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,296 1,560 1,426 Amortization 1,116 1,097 1,086 Gain on disposal of fixed assets - - (1,183) Compensation from stock option grant 19 33 70 Change in deferred income taxes and other assets 419 451 (69) Change in postretirement benefits and other liabilities (1,132) 136 (333) Change in receivables 761 (1,496) (1,270) Change in inventories and prepaid expenses 1,359 (729) 3,836 Change in accounts payable and accrued expenses 2,023 (531) (2,762) -------------------------------- Net cash provided by operating activities 6,697 1,316 909 Investing activities Acquisition of intangible assets - (975) (587) Capital expenditures (610) (1,334) (1,413) Proceeds from disposal of fixed assets 401 - 1,994 Other 147 178 464 -------------------------------- Net cash (used in) provided by investing activities (62) (2,131) 458 Financing activities Borrowings under long term credit facility 3,800 - 1,150 Redemption of convertible subordinate notes (3,800) Principal payments on long term debt (5,117) (1,317) (615) Issuance of common stock 49 - - Cash dividends (346) (691) (692) -------------------------------- Net cash used in financing activities (5,414) (2,008) (157) -------------------------------- Change in cash and cash equivalents 1,221 (2,823) 1,210 Cash and cash equivalents at beginning of year 530 3,353 2,143 -------------------------------- Cash and cash equivalents at end of year $ 1,751 $ 530 $ 3,353 ================================ Income tax payments (recoveries) $ - $ 150 $(1,632) ================================ Interest payments $ 437 $ 567 $ 636 ================================
See accompanying notes to consolidated financial statements. 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SIGNIFICANT ACCOUNTING POLICIES The Company, which operates primarily in the United States, markets and manufactures through its own plants and licensed dairies a broad range of frozen novelties, frozen yogurt, ice cream and sorbet products under the Eskimo Pie, RealFruit, Welch's, Weight Watchers, Smart Ones, SnackWell's and OREO brand names. The Company also continues to manufacture ingredients and packaging for sale to the dairy industry. Principles of Consolidation: The accounts of the Company and its wholly-owned subsidiaries are included in the consolidated financial statements after elimination of all material intercompany balances and transactions. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash Equivalents and Investments: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount of cash equivalents approximates fair value because of the short maturity of those investments. Investments with maturities beyond three months are carried at fair value. Inventories: Inventories are stated at the lower of cost or market. The cost of inventories is determined by the last-in, first-out (LIFO) method except for approximately $650,000 of inventories at December 31, 1999 and $625,000 in 1998 which were determined by the first-in, first-out (FIFO) method. LIFO liquidations reduced cost of goods sold by $118,000 in 1999 and $120,000 in 1997. Inventories are classified as follows:
As of December 31, 1999 1998 - ------------------------------------------------------------------------------------------- (In thousands) Finished goods $ 2,667 $ 3,294 Raw materials and packaging supplies 2,286 2,642 -------- -------- Total FIFO inventories 4,953 5,936 Reserve to adjust inventories to LIFO (921) (1,039) -------- -------- $ 4,032 $ 4,897 ======== ======== - -------------------------------------------------------------------------------------------
Property, Plant, and Equipment : Property, plant and equipment is stated at cost and consists of the following:
As of December 31, 1999 1998 - ------------------------------------------------------------------------------------------- (In thousands) Land $ 679 $ 630 Buildings 5,315 5,304 Machinery and equipment 11,070 10,789 Equipment leased or loaned to customers 2,400 3,727 -------- -------- 19,464 20,450 Less accumulated depreciation and amortization (12,886) (12,785) -------- -------- $ 6,578 $ 7,665 ======== ======== - -------------------------------------------------------------------------------------------
Development and implementation costs for purchased and internally developed software are capitalized in accordance with AICPA Statement of Position 98-1, "Accounting for the Costs of Computer Software Development for or Obtained for Internal Use." At December 31, 1999 and 20 1998, capitalized software costs included in machinery and equipment above amounted to $1.9 million and $1.5 million, respectively. Depreciation and amortization are provided by the straight line method over the estimated useful lives of the assets which is generally 30 years for buildings, and five to ten years for machinery and equipment, five to seven years for computer software and three years for computer hardware. Goodwill and Other Intangibles: Goodwill, which represents the excess of the purchase price of acquired companies over the fair value of the net assets acquired, is amortized on a straight line basis over 40 years. Other intangibles include costs associated primarily with trademarks, sub-licensed brand names and carton development and are amortized on a straight line basis over periods which range from four to twenty years. Accumulated amortization at December 31, 1999 and 1998 was approximately $3,691,000 and $2,831,000, respectively. The Company periodically evaluates the recoverability of material components of goodwill and other intangibles based on expected undiscounted cash flows. Any impairment in value would be charged to earnings in the year recognized. The Company believes that no impairment of value exists as of December 31, 1999. Revenue Recognition: The Company records sales when products are shipped from its manufacturing facilities or those of its "drop ship" vendors. No right of return exists. The Company also accrues licensing fees as they are earned based upon the terms of the respective licensing agreements. Advertising and Sales Promotion Expenses: The Company generally expenses advertising and sales promotion costs in the period incurred. There were no material capitalized advertising and sales promotion costs as of December 31, 1999 and 1998. Product Development and Quality Control Costs: Costs for product development and quality control, which are performed by the same personnel, are expensed as incurred and were approximately $1,265,000 in 1999, $1,300,000 in 1998 and $1,350,000 in 1997. Stock Options: The Company accounts for stock options granted under incentive stock plans in accordance with Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees" and related interpretations. New Accounting Standards: In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires the recognition of all derivatives on the balance sheet at fair value. This statement is effective for the Company in 2001 and is not expected to materially affect the consolidated balance sheet or statement of income. Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform with current presentation. NOTE B - INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 1999, the Company had $432,000 ($272,000 in 1998) of current deferred tax assets included in prepaid expenses and $8,000 of long term deferred tax liabilities included in postretirement benefits and other liabilities. At December 31, 1998, the Company had $567,000 of long term deferred tax assets included in other assets. The significant components of deferred tax assets and liabilities are as follows:
- ---------------------------------------------------------------------------------------------- As of December 31, 1999 1998 - ----------------------------------------------------------------------------------------------
21 (In thousands) Assets: Bad Debt Reserves $ 95 $ 29 Inventory 238 86 Accrued postretirement benefits 718 1,277 Net operating loss carryforwards 397 429 Other amounts 204 379 ------- ------- 1,652 2,200 Liabilities: Depreciation and amortization (1,228) (1,137) Other amounts - (224) ------- ------- (1,228) (1,361) Total deferred tax assets $ 424 $ 839 ======= ======= - ----------------------------------------------------------------------------------------------
At December 31, 1999, there is approximately $397,000 of tax benefits associated with approximately $1,030,000 of net operating loss (NOL) carryforwards which expire in 2011. No valuation allowance has been recorded against the benefits associated with the NOL as the Company believes it will generate sufficient taxable income in the future to ensure realization of the tax benefit. Significant components of the provision for income taxes are as follows:
- ---------------------------------------------------------------------------------------------- For the year ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------------------------------- (In thousands) Current: Federal 51 $ ( 23) $ 165 State 9 (3) 36 ----- ------- ------- 80 (26) 201 Deferred: Federal 341 436 (111) State 73 57 (24) ----- ------- ------- 414 493 (135) ----- ------- ------- Total income tax provision $ 494 $ 467 $ 66 ===== ======= ======= - ----------------------------------------------------------------------------------------------
A reconciliation of federal statutory and effective income tax rates is as follows:
- ---------------------------------------------------------------------------------------------- For the year ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------------------------------- Federal statutory rate 34.0% 34.0% 34.0% Effect of State taxes 1.4 4.6 4.4 Permanent differences and other 1.6 (1.6) (.5) ---- ---- ---- Effective income tax rate 37.0% 37.0% 37.9% ==== ==== ==== - ----------------------------------------------------------------------------------------------
22 NOTE C - FINANCING ARRANGEMENTS
- -------------------------------------------------------------------------------------------------------- Long Term Debt Carrying Amount ---------------------------- As of December 31, 1999 1998 - -------------------------------------------------------------------------------------------------------- (In thousands) Revolving credit facility $3,786 $ 4,643 (variable interest rate, currently 7.0%) Long term line of credit 115 575 (variable interest rate, currently 6.6%) Convertible subordinated notes ___ 3,800 ------ ------- (4.5% interest rate) 3,901 9,018 Less current maturities (972) (1,317) ------ ------- $2,929 $ 7,701 ====== ======= - --------------------------------------------------------------------------------------------------------
Based upon prevailing interest rates and after consideration of credit risk, the carrying value of the Company's long term debt is a fair approximation of market value. Interest expense for 1999, 1998 and 1997 was $437,000, $591,000 and $606,000, respectively. In 1994, the Company entered into a $6,000,000, ten year revolving credit facility with a commercial bank which provided for renewable loans with required principal reductions beginning in June 1997. Under the terms of the agreement, the Company will retire the loan over the seven year period ending June 2004. Except for the amounts due in 2000, the Company has classified all of this loan as long term debt based upon its ability and intention to defer payment past 2000. During 1997, the Company borrowed $1,150,000 under one of the Company's existing long term lines of credit to finance the acquisition of computer hardware and software. Borrowings under the line bear interest at the 30 day LIBOR rate plus 100 basis points and will be repaid in equal monthly installments through April 2000. As partial consideration in connection with the 1994 acquisition of Sugar Creek Foods, the Company issued $3,800,000 in convertible subordinated notes to the former Sugar Creek Foods' shareholders. These notes, which became due in February 1999, were classified as long term debt at December 31, 1998 as the Company had the intent and ability to refinance the notes on a long-term basis. In February 1999, the Company refinanced the $3.8 million note payment by transferring the amount to its $10 million committed line of credit discussed below. During 1999 the Company used cash generated from operations to pay off the $3.8 million balance. The Company had previously reserved 162,567 shares of its common stock for conversion of the notes (at $23 3/8 per share). During 1999, the Company renewed its $10,000,000 committed line of credit which is available for general corporate purposes through April 2001. Borrowings under the line bear interest at the bank's overnight money market rate plus 75 basis points. At December 31, 1999, there were no borrowings under the line. The revolving and committed credit agreements impose, among other things, certain requirements on the ratio of total debt to net worth, the maintenance of minimum shareholders' equity and minimum interest coverage. No assets are pledged as security under these agreements. The combined aggregate amount of the scheduled maturites for all long term debt is as follows:
- -------------------------------------------------------------------------------- 2000 2001 2002 2003 2004 - -------------------------------------------------------------------------------- $972 $ 857 $ 857 $ 857 $ 358 - --------------------------------------------------------------------------------
23 NOTE D - SHAREHOLDERS' EQUITY Stock Options Under the Company's Incentive Stock Plans (the Plans), key employees and non-employee directors of the Company may receive grants and awards of up to a total of 425,000 shares of stock options, stock appreciation rights and restricted stock. Stock options are generally granted at a price not less than the fair market value on the date the options are granted, become exercisable at various intervals which generally range from the date of grant to four years after the date of the grant and expire after ten years. Effective January 7, 1999, the Board of Directors authorized that all outstanding option agreements be amended to be immediately vested upon a corporate change of control (as defined). The details of stock option activity are as follows:
------------------------------------------------------- Range of Weighted Average Number of Shares Exercise Prices Exercise Price - ---------------------------------------------------------------------------------------------------------------------- 1997 Outstanding, beginning of year 138,227 17.00 - 21.25 18.60 Granted at fair market value 125,986 10.88 - 12.50 12.49 Granted at less than fair market value 50,000 10.00 10.00 Cancelled 92,874 12.50 - 20.50 17.53 Outstanding, end of year 221,339 10.00 - 21.25 13.63 Exercisable, end of year 61,236 10.00 - 21.25 15.57 1998 Granted 81,000 13.38 - 14.50 13.39 Cancelled 58,233 10.88 - 21.25 16.45 Outstanding, end of year 244,106 10.00 - 21.25 12.87 Exercisable, end of year 55,569 10.00 - 21.25 13.25 1999 Granted 96,700 10.44 - 13.25 13.22 Cancelled 45,012 12.50 - 13.38 13.04 Outstanding, end of year 295,794 10.00 - 21.25 12.96 Exercisable, end of year 132,232 10.00 - 21.25 12.92 - ------------------------------------------------------------------------------------------------------------------
Included in the amounts shown above is the effect of certain modifications made to prior year awards during 1997. On March 4, 1997, the Board of Directors approved a plan whereby employee stock options on a total of 48,100 shares with a weighted average exercise price of $18.51 were exchanged for 37,486 shares of repriced options with an exercise price of $12.50 per share. The repriced and forfeited options, which had an equivalent value under the Black-Scholes Option Pricing Model, are included in the 1997 "Granted at fair market value" and "Cancelled" captions, respectively, in the above table. On March 4, 1997, the Company also awarded 50,000 shares of stock options at a $2.50 discount to the then fair market value of $12.50 per share. This discount-to-market is being expensed over a three year graded scale consistent with the terms upon which the options become exercisable. As a result of this award, amounts expensed under this plan were approximately $19,000 in 1999, $33,000 in 1998, and $70,000 in 1997. As permitted by the provisions of Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock Based Compensation", the Company continues to follow APB 25 and related interpretations in accounting for its stock based awards. As stock options are generally issued at the fair market value on the date of grant, the Company does not recognize compensation cost related to its stock option plans except as discussed above as it relates to stock option grants with exercise prices which were less than the fair market value on the date of the grant. 24 The following information is provided solely in connection with the disclosure requirements of SFAS 123. If the Company had elected to recognize compensation expense related to its stock options in accordance with the provisions of SFAS 123, the additional costs from options granted since 1995 would have resulted in a pro forma net income of $ 515,000 in 1999 ($0.15 per share), $564,000 in 1998 ($0.16 per share), and a pro forma loss of $119,000 in 1997 ($0.03 per share). These pro forma amounts are not indicative of the future effects of applying the provisions of SFAS 123 since the respective vesting periods are used to measure each respective period's pro forma compensation expense. The weighted average fair value of options granted in 1999, 1998 and 1997 was $5.51, $5.16 and $5.47 per share, respectively. The fair values were estimated at the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:
- ------------------------------------------------------------------------------- For the year ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------- Volatility factor .371 .319 .333 Risk free interest rate 4.74% 5.69% 6.49% Dividend yields 1.5% 1.5% 1.6% Expected life (years) 7.9 7.2 7.1 - -------------------------------------------------------------------------------
As of December 31, 1999, the weighted average remaining contractual life of all outstanding stock options was 7.8 years. The Company has also granted the following restricted stock awards in accordance with the Plans:
- ------------------------------------------------------------------------------- For the year ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------- Number of shares issued 1,200 1,000 11,000 Weighted average fair value $10.44 $14.13 $ 12.35 - -------------------------------------------------------------------------------
At December 31, 1999, approximately 85,000 shares were available for future grants under the Plans. Earnings Per Share The following table sets forth the computation of earnings per share:
- -------------------------------------------------------------------------------------------------------------------- For the year ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 836,000 $ 795,000 $ 108,000 ========== ========== ========== Weighted average number of common shares outstanding 3,463,211 3,458,394 3,456,180 Dilutive effect of stock options - 4,283 5,687 ---------- ---------- ---------- Weighted average number of common shares outstanding assuming potential dilution 3,463,211 3,462,677 3,461,867 ========== ========== ========== Basic earnings per share $ 0.24 $ 0.23 $ 0.03 ========== ========== ========== Earnings per share - assuming dilution $ 0.24 $ 0.23 $ 0.03 ========== ========== ========== - --------------------------------------------------------------------------------------------------------------------
Options to purchase 296,000 shares in 1999, 193,000 shares in 1998 and 170,000 shares in 1997 were not considered for their dilutive effect because the exercise price of the options exceeded the average market price for the respective year, and as such, the effect would be anti-dilutive. 25 Additional disclosure concerning the convertible subordinated notes is provided in Note C to the Consolidated Financial Statements. The effect of the assumed conversion was not considered for its dilutive effect in any of the years presented as the conversion would have been anti-dilutive. Shareholder Rights Plan In January 1993, the Board of Directors approved the adoption of the Shareholder Rights Agreement wherein, effective February 5, 1993, one Right attaches to and trades with each share of Common Stock. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share (Unit) of Series A Junior Participating Preferred Stock, par value $1.00 per share. The Company has designated 100,000 shares of its Preferred Stock as Series A Junior Participating Preferred Stock. The exercise price per Right is $75.00, subject to adjustment. Each Unit of Preferred Stock is structured to be the equivalent of one share of Common Stock. The Rights are initially exercisable to purchase one Unit of Preferred Stock at the exercise price only if a person or group (Acquiring Person) acquires 20% or more of the Company's Common Stock or announces a tender offer for 20% or more of the outstanding Common Stock at which time the Rights detach and trade separately from the Common Stock. At any time thereafter, the Company may issue 1.5 shares of Common Stock in exchange for each Right other than those held by the Acquiring Person. Generally, if an Acquiring Person acquires 30% or more of the Company's Common Stock or an Acquiring Person merges into or combines with the Company, or if the Company is acquired in a merger or other business combination in which it does not survive, or if 50% of its earnings power or assets is sold, each Rights holder other than the Acquiring Person may be entitled, upon payment of the exercise price, to purchase securities of the Company or the surviving company having a market value equal to twice the exercise price. The Rights, which do not have voting privileges, expire in 2003, but may be redeemed under certain circumstances by the Board prior to that time for $.01 per Right. NOTE E - RETIREMENT PLANS The Company currently maintains two defined benefit pension plans covering substantially all salaried employees. These plans provide retirement benefits based primarily on employee compensation and years of service. In addition, the Company entered into an agreement with Reynolds Metals Company to indemnify the cost of retiree health care and life insurance benefits for salaried employees of the Company who had retired prior to April 1992. Under the agreement, the Company may elect to prepay the Company's remaining obligation. The Company does not provide postretirement health and life insurance benefits for employees who retire subsequent to April 1992. The above mentioned plans are collectively referred to as the "Plans." The following table reconciles the changes in benefit obligations and plan assets in 1999 and 1998, and reconciles the funded status to accrued benefit cost at December 31, 1999 and 1998: 26
- ------------------------------------------------------------------------------------------------------------------------------- Pension Benefits Other Benefits ---------------- -------------- For the year ended December 31, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- (In thousands) Change in Benefit Obligation: Benefit obligation at beginning of year $2,052 $1,672 $2,542 $2,397 Service cost 283 268 - - Interest cost 143 116 119 116 Actuarial (gain)/loss (409) 13 54 29 Benefit payments (44) (17) 649 - -------------------------- -------------------------- Benefit obligation at end of year 2,025 2,052 2,066 2,542 -------------------------- -------------------------- Change in Plan assets: Fair value of Plan assets at beginning of year 1,863 1,592 - - Actual return on Plan assets 226 196 - - Employer contributions 20 92 - - Benefit payments (44) (17) - - -------------------------- -------------------------- Fair value of Plan assets at end of year 2,065 1,863 - - -------------------------- -------------------------- Funded status: Benefit obligations in excess of Plan assets (40) 189 2,006 2,542 Unrecognized actuarial gains 766 285 186 300 -------------------------- -------------------------- Accrued benefit cost $ 726 $ 474 $2,252 $2,842 ========================== ========================== - -------------------------------------------------------------------------------------------------------------------------------
The Company funds its ERISA qualified defined benefit plan in accordance with guidelines established by the U.S. Department of Labor and limitations under federal income tax regulations. Other benefit plans are funded as benefit payments are required. The projected and accumulated benefit obligation for the Company's unfunded, non-qualified, defined benefit pension plan were $459,000 and $337,000, respectively, as of December 31, 1999 ($400,000 and $245,000, respectively, in 1998). At December 31, 1999 and 1998, accrued benefit costs of $2,197,000 and $3,316,000 are included in postretirement benefits and other liabilities; accrued benefit costs of $781,000 are included in current liabilities at December 31, 1999. The following table provides the components of the net periodic benefit cost:
- --------------------------------------------------------------------------------------------------------------- Pension Benefits Other Benefits ------------------ ---------------- For the year ended December 31, 1999 1998 1997 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------- (In thousands) Service cost $ 283 $ 268 $ 294 $ - $ - $ - Interest cost 143 116 100 118 116 126 Expected return on Plan assets (149) (127) (101) - - - Recognized net actuarial gain (7) (2) (2) - (83) (69) --------------------------------------------------------- Net period benefit cost $ 270 $ 255 $ 291 $ 118 $ 33 $ 57 ========================================================= - ---------------------------------------------------------------------------------------------------------------
The assumptions used in the measurement of the Company's benefit obligations are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Pension Benefits Other Benefits ---------------- -------------- 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Benefit obligation, beginning of year 7% 7% 7.75% 7.25% Rate of compensation increase, end of year 5% 5% Expected return on plan assets, during the year 8% 8% - ------------------------------------------------------------------------------------------------------------------------------------
The weighted average annual assumed rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) is 6.50% for 2000 and is assumed to decrease to 5% by 2003 and remain at that level thereafter. A one percentage point increase or decrease in the assumed health care cost trend rate would change the accumulated postretirement benefit obligation by approximately $100,000 and the net periodic postretirement benefit cost by 27 approximately $10,000. The Company recognizes 20% of deferred postretirement gains or losses annually. The Company also sponsors a defined contribution plan which covers substantially all salaried and hourly employees. Company contributions are generally determined as a percentage of the covered employees' contributions up to 3% of the employees' annual salary. Amounts expensed under this plan were approximately $109,000 in 1999, $129,000 in 1998 and $140,000 in 1997. NOTE F - BUSINESS SEGMENTS Effective January 1, 1998, the Company began operating under a divisional structure aligned with separate lines of business based on the types of products sold. Prior to 1998, the Company was operated as a single business segment under a functional management structure (i.e. sales, production). Under the former alignment, sales were reported and reviewed by product line but costs and assets were aggregated on a corporate basis without reference to the respective products. Therefore, complete segment information required by Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," is provided for 1999 and 1998, however only sales is provided for 1997 as other financial data was not previously captured with adequate detail to allow for accurate restatement. The Company's reportable segments are separate divisions that offer different products although customers are often served by more than one segment (primarily as it relates to the National Brands, Flavors and Packaging division customers). The National Brands division sells proprietary flavorings, ingredients and packaging used in the licensed production of the Company's nationally branded frozen novelties and other ice cream products. The Flavors division blends, cooks and processes basic flavors and fruits to produce products which subsequently are used by the Company's customers to flavor frozen desserts, ice cream novelties and fluid dairy products. The Foodservice division sells soft serve yogurt and premium ice cream mix to foodservice distributors. The Other segment consists primarily of amounts relating to the Company's Packaging division which sells flexible packaging to dairies for their frozen novelty products. The Company generally does not require collateral or other security from its licensees and customers. Management measures divisional operating performance based on operating profit before selling, general and administrative expenses. Operating profit for the National Brands and Flavors divisions include the effects of $570,000 in 1999 and $600,000 in 1998 of inter-segment cost allocations associated with the Flavors division's production of National Brands flavors and ingredients. This inter-segment charge, which has no net effect on consolidated profitability, increases Flavors' profitability with an offsetting decrease in the National Brands profitability. Segment assets include receivables (1999 only), inventories; property, plant and equipment; and goodwill and other intangibles. All other assets are managed on a corporate basis and are not considered in divisional analysis. The accounting policies for each of the business segments are the same as those described in the summary of significant accounting policies. 28
National Business Segments Brands Flavors Foodservice Other Totals - ------------------------------------------------------------------------------------------------------------------------------- (In thousands) 1999 Segment Data - ----------------- Sales $ 42,113 $ 13,181 $ 9,477 $ 1,681 $ 66,452 Depreciation and amortization expense 950 354 621 119 2,044 - ------------------------------------------------------------------------------------------------------------------------------ Corporate expense 368 --------- Total depreciation and amortization expenses $ 2,412 Segment profitability $ 7,500 $ 2,210 $ 1,914 $ (24) $ 11,600 - ------------------------------------------------------------------------------------------------------------------------------ Selling, general and administrative expenses 8,109 Restructuring and other special charges 1,808 Interest income & expenses - net 356 --------- Income before income taxes $ 1,327 ========= Identifiable assets $ 12,229 $ 6,720 $ 12,377 $ 685 $ 32,011 - ------------------------------------------------------------------------------------------------------------------------------ Corporate assets 4,475 --------- Total assets $ 36,486 ========= Capital Expenditures $ 30 $ 202 $ 164 $ - $ 396 - ------------------------------------------------------------------------------------------------------------------------------ Corporate expenditures 214 --------- Total capital expenditures $ 610 ========= 1998 Segment Data - ----------------- Sales $ 41,648 $ 12,040 $ 8,127 $ 1,677 $ 63,492 Depreciation and amortization expense 1,045 363 742 122 2,272 - ------------------------------------------------------------------------------------------------------------------------------ Corporate expense 385 --------- Total depreciation and amortization $ 2,657 ========= Expenses Segment profitability $ 7,054 $ 1,559 $ 1,848 $ (453) $ 10,008 - ------------------------------------------------------------------------------------------------------------------------------ Selling, general and administrative expenses 8,253 Interest income & expenses - net 493 --------- Income before income taxes $ 1,262 ========= Identifiable assets $ 9,767 $ 4,773 $ 12,379 $ 991 $ 27,910 - ------------------------------------------------------------------------------------------------------------------------------ Corporate assets 12,178 --------- Total assets $ 40,088 ========= Capital Expenditures $ 145 $ 639 $ 256 $ 95 $ 1,135 - ------------------------------------------------------------------------------------------------------------------------------ Corporate expenditures 199 --------- Total capital expenditures $ 1,334 ========= 1997 Segment Data - ----------------- Sales $ 44,428 $ 12,319 $ 8,164 $ 1,481 $ 66,392 =========================================================================
Due to the nature of the Company's licensing operations, four of the licensee dairies individually account for over 10% of the Company's total net sales. These four customers, in the aggregate, account for approximately 50% of annual net sales, most of which occur within the National Brands division. Based upon prior experience, management believes it could find a suitable replacement for the loss of any of its licensees and, as a result, such loss would not have a significant effect on the Company's operations, liquidity or capital resources. 29 NOTE G - INCOME (EXPENSE) FROM RESTRUCTURING AND OTHER ACTIVITIES During 1999, the Company incurred $1,808,000 in restructuring and other special charges, associated with three separate activities. The Company incurred approximately $1,223,000 in costs associated with its examination of strategic alternatives to enhance shareholder value, the development of the Company's Growth and Restructuring Plan and the Company's pursuit to sell the Company in whole or in parts. $433,000 of these costs relate to retention bonuses to be paid to certain key employees for their continued employment. The remaining costs consist primarily of legal, investment banking, additional directors fees and other professional fees associated with continued due diligence efforts of potential buyers of the Company. The Company executed two programs to reduce overhead expenses. During the first quarter of 1999, the Company discontinued certain non-core manufacturing operations and terminated the employment of seven production employees at its Bloomfield, New Jersey packaging plant. As a result, the Company incurred related severance costs of approximately $105,000 all of which was paid as of December 31,1999. During the second quarter of 1999, the Company eliminated two vacant positions and terminated the employment of six employees at the Company's corporate headquarters. The severance costs associated with the terminations totaled $86,000, of which $30,000 remains accrued at December 31, 1999 and will be paid during the first quarter of 2000. The Company incurred approximately $394,000 of proxy contest expenses associated with the Company's delayed annual meeting of shareholders held on September 8, 1999. These costs consisted primarily of legal fees, other professional fees and administrative costs. During the third quarter of 1997, the Company consolidated its flavors production in New Berlin, Wisconsin. In connection with the consolidation, the Company discontinued flavors operations in Los Angeles, California, terminated the employment of the plant's 14 employees and sold the plant facility. The Company recorded third quarter 1997 income of $689,000 which included a $1,000,000 gain from the sale of the Los Angeles plant offset primarily by employee severances. During the fourth quarter of 1997, the Company completed a restructuring of its operations into a divisional operating unit alignment. In connection with this restructuring, two senior level employees were terminated with severance benefits of approximately $215,000. In addition, $200,000 of previously incurred severance and other non-recurring costs associated with the Company's 1997 restructuring activities were offset against the income recognized from the Flavors consolidation. NOTE H - OTHER INFORMATION The Company is subject to litigation incidental to the conduct of its business, the disposition of which is not expected to have a significant effect on the Company's financial condition or operations. The Company is also subject to government agency regulations relating to food products, environmental matters and other aspects of its business. The Company is involved in environmental testing activities resulting from past operations. The Company has recorded amounts which, in management's best estimate, will be sufficient to satisfy the anticipated cost of such activities. In September 1999, the Company's Board of Directors approved a plan which would provide certain lump sum payments to key employees if a change in control of the Company occurred prior to December 31, 2000. Assuming all employees covered remain employed through a change in control, these payments would total approximately $700,000. In addition, the plan also provides for 30 certain lump sum payments as well as continued medical and healthcare benefits to employees who are terminated subsequent to a change in control of the Company. In 1991, the Company sold, at its cost, approximately $1,000,000 of machinery and equipment purchased for resale. As a result of the sale, the Company received a ten year note, payable annually, from its customer. The long term portion of the note receivable amounts to approximately $140,000 at December 31, 1999 ($275,000 in 1998), which is included in other assets, and is net of an unamortized discount of approximately $30,000 ($58,000 in 1998). The note bears imputed interest at approximately 10% and is collateralized by the machinery and equipment. Based upon prevailing interest rates, and after consideration of credit risk, the carrying value is a fair approximation of market value. During the fourth quarter of 1998, the Company entered into negotiations and reached a settlement of terms relating to past due rental income owed to the Company in connection with ice cream making equipment leased to one of the Company's licensee customers. The Company had previously received rental income based on the "units of production" manufactured on the equipment since 1992 but at amounts less than that required to fully amortize the Company's original investment. The customer acknowledged its past due obligation and agreed to pay $600,000 to bring the lease current at December 31, 1998. As collectibility of the lease payments was not reasonably predictable, no contingent rent had been previously recorded and the $600,000 recovery was recognized in the fourth quarter 1998 as a reduction of cost of goods sold (consistent with the previous rent received on this equipment). In January 1999, the Company sold the leased equipment to the licensee customer at the Company's net carrying value of approximately $400,000 which, management believes, approximated the fair market value. 31 REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP Shareholders and Board of Directors Eskimo Pie Corporation We have audited the accompanying consolidated balance sheets of Eskimo Pie Corporation as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1999. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Eskimo Pie Corporation at December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Richmond, Virginia March 2, 2000 REPORT OF MANAGEMENT Eskimo Pie Corporation The consolidated financial statements and other financial information of Eskimo Pie Corporation have been prepared by management, which is responsible for their integrity and objectivity. These statements have been prepared in accordance with generally accepted accounting principles and, where appropriate, reflect estimates based on judgements of management. The Company maintains a system of internal financial controls which considers the expected costs and benefits of specific control procedures and provides reasonable assurance that Company assets are protected against loss or misuse, that transactions are executed in accordance with management's authorization and that the financial records can be relied upon to produce financial statements in accordance with generally accepted accounting principles. The internal financial controls system is supported by the management of the Company through the establishment and communication of business and accounting policies, the division of responsibility in organizational matters and the careful selection and training of management personnel. The consolidated financial statements have been audited by the Company's independent auditors, Ernst & Young LLP. Their audit was conducted in accordance with generally accepted auditing standards and their report is included elsewhere herein. As a part of their audit, Ernst & Young LLP develops and maintains an understanding of the Company's internal accounting controls and conducts such tests and employs such procedures as they consider necessary to render their opinion on the financial statements. The Board of Directors exercises its oversight role with respect to the Company's system of internal financial controls primarily through its Audit Committee which consists of outside directors. The Board of Directors, upon the recommendation of the Audit Committee, selects the independent auditors subject to ratification by the shareholders. The Audit Committee meets periodically with representatives of management. Ernst & Young LLP has full and free access to meet with the Audit Committee, with or without the presence of management representatives. /s/ David B. Kewer /s/ Thomas M. Mishoe, Jr. David B. Kewer Thomas M. Mishoe, Jr. President Chief Financial Officer, And Chief Executive Officer Vice President, Treasurer and Corporate Secretary 32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information on the Company's Board of Directors is included under the caption "Election of Directors" in the Registrant's Proxy Statement for the Annual Meeting scheduled to be held on May 3, 2000 (Proxy Statement) and is incorporated herein by reference. Information on Section 16(a) compliance is included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information on compensation is included under the captions "Compensation Committee Interlocks and Insider Participation", "Compensation of Directors" and "Executive Compensation" in the Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information on security ownership of certain beneficial owners and management is included under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information on certain relationships and related transactions is included under the caption "Certain Relationships" in the Proxy Statement and is incorporated herein by reference. 33 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The following financial statements of Eskimo Pie Corporation are included in Item 8: Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997 Consolidated Balance Sheets at December 31, 1999 and 1998 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 Notes to Consolidated Financial Statements Report of Independent Auditors, Ernst & Young LLP (2) Financial Statements Schedules No financial statement schedules are required because the required information is not present in amounts sufficient to warrant submission of the schedules or the required information is included in the consolidated financial statements or notes to consolidated financial statements. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed by the registrant during the last quarter of the period covered by this report. (c) Exhibits -------- The exhibits listed in the accompanying "Index of Exhibits" are filed as part of this Annual Report and each management contract or compensatory plan or arrangement included therein is identified as such. 34 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 23/rd/ day of March, 2000. ESKIMO PIE CORPORATION /s/ David B. Kewer ------------------ David B. Kewer President and Chief Executive 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 registrant and in the capacities as of the 23/rd/ day of March 2000. Signature Title /s/ David B. Kewer President and - -------------------------------- Chief Executive Officer David B. Kewer (Principal Executive Officer) /s/ Thomas M. Mishoe, Jr. Chief Financial Officer, - -------------------------------- Vice President, Treasurer Thomas M. Mishoe, Jr. and Corporate Secretary (Principal Financial and Accounting Officer) /s/ Kathryn L. Tyler Controller - -------------------------------- Kathryn L. Tyler */s/ Arnold H. Dreyfuss Chairman of the Board - -------------------------------- Arnold H. Dreyfuss */s/ Wilson H. Flohr, Jr. Director - -------------------------------- Wilson H. Flohr, Jr. */s/ F. Claiborne Johnston, Jr. Director - -------------------------------- F. Claiborne Johnston, Jr. */s/ Daniel J. Ludeman Director - -------------------------------- Daniel J. Ludeman */s/ Judith B. McBee Director - -------------------------------- Judith B. McBee */s/ Robert C. Sledd Director - -------------------------------- Robert C. Sledd *By /s/ David B. Kewer - -------------------------------- David B. Kewer Attorney-in-fact 35 INDEX OF EXHIBITS Exhibit No. Description 3.1 Amended and Restated Articles of Incorporation incorporated herein by reference to Exhibit C to the Company's Proxy Statement for its 1996 Annual Meeting of Shareholders. 3.2 Amended and Restated Bylaws, amended through December 16, 1999, filed herewith. 4.1 (a) Rights Agreement dated as of January 21, 1993, between the Company and Mellon Securities Trust Company, incorporated herein by reference to Exhibit 28.1 to the Company's Current Report on Form 8-K dated January 21, 1993. (b) Amendment No. 1, dated as of November 23, 1998, between Eskimo Pie Corporation and First Union National Bank, as successor Rights Agent, to Rights Agreement dated as of January 21, 1993, between the Company and Mellon Securities Trust Company, incorporated herein by reference to Exhibit 4.1(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 4.2 The Company agrees to furnish to the Commission upon request any instrument with respect to long-term debt as to which the total amount of securities authorized thereunder does not exceed 10% of the Company's total consolidated assets. 10.1* Executive Retention and Severance Agreement between the Company and Thomas M. Mishoe, Jr., dated October 23, 1999, filed herewith. 10.2* Executive Retention and Severance Agreement between the Company and William J. Weiskopf, dated October 25, 1999, filed herewith. 10.3* Executive Retention and Severance Agreement between the Company and Kimberly P. Ferryman, dated October 25, 1999, filed herewith. 10.4* Executive Retention and Severance Agreement between the Company and Craig L. Hettrich, dated October 19, 1999, filed herewith. 10.5* Executive Retention and Severance Agreement between the Company and V. Stephen Kangisser, dated October 25, 1999, filed herewith. 10.6* Executive Retention and Severance Agreement between the Company and David B. Kewer, dated October 21, 1999, filed herewith. 10.7* Incentive Stock Plan dated February 17, 1992, incorporated herein by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 (Registration No.33-45852). 10.8* 1996 Incentive Stock Plan, as amended effective December 16, 1999, filed herewith. 10.9* Senior Management Annual Incentive Plan, dated as of January 1, 1993, incorporated herein by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992. 10.10* Salaried Retirement Plan dated as of April 6, 1992, as amended, filed herewith. 10.11* Executive Retirement Plan and Trust dated as of April 6, 1992, as amended, incorporated herein by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 36 10.12 Master License Agreement between the Company and Welch Foods Inc. dated as of August 1, 1998, incorporated herein by reference to Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter ended September 30, 1998. 10.13 (a) Letter Agreement, dated March 20, 1998, for a $10,000,000 revolving line of credit between the Company and Crestar Bank, incorporated herein by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (b) Letter Agreement, dated May 20, 1999, between the Company and Crestar Bank, incorporated herein by reference to Exhibit 10.1 to the Company's Report on Form 10-Q for the quarter ended June 30, 1999. 10.14 (a) Credit Agreement, dated as of May 5, 1994, between the Company and First Union National Bank of Virginia, incorporated herein by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. (b) Amendment No. 1, dated as of April 18, 1997, to the Credit Agreement, dated as of May 5, 1994, between the Company and First Union National Bank of Virginia, incorporated herein by reference to Exhibit 10.16(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. (c) Amendment No. 2, dated as of April 28, 1998, to the Credit Agreement, dated as of May 5, 1994, between the Company and First Union National Bank of Virginia, incorporated herein by reference to Exhibit 10.16(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 10.15 Agreement dated February 17, 1992 between the Company and Reynolds Metals Company, incorporated herein by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 (Registration No. 33-45852). 10.16 Form of Reimbursement Agreement dated as of February 17, 1992 between the Company and Reynolds Metals Company, incorporated herein by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1 (Registration No. 33-45852). 10.17* Eskimo Pie Corporation Savings Plan and Trust, as amended, filed herewith. 10.18* Eskimo Pie Corporation Employee Stock Purchase Plan, as amended, incorporated herein by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors, Ernst & Young LLP. 24. Powers of Attorney. 27. Financial Data Schedules. * Exhibits are Management Contracts or Compensatory Plans or Arrangements. ________________________________________ 37 In accordance with the Securities and Exchange Commission's requirements, we will furnish copies of the exhibits listed for a copying fee of 10 cents per page. Please direct your request to: Corporate Secretary Eskimo Pie Corporation P.O. Box 26906 Richmond, Virginia 23261-6906 Phone No. (804) 560-8400 38 EX-3 2 EX3_2 Exhibit 3.2 Amended and Restated Bylaws of ESKIMO PIE CORPORATION ARTICLE I - Stock 1. Certificates for Stock. Certificates of Stock shall be issued in ---------------------- numerical order, be signed by the Chairman of the Board of Directors, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, and sealed with the corporate seal; provided, that where any Certificate of Stock is signed by a duly appointed and authorized Transfer Agent or Registrar the signatures of the Chairman of the Board of Directors, the President, Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer may be facsimile, engraved or printed, and the seal of the corporation on any such Certificate of Stock may be facsimile, engraved or printed. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. 2. Transfers of Stock. Transfers of stock shall be made only upon the books ------------------ of the corporation, and only by the person named in the certificate or by attorney, lawfully constituted in writing, and only upon surrender of the certificate therefor. The directors may by resolution make reasonable regulations for the transfers of stock. To the extent that any provision of the Rights Agreement between the corporation and First Union National Bank, as Successor Rights Agent, dated as of January 21, 1993, is deemed to constitute a restriction on the transfer of any securities of the corporation, including, without limitation, the Rights, as defined therein, such restriction is hereby authorized by the bylaws of the corporation. 3. Holders of Record. Registered shareholders only shall be entitled to be ----------------- treated by the corporation as the holders in fact of the stock standing in their respective names and the corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Virginia. 4. Lost or Destroyed Certificates. In case of loss or destruction of any ------------------------------ certificate of stock another may be issued in its place upon satisfactory proof of such loss or destruction and upon the giving of a satisfactory bond of indemnity to the corporation, all as determined either expressly by the directors or pursuant to general authority granted by them. ARTICLE II - Shareholders' Meetings 1. Place of Meetings. Meetings of the shareholders shall be held at such ----------------- place, within or outside the Commonwealth of Virginia, as the Board of Directors may determine. 2. Annual Meeting. The annual meeting of the shareholders of the -------------- corporation, for the election of directors to succeed those whose terms expire, and for the transaction of such other business as may come before the meeting, shall be held on the first Wednesday in May of each year, if not a legal holiday, and if a legal holiday, then on the first business day following, at ten o'clock in the forenoon, or on such other date and at such other time as may be fixed by the Board of Directors. If the annual meeting of the shareholders be not held as herein prescribed, the election of directors may be held at any meeting thereafter called pursuant to these Bylaws. 3. Special Meetings. Special meetings of the shareholders may be called by ---------------- the Chairman of the Board, if one is elected, or the President or the Board of Directors. 4. Notice of Meetings. Written notice of the place, date and hour of the ------------------ annual and of all special meetings of the shareholders and, in the case of special meetings, of the purpose or purposes for which such special meeting is called, shall be given in the manner specified in Section 1 of Article VII of these Bylaws not less than ten (10) nor more than sixty (60) days prior to the meeting (except that notice of a shareholders' meeting to act on an amendment of the articles of incorporation, a plan of merger or share exchange, a proposed sale of assets other than in the ordinary course of business, or the dissolution of the corporation shall be given not less then twenty-five nor more than 60 days before the meeting date), to each shareholder of record of the corporation entitled to vote thereat. Business transacted at all special meetings shall be confined to the purposes stated in the notice. 5. Quorum. A quorum at any annual or special meeting of the shareholders ------ shall consist of shareholders holding a majority of the capital stock of this corporation outstanding and entitled to vote thereat, represented either in person or by proxy, except as otherwise specifically provided by law or in the Articles of Incorporation. 6. Adjourned Meetings. A properly called shareholders' meeting may be ------------------ adjourned from time to time by a majority in interest of those present in person or by proxy and entitled to vote thereat. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than 120 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting; otherwise, no notice of such adjourned meeting need be given if the time and place thereof are announced at the meeting at which the adjournment is taken. The absence from any meeting of shareholders holding the number of shares of stock of the corporation required by law, the Articles of Incorporation or these Bylaws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat in person or by proxy shareholders holding the number of shares of stock of the corporation required in respect of such other matter or matters. 2 7. Inspectors of Election. In advance of any meeting of shareholders, the ---------------------- Chairman of the Board, President, Treasurer or Secretary of the corporation shall appoint one or more inspectors of election to serve at such meeting and to make a written report with respect thereto. In addition, any such officer may, but shall not be required to, designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of shareholders, the presiding officer at such meeting shall appoint one or more inspectors to act at the meeting. Each inspector shall discharge his or her duties in accordance with applicable law and shall, before entering upon the discharge of his or her duties, take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. 8. List of Shareholders. A complete list of the shareholders entitled to -------------------- vote at each annual or special meeting of the shareholders of the corporation, arranged in alphabetical order, showing the address of record of each and the number of voting shares held by each, shall be prepared by the Secretary or the transfer agent, who shall have charge of the stock ledger, and at least ten (10) days before every such meeting shall be kept on file at the principal office of the corporation or at the office of its transfer agent or registrar, and shall, during the usual hours for business, be open to the examination of any shareholder in accordance with Virginia law, and during the whole time of said meeting be open to the examination of any shareholder for the purposes thereof. 9. Voting. Subject to the provisions of Section 10 of this Article II of ------ these Bylaws, each holder of stock of a class which is entitled to vote in any election or on any other questions at any annual or special meeting of the shareholders shall be entitled to one vote, in person or by written proxy, for each share of such class held of record. Except where, and to the extent that, a different percentage of votes and/or a different exercise of voting power is prescribed by law, the Articles of Incorporation or these Bylaws, the following applies: (i) Any corporate action, except the election of directors, an amendment or restatement of the Articles of Incorporation, a merger, a statutory share exchange, sale or other disposition of all or substantially all the corporation's assets otherwise than in the usual and regular course of business, or dissolution shall, for each voting group entitled to vote on the matter, be approved at a meeting at which a quorum of the voting group is present if the votes cast in favor of the action exceed the votes cast against the action; (ii) Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present; and (iii) An amendment or restatement of the Articles of Incorporation, a merger, statutory share exchange, sale or other disposition of all or substantially all the corporation's assets otherwise than in the usual and regular course of business, or dissolution shall be approved by a majority of the votes present and entitled to vote by 3 each voting group entitled to vote on the transaction at a meeting at which a quorum of the voting group is present. 10. Determination of Shareholders of Record. The share transfer books may --------------------------------------- be closed by order of the board of directors for not more than 70 days for the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof (or entitled to receive any distribution or in order to make a determination of shareholders for any other purpose). In lieu of closing such books, the board of directors may fix in advance as the record date for any such determination a date not more than 70 days before the date on which such meeting is to be held (or such distribution made or other action requiring such determination is to be taken). If the books are not thus closed or the record date is not thus fixed, the record date shall be the close of business on the day before the effective date of the notice to shareholders. 11. Matters to be Brought Before Shareholders' Meetings. Except as --------------------------------------------------- otherwise provided by law, at any annual or special meeting of shareholders only such business shall be conducted as shall have been properly brought before the meeting in accordance with this Section. In order to be properly brought before the meeting, such business must have either been (i) specified in the written notice of the meeting (or any supplement thereto) given to shareholders of record on the record date for such meeting by or at the direction of the Board of Directors, (ii) brought before the meeting at the direction of the Board of Directors or the officer presiding over the meeting, or (iii) specified in a written notice given by or on behalf of a shareholder of record on the record date for such meeting entitled to vote thereat or a duly authorized proxy for such shareholder, in accordance with all the following requirements. A notice referred to in clause (iii) hereof must be delivered personally to, or mailed to and received at, the principal executive office of the corporation, addressed to the attention of the Secretary, not more than ten (10) days after the date of the initial notice referred to in clause (i) hereof, in the case of business to be brought before a special meeting of shareholders, and not less than thirty (30) days prior to the first anniversary date of the initial notice referred to in clause (i) hereof of the previous year's annual meeting, in the case of business to be brought before an annual meeting of shareholders, provided, however, that such notice shall not be required to be given more than ninety (90) days prior to an annual meeting of shareholders. Such notice referred to in clause (iii) hereof shall set forth: (a) a full description of each such item of business proposed to be brought before the meeting; 4 (b) the name and address of the person proposing to bring such business before the meeting; (c) the class and number of shares held of record, held beneficially and represented by proxy by such person as of the record date for the meeting (if such date has been made publicly available) and as of the date of such notice; (d) if any item of such business involves a nomination for director, all information regarding each such nominee that would be required to be set forth in a definitive proxy statement filed with the Securities and Exchange Commission pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, or any successor thereto and the written consent of each such nominee to serve if elected; and (e) all other information that would be required to be filed with the Securities and Exchange Commission if, with respect to the business proposed to be brought before the meeting, the person proposing such business was a participant in a solicitation subject to Section 14 of the Securities Exchange Act of 1934, as amended, or any successor thereto. Any matter brought before a meeting of shareholders upon the affirmative recommendation of the Board of Directors where such matter is included in the written notice of the meeting (or any supplement thereto) and accompanying proxy statement given to shareholders of record on the record date for such meeting by or at the direction of the Board of Directors is deemed to be properly before the shareholders for a vote and does not need to be moved or seconded from the floor of such meeting. No business shall be brought before any meeting of shareholders of the corporation otherwise than as provided in this Section. ARTICLE III - Board of Directors 1. Number; Term of Office; Powers. The business and affairs of the ------------------------------ corporation shall be under the direction of a Board of Directors, consisting of a minimum of five (5) and a maximum of eight (8) persons, with the number to be fixed or changed from time to time, within such minimum and maximum range, by resolution of the Board of Directors. In the absence of a specific resolution to the contrary, the number of directors shall be fixed at the number of persons nominated by the Board of Directors for election as directors in connection with the annual meeting of shareholders. Directors shall be elected for one year, and shall hold office until their successors are elected and qualified. Directors need not be shareholders. In addition to the power and authority expressly conferred upon them by the Bylaws and the Articles of Incorporation, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by law or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. 2. Eligibility to Serve. No person shall be eligible to stand for election -------------------- or re-election to the Board of Directors in the corporation's fiscal year in which such person shall have his or her 70th birthday, except that any director serving at January 1, 1996 who was then 65 years old or older shall continue to be eligible to serve until age 72. 5 3. Resignations. Any director may resign at any time by giving written ------------ notice of resignation to the Board of Directors, to the Chairman of the Board of Directors or to the Secretary of the corporation. Any such resignation shall take effect at the time specified therein, or if the time be not specified therein, the upon receipt thereof. The acceptance of such resignation shall not be necessary to make it effective. 4. Vacancies. Except as otherwise specifically provided by law, the --------- Articles of Incorporation or these Bylaws, all vacancies in the Board of Directors, whether caused by resignation, death, increase in the number of authorized directors or otherwise, may be filled by a majority of the Board of Directors then in office, even though less than a quorum, or by the shareholders at a special meeting. A director thus elected to fill any vacancy shall hold office until the next annual meeting of shareholders and until a successor is elected and qualified. 5. Annual Meeting. The annual meeting of the Board of Directors, for the -------------- election of officers and the transaction of other business, shall be held on the same day and at the same place as, and as soon as practicable following, the annual meeting of shareholders, or at such other date, time or place within or outside the Commonwealth of Virginia as the directors may by resolution designate. 6. Regular Meetings. Regular meetings of the Board of Directors shall be ---------------- held at such times, and at such place within or outside the Commonwealth of Virginia, as the Board of Directors may from time to time by resolution designate. 7. Special Meetings. Special meetings of the directors may be called at any ---------------- time by the Chairman of the Board of Directors or the President; or by the Secretary upon written request of one-third of the directors, such request stating the purpose for which the meeting is to be called. Special meetings shall be held at the principal office of the corporation or at such office within or outside the Commonwealth of Virginia as the directors may from time to time designate. 8. Notice of Meetings. Except as otherwise required by law or a resolution ------------------ of the Board of Directors, notice of special meetings of the Board of Directors or of any committee of the Board of Directors shall be given to each director or to each committee member, as the case may be, by mail at least two days before the day on which the meeting is to be held or by personal delivery, word-of- mouth, telephone, telegraph, radio, cable or other comparable means at least six hours before the time at which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof unless otherwise required by law. No notice need be given of the annual meeting of directors or of regular meetings of directors or of committees of the Board of Directors, provided that, whenever the time or place of such meetings shall be fixed or changed, notice of such action shall be given promptly to each director or to each committee member, as the case may be, who shall not have been present at the meeting at which such action was taken. 9. Quorum; Adjourned Meetings; Required Vote. A majority of the Board of ----------------------------------------- Directors as constituted from time to time shall be necessary and sufficient at all meetings to 6 constitute a quorum for the transaction of business. In the absence of a quorum, a majority of those present may adjourn the meeting from time to time and the meeting may be held as adjourned without further notice provided a quorum be present at such adjourned meeting. Unless otherwise specifically provided by the Articles of Incorporation or law, the act of a majority of the directors present at any properly convened meeting at which there is a quorum shall be the act of the Board of Directors. 10. Committees. Standing or Temporary Committees may be appointed from ---------- their own number by the Board of Directors from time to time, and the directors may from time to time vest such committees with such powers as the directors may see fit, subject to such conditions as the directors may prescribe or as may be prescribed by law. All committees shall consist of two or more directors. The term of office of the members of each committee shall be as fixed from time to time by the Board of Directors; provided, however, that any committee member who ceases to be a director shall ipso facto cease to be a committee member. Any ---------- member of any committee may be removed at any time with or without cause by the Board of Directors, and any vacancy in any committee may be filled by the Board of Directors. All committees shall keep regular minutes of their transactions and shall cause them to be recorded in books kept for that purpose in the office of the corporation, and shall report the same to the Board of Directors at their regular meetings. Subject to this Section 9 and except as otherwise determined by the Board of Directors, each committee may make rules for the conduct of its business. 11. Compensation. Directors, as such, may receive, pursuant to resolution ------------ of the Board of Directors, fixed fees, other compensation and expenses for their services as directors, including, without limitation, services as chairmen or as members of committees of the directors; provided, however, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 12. Consents in Writing. Any action required or permitted to be taken at ------------------- any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. 13. Participation by Conference Telephone. Members of the Board of ------------------------------------- Directors or of any committee may participate in a meeting of such Board of Directors or committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at the meeting. 14. Shareholder Instructions. The Board of Directors, in exercising its ------------------------ rights and duties with respect to the administration of the Shareholder Rights Agreement, dated January 21, 1993, between this corporation and Mellon Securities Trust Company, as rights agent (the "Rights Agreement") and any rights, options or warrants for the purchase of shares of Eskimo or other instrument of a similar type or kind, will carry out a resolution authorizing the partial or complete redemption of, or amendment to, the Rights Agreement, if such resolution is authorized 7 and approved by the affirmative vote of shareholders owning or having the right to vote a majority of the capital stock of Eskimo. The provisions of this Section 14 may be repealed or amended only with the affirmative vote of holders of (sic) owning or having the right to vote a majority of the shares of this corporation entitled to vote thereon. ARTICLE IV - Officers 1. Officers. The officers of the corporation shall be a Chairman of the -------- Board of Directors, a President, one or more Vice Presidents, one or more of whom may be an Executive Vice President, a Secretary, a Treasurer, and such other officers and assistant officers as the Board of Directors shall deem appropriate, all of whom shall be elected annually by the Board of Directors. One person may hold more than one office. 2. Chairman of the Board. The Chairman of the Board of Directors shall --------------------- preside at all meetings of shareholders and directors, shall be the chief executive officer of the corporation and, subject to the direction of the Board of Directors, shall have general supervision and management of the business and affairs of the corporation and shall perform all such other duties as are incident to such office or are properly required by the Board of Directors. 3. President. The President shall be the chief operating officer of the --------- corporation and shall, subject to the direction of the Board of Directors and the Chairman of the Board of Directors, direct and supervise the business and affairs of the corporation and shall perform all such other duties as are incident to such office or as are properly required by the Board of Directors or the Chairman of the Board of Directors. During the absence or disability of the Chairman of the Board of Directors, the President shall exercise all powers and discharge all the duties of the Chairman of the Board of Directors. 4. Executive Vice Presidents and Other Vice Presidents. Each of the --------------------------------------------------- Executive Vice Presidents and other Vice Presidents shall perform such duties as are properly required by the Board of Directors, the Chairman of the Board of Directors or the President. 5. Treasurer. The Treasurer shall have the custody of all moneys and --------- securities of the corporation and shall keep or cause to be kept accurate accounts of all money received or payments made in books kept for that purpose. The Treasurer shall deposit or cause to be deposited funds of the corporation in accordance with Article V, Section 2 of these Bylaws and shall disburse the funds of the corporation by checks or vouchers as authorized by the Board of Directors. The Treasurer shall keep or cause to be kept all books of accounts and accounting records of the corporation and shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation. The Treasurer shall prepare or cause to be prepared appropriate financial statements for the corporation and shall have such other powers and perform such other duties as may be incident to the office of Treasurer. 6. Secretary. The Secretary shall keep the minutes of the meetings of the --------- shareholders and of the Board of Directors, and, when required, the minutes of the meetings of the committees, and shall be responsible for the custody of all such minutes. The Secretary shall 8 be responsible for the custody of the stock ledger and documents of the corporation. The Secretary shall have custody of the corporate seal and shall affix and attest such seal to any instrument whose execution under seal shall have been duly authorized and enjoy all other powers incident to the office of Secretary. 7. Other Officers and Assistant Officers. All other officers and assistant ------------------------------------- officers shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors, the Chairman of the Board of Directors or the President. 8. Term of Office; Vacancies. Each officer shall hold office until the ------------------------- annual meeting of the Board of Directors following the end of the term of the Board by which such officer is elected, except in the case of earlier death, resignation or removal. Vacancies in any office arising from any cause may be filled by the directors at any regular or special meeting. 9. Removal. Any officer elected or appointed by the Board of Directors may ------- be removed at any time, with or without cause, by the Board of Directors. 10. Proxies. Unless otherwise prescribed by the Board of Directors, the ------- Chairman of the Board of Directors or the President may from time to time himself, by such proxy or proxies, attorney or attorneys, agent or agents of the corporation as he shall designate in the name and on behalf of the corporation, cast the votes to which the corporation may be entitled as a shareholder or otherwise in any other corporation, at meetings, or consent in writing to any action by any such other corporation; and he may instruct the individual or individuals so appointed as to the manner of casting such votes or giving such consent, and execute or cause to be executed on behalf of the corporation such written proxies, consents, waivers or other instruments as he may deem necessary or desirable. ARTICLE V - Dividends and Finance 1. Dividends. Dividends may be declared to the full extent permitted by law --------- at such times as the Board of Directors shall direct. 2. Deposits; Withdrawals; Notes and Other Instruments. The moneys of the -------------------------------------------------- corporation shall be deposited in the name of the corporation in such banks or trust companies as shall be designated by, and shall be drawn out only by check signed by, persons designated from time to time, by the Board of Directors or by an officer of this corporation to whom the Board of Directors has delegated such authority. All notes and other instruments for the payment of money shall be signed or endorsed by officers or other person authorized from time to time by the Board of Directors or by an officer of this corporation to whom the Board of Directors has delegated such authority. 3. Fiscal Year. The fiscal year of the corporation shall date from the ----------- first day of January in each year. ARTICLE VI - Books and Records; Offices 9 1. Books and Records. The books, accounts and records of the corporation, ----------------- except as may be otherwise required by the laws of the Commonwealth of Virginia, may be kept within or outside of the said State at such places as the Board of Directors may from time to time appoint. 2. Offices. The corporation may have offices in the City of Richmond, ------- Virginia and at such other places as the Board of Directors may from time to time designate or the business of the corporation may require. ARTICLE VII - Notices 1. Notices. Whenever any provision of law or these Bylaws requires notice ------- to be given to any director, officer or shareholder, such notice may be given in writing by mailing the same to such director, officer or shareholder at his or her address as the same appears in the books of the corporation, unless such shareholder shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. The time when the same shall be mailed shall be deemed to be the time of the giving of such notice. This section shall not be deemed to preclude the giving of notice by other means if permitted by the applicable provision of law or these Bylaws. 2. Waivers of Notice. A waiver of any notice in writing, signed by a ----------------- shareholder or director, whether before or after the time stated in said waiver for holding a meeting, shall be deemed equivalent to a notice required to be given to any shareholder or director. A shareholder's or director's attendance at or participation in a meeting waives any required notice to him of the meeting unless he at the beginning of the meeting or promptly upon his arrival objects to the holding of the meeting or the transaction of business at the meeting and does not thereafter vote for or assent to the action taken at the meeting. ARTICLE VIII - Conflict of Interest 1. Interested Directors or Officers. No contract or transaction between the -------------------------------- corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association or other organization in which one or more of the directors or officers of the corporation are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer of the corporation is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (i) the material facts of the transaction and the director's or officer's interest are disclosed or known to the board of directors or a committee of the board of directors, and the transaction was authorized, approved or ratified by the affirmative vote of a majority of the directors on the board of directors, or on the committee, who have no 10 direct or indirect personal interest in the transaction; provided, however, that a transaction shall not be authorized, approved or ratified by a single director; or (ii) the material facts of the transaction and the director's or officer's interest are disclosed to the shareholders entitled to vote, and the transaction is authorized, approved or ratified by the vote of a majority of the shares other than shares owned by or voted under the control of a director or officer who has a direct or indirect interest in the transaction; or (iii) the transaction is fair to the corporation. ARTICLE IX - Seal 1. Seal. The corporate seal of the corporation shall be a flat-face ---- circular die containing the name of the corporation, of which there may be any number of counterparts or facsimiles, in such form as the Board of Directors shall from time to time adopt. ARTICLE X - Amendments 1. Amendments. These bylaws may be amended or repealed by the Board of ---------- Directors except to the extent that: (i) this power is reserved exclusively to the shareholders by law or the articles of incorporation; or (ii) the shareholders in adopting or amending particular bylaws provide expressly that the Board of Directors may not amend or repeal the same. These bylaws may be amended or repealed by the shareholders even though the same also may be amended or repealed by the Board of Directors. 11 EX-10 3 EX10_1 Exhibit 10.1 Eskimo Pie Corporation Executive Retention Bonus and Severance Agreement Eskimo Pie Corporation (the "Company") has adopted an Executive Retention Bonus and Severance Program (the "Executive Retention Bonus and Severance Program") designed to encourage executives to remain focused on their job responsibilities and to continue employment with the Company or a subsidiary in light of a possible "Sale of the Company" (as that term is defined below) relating to your employment. In accordance with established criteria for the Executive Retention Bonus and Severance Program, you have been selected as a participant in lieu of participation in the Company's general retention and severance program contained in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation Welfare Benefit Plan (the Company's "welfare plan"). 1. Executive Retention Bonus. If you are eligible in accordance with the ------------------------- criteria which follow, you will receive an Executive Retention Bonus consisting of two installments - one for $56,250 (the "First Installment") and one for $168,750 (the "Second Installment"), each subject to normal tax and other applicable withholding and deductions. In order to receive the First Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the First Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the First Installment on or about January 15, 2000 (but in no event later than the date the Second Installment of the Executive Retention Bonus is due) in a lump sum payment. In order to receive the Second Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the Second Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the Second Installment within five business days after the Sale of the Company relating to your employment in a lump sum payment. If for any reason no Sale of the Company relating to your employment occurs before January 1, 2001, you will not receive the Second Installment of the Executive Retention Bonus. 2. Severance Benefits. If you cease to be employed by the Company at or ------------------ within one year after the Sale of the Business relating to your employment under the applicable additional eligibility criteria described below for severance benefits for any reason (including without limitation your voluntary cessation of employment) other than Cause (as defined below) or death, you will also be entitled to severance benefits in the form of extended medical and dental insurance coverage under the Company's welfare plan for you, your spouse and your eligible dependents for one year with the Company paying the entire cost of coverage for such extended coverage period. This extended medical and dental coverage will not run concurrently with the COBRA coverage period under the Company's welfare plan, and the applicable COBRA coverage period under the Company's welfare plan will be available to you and your qualifying beneficiaries after the end of this extended medical and dental coverage period. 3. Retention Period. The Retention Period began on October 7, 1999. It ---------------- ends for the First Installment of the Executive Retention Bonus on December 31, 1999 or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). It ends for the Second Installment of the Executive Retention Bonus on the Sale of the Company relating to your employment or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). For purposes hereof, you will automatically be considered involuntarily terminated by the Company for reasons other than death, permanent disability or Cause if you voluntarily terminate for Good Reason (as defined below) 4. Sale of the Company. For purposes of this Agreement, the term "Sale of ------------------- the Company" means any of the following occurring before January 1, 2001: a) a change in the ownership of the Company resulting in the possession by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the outstanding stock of the Company (whether by sale or issuance of stock, reorganization, merger, consolidation or otherwise) in connection with a transaction contemplated by the Board of Directors of the Company (the "Board") in connection with the Board's publicly announced intention to sell the Company or its assets, including the assets of its subsidiaries (the "Company Sale Announcement"); b) if you are employed by a subsidiary or a division of the Company, the sale of the stock of , or substantially all of the assets of, that subsidiary or that division of the Company; c) if you are employed in connection with Company-wide matters, substantially all of your duties and responsibilities as of October 7, 1999 are effectively eliminated by reason of a sale or sales of the assets or divisions of the Company or of its subsidiaries; or d) if you are employed in connection with any other operations of the Company or any subsidiary (including corporate headquarters operations) which is the subject of or related to any other sale of assets determined by the Company to result in a cessation of such operations in connection with the Company Sale Announcement, the sale of such assets. 5. Cause. For purposes of this Agreement, "Cause" means: ----- a) dishonesty, b) conviction of a felony, c) the willful unauthorized disclosure of confidential information of the Company or any of its subsidiaries or affiliates, or d) the willful and continued failure to substantially perform your duties with the Company or any of its subsidiaries or affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board, the Compensation Committee or its delegate which specifically identifies the manner in which you have not substantially performed your duties. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or any committee of the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. 2 6. Good Reason. For purposes of this Agreement, "Good Reason" shall mean ----------- the occurrence of any of the following without Cause: a) the assignment to you of any duties which are inconsistent with the position (including status, offices, titles, and reporting requirements) or authority in the Company that you held immediately on October 7, 1999, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately on October 7, 1999, provided that any promotion or such change or alteration in your duties, authority, responsibilities or conditions of employment which is either accepted or not rejected in writing delivered to the Board of Directors of the Company within 10 days of such promotion, change or alteration shall be deemed to have been held or in effect immediately on October 7, 1999; b) a reduction by the Company in your annual base salary as in effect on October 7, 1999 or as the same may be increased from time to time; c) if you are principally employed at the Company's principal executive offices, the relocation of the Company's principal executive offices to a location outside the Richmond Metropolitan Area or the Company's requiring you to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; d) except in the event of reasonable administrative delay, the failure by the Company to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; e) the failure by the Company to continue in effect any compensation plan in which you participated on October 7, 1999 that is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as it existed on October 7, 1999; f) the failure by the Company to continue to provide you with benefits having an aggregate value of at least 75% of the aggregate value of the benefits enjoyed by you under any of the Company's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which you were participating on October 7, 1999, the taking of any action by the Company which would directly or indirectly reduce by more than 25% the aggregate value of such benefits or deprive you of any material fringe benefit enjoyed by you on October 7, 1999, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on October 7, 1999; or g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in section 8.l) captioned "Successors" below. 3 7. Additional Eligibility Criteria for Benefits. Eligibility for either -------------------------------------------- installment of the Executive Retention Bonus and for severance benefits is also conditioned on the following additional rules, as applicable to the particular benefit: a) Voluntary Resignation. You will not receive an Executive Retention Bonus installment if you voluntarily resign your employment prior to the last day of the applicable Retention Period other than for Good Reason. b) Death, Disability or Involuntary Termination for Cause. You will not receive an Executive Retention Bonus installment if you die, become permanently disabled or are involuntarily terminated for Cause by the Company during the applicable Retention Period. c) No Other Employment. You will not be eligible for an Executive Retention Bonus installment or severance benefits under this Agreement if you engage in any activity during the applicable Retention Period or, in the case of severance benefits, prior to the Sale of the Company relating to your employment, which is inconsistent with the satisfactory performance of your duties including, but not limited to, engaging in other full-time or substantially full-time employment, whether as an employee, consultant or in any other capacity, whether or not you are compensated for such other employment, or engaging in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by an authorized representative of the Company. d) Confidentiality. You agree to maintain the utmost confidentiality of the existence and the terms of this Agreement and all documentation or records relating to this Agreement and the Executive Retention Bonus and Severance Program and not to disclose these matters to any person or entity without the prior written consent of the Company unless required otherwise by law or court order. You will not be eligible for the Executive Retention Bonus or severance benefits under this Agreement if you violate this confidentially requirement. e) Resignation as Director and/or Officer. You will not be eligible for severance benefits under this Agreement unless, promptly after your cessation of employment with the Company and upon receiving a written request to do so, you resign as a director and/or officer of the Company (including of each subsidiary and affiliate of the Company) for which you are then serving as a director and/or officer. f) Waiver of Other Retention, Termination and Severance Benefits and Participant in General Retention Bonus Program. Eligibility to receive the Executive Retention Bonus installments and severance benefits under this Agreement is contingent upon your agreeing to waive your rights under and terminate your participation in any and all other retention, termination and severance programs of the Company and of each subsidiary and affiliate of the Company (whether by individual agreement or otherwise) now or subsequently existing during the period this Agreement is in effect (including without limitation any executive or other severance agreement now in force and the Company's general retention bonus and severance program for rank and file employees contained in the 1999 Company Sale Severance Program), which you may do by signing, dating and returning to the Company one copy of this Agreement g) Acceptance of Agreement. Eligibility to receive the Executive Retention Bonus and severance benefits under this Agreement is contingent upon your acceptance of the terms 4 of this Agreement by signing, dating and returning to the Company one copy of this Agreement no later than October 25, 1999. 8. Other Terms and Conditions. The following additional terms and -------------------------- conditions apply for purposes of this Agreement: a) No Contract of Employment. This Agreement is not intended to, and does not, create a contract of employment for any definite period of time between you and the Company. b) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. You may at any time or from time to time waive any or all of the benefits provided for herein which have not been received by you at the time of such waiver. In addition, prior to the last day of the calendar year in which your cessation of employment occurs, you may waive any or all rights and benefits provided for herein which have been received by you; provided that you repay to the Company the amount of the benefits received (together with interest at the rate provided in Section l274(b)(2)(B) of the Code). Any waiver of benefits pursuant to this paragraph shall be irrevocable. c) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. d) Modification. Any modifications to this Agreement must be approved in writing by an authorized representative of the Company. No reduction in your rights under this Agreement may be made without your written consent. e) Governing law. This Agreement shall be construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia. f) Excise Tax. If you become entitled to benefits under this Agreement and if any part or all of such benefits will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the amount otherwise payable or provided to you in accordance with this Agreement shall be reduced as necessary so that no part of such payment shall be subject to the Excise Tax. g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not be governed by any duty to mitigate your damages by seeking further employment nor offset by any compensation which you may receive from future employment. h) Interest on Delayed Payments. If payment or provision of any benefit due to you under this Agreement is not timely made, you shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time the Sale of the Business relating to your employment occurs, such interest to accrue from the date such benefit is due through the date of payment or provision thereof. i) Adjudication. If a dispute or controversy arises under or in connection with this Agreement, you shall be entitled to an adjudication in an appropriate court of the Commonwealth of Virginia, or in any other court of competent jurisdiction. Alternatively, you, at your option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. 5 j) Expenses relating to the Company's Failure to Perform. If any contest or dispute shall arise under this Agreement involving the failure or refusal of the Company to perform fully in accordance with the terms hereof other than in connection with a good faith determination of the existence of Cause, the Company shall reimburse you, on a current basis, for all legal fees and expenses, if any, incurred by you in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to your making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. k) Other Expenses. If any claim, action or proceeding (including without limitation a claim, action or proceeding by you against the Company) occurs with respect to this Agreement other than one described in section 8.j) above, the Company shall pay or reimburse you for all costs and expenses, including without limitation court costs and attorney's fees, incurred by you as a result thereof, provided that if the claim, action or proceeding is by you against the Company, you are successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. l) Successors. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor which employs you in connection with a Sale of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if you had remained employed by the Company. As used in this Agreement, the "Company" shall mean Eskimo Pie Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. m) Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable hereunder if you had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, your estate. n) Termination. If no Sale of the Company occurs prior to January 1, 2001, this Agreement shall then terminate. Eskimo Pie Corporation By /s/ David B. Kewer ---------------------------- David B. Kewer President and Chief Executive Officer 6 I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE AGREEMENT AND AGREE TO ITS TERMS. Agreed and Accepted: /s/ Thomas M. Mishoe, Jr. October 23, 1999 - ------------------------------------ --------------------- (Name) (Date) 7 EX-10 4 EX10_2 Exhibit 10.2 Eskimo Pie Corporation Executive Retention Bonus and Severance Agreement Eskimo Pie Corporation (the "Company") has adopted an Executive Retention Bonus and Severance Program (the "Executive Retention Bonus and Severance Program") designed to encourage executives to remain focused on their job responsibilities and to continue employment with the Company or a subsidiary in light of a possible "Sale of the Company" (as that term is defined below) relating to your employment. In accordance with established criteria for the Executive Retention Bonus and Severance Program, you have been selected as a participant in lieu of participation in the Company's general retention and severance program contained in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation Welfare Benefit Plan (the Company's "welfare plan"). 1. Executive Retention Bonus. If you are eligible in accordance with ------------------------- the criteria which follow, you will receive an Executive Retention Bonus consisting of two installments - one for $37,500 (the "First Installment") and one for $112,500 (the "Second Installment"), each subject to normal tax and other applicable withholding and deductions. In order to receive the First Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the First Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the First Installment on or about January 15, 2000 (but in no event later than the date the Second Installment of the Executive Retention Bonus is due) in a lump sum payment. In order to receive the Second Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the Second Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the Second Installment within five business days after the Sale of the Company relating to your employment in a lump sum payment. If for any reason no Sale of the Company relating to your employment occurs before January 1, 2001, you will not receive the Second Installment of the Executive Retention Bonus. 2. Severance Benefits. If you cease to be employed by the Company at or ------------------ within one year after the Sale of the Business relating to your employment under the applicable additional eligibility criteria described below for severance benefits for any reason (including without limitation your voluntary cessation of employment) other than Cause (as defined below) or death, you will also be entitled to severance benefits in the form of extended medical and dental insurance coverage under the Company's welfare plan for you, your spouse and your eligible dependents for one year with the Company paying the entire cost of coverage for such extended coverage period. This extended medical and dental coverage will not run concurrently with the COBRA coverage period under the Company's welfare plan, and the applicable COBRA coverage period under the Company's welfare plan will be available to you and your qualifying beneficiaries after the end of this extended medical and dental coverage period. 3. Retention Period. The Retention Period began on October 7, 1999. It ---------------- ends for the First Installment of the Executive Retention Bonus on December 31, 1999 or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). It ends for the Second Installment of the Executive Retention Bonus on the Sale of the Company relating to your employment or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). For purposes hereof, you will automatically be considered involuntarily terminated by the Company for reasons other than death, permanent disability or Cause if you voluntarily terminate for Good Reason (as defined below) 4. Sale of the Company. For purposes of this Agreement, the term ------------------- "Sale of the Company" means any of the following occurring before January 1, 2001: a) a change in the ownership of the Company resulting in the possession by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the outstanding stock of the Company (whether by sale or issuance of stock, reorganization, merger, consolidation or otherwise) in connection with a transaction contemplated by the Board of Directors of the Company (the "Board") in connection with the Board's publicly announced intention to sell the Company or its assets, including the assets of its subsidiaries (the "Company Sale Announcement"); b) if you are employed by a subsidiary or a division of the Company, the sale of the stock of , or substantially all of the assets of, that subsidiary or that division of the Company; c) if you are employed in connection with Company-wide matters, substantially all of your duties and responsibilities as of October 7, 1999 are effectively eliminated by reason of a sale or sales of the assets or divisions of the Company or of its subsidiaries; or d) if you are employed in connection with any other operations of the Company or any subsidiary (including corporate headquarters operations) which is the subject of or related to any other sale of assets determined by the Company to result in a cessation of such operations in connection with the Company Sale Announcement, the sale of such assets. 5. Cause. For purposes of this Agreement, "Cause" means: ----- a) dishonesty, b) conviction of a felony, c) the willful unauthorized disclosure of confidential information of the Company or any of its subsidiaries or affiliates, or d) the willful and continued failure to substantially perform your duties with the Company or any of its subsidiaries or affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board, the Compensation Committee or its delegate which specifically identifies the manner in which you have not substantially performed your duties. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or any committee of the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. 6. Good Reason. For purposes of this Agreement, "Good Reason" shall ----------- mean the occurrence of any of the following without Cause: 2 a) the assignment to you of any duties which are inconsistent with the position (including status, offices, titles, and reporting requirements) or authority in the Company that you held immediately on October 7, 1999, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately on October 7, 1999, provided that any promotion or such change or alteration in your duties, authority, responsibilities or conditions of employment which is either accepted or not rejected in writing delivered to the Board of Directors of the Company within 10 days of such promotion, change or alteration shall be deemed to have been held or in effect immediately on October 7, 1999; b) a reduction by the Company in your annual base salary as in effect on October 7, 1999 or as the same may be increased from time to time; c) if you are principally employed at the Company's principal executive offices, the relocation of the Company's principal executive offices to a location outside the Richmond Metropolitan Area or the Company's requiring you to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; d) except in the event of reasonable administrative delay, the failure by the Company to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; e) the failure by the Company to continue in effect any compensation plan in which you participated on October 7, 1999 that is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as it existed on October 7, 1999; f) the failure by the Company to continue to provide you with benefits having an aggregate value of at least 75% of the aggregate value of the benefits enjoyed by you under any of the Company's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which you were participating on October 7, 1999, the taking of any action by the Company which would directly or indirectly reduce by more than 25% the aggregate value of such benefits or deprive you of any material fringe benefit enjoyed by you on October 7, 1999, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on October 7, 1999; or g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in section 8.1) captioned "Successors" below. 7. Additional Eligibility Criteria for Benefits. Eligibility for -------------------------------------------- either installment of the Executive Retention Bonus and for severance benefits is also conditioned on the following additional rules, as applicable to the particular benefit: 3 a) Voluntary Resignation. You will not receive an Executive Retention Bonus installment if you voluntarily resign your employment prior to the last day of the applicable Retention Period other than for Good Reason. b) Death, Disability or Involuntary Termination for Cause. You will not receive an Executive Retention Bonus installment if you die, become permanently disabled or are involuntarily terminated for Cause by the Company during the applicable Retention Period. c) No Other Employment. You will not be eligible for an Executive Retention Bonus installment or severance benefits under this Agreement if you engage in any activity during the applicable Retention Period or, in the case of severance benefits, prior to the Sale of the Company relating to your employment, which is inconsistent with the satisfactory performance of your duties including, but not limited to, engaging in other full-time or substantially full-time employment, whether as an employee, consultant or in any other capacity, whether or not you are compensated for such other employment, or engaging in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by an authorized representative of the Company. d) Confidentiality. You agree to maintain the utmost confidentiality of the existence and the terms of this Agreement and all documentation or records relating to this Agreement and the Executive Retention Bonus and Severance Program and not to disclose these matters to any person or entity without the prior written consent of the Company unless required otherwise by law or court order. You will not be eligible for the Executive Retention Bonus or severance benefits under this Agreement if you violate this confidentially requirement. e) Resignation as Director and/or Officer. You will not be eligible for severance benefits under this Agreement unless, promptly after your cessation of employment with the Company and upon receiving a written request to do so, you resign as a director and/or officer of the Company (including of each subsidiary and affiliate of the Company) for which you are then serving as a director and/or officer. f) Waiver of Other Retention, Termination and Severance Benefits and Participant in General Retention Bonus Program. Eligibility to receive the Executive Retention Bonus installments and severance benefits under this Agreement is contingent upon your agreeing to waive your rights under and terminate your participation in any and all other retention, termination and severance programs of the Company and of each subsidiary and affiliate of the Company (whether by individual agreement or otherwise) now or subsequently existing during the period this Agreement is in effect (including without limitation any executive or other severance agreement now in force and the Company's general retention bonus and severance program for rank and file employees contained in the 1999 Company Sale Severance Program), which you may do by signing, dating and returning to the Company one copy of this Agreement g) Acceptance of Agreement. Eligibility to receive the Executive Retention Bonus and severance benefits under this Agreement is contingent upon your acceptance of the terms of this Agreement by signing, dating and returning to the Company one copy of this Agreement no later than October 25, 1999. 8. Other Terms and Conditions. The following additional terms and -------------------------- conditions apply for purposes of this Agreement: 4 a) No Contract of Employment. This Agreement is not intended to, and does not, create a contract of employment for any definite period of time between you and the Company. b) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. You may at any time or from time to time waive any or all of the benefits provided for herein which have not been received by you at the time of such waiver. In addition, prior to the last day of the calendar year in which your cessation of employment occurs, you may waive any or all rights and benefits provided for herein which have been received by you; provided that you repay to the Company the amount of the benefits received (together with interest at the rate provided in Section l274(b)(2)(B) of the Code). Any waiver of benefits pursuant to this paragraph shall be irrevocable. c) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. d) Modification. Any modifications to this Agreement must be approved in writing by an authorized representative of the Company. No reduction in your rights under this Agreement may be made without your written consent. e) Governing law. This Agreement shall be construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia. f) Excise Tax. If you become entitled to benefits under this Agreement and if any part or all of such benefits will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the amount otherwise payable or provided to you in accordance with this Agreement shall be reduced as necessary so that no part of such payment shall be subject to the Excise Tax. g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not be governed by any duty to mitigate your damages by seeking further employment nor offset by any compensation which you may receive from future employment. h) Interest on Delayed Payments. If payment or provision of any benefit due to you under this Agreement is not timely made, you shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time the Sale of the Business relating to your employment occurs, such interest to accrue from the date such benefit is due through the date of payment or provision thereof. i) Adjudication. If a dispute or controversy arises under or in connection with this Agreement, you shall be entitled to an adjudication in an appropriate court of the Commonwealth of Virginia, or in any other court of competent jurisdiction. Alternatively, you, at your option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. j) Expenses relating to the Company's Failure to Perform. If any contest or dispute shall arise under this Agreement involving the failure or refusal of the Company to perform fully in accordance with the terms hereof other than in connection with a good faith determination of the existence of Cause, the Company shall reimburse you, on a 5 current basis, for all legal fees and expenses, if any, incurred by you in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to your making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. k) Other Expenses. If any claim, action or proceeding (including without limitation a claim, action or proceeding by you against the Company) occurs with respect to this Agreement other than one described in section 8.j) above, the Company shall pay or reimburse you for all costs and expenses, including without limitation court costs and attorney's fees, incurred by you as a result thereof, provided that if the claim, action or proceeding is by you against the Company, you are successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. l) Successors. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor which employs you in connection with a Sale of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if you had remained employed by the Company. As used in this Agreement, the "Company" shall mean Eskimo Pie Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. m) Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable hereunder if you had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, your estate. n) Termination. If no Sale of the Company occurs prior to January 1, 2001, this Agreement shall then terminate. Eskimo Pie Corporation By /s/ David B. Kewer -------------------------------------- David B. Kewer President and Chief Executive Officer I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE AGREEMENT AND AGREE TO ITS TERMS. 6 Agreed and Accepted: /s/ William J. Weiskopf October 25, 1999 - -------------------------------------------- -------------------- (Name) (Date) 7 EX-10 5 EX10_3 Exhibit 10.3 Eskimo Pie Corporation Executive Retention Bonus and Severance Agreement Eskimo Pie Corporation (the "Company") has adopted an Executive Retention Bonus and Severance Program (the "Executive Retention Bonus and Severance Program") designed to encourage executives to remain focused on their job responsibilities and to continue employment with the Company or a subsidiary in light of a possible "Sale of the Company" (as that term is defined below) relating to your employment. In accordance with established criteria for the Executive Retention Bonus and Severance Program, you have been selected as a participant in lieu of participation in the Company's general retention and severance program contained in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation Welfare Benefit Plan (the Company's "welfare plan"). 1. Executive Retention Bonus. If you are eligible in accordance with -------------------------- the criteria which follow, you will receive an Executive Retention Bonus consisting of two installments - one for $31,250 (the "First Installment") and one for $93,750 (the "Second Installment"), each subject to normal tax and other applicable withholding and deductions. In order to receive the First Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the First Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the First Installment on or about January 15, 2000 (but in no event later than the date the Second Installment of the Executive Retention Bonus is due) in a lump sum payment. In order to receive the Second Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the Second Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the Second Installment within five business days after the Sale of the Company relating to your employment in a lump sum payment. If for any reason no Sale of the Company relating to your employment occurs before January 1, 2001, you will not receive the Second Installment of the Executive Retention Bonus. 2. Severance Benefits. If you cease to be employed by the Company at ------------------- or within one year after the Sale of the Business relating to your employment under the applicable additional eligibility criteria described below for severance benefits for any reason (including without limitation your voluntary cessation of employment) other than Cause (as defined below) or death, you will also be entitled to severance benefits in the form of extended medical and dental insurance coverage under the Company's welfare plan for you, your spouse and your eligible dependents for one year with the Company paying the entire cost of coverage for such extended coverage period. This extended medical and dental coverage will not run concurrently with the COBRA coverage period under the Company's welfare plan, and the applicable COBRA coverage period under the Company's welfare plan will be available to you and your qualifying beneficiaries after the end of this extended medical and dental coverage period. 3. Retention Period. The Retention Period began on October 7, 1999. ----------------- It ends for the First Installment of the Executive Retention Bonus on December 31, 1999 or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). It ends for the Second Installment of the Executive Retention Bonus on the Sale of the Company relating to your employment or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). For purposes hereof, you will automatically be considered involuntarily terminated by the Company for reasons other than death, permanent disability or Cause if you voluntarily terminate for Good Reason (as defined below) 4. Sale of the Company. For purposes of this Agreement, the term "Sale -------------------- of the Company" means any of the following occurring before January 1, 2001: a) a change in the ownership of the Company resulting in the possession by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the outstanding stock of the Company (whether by sale or issuance of stock, reorganization, merger, consolidation or otherwise) in connection with a transaction contemplated by the Board of Directors of the Company (the "Board") in connection with the Board's publicly announced intention to sell the Company or its assets, including the assets of its subsidiaries (the "Company Sale Announcement"); b) if you are employed by a subsidiary or a division of the Company, the sale of the stock of , or substantially all of the assets of, that subsidiary or that division of the Company; c) if you are employed in connection with Company-wide matters, substantially all of your duties and responsibilities as of October 7, 1999 are effectively eliminated by reason of a sale or sales of the assets or divisions of the Company or of its subsidiaries; or d) if you are employed in connection with any other operations of the Company or any subsidiary (including corporate headquarters operations) which is the subject of or related to any other sale of assets determined by the Company to result in a cessation of such operations in connection with the Company Sale Announcement, the sale of such assets. 5. Cause. For purposes of this Agreement, "Cause" means: ------ a) dishonesty, b) conviction of a felony, c) the willful unauthorized disclosure of confidential information of the Company or any of its subsidiaries or affiliates, or d) the willful and continued failure to substantially perform your duties with the Company or any of its subsidiaries or affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board, the Compensation Committee or its delegate which specifically identifies the manner in which you have not substantially performed your duties. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or any committee of the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. 6. Good Reason. For purposes of this Agreement, "Good Reason" shall ------------ mean the occurrence of any of the following without Cause: 2 a) the assignment to you of any duties which are inconsistent with the position (including status, offices, titles, and reporting requirements) or authority in the Company that you held immediately on October 7, 1999, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately on October 7, 1999, provided that any promotion or such change or alteration in your duties, authority, responsibilities or conditions of employment which is either accepted or not rejected in writing delivered to the Board of Directors of the Company within 10 days of such promotion, change or alteration shall be deemed to have been held or in effect immediately on October 7, 1999; b) a reduction by the Company in your annual base salary as in effect on October 7, 1999 or as the same may be increased from time to time; c) if you are principally employed at the Company's principal executive offices, the relocation of the Company's principal executive offices to a location outside the Richmond Metropolitan Area or the Company's requiring you to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; d) except in the event of reasonable administrative delay, the failure by the Company to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; e) the failure by the Company to continue in effect any compensation plan in which you participated on October 7, 1999 that is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as it existed on October 7, 1999; f) the failure by the Company to continue to provide you with benefits having an aggregate value of at least 75% of the aggregate value of the benefits enjoyed by you under any of the Company's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which you were participating on October 7, 1999, the taking of any action by the Company which would directly or indirectly reduce by more than 25% the aggregate value of such benefits or deprive you of any material fringe benefit enjoyed by you on October 7, 1999, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on October 7, 1999; or g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in section 8.1) captioned "Successors" below. 7. Additional Eligibility Criteria for Benefits. Eligibility for --------------------------------------------- either installment of the Executive Retention Bonus and for severance benefits is also conditioned on the following additional rules, as applicable to the particular benefit: 3 a) Voluntary Resignation. You will not receive an Executive Retention Bonus installment if you voluntarily resign your employment prior to the last day of the applicable Retention Period other than for Good Reason. b) Death, Disability or Involuntary Termination for Cause. You will not receive an Executive Retention Bonus installment if you die, become permanently disabled or are involuntarily terminated for Cause by the Company during the applicable Retention Period. c) No Other Employment. You will not be eligible for an Executive Retention Bonus installment or severance benefits under this Agreement if you engage in any activity during the applicable Retention Period or, in the case of severance benefits, prior to the Sale of the Company relating to your employment, which is inconsistent with the satisfactory performance of your duties including, but not limited to, engaging in other full-time or substantially full-time employment, whether as an employee, consultant or in any other capacity, whether or not you are compensated for such other employment, or engaging in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by an authorized representative of the Company. d) Confidentiality. You agree to maintain the utmost confidentiality of the existence and the terms of this Agreement and all documentation or records relating to this Agreement and the Executive Retention Bonus and Severance Program and not to disclose these matters to any person or entity without the prior written consent of the Company unless required otherwise by law or court order. You will not be eligible for the Executive Retention Bonus or severance benefits under this Agreement if you violate this confidentially requirement. e) Resignation as Director and/or Officer. You will not be eligible for severance benefits under this Agreement unless, promptly after your cessation of employment with the Company and upon receiving a written request to do so, you resign as a director andor officer of the Company (including of each subsidiary and affiliate of the Company) for which you are then serving as a director andor officer. f) Waiver of Other Retention, Termination and Severance Benefits and Participant in General Retention Bonus Program. Eligibility to receive the Executive Retention Bonus installments and severance benefits under this Agreement is contingent upon your agreeing to waive your rights under and terminate your participation in any and all other retention, termination and severance programs of the Company and of each subsidiary and affiliate of the Company (whether by individual agreement or otherwise) now or subsequently existing during the period this Agreement is in effect (including without limitation any executive or other severance agreement now in force and the Company's general retention bonus and severance program for rank and file employees contained in the 1999 Company Sale Severance Program), which you may do by signing, dating and returning to the Company one copy of this Agreement g) Acceptance of Agreement. Eligibility to receive the Executive Retention Bonus and severance benefits under this Agreement is contingent upon your acceptance of the terms of this Agreement by signing, dating and returning to the Company one copy of this Agreement no later than October 25, 1999. 8. Other Terms and Conditions. The following additional terms and --------------------------- conditions apply for purposes of this Agreement: 4 a) No Contract of Employment. This Agreement is not intended to, and does not, create a contract of employment for any definite period of time between you and the Company. b) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. You may at any time or from time to time waive any or all of the benefits provided for herein which have not been received by you at the time of such waiver. In addition, prior to the last day of the calendar year in which your cessation of employment occurs, you may waive any or all rights and benefits provided for herein which have been received by you; provided that you repay to the Company the amount of the benefits received (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). Any waiver of benefits pursuant to this paragraph shall be irrevocable. c) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. d) Modification. Any modifications to this Agreement must be approved in writing by an authorized representative of the Company. No reduction in your rights under this Agreement may be made without your written consent. e) Governing law. This Agreement shall be construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia. f) Excise Tax. If you become entitled to benefits under this Agreement and if any part or all of such benefits will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the amount otherwise payable or provided to you in accordance with this Agreement shall be reduced as necessary so that no part of such payment shall be subject to the Excise Tax. g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not be governed by any duty to mitigate your damages by seeking further employment nor offset by any compensation which you may receive from future employment. h) Interest on Delayed Payments. If payment or provision of any benefit due to you under this Agreement is not timely made, you shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time the Sale of the Business relating to your employment occurs, such interest to accrue from the date such benefit is due through the date of payment or provision thereof. i) Adjudication. If a dispute or controversy arises under or in connection with this Agreement, you shall be entitled to an adjudication in an appropriate court of the Commonwealth of Virginia, or in any other court of competent jurisdiction. Alternatively, you, at your option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. j) Expenses relating to the Company's Failure to Perform. If any contest or dispute shall arise under this Agreement involving the failure or refusal of the Company to perform fully in accordance with the terms hereof other than in connection with a good faith determination of the existence of Cause, the Company shall reimburse you, on a 5 current basis, for all legal fees and expenses, if any, incurred by you in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to your making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. k) Other Expenses. If any claim, action or proceeding (including without limitation a claim, action or proceeding by you against the Company) occurs with respect to this Agreement other than one described in section 8.j) above, the Company shall pay or reimburse you for all costs and expenses, including without limitation court costs and attorney's fees, incurred by you as a result thereof, provided that if the claim, action or proceeding is by you against the Company, you are successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. l) Successors. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor which employs you in connection with a Sale of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if you had remained employed by the Company. As used in this Agreement, the "Company" shall mean Eskimo Pie Corporation as hereinbefore defined and any successor to its business andor assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. m) Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable hereunder if you had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, your estate. n) Termination. If no Sale of the Company occurs prior to January 1, 2001, this Agreement shall then terminate. Eskimo Pie Corporation By /s/ David B. Kewer ------------------------------- David B. Kewer President and Chief Executive Officer I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE AGREEMENT AND AGREE TO ITS TERMS. 6 Agreed and Accepted: /s/ Kimberly P. Ferryman October 25, 1999 - -------------------------------- ---------------------- (Name) (Date) 7 EX-10 6 EX10_4 Exhibit 10.4 Eskimo Pie Corporation Executive Retention Bonus and Severance Agreement Eskimo Pie Corporation (the "Company") has adopted an Executive Retention Bonus and Severance Program (the "Executive Retention Bonus and Severance Program") designed to encourage executives to remain focused on their job responsibilities and to continue employment with the Company or a subsidiary in light of a possible "Sale of the Company" (as that term is defined below) relating to your employment. In accordance with established criteria for the Executive Retention Bonus and Severance Program, you have been selected as a participant in lieu of participation in the Company's general retention and severance program contained in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation Welfare Benefit Plan (the Company's "welfare plan"). 1. Executive Retention Bonus. If you are eligible in accordance with ------------------------- the criteria which follow, you will receive an Executive Retention Bonus consisting of two installments - one for $56,250 (the "First Installment") and one for $168,750 (the "Second Installment"), each subject to normal tax and other applicable withholding and deductions. In order to receive the First Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the First Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the First Installment on or about January 15, 2000 (but in no event later than the date the Second Installment of the Executive Retention Bonus is due) in a lump sum payment. In order to receive the Second Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the Second Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the Second Installment within five business days after the Sale of the Company relating to your employment in a lump sum payment. If for any reason no Sale of the Company relating to your employment occurs before January 1, 2001, you will not receive the Second Installment of the Executive Retention Bonus. 2. Severance Benefits. If you cease to be employed by the Company at or ------------------- within one year after the Sale of the Business relating to your employment under the applicable additional eligibility criteria described below for severance benefits for any reason (including without limitation your voluntary cessation of employment) other than Cause (as defined below) or death, you will also be entitled to severance benefits in the form of extended medical and dental insurance coverage under the Company's welfare plan for you, your spouse and your eligible dependents for one year with the Company paying the entire cost of coverage for such extended coverage period. This extended medical and dental coverage will not run concurrently with the COBRA coverage period under the Company's welfare plan, and the applicable COBRA coverage period under the Company's welfare plan will be available to you and your qualifying beneficiaries after the end of this extended medical and dental coverage period. 3. Retention Period. The Retention Period began on October 7, 1999. It ---------------- ends for the First Installment of the Executive Retention Bonus on December 31, 1999 or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). It ends for the Second Installment of the Executive Retention Bonus on the Sale of the Company relating to your employment or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). For purposes hereof, you will automatically be considered involuntarily terminated by the Company for reasons other than death, permanent disability or Cause if you voluntarily terminate for Good Reason (as defined below) 4. Sale of the Company. For purposes of this Agreement, the term ------------------- "Sale of the Company" means any of the following occurring before January 1, 2001: a) a change in the ownership of the Company resulting in the possession by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the outstanding stock of the Company (whether by sale or issuance of stock, reorganization, merger, consolidation or otherwise) in connection with a transaction contemplated by the Board of Directors of the Company (the "Board") in connection with the Board's publicly announced intention to sell the Company or its assets, including the assets of its subsidiaries (the "Company Sale Announcement"); b) if you are employed by a subsidiary or a division of the Company, the sale of the stock of, or substantially all of the assets of, that subsidiary or that division of the Company; c) if you are employed in connection with Company-wide matters, substantially all of your duties and responsibilities as of October 7, 1999 are effectively eliminated by reason of a sale or sales of the assets or divisions of the Company or of its subsidiaries; or d) if you are employed in connection with any other operations of the Company or any subsidiary (including corporate headquarters operations) which is the subject of or related to any other sale of assets determined by the Company to result in a cessation of such operations in connection with the Company Sale Announcement, the sale of such assets. 5. Cause. For purposes of this Agreement, "Cause" means: ----- a) dishonesty, b) conviction of a felony, c) the willful unauthorized disclosure of confidential information of the Company or any of its subsidiaries or affiliates, or d) the willful and continued failure to substantially perform your duties with the Company or any of its subsidiaries or affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board, the Compensation Committee or its delegate which specifically identifies the manner in which you have not substantially performed your duties. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or any committee of the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. 6. Good Reason. For purposes of this Agreement, "Good Reason" shall ----------- mean the occurrence of any of the following without Cause: 2 a) the assignment to you of any duties which are inconsistent with the position (including status, offices, titles, and reporting requirements) or authority in the Company that you held immediately on October 7, 1999, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately on October 7, 1999, provided that any promotion or such change or alteration in your duties, authority, responsibilities or conditions of employment which is either accepted or not rejected in writing delivered to the Board of Directors of the Company within 10 days of such promotion, change or alteration shall be deemed to have been held or in effect immediately on October 7, 1999; b) a reduction by the Company in your annual base salary as in effect on October 7, 1999 or as the same may be increased from time to time; c) if you are principally employed at the Company's principal executive offices, the relocation of the Company's principal executive offices to a location outside the Richmond Metropolitan Area or the Company's requiring you to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; d) except in the event of reasonable administrative delay, the failure by the Company to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; e) the failure by the Company to continue in effect any compensation plan in which you participated on October 7, 1999 that is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as it existed on October 7, 1999; f) the failure by the Company to continue to provide you with benefits having an aggregate value of at least 75% of the aggregate value of the benefits enjoyed by you under any of the Company's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which you were participating on October 7, 1999, the taking of any action by the Company which would directly or indirectly reduce by more than 25% the aggregate value of such benefits or deprive you of any material fringe benefit enjoyed by you on October 7, 1999, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on October 7, 1999; or g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in section 8.1) captioned "Successors" below. 7. Additional Eligibility Criteria for Benefits. Eligibility for -------------------------------------------- either installment of the Executive Retention Bonus and for severance benefits is also conditioned on the following additional rules, as applicable to the particular benefit: 3 a) Voluntary Resignation. You will not receive an Executive Retention Bonus installment if you voluntarily resign your employment prior to the last day of the applicable Retention Period other than for Good Reason. b) Death, Disability or Involuntary Termination for Cause. You will not receive an Executive Retention Bonus installment if you die, become permanently disabled or are involuntarily terminated for Cause by the Company during the applicable Retention Period. c) No Other Employment. You will not be eligible for an Executive Retention Bonus installment or severance benefits under this Agreement if you engage in any activity during the applicable Retention Period or, in the case of severance benefits, prior to the Sale of the Company relating to your employment, which is inconsistent with the satisfactory performance of your duties including, but not limited to, engaging in other full-time or substantially full-time employment, whether as an employee, consultant or in any other capacity, whether or not you are compensated for such other employment, or engaging in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by an authorized representative of the Company. d) Confidentiality. You agree to maintain the utmost confidentiality of the existence and the terms of this Agreement and all documentation or records relating to this Agreement and the Executive Retention Bonus and Severance Program and not to disclose these matters to any person or entity without the prior written consent of the Company unless required otherwise by law or court order. You will not be eligible for the Executive Retention Bonus or severance benefits under this Agreement if you violate this confidentially requirement. e) Resignation as Director and/or Officer. You will not be eligible for severance benefits under this Agreement unless, promptly after your cessation of employment with the Company and upon receiving a written request to do so, you resign as a director and/or officer of the Company (including of each subsidiary and affiliate of the Company) for which you are then serving as a director and/or officer. f) Waiver of Other Retention, Termination and Severance Benefits and Participant in General Retention Bonus Program. Eligibility to receive the Executive Retention Bonus installments and severance benefits under this Agreement is contingent upon your agreeing to waive your rights under and terminate your participation in any and all other retention, termination and severance programs of the Company and of each subsidiary and affiliate of the Company (whether by individual agreement or otherwise) now or subsequently existing during the period this Agreement is in effect (including without limitation any executive or other severance agreement now in force and the Company's general retention bonus and severance program for rank and file employees contained in the 1999 Company Sale Severance Program), which you may do by signing, dating and returning to the Company one copy of this Agreement g) Acceptance of Agreement. Eligibility to receive the Executive Retention Bonus and severance benefits under this Agreement is contingent upon your acceptance of the terms of this Agreement by signing, dating and returning to the Company one copy of this Agreement no later than October 25, 1999. 8. Other Terms and Conditions. The following additional terms and -------------------------- conditions apply for purposes of this Agreement: 4 a) No Contract of Employment. This Agreement is not intended to, and does not, create a contract of employment for any definite period of time between you and the Company. b) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. You may at any time or from time to time waive any or all of the benefits provided for herein which have not been received by you at the time of such waiver. In addition, prior to the last day of the calendar year in which your cessation of employment occurs, you may waive any or all rights and benefits provided for herein which have been received by you; provided that you repay to the Company the amount of the benefits received (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). Any waiver of benefits pursuant to this paragraph shall be irrevocable. c) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. d) Modification. Any modifications to this Agreement must be approved in writing by an authorized representative of the Company. No reduction in your rights under this Agreement may be made without your written consent. e) Governing law. This Agreement shall be construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia. f) Excise Tax. If you become entitled to benefits under this Agreement and if any part or all of such benefits will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the amount otherwise payable or provided to you in accordance with this Agreement shall be reduced as necessary so that no part of such payment shall be subject to the Excise Tax. g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not be governed by any duty to mitigate your damages by seeking further employment nor offset by any compensation which you may receive from future employment. h) Interest on Delayed Payments. If payment or provision of any benefit due to you under this Agreement is not timely made, you shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time the Sale of the Business relating to your employment occurs, such interest to accrue from the date such benefit is due through the date of payment or provision thereof. i) Adjudication. If a dispute or controversy arises under or in connection with this Agreement, you shall be entitled to an adjudication in an appropriate court of the Commonwealth of Virginia, or in any other court of competent jurisdiction. Alternatively, you, at your option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. j) Expenses relating to the Company's Failure to Perform. If any contest or dispute shall arise under this Agreement involving the failure or refusal of the Company to perform fully in accordance with the terms hereof other than in connection with a good faith determination of the existence of Cause, the Company shall reimburse you, on a 5 current basis, for all legal fees and expenses, if any, incurred by you in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to your making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. k) Other Expenses. If any claim, action or proceeding (including without limitation a claim, action or proceeding by you against the Company) occurs with respect to this Agreement other than one described in section 8.j) above, the Company shall pay or reimburse you for all costs and expenses, including without limitation court costs and attorney's fees, incurred by you as a result thereof, provided that if the claim, action or proceeding is by you against the Company, you are successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. l) Successors. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor which employs you in connection with a Sale of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if you had remained employed by the Company. As used in this Agreement, the "Company" shall mean Eskimo Pie Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. m) Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable hereunder if you had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, your estate. n) Termination. If no Sale of the Company occurs prior to January 1, 2001, this Agreement shall then terminate. Eskimo Pie Corporation By /s/ David B. Kewer ----------------------------------- David B. Kewer President and Chief Executive Officer I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE AGREEMENT AND AGREE TO ITS TERMS. 6 Agreed and Accepted: /s/ Craig L. Hettrich October 19, 1999 - ----------------------------------- -------------------- (Name) (Date) 7 EX-10 7 EX10_5 Exhibit 10.5 Eskimo Pie Corporation Executive Retention Bonus and Severance Agreement Eskimo Pie Corporation (the "Company") has adopted an Executive Retention Bonus and Severance Program (the "Executive Retention Bonus and Severance Program") designed to encourage executives to remain focused on their job responsibilities and to continue employment with the Company or a subsidiary in light of a possible "Sale of the Company" (as that term is defined below) relating to your employment. In accordance with established criteria for the Executive Retention Bonus and Severance Program, you have been selected as a participant in lieu of participation in the Company's general retention and severance program contained in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation Welfare Benefit Plan (the Company's "welfare plan"). 1. Executive Retention Bonus. If you are eligible in accordance with ------------------------- the criteria which follow, you will receive an Executive Retention Bonus consisting of two installments - one for $56,250 (the "First Installment") and one for $168,750 (the "Second Installment"), each subject to normal tax and other applicable withholding and deductions. In order to receive the First Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the First Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the First Installment on or about January 15, 2000 (but in no event later than the date the Second Installment of the Executive Retention Bonus is due) in a lump sum payment. In order to receive the Second Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the Second Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the Second Installment within five business days after the Sale of the Company relating to your employment in a lump sum payment. If for any reason no Sale of the Company relating to your employment occurs before January 1, 2001, you will not receive the Second Installment of the Executive Retention Bonus. 2. Severance Benefits. If you cease to be employed by the Company at ------------------ or within one year after the Sale of the Business relating to your employment under the applicable additional eligibility criteria described below for severance benefits for any reason (including without limitation your voluntary cessation of employment) other than Cause (as defined below) or death, you will also be entitled to severance benefits in the form of extended medical and dental insurance coverage under the Company's welfare plan for you, your spouse and your eligible dependents for one year with the Company paying the entire cost of coverage for such extended coverage period. This extended medical and dental coverage will not run concurrently with the COBRA coverage period under the Company's welfare plan, and the applicable COBRA coverage period under the Company's welfare plan will be available to you and your qualifying beneficiaries after the end of this extended medical and dental coverage period. 3. Retention Period. The Retention Period began on October 7, 1999. ---------------- It ends for the First Installment of the Executive Retention Bonus on December 31, 1999 or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). It ends for the Second Installment of the Executive Retention Bonus on the Sale of the Company relating to your employment or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). For purposes hereof, you will automatically be considered involuntarily terminated by the Company for reasons other than death, permanent disability or Cause if you voluntarily terminate for Good Reason (as defined below) 4. Sale of the Company. For purposes of this Agreement, the term "Sale ------------------- of the Company" means any of the following occurring before January 1, 2001: a) a change in the ownership of the Company resulting in the possession by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the outstanding stock of the Company (whether by sale or issuance of stock, reorganization, merger, consolidation or otherwise) in connection with a transaction contemplated by the Board of Directors of the Company (the "Board") in connection with the Board's publicly announced intention to sell the Company or its assets, including the assets of its subsidiaries (the "Company Sale Announcement"); b) if you are employed by a subsidiary or a division of the Company, the sale of the stock of, or substantially all of the assets of, that subsidiary or that division of the Company; c) if you are employed in connection with Company-wide matters, substantially all of your duties and responsibilities as of October 7, 1999 are effectively eliminated by reason of a sale or sales of the assets or divisions of the Company or of its subsidiaries; or d) if you are employed in connection with any other operations of the Company or any subsidiary (including corporate headquarters operations) which is the subject of or related to any other sale of assets determined by the Company to result in a cessation of such operations in connection with the Company Sale Announcement, the sale of such assets. 5. Cause. For purposes of this Agreement, "Cause" means: ----- a) dishonesty, b) conviction of a felony, c) the willful unauthorized disclosure of confidential information of the Company or any of its subsidiaries or affiliates, or d) the willful and continued failure to substantially perform your duties with the Company or any of its subsidiaries or affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board, the Compensation Committee or its delegate which specifically identifies the manner in which you have not substantially performed your duties. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or any committee of the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. 6. Good Reason. For purposes of this Agreement, "Good Reason" shall ----------- mean the occurrence of any of the following without Cause: 2 a) the assignment to you of any duties which are inconsistent with the position (including status, offices, titles, and reporting requirements) or authority in the Company that you held immediately on October 7, 1999, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately on October 7, 1999, provided that any promotion or such change or alteration in your duties, authority, responsibilities or conditions of employment which is either accepted or not rejected in writing delivered to the Board of Directors of the Company within 10 days of such promotion, change or alteration shall be deemed to have been held or in effect immediately on October 7, 1999; b) a reduction by the Company in your annual base salary as in effect on October 7, 1999 or as the same may be increased from time to time; c) if you are principally employed at the Company's principal executive offices, the relocation of the Company's principal executive offices to a location outside the Richmond Metropolitan Area or the Company's requiring you to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; d) except in the event of reasonable administrative delay, the failure by the Company to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; e) the failure by the Company to continue in effect any compensation plan in which you participated on October 7, 1999 that is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as it existed on October 7, 1999; f) the failure by the Company to continue to provide you with benefits having an aggregate value of at least 75% of the aggregate value of the benefits enjoyed by you under any of the Company's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which you were participating on October 7, 1999, the taking of any action by the Company which would directly or indirectly reduce by more than 25% the aggregate value of such benefits or deprive you of any material fringe benefit enjoyed by you on October 7, 1999, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on October 7, 1999; or g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in section 8.1) captioned "Successors" below. 7. Additional Eligibility Criteria for Benefits. Eligibility for -------------------------------------------- either installment of the Executive Retention Bonus and for severance benefits is also conditioned on the following additional rules, as applicable to the particular benefit: 3 a) Voluntary Resignation. You will not receive an Executive Retention Bonus installment if you voluntarily resign your employment prior to the last day of the applicable Retention Period other than for Good Reason. b) Death, Disability or Involuntary Termination for Cause. You will not receive an Executive Retention Bonus installment if you die, become permanently disabled or are involuntarily terminated for Cause by the Company during the applicable Retention Period. c) No Other Employment. You will not be eligible for an Executive Retention Bonus installment or severance benefits under this Agreement if you engage in any activity during the applicable Retention Period or, in the case of severance benefits, prior to the Sale of the Company relating to your employment, which is inconsistent with the satisfactory performance of your duties including, but not limited to, engaging in other full-time or substantially full-time employment, whether as an employee, consultant or in any other capacity, whether or not you are compensated for such other employment, or engaging in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by an authorized representative of the Company. d) Confidentiality. You agree to maintain the utmost confidentiality of the existence and the terms of this Agreement and all documentation or records relating to this Agreement and the Executive Retention Bonus and Severance Program and not to disclose these matters to any person or entity without the prior written consent of the Company unless required otherwise by law or court order. You will not be eligible for the Executive Retention Bonus or severance benefits under this Agreement if you violate this confidentially requirement. e) Resignation as Director and/or Officer. You will not be eligible for severance benefits under this Agreement unless, promptly after your cessation of employment with the Company and upon receiving a written request to do so, you resign as a director and/or officer of the Company (including of each subsidiary and affiliate of the Company) for which you are then serving as a director and/or officer. f) Waiver of Other Retention, Termination and Severance Benefits and Participant in General Retention Bonus Program. Eligibility to receive the Executive Retention Bonus installments and severance benefits under this Agreement is contingent upon your agreeing to waive your rights under and terminate your participation in any and all other retention, termination and severance programs of the Company and of each subsidiary and affiliate of the Company (whether by individual agreement or otherwise) now or subsequently existing during the period this Agreement is in effect (including without limitation any executive or other severance agreement now in force and the Company's general retention bonus and severance program for rank and file employees contained in the 1999 Company Sale Severance Program), which you may do by signing, dating and returning to the Company one copy of this Agreement g) Acceptance of Agreement. Eligibility to receive the Executive Retention Bonus and severance benefits under this Agreement is contingent upon your acceptance of the terms of this Agreement by signing, dating and returning to the Company one copy of this Agreement no later than October 25, 1999. 8. Other Terms and Conditions. The following additional terms and -------------------------- conditions apply for purposes of this Agreement: 4 a) No Contract of Employment. This Agreement is not intended to, and does not, create a contract of employment for any definite period of time between you and the Company. b) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. You may at any time or from time to time waive any or all of the benefits provided for herein which have not been received by you at the time of such waiver. In addition, prior to the last day of the calendar year in which your cessation of employment occurs, you may waive any or all rights and benefits provided for herein which have been received by you; provided that you repay to the Company the amount of the benefits received (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). Any waiver of benefits pursuant to this paragraph shall be irrevocable. c) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. d) Modification. Any modifications to this Agreement must be approved in writing by an authorized representative of the Company. No reduction in your rights under this Agreement may be made without your written consent. e) Governing law. This Agreement shall be construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia. f) Excise Tax. If you become entitled to benefits under this Agreement and if any part or all of such benefits will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the amount otherwise payable or provided to you in accordance with this Agreement shall be reduced as necessary so that no part of such payment shall be subject to the Excise Tax. g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not be governed by any duty to mitigate your damages by seeking further employment nor offset by any compensation which you may receive from future employment. h) Interest on Delayed Payments. If payment or provision of any benefit due to you under this Agreement is not timely made, you shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time the Sale of the Business relating to your employment occurs, such interest to accrue from the date such benefit is due through the date of payment or provision thereof. i) Adjudication. If a dispute or controversy arises under or in connection with this Agreement, you shall be entitled to an adjudication in an appropriate court of the Commonwealth of Virginia, or in any other court of competent jurisdiction. Alternatively, you, at your option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. j) Expenses relating to the Company's Failure to Perform. If any contest or dispute shall arise under this Agreement involving the failure or refusal of the Company to perform fully in accordance with the terms hereof other than in connection with a good faith determination of the existence of Cause, the Company shall reimburse you, on a 5 current basis, for all legal fees and expenses, if any, incurred by you in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to your making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. k) Other Expenses. If any claim, action or proceeding (including without limitation a claim, action or proceeding by you against the Company) occurs with respect to this Agreement other than one described in section 8.j) above, the Company shall pay or reimburse you for all costs and expenses, including without limitation court costs and attorney's fees, incurred by you as a result thereof, provided that if the claim, action or proceeding is by you against the Company, you are successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. l) Successors. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor which employs you in connection with a Sale of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if you had remained employed by the Company. As used in this Agreement, the "Company" shall mean Eskimo Pie Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. m) Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable hereunder if you had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, your estate. n) Termination. If no Sale of the Company occurs prior to January 1, 2001, this Agreement shall then terminate. Eskimo Pie Corporation By /s/ David B. Kewer ---------------------------- David B. Kewer President and Chief Executive Officer I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE AGREEMENT AND AGREE TO ITS TERMS. 6 Agreed and Accepted: /s/ V. Stephen Kangisser October 25, 1999 ---------------------------------- --------------------- (Name) (Date) 7 EX-10 8 EX10_6 Exhibit 10.6 Eskimo Pie Corporation Executive Retention Bonus and Severance Agreement Eskimo Pie Corporation (the "Company") has adopted an Executive Retention Bonus and Severance Program (the "Executive Retention Bonus and Severance Program") designed to encourage executives to remain focused on their job responsibilities and to continue employment with the Company or a subsidiary in light of a possible "Sale of the Company" (as that term is defined below) relating to your employment. In accordance with established criteria for the Executive Retention Bonus and Severance Program, you have been selected as a participant in lieu of participation in the Company's general retention and severance program contained in the 1999 Company Sale Severance Program under the Eskimo Pie Corporation Welfare Benefit Plan (the Company's "welfare plan"). 1. Executive Retention Bonus. If you are eligible in accordance with ------------------------- the criteria which follow, you will receive an Executive Retention Bonus consisting of two installments - one for $150,000 (the "First Installment") and one for $450,000 (the "Second Installment"), each subject to normal tax and other applicable withholding and deductions. In order to receive the First Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the First Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the First Installment on or about January 15, 2000 (but in no event later than the date the Second Installment of the Executive Retention Bonus is due) in a lump sum payment. In order to receive the Second Installment of the Executive Retention Bonus, you must remain employed in your current position, or in one into which you are requested by the Company to transfer, during the Retention Period for the Second Installment. In that event, if you satisfy the applicable additional eligibility criteria described below, you will receive the Second Installment within five business days after the Sale of the Company relating to your employment in a lump sum payment. If for any reason no Sale of the Company relating to your employment occurs before January 1, 2001, you will not receive the Second Installment of the Executive Retention Bonus. 2. Severance Benefits. If you cease to be employed by the Company at ------------------ or within one year after the Sale of the Business relating to your employment under the applicable additional eligibility criteria described below for severance benefits for any reason (including without limitation your voluntary cessation of employment) other than Cause (as defined below) or death, you will also be entitled to severance benefits in the form of extended medical and dental insurance coverage under the Company's welfare plan for you, your spouse and your eligible dependents for one year with the Company paying the entire cost of coverage for such extended coverage period. This extended medical and dental coverage will not run concurrently with the COBRA coverage period under the Company's welfare plan, and the applicable COBRA coverage period under the Company's welfare plan will be available to you and your qualifying beneficiaries after the end of this extended medical and dental coverage period. 3. Retention Period. The Retention Period began on October 7, 1999. ---------------- It ends for the First Installment of the Executive Retention Bonus on December 31, 1999 or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). It ends for the Second Installment of the Executive Retention Bonus on the 30th day after the Sale of the Company relating to your employment or your earlier involuntary termination by the Company for reasons other than death, permanent disability or Cause (as defined below). For purposes hereof, you will automatically be considered involuntarily terminated by the Company for reasons other than death, permanent disability or Cause if you voluntarily terminate for Good Reason (as defined below) 4. Sale of the Company. For purposes of this Agreement, the term "Sale of ------------------- the Company" means any of the following occurring before January 1, 2001: a) a change in the ownership of the Company resulting in the possession by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the outstanding stock of the Company (whether by sale or issuance of stock, reorganization, merger, consolidation or otherwise) in connection with a transaction contemplated by the Board of Directors of the Company (the "Board") in connection with the Board's publicly announced intention to sell the Company or its assets, including the assets of its subsidiaries (the "Company Sale Announcement"); b) if you are employed by a subsidiary or a division of the Company, the sale of the stock of, or substantially all of the assets of, that subsidiary or that division of the Company; c) if you are employed in connection with Company-wide matters, substantially all of your duties and responsibilities as of October 7, 1999 are effectively eliminated by reason of a sale or sales of the assets or divisions of the Company or of its subsidiaries; or d) if you are employed in connection with any other operations of the Company or any subsidiary (including corporate headquarters operations) which is the subject of or related to any other sale of assets determined by the Company to result in a cessation of such operations in connection with the Company Sale Announcement, the sale of such assets. 5. Cause. For purposes of this Agreement, "Cause" means: ----- a) dishonesty, b) conviction of a felony, c) the willful unauthorized disclosure of confidential information of the Company or any of its subsidiaries or affiliates, or d) the willful and continued failure to substantially perform your duties with the Company or any of its subsidiaries or affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to you by the Board, the Compensation Committee or its delegate which specifically identifies the manner in which you have not substantially performed your duties. For purposes of this provision, no act or failure to act, on your part, shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or any committee of the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by you in good faith and in the best interests of the Company. 6. Good Reason. For purposes of this Agreement, "Good Reason" shall mean ----------- the occurrence of any of the following without Cause: 2 a) the assignment to you of any duties which are inconsistent with the position (including status, offices, titles, and reporting requirements) or authority in the Company that you held immediately on October 7, 1999, or a significant adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately on October 7, 1999, provided that any promotion or such change or alteration in your duties, authority, responsibilities or conditions of employment which is either accepted or not rejected in writing delivered to the Board of Directors of the Company within 10 days of such promotion, change or alteration shall be deemed to have been held or in effect immediately on October 7, 1999; b) a reduction by the Company in your annual base salary as in effect on October 7, 1999 or as the same may be increased from time to time; c) if you are principally employed at the Company's principal executive offices, the relocation of the Company's principal executive offices to a location outside the Richmond Metropolitan Area or the Company's requiring you to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations; d) except in the event of reasonable administrative delay, the failure by the Company to pay to you any portion of your current compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; e) the failure by the Company to continue in effect any compensation plan in which you participated on October 7, 1999 that is material to your total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as it existed on October 7, 1999; f) the failure by the Company to continue to provide you with benefits having an aggregate value of at least 75% of the aggregate value of the benefits enjoyed by you under any of the Company's life insurance, medical, health and accident, disability plans, or other welfare and defined benefit plans (qualified and non-qualified) in which you were participating on October 7, 1999, the taking of any action by the Company which would directly or indirectly reduce by more than 25% the aggregate value of such benefits or deprive you of any material fringe benefit enjoyed by you on October 7, 1999, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on October 7, 1999; or g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in section 8.1) captioned "Successors" below. 7. Additional Eligibility Criteria for Benefits. Eligibility for either -------------------------------------------- installment of the Executive Retention Bonus and for severance benefits is also conditioned on the following additional rules, as applicable to the particular benefit: 3 a) Voluntary Resignation. You will not receive an Executive Retention Bonus installment if you voluntarily resign your employment prior to the last day of the applicable Retention Period other than for Good Reason. b) Death, Disability or Involuntary Termination for Cause. You will not receive an Executive Retention Bonus installment if you die, become permanently disabled or are involuntarily terminated for Cause by the Company during the applicable Retention Period. c) No Other Employment. You will not be eligible for an Executive Retention Bonus installment or severance benefits under this Agreement if you engage in any activity during the applicable Retention Period or, in the case of severance benefits, prior to the Sale of the Company relating to your employment, which is inconsistent with the satisfactory performance of your duties including, but not limited to, engaging in other full-time or substantially full-time employment, whether as an employee, consultant or in any other capacity, whether or not you are compensated for such other employment, or engaging in any other business activity, whether or not such business activity is pursued for gain or profit, except as approved in advance in writing by an authorized representative of the Company. d) Confidentiality. You agree to maintain the utmost confidentiality of the existence and the terms of this Agreement and all documentation or records relating to this Agreement and the Executive Retention Bonus and Severance Program and not to disclose these matters to any person or entity without the prior written consent of the Company unless required otherwise by law or court order. You will not be eligible for the Executive Retention Bonus or severance benefits under this Agreement if you violate this confidentially requirement. e) Resignation as Director and/or Officer. You will not be eligible for severance benefits under this Agreement unless, promptly after your cessation of employment with the Company and upon receiving a written request to do so, you resign as a director and/or officer of the Company (including of each subsidiary and affiliate of the Company) for which you are then serving as a director and/or officer. f) Waiver of Other Retention, Termination and Severance Benefits and Participant in General Retention Bonus Program. Eligibility to receive the Executive Retention Bonus installments and severance benefits under this Agreement is contingent upon your agreeing to waive your rights under and terminate your participation in any and all other retention, termination and severance programs of the Company and of each subsidiary and affiliate of the Company (whether by individual agreement or otherwise) now or subsequently existing during the period this Agreement is in effect (including without limitation any executive or other severance agreement now in force and the Company's general retention bonus and severance program for rank and file employees contained in the 1999 Company Sale Severance Program), which you may do by signing, dating and returning to the Company one copy of this Agreement g) Acceptance of Agreement. Eligibility to receive the Executive Retention Bonus and severance benefits under this Agreement is contingent upon your acceptance of the terms of this Agreement by signing, dating and returning to the Company one copy of this Agreement no later than October 25, 1999. 8. Other Terms and Conditions. The following additional terms and -------------------------- conditions apply for purposes of this Agreement: 4 a) No Contract of Employment. This Agreement is not intended to, and does not, create a contract of employment for any definite period of time between you and the Company. b) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. You may at any time or from time to time waive any or all of the benefits provided for herein which have not been received by you at the time of such waiver. In addition, prior to the last day of the calendar year in which your cessation of employment occurs, you may waive any or all rights and benefits provided for herein which have been received by you; provided that you repay to the Company the amount of the benefits received (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). Any waiver of benefits pursuant to this paragraph shall be irrevocable. c) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by law. d) Modification. Any modifications to this Agreement must be approved in writing by an authorized representative of the Company. No reduction in your rights under this Agreement may be made without your written consent. e) Governing law. This Agreement shall be construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia. f) Excise Tax. If you become entitled to benefits under this Agreement and if any part or all of such benefits will be subject to the tax ("Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then the amount otherwise payable or provided to you in accordance with this Agreement shall be reduced as necessary so that no part of such payment shall be subject to the Excise Tax. g) No Duty to Mitigate. Your entitlement to benefits hereunder shall not be governed by any duty to mitigate your damages by seeking further employment nor offset by any compensation which you may receive from future employment. h) Interest on Delayed Payments. If payment or provision of any benefit due to you under this Agreement is not timely made, you shall be entitled to interest on the amount not timely paid at 120% of the applicable federal rate, compounded semi-annually, under Section 1274(d) of the Code determined at the time the Sale of the Business relating to your employment occurs, such interest to accrue from the date such benefit is due through the date of payment or provision thereof. i) Adjudication. If a dispute or controversy arises under or in connection with this Agreement, you shall be entitled to an adjudication in an appropriate court of the Commonwealth of Virginia, or in any other court of competent jurisdiction. Alternatively, you, at your option, may seek an award in arbitration to be conducted by a single arbitrator under the Commercial Arbitration Rules of the American Arbitration Association. j) Expenses relating to the Company's Failure to Perform. If any contest or dispute shall arise under this Agreement involving the failure or refusal of the Company to perform fully in accordance with the terms hereof other than in connection with a good faith determination of the existence of Cause, the Company shall reimburse you, on a 5 current basis, for all legal fees and expenses, if any, incurred by you in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. Such reimbursement shall include the cost of attorney's fees in reviewing this Agreement in connection with such contest or dispute and in negotiating or attempting to negotiate a settlement of such contest or dispute prior to your making such claim or commencing any action or proceeding and in settling any matter relating to this Agreement. k) Other Expenses. If any claim, action or proceeding (including without limitation a claim, action or proceeding by you against the Company) occurs with respect to this Agreement other than one described in section 8.j) above, the Company shall pay or reimburse you for all costs and expenses, including without limitation court costs and attorney's fees, incurred by you as a result thereof, provided that if the claim, action or proceeding is by you against the Company, you are successful in whole or in part on the merits or otherwise in such claim, action or proceeding. Such reimbursement shall include interest in an amount equal to the prime rate of BankAmerica from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives your statement for such fees and expenses through the date of payment thereof. l) Successors. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor which employs you in connection with a Sale of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if you had remained employed by the Company. As used in this Agreement, the "Company" shall mean Eskimo Pie Corporation as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. m) Binding Agreement. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable hereunder if you had continued to live, any such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, your estate. n) Termination. If no Sale of the Company occurs prior to January 1, 2001, this Agreement shall then terminate. Eskimo Pie Corporation By /s/ Arnold H. Dreyfuss ----------------------- Arnold H. Dreyfuss Chairman of the Board I HAVE READ AND UNDERSTAND THIS EXECUTIVE RETENTION BONUS AND SEVERANCE AGREEMENT AND AGREE TO ITS TERMS. 6 Agreed and Accepted: /s/ David B. Kewer October 21, 1999 - ---------------------------------- ---------------- David B. Kewer (Date) 7 EX-10 9 EX10_8 Exhibit 10.8 ESKIMO PIE CORPORATION 1996 INCENTIVE STOCK PLAN (As Amended effective December 16, 1999) ARTICLE I Establishment, Purpose, and Duration 1.1 Establishment of the Plan. Eskimo Pie Corporation, hereby establishes ------------------------- an incentive compensation plan to be known as the "1996 Incentive Stock Plan", as set forth in this document. Unless otherwise defined herein, all capitalized terms shall have the meanings set forth in Section 2.1 herein. The Plan permits the grant of Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights and Stock Awards. The Plan was adopted by the Board of Directors on, and shall become effective, as of February 23, 1996 (the "Effective Date"), subject to the approval by vote of shareholders of the Company in accordance with applicable laws. Awards may be granted prior to shareholder approval of the Plan, but each such Award shall be subject to the approval of the Plan by the shareholders. 1.1 Purpose of the Plan. The purpose of the Plan is to promote the ------------------- success of the Company and its Subsidiaries by providing incentives to Key Employees that will promote the identification of their personal interest with the long-term financial success of the Company and with growth in shareholder value. The Plan is designed to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Key Employees upon whose judgment, interest, and special effort the successful conduct of its operation is largely dependent. The Plan is also intended to promote a greater identity of interest between Non-Employee Directors and the Company's shareholders by increasing the Non-Employee Director's proprietary interest in the Company through receipt of Awards in lieu of cash payments for a portion of each Non-Employee Director's fees. 1.3 Duration of the Plan. The Plan shall commence on the Effective Date, -------------------- as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 13 herein, until February 23, 2006 (the "Term"), at which time it shall terminate except with respect to Awards made prior to, and outstanding on, that date which shall remain valid in accordance with their terms. ARTICLE II. Definitions 2.1 Definitions. Except as otherwise defined in the Plan, the following ----------- terms shall have the meanings set forth below: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) "Agreement" means a written agreement implementing the grant of each Award signed by an authorized officer of the Company and by the Participant. (c) "Automatic Grant Date" means the first business day after the annual meeting of stockholders of the Company of each year during the Term. (d) "Award" means, individually or collectively, a grant under this Plan of Automatic Options, Automatic Restricted Stock Awards, Incentive Stock Options, Non-qualified Stock Options, Stock Appreciation Rights, Stock Awards and Stock Payment Awards. Automatic Options and Automatic Restricted Stock Awards are collectively referred to as "Automatic Awards." (e) "Award Date" or "Grant Date" means the date on which an Award is made by the Committee under this Plan. (f) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act. (g) "Board" or "Board of Directors" means the Board of Directors of the Company. (h) "Change in Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (1) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the "Outstanding Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"). Notwithstanding the foregoing, the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by, or benefit distribution from, any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any acquisition pursuant to any compensatory stock option or stock purchase plan for employees, or (E) any acquisition pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions -2- described in clauses (A), (B), and (C) of Subsection (3) of this Section 2.1(h) are satisfied; or (2) Individuals who, as of the Effective Date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election or nomination for election was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board (with his predecessor thereafter ceasing to be a member); or (3) Approval by the shareholders of the Company of the reorganization, merger, or consolidation of the Company unless, following such reorganization, merger, or consolidation, (A) more than 60% of the then outstanding shares of common stock and the then outstanding voting securities of the resulting corporation is then beneficially owned by all or substantially all of the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Securities immediately prior to such reorganization, merger, or consolidation, (B) no Person (excluding (I) the Company, (II) any employee benefit plan (or related trust) of the Company or such corporation resulting from such reorganization, merger, or consolidation, and (III) any Person beneficially owning, immediately prior to such reorganization, merger, or consolidation, 20% or more of the Outstanding Common Stock or Outstanding Voting Securities, as the case may be) beneficially owns 20% or more of the then outstanding shares of common stock or the combined voting power of the then outstanding voting securities of the resulting corporation, and (C) at least a majority of the members of the board of directors of the resulting corporation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger, or consolidation; or (4) Approval by the shareholders of the Company of (A) a complete liquidation or dissolution of the Company, or (B) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or other disposition, (I) more than 60% of the outstanding shares of common stock and the then outstanding voting securities of such corporation is beneficially owned by all or substantially all of the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such sale or disposition; (II) no Person (excluding (x) the Company , (y) any employee benefit plan (or related trust) of the Company or such corporation, and (z) any Person beneficially owning, immediately prior to such sale or other disposition, 20% or more of the Outstanding Common Stock or Outstanding Voting Securities, as -3- the case may be) beneficially owns 20% or more of the then outstanding shares of common stock or the combined voting power of the then outstanding voting securities of such corporation, and (III) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such sale or other disposition of the assets of the corporation. (i) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (j) "Committee" means the committee of the Board appointed to administer the Plan pursuant to Article 3 herein, all of the members of which shall be "disinterested persons" as defined in Rule 16b-3, as amended, under the Exchange Act or any similar or successor rule and "outside directors" within the meaning of Section 162(m)(4)(C)(i) of the Code, as amended. (k) "Company" means Eskimo Pie Corporation, or any successor thereto as provided in Article 14 herein. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" of a Share means (i) with respect to Awards other than Stock Payment Awards, the mean between the high and low sales price of the Stock on the relevant date if it is a trading date, or if not, on the most recent date on which the Stock was traded prior to such date, as reported by NASDAQ National Market System, or if, in the opinion of the Committee, this method is inapplicable or inappropriate for any reason, the fair market value as determined pursuant to a reasonable method adopted by the Committee in good faith for such purpose and (ii) with respect to Stock Payment Awards, the average closing sale price of the Stock, as reported by the NASDAQ National Market System, for all trading dates from the beginning of the relevant calendar quarter up through and including the Determination Date for that quarter (as defined in Section 9.3). (n) "Incentive Stock Option" or "ISO" means an option to purchase Stock, granted under Article 6 herein, which is designated as an incentive stock option and is intended to meet the requirements of Section 422 of the Code. (o) "Key Employee" means an officer or other key employee of the Company or its Subsidiaries, who, in the opinion of the Committee, can contribute significantly to the growth and profitability of, or perform services of major importance to, the Company and its Subsidiaries. "Key Employee" does not include Non-Employee Directors. (p) "Non-Employee Director" means (i) with respect to Automatic Awards an individual who is a member of the Board on the applicable Automatic Grant Date and -4- who is not an employee of the Company or a Subsidiary and (ii) with respect to Stock Payment Awards an individual who is a member of the Board at any time during the calendar year and who is not an employee of the Company or Subsidiary. (q) "Non-qualified Stock Option" or "NQSO" means an option to purchase Stock, granted under Article 6 or Article 9 herein, which is not intended to be an Incentive Stock Option. (r) "Option" means an Incentive Stock Option or a Non-qualified Stock Option. (s) "Participant" means a Key Employee or Non-Employee Director who is granted or receives an Award under the Plan. (t) "Performance Criteria" means one or more specified performance goals, which may be stated in terms of the value of the Common Stock, return on equity, earnings per share, total earnings, earnings growth, return on assets or return on capital, with respect to awards of Restricted Stock pursuant to Article 8. (u) "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is restricted, pursuant to Article 8 or Article 9 herein. (v) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (w) "Plan" means the Eskimo Pie Corporation 1996 Incentive Stock Plan, as described herein and as hereafter from time to time amended. (x) "Related Option" means an Option with respect to which a Stock Appreciation Right has been granted. (y) "Restricted Stock" means a Stock Award which is subject to a Period of Restriction and/or satisfaction of Performance Criteria granted to a Participant pursuant to Article 8 or Article 9 herein. (z) "Restrictions" means any applicable Period of Restriction and/or Performance Criteria with respect to Shares of Restricted Stock. (aa) "Stock" or "Shares" means the Common Stock of the Company. (bb) "Stock Appreciation Right" or "SAR" means an Award, designated as a stock appreciation right, granted to a Participant pursuant to Article 7 herein. -5- (cc) "Stock Payment Awards" means an award of Stock made to a Non- Employee Director in payment of director fees (retainer and meeting attendance fees) in accordance with the formula and other provisions established in Section 9.3 herein. (dd) "Stock Awards" means an award of Stock granted to a Participant pursuant to Article 8 herein. (ee) "Subsidiary" shall mean a corporation at least 50% of the total combined voting power of all classes of stock of which is owned by the Company, either directly or through one or more of its Subsidiaries. ARTICLE III. Administration 3.1 The Committee. Subject to the Board's right to retain administration ------------- of the Plan and except as otherwise provided in Section 3.4, the Plan shall be administered by the Committee which shall have all powers necessary or desirable for such administration. Except as otherwise provided in Section 3.4 and Article 9, the express grant in this Plan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. In addition to any other powers and, subject to the provisions of the Plan, the Committee shall have the following specific powers: (i) to determine the terms and conditions upon which the Awards may be made and exercised; (ii) to determine all terms and provisions of each Agreement, which need not be identical; (iii) to construe and interpret the Agreements and the Plan; (iv) to establish, amend or waive rules or regulations for the Plan's administration; (v) to accelerate the exercisability of any Award or the termination of any Period of Restriction; and (vi) to make all other determinations and take all other actions necessary or advisable for the administration of the Plan. 3.2 Delegation of Certain Duties. The Committee may in its sole ---------------------------- discretion delegate all or part of its duties and obligations to designated officer(s) to administer the Plan with respect to Awards to Key Employees who are not subject to Section 16 of Exchange Act. 3.3 Selection of Key Employees. The Committee shall have the authority to -------------------------- grant Awards under the Plan, from time to time, to such Key Employees as may be selected by it. Each Award shall be evidenced by an Agreement. 3.4 Awards to Non-Employee Directors. With respect to Awards made to -------------------------------- Non-Employee Directors pursuant to Article 9, except as otherwise provided in Article XI, the Plan shall be administered by employee directors of the Board or their delegate who shall have complete authority to interpret all provisions of Article 9; to prescribe the form of Agreements for Awards to Non-Employee Directors pursuant to Article 9; to adopt, amend and rescind rules and regulations pertaining to Awards to Non-Employee Directors and to make all other determinations necessary or advisable for the administration of Article 9 of the Plan. -6- 3.5 Decisions Binding. All determinations and decisions made by the ----------------- Board, the Committee or the employee directors pursuant to the provisions of the Plan shall be final, conclusive and binding. 3.6 Requirements of Rule 16b-3 and Code Section 162(m). Notwithstanding -------------------------------------------------- any other provision of the Plan, the Board or the Committee may impose such conditions on any Award, and amend the Plan in any such respects, as may be required to satisfy the requirements of Rule 16b-3, as amended (or any successor or similar rule), under the Exchange Act. Any provision of the Plan to the contrary notwithstanding, and except to the extent that the Committee determines otherwise: (a) transactions by and with respect to officers and directors of the Company who are subject to Section 16(b) of the Exchange Act (hereafter, "Section 16 Persons") shall comply with any applicable conditions of SEC Rule 16b-3; (b) transactions with respect to persons whose remuneration is subject to the provisions of Section 162(m) of the Code shall conform to the requirements of Section 162(m)(4)(C) of the Code; and (c) every provision of the Plan shall be administered, interpreted and construed to carry out the foregoing provisions of this sentence. Notwithstanding any provision of the Plan to the contrary, the Plan is intended to give the Committee the authority to grant Awards that qualify as performance-based compensation under Code Section 162(m)(4)(C) as well as Awards that do not so qualify. Every provision of the Plan shall be administered, interpreted and construed to carry out such intention and any provision that cannot be so administered, interpreted and construed shall to that extent be disregarded; and any provision of the Plan that would prevent an Award that the Committee intends to qualify as performance-based compensation under Code Section 162(m)(4)(C) from so qualifying shall be administered, interpreted and construed to carry out such intention and any provision that cannot be so administered, interpreted and construed shall to that extent be disregarded. 3.7 Indemnification. In addition to such other rights of indemnification --------------- as they may have as directors or as members of the Committee, the members of the Committee and the employee directors or their delegate shall be indemnified by the Company against reasonable expenses, including attorneys' fees, actually and reasonably incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted or made hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding, if such members acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Company and its Subsidiaries. ARTICLE IV. Stock Subject to the Plan 4.1 Number of Shares. Subject to adjustment as provided in Section 4.4 ---------------- herein, the maximum aggregate number of Shares that may be issued pursuant to Awards made under the Plan shall not exceed 200,000. No more than one-half of the aggregate number of such Shares shall be issued in connection with Stock Awards. Except as provided in Sections 4.2 and 4.3 herein, the issuance of Shares in connection with the exercise of, or as other payment for -7- Awards, under the Plan shall reduce the number of Shares available for future Awards under the Plan. 4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this --------------------------------- Plan (for which no material benefits of ownership have been received, including dividends) terminates, expires, or lapses for any reason other than by virtue of exercise of the Award, or if Shares issued pursuant to Awards (for which no material benefits of ownership have been received, including dividends) are forfeited, any Stock subject to such Award again shall be available for the grant of an Award under the Plan, subject to Section 7.2. 4.3 Delivery of Shares as Payment. In the event a Participant pays the ----------------------------- Option Price for Shares pursuant to the exercise of an Option with previously acquired Shares, the number of Shares available for future Awards under the Plan solely to Key Employees who are not Section 16 Persons shall be reduced only by the net number of new Shares issued upon the exercise of the Option. 4.4 Capital Adjustments. The number and class of Shares subject to each ------------------- outstanding Award and each Automatic Award, the Option Price and the aggregate number and class of Shares for which Awards thereafter may be made shall be subject to such adjustment, if any, as the Committee in its sole discretion deems appropriate to reflect such events as stock dividends, stock splits, recapitalizations, mergers, consolidations or reorganizations of or by the Company. ARTICLE V. Eligibility Persons eligible to participate in the Plan include all employees of the Company and its Subsidiaries who, in the opinion of the Committee, are Key Employees. Key Employees do not include Non-Employee Directors. Non-Employee Directors shall receive Automatic Awards, and may elect to receive Stock Payment Awards, under the Plan pursuant to Article 9. ARTICLE VI. Stock Options 6.1 Grant of Options. Subject to the terms and provisions of the Plan, ---------------- Options may be granted to Key Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Shares subject to Options granted to each Key Employee, provided, however, (a) no Key Employee may be granted Options in any calendar year for more than 50,000 shares of Common Stock and (b) that the aggregate Fair Market Value (determined at the time the Award is made) of Shares with respect to which any Key Employee may first exercise ISOs granted under the Plan during any calendar year may not exceed $100,000 or such amount as shall be specified in Section 422 of the Code and rules and regulation thereunder. 6.2 Option Agreement. Each Option grant shall be evidenced by an ---------------- Agreement that shall specify the type of Option granted, the Option Price (as hereinafter defined), the duration -8- of the Option, the number of Shares to which the Option pertains, any conditions imposed upon the exercisability of Options in the event of retirement, death, disability or other termination of employment, and such other provisions as the Committee shall determine. The Agreement shall specify whether the Option is intended to be an Incentive Stock Option within the meaning of Section 422 of the Code, or Nonqualified Stock Option not intended to be within the provisions of Section 422 of the Code. 6.3 Option Price. The exercise price per share of Stock covered by an ------------ Option ("Option Price") shall be determined by the Committee subject to the following limitations. The Option Price shall not be less than 100% of the Fair Market Value of such Stock on the Grant Date. In addition, an ISO granted to an employee who, at the time of grant, owns (within the meaning of Section 425(d) of the Code) Stock possessing more than 10% of the total combined voting power of all classes of Stock of the Company, shall have an Option Price which is at least equal to 110% of the Fair Market Value of the Stock. 6.4 Duration of Options. Each Option shall expire at such time as the ------------------- Committee shall determine at the time of grant provided, however, that no ISO shall be exercisable later than the tenth (10th) anniversary date of its Award Date. 6.5 Exercisability. Options granted under the Plan shall be exercisable -------------- at such times and be subject to such restrictions and conditions as the Committee shall determine, which need not be the same for all Key Employees. 6.6 Method of Exercise. Options shall be exercised by the delivery of a ------------------ written notice to the Company in the form prescribed by the Committee setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares which shall be deemed to include arrangements approved by the Committee for the delivery to the Company of the proceeds of a sale or margin loan in the case of a "cashless" exercise. The Option Price shall be payable to the Company in full either in cash (including the proceeds of a cashless exercise in the Committee's discretion), by delivery of Shares of Stock valued at Fair Market Value at the time of exercise, delivery of a promissory note (in the Committee's discretion) or by a combination of the foregoing. As soon as practicable after receipt of written notice and payment, the Company shall deliver to the Participant, stock certificates in an appropriate amount based upon the number of Options exercised, issued in the Participant's name. No Participant who is awarded Options shall have rights as a shareholder until the date of exercise of the Options. 6.7 Restrictions on Stock Transferability. The Committee shall impose ------------------------------------- such restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan as it may deem advisable, including, without limitation, restrictions under the applicable Federal securities law, under the requirements of the National Association of Securities Dealers, Inc. or any stock exchange upon which such Shares are then listed and under any blue sky or state securities laws applicable to such Shares. 6.8 Nontransferability of Options. Except as specifically provided in an ----------------------------- Agreement pursuant to 6.9 below, no Option granted under the Plan may be sold, transferred, pledged, -9- assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or legal representative. 6.9 Transferability of Certain Options and SARs. In addition to -------------------------------------------- nontransferable Options, the Committee may grant Nonqualified Stock Options (with or without tandem SARs) or SARs that are transferable during the lifetime of the Key Employee, provided that (i) no consideration is paid for the transfer and (ii) no Options granted to Section 16 Persons may be transferable unless and except to the extent such transferability would not result in the loss of any Rule 16b-3 exemptions for nontransferable Options granted or to be granted under the Plan. The transferee of an Option shall be subject to all restrictions applicable to the Option prior to its transfer. The Agreement granting the Option shall set forth the transfer conditions and restrictions. The Committee may impose on any transferable Option and on Stock issued upon the exercise of any Option such limitations and conditions as the Committee deems appropriate. ARTICLE VII. Stock Appreciation Rights 7.1 Grant of Stock Appreciation Rights. Subject to the terms and ---------------------------------- conditions of the Plan, Stock Appreciation Rights may be granted to Key Employees, at the discretion of the Committee (a) in connection with the grant, and exercisable in lieu of Options ("Tandem SARs"), (b) independent of the grant of the Options ("Freestanding SARs") or (c) in any combination of the foregoing. 7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect to ----------------------- all or part of the Shares subject to the Related Option. The exercise of Tandem SARs shall cause a reduction in the number of Shares subject to the Related Option equal to the number of Shares with respect to which the Tandem SAR is exercised. Conversely, the exercise, in whole or in part, of a Related Option, shall cause a reduction in the number of Shares subject to the Tandem Option equal to the number of Shares with respect to which the Related Option is exercised. Shares with respect to which the SAR shall have been exercised may not be subject again to an Award under the Plan. Notwithstanding any other provision of the Plan to the contrary, a Tandem SAR shall expire no later than the expiration of the Related Option, shall be transferable only when and under the same conditions as the Related Option and shall be exercisable only when the Related Option is eligible to be exercised. In addition, if the Related Option is an ISO, a SAR shall be exercised for no more than 100% of the difference between the Option Price of the Related Option and the Fair Market Value of Shares subject to the Related Option at the time the SAR is exercised. 7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised ----------------------------- upon whatever terms and conditions the Committee, in it sole discretion, imposes upon such SARs. -10- 7.4 Other Conditions Applicable to SARs. In no event shall the term of ----------------------------------- any SAR granted under the Plan exceed ten years from the Grant Date. A SAR may be exercised only when the Fair Market Value of a Share exceeds either (a) the Option Price of the Related Option in the case of a Tandem SAR or (b) the Fair Market Value of a Share on the Grant Date in the case of a Freestanding SAR. A SAR shall be exercised by delivery to the Committee of a notice of exercise in the form prescribed by the Committee. 7.5 Payment Upon Exercise of SARs. Subject to the provisions of the ----------------------------- Agreement, upon the exercise of a SAR, the Participant is entitled to receive, without any payment to the Company (other than required tax withholding amounts), an amount equal to the product of multiplying (i) the number of Shares with respect to which the SAR is exercised by (ii) an amount equal to the excess of (A) the Fair Market Value per Share on the date of exercise of the SAR over (B) either (x) the Option Price of the Related Option in the case of a Tandem SAR or (y) the Fair Market Value per Share on the Award Date in the case of a Freestanding SAR. Payment to the Key Employee shall be made in Shares, valued at the Fair Market Value on the date of exercise, in cash if the Key Employee has so elected in his written notice of exercise and Committee has consented thereto, or a combination thereof. To the extent required to satisfy the conditions of Rule 16b-3(e) under the Exchange Act, or any successor or similar rule, or as otherwise provided in the Agreement, the Committee shall have the sole discretion to consent to or disapprove the election of any Key Employee to receive cash in full or partial settlement of a SAR. In cases where an election of settlement in cash must be consented to by the Committee, the Committee may consent to, or disapprove, such election at any time after such election, or within such period for taking action as is specified in the election, and failure to give consent shall be disapproval. Consent may be given in whole or as to a portion of the SAR surrendered by the Key Employee. If the election to receive cash is disapproved in whole or in part, the SAR shall be deemed to have been exercised for Shares, or, if so specified in the notice of exercise and election, not to have been exercised to the extent the election to receive cash is disapproved. 7.6 Nontransferability of SARs. Unless the Committee provides otherwise -------------------------- pursuant to Section 6.9, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution. Further, all SARs granted to a Key Employee under the Plan shall be exercisable during his lifetime only by such Key Employee or his guardian or legal representative. ARTICLE VIII. Stock Awards 8.1 Grant of Stock Awards. Subject to the terms and provisions of the --------------------- Plan, the Committee, at any time and from time to time, may grant Stock Awards under the Plan to such Key Employees, which may but need not be Restricted Stock, and in such amounts as it shall determine; provided, however, that no Key Employee may be granted Stock Awards in any calendar year for more than 50,000 shares of Common Stock. Key Employees receiving Stock -11- Awards are not required to pay the Company therefor (except for applicable tax withholding) other than the rendering of services. 8.2 Stock Award Agreement. Each Stock Award shall be evidenced by an --------------------- Agreement that shall specify the number of shares of Stock covered by the Stock Award, any applicable Restrictions and such other provisions as the Committee shall determine. The Committee may impose such other restrictions to be set forth in the Agreement as it may deem advisable, including without limitation, restrictions under applicable Federal or state securities laws, and may legend the certificates representing Stock Awards to give appropriate notice of such restrictions. 8.3 Transferability. Except as otherwise provided in the Agreement --------------- pursuant to which Stock Awards are made and subject to the limitation in the next sentence, the Shares of Stock granted as Stock Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the termination of any applicable Restrictions or upon earlier satisfaction of other conditions as specified by the Committee in its sole discretion and set forth in the Agreement. All rights with respect to the Stock Awards granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant or his guardian or legal representative. 8.4 Restrictions on Restricted Stock. With respect to Shares of -------------------------------- Restricted Stock granted pursuant to the Plan, the Committee shall either (a) impose a Period of Restriction which requires continuation of employment for a prescribed period, or (b) require the satisfaction of one or more specified Performance Criteria to be achieved within a stated time period, in order for the Participant to be fully vested in the Shares of Restricted Stock. Shares of Restricted Stock issued prior to the termination of applicable Restrictions shall be retained by the Company until the termination of such Restrictions. 8.5 Certificate Legend. In addition to any legends placed on certificates ------------------ pursuant to Section 8.2 herein, each certificate representing shares of Restricted Stock granted pursuant to the Plan shall bear the following legend: The sale or other transfer of the Shares of Stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer set forth in the 1996 Incentive Stock Plan of Eskimo Pie Corporation, in the rules and administrative procedures adopted pursuant to such Plan, and in an Agreement dated ____________. A copy of the Plan, such rules and procedures, and such Restricted Stock Agreement may be obtained from the Secretary of Eskimo Pie Corporation. 8.6 Removal of Restrictions. Except as otherwise provided in this ----------------------- Article, Shares of Restricted Stock covered by each Restricted Stock Award made under the Plan shall become freely transferable by Participant after the last day of the Period of Restriction or on the day immediately following the date on which the Performance Criteria have been timely satisfied. Once the Shares are released from the restrictions, the Company shall deliver the certificate -12- representing the Restricted Stock to the Participant and the Participant shall be entitled to have the legend required by Section 8.5 herein removed from his Stock certificate. 8.7 Voting Rights. Participants holding Shares of Restricted Stock still ------------- subject to Restrictions may exercise full voting rights with respect to those Shares. 8.8 Dividends and Other Distributions. Participants holding shares of --------------------------------- Restricted Stock still subject to Restrictions shall be entitled to receive all dividends and other distributions paid with respect to those shares while they are so held. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability as the Shares of Restricted Stock with respect to which they were distributed. 8.9 Termination of Employment Due to Retirement. Unless otherwise ------------------------------------------- provided in the Agreement, in the event that a Key Employee terminates his employment with the Company or one of its Subsidiaries because of normal retirement (as defined in the plans and/or policies of the Company in effect at the time), any remaining Restrictions applicable to the Restricted Stock Shares pursuant to Section 8.4 herein shall automatically terminate and, except as otherwise provided in Section 8.2 herein the Shares of Restricted Stock shall thereby be free of restrictions and freely transferable. Unless otherwise provided in the Agreement, in the event that a Key Employee terminates his employment with the Company because of early retirement (as defined in the policies and/or plans of the Company in effect at the time), the Committee, in its sole discretion, may waive the restrictions remaining on any or all Shares of Restricted Stock pursuant to Section 8.2 herein and add such new restrictions to those Shares of Restricted Stock as it deems appropriate. 8.10 Termination of Employment Due to Death or Disability. In the event a ---------------------------------------------------- Key Employee's employment is terminated because of death or disability, any remaining Restriction applicable to the Restricted Stock pursuant to Section 8.4 herein shall automatically terminate and, except as otherwise provided in Section 8.2 herein the shares of Restricted Stock shall thereby be free of restrictions and fully transferable. 8.11 Termination of Employment for Other Reasons. Unless otherwise ------------------------------------------- provided in the Agreement, in the event that a Key Employee terminates his employment with the Company for any reason other than for death, disability, or retirement, as set forth in Sections 8.9 and 8.10 herein, then any shares of Restricted Stock still subject to Restrictions as of the date of such termination shall automatically be forfeited and returned to the Company. 8.12 Failure to Satisfy Performance Criteria. In the event that a Key --------------------------------------- Employee fails to satisfy the specified Performance Criteria within the time period established by the Committee, the Shares of Restricted Shares which were awarded subject to the satisfaction of such Performance Goals shall be automatically forfeited and returned to the Company. ARTICLE IX. Automatic Awards to Non-Employee Directors -13- 9.1. Automatic Options. On each Automatic Grant Date, each Non-Employee ----------------- Director will automatically receive a Non-Qualified Stock Option covering 200 Shares ("Automatic Option") to be evidenced by an Agreement. The Option Price of Automatic Options shall be 100% of the Fair Market Value on the Automatic Grant Date. Unless otherwise provided in the Agreement pursuant to which they are received, Automatic Option Awards first become exercisable 6 months after their Automatic Grant Date, provided however that an Automatic Option Award shall be immediately exercisable if the Non-Employee Director's membership on the Board terminates as a result of the Non-Employee Director's retirement from Board service in accordance with the Company's policy, death or permanent and total disability (as such term is defined in Section 22(e)(3) of the Code). An Automatic Option shall be forfeited if, as of the termination of the Non- Employee Director's membership on the Board, the Automatic Option is not then exercisable and such termination occurs for any reason other as a result of the Non-Employee Director's retirement from Board service in accordance with the Company's policy, death or permanent and total disability (as such term is defined in Section 22(e)(3) of the Code). Automatic Options that are exercisable or that become exercisable upon the Non-Employee Director's termination of membership on the Board will remain exercisable until the tenth anniversary of the Automatic Option's Automatic Grant Date. An Automatic Option may be exercised with respect to any number of whole shares less than the full number for which the Option could be exercised. A partial exercise of an Automatic Option shall not affect the right to exercise the Automatic Option from time to time in accordance with this Plan and the applicable Agreement with respect to the shares remaining subject to the Automatic Option. The provisions of Sections 6.6, 6.7 and 6.8 shall be applicable to Automatic Options. 9.2 Automatic Restricted Stock Awards. On each Automatic Grant Date, each --------------------------------- Non-Employee Director shall automatically receive a Restricted Stock Award for 200 Shares ("Automatic Restricted Stock Award") to be evidenced by an Agreement. The applicable Period of Restriction for each Automatic Restricted Stock Award shall be three years from the Automatic Grant Date; provided, however, that any remaining Period of Restriction shall automatically terminate and the shares of Automatic Restricted Stock shall be free of restrictions and fully transferable upon termination of the Non-Employee Director's service as a Director as a result of the Non-employee Director's retirement from Board service in accordance with the Company's policy, death or permanent and total disability (as such term is defined in Section 22(e)(3) of the Code). In the event of termination of service as a Director for any other reason during the Period of Restriction, any shares of Restricted Stock still subject to restrictions as the date of such termination shall automatically be forfeited and returned to the Company. The provisions of Sections 8.5, 8.6, 8.7 and 8.8 shall be applicable to Automatic Restricted Stock Awards. 9.3 Stock Payment Awards. Non-Employee Directors may elect to receive -------------------- payment of their retainer and meeting attendance fees ("Fees") in the form of Stock Payment Awards in accordance with the provisions of this Section. An election to receive Stock Payment Awards must be made on an annual basis by delivering written notice to the Secretary of the Company on the election form provided by the Company for that purpose ("Election Form"). With respect to elections for 2000, the election form must be delivered on or before December 31, 1999, and, with respect to elections for subsequent calendar years, on or before the date of the last Board meeting in the calendar year preceding the year to which the election relates. In the event an -14- individual becomes a Non-Employee Director after the deadline for delivery of the election notice for a particular calendar year, the Company may, but shall not be required to, permit such Non-Employee Director to make an election to receive Stock Payment Awards for such calendar year. Once made, an election for a particular calendar year may not be revoked and will be effective for all Fees owing to an electing Non-Employee Director for services to be rendered as a director during that calendar year; provided, however, that upon the execution ----------------- by the Company of a definitive agreement the consummation of which will result in a Change in Control, as defined herein, any Non-Employee Director's election to receive Stock Payment Awards will be terminated and any payment of Fees to be made to such Non-Employee Director thereafter for such calendar year will be made in cash form. Stock Payment Awards shall be made on a quarterly basis, beginning with the first quarter of the calendar year 2000. Stock Payment Awards shall be made as soon as possible but in no event later than 30 days after the last day of the quarter for which the Non-Employee Director's Fees are earned. The number of Shares constituting a quarterly Stock Payment Award for each electing Non-Employee Director shall be that number of Shares, rounded to the nearest whole number, which results from dividing the respective Non-Employee Director's Fees earned during that quarter by the Fair Market Value of the Shares as of the Determination Date (as hereinafter defined). The Company shall send each electing Non-Employee Director a letter agreement setting forth the number of Shares constituting each Stock Payment Award and such other terms and conditions of the Award as are consistent with this Section 9.3. Determination Date shall mean the earlier of (a) the last day of the quarter for which the Non-Employee Director's Fees are earned (March 31, June 30, September 30 and December 31, respectively) or (b) the effective date of an electing Non-Employee Director's termination as a member of the Board prior to the end of a calendar quarter. A Non-Employee Director shall have no voting or dividend rights with respect to, and no right to transfer any interest in, any Stock Payment Awards prior to the Determination Date for such Award. Following a Determination Date, a Non-Employee Director shall be entitled to vote Stock Payment Award Shares and to receive dividends thereafter declared and payable on such Shares. Following a Determination Date, the Stock Payment Award Shares shall not be subject to any restrictions on transfer and the Company shall, in accordance with each Non- Employee Director's written request made on an Election Form, either cause a stock certificate to be issued evidencing the Stock Payment Award Shares or maintain a book-entry record evidencing such Shares. Stock Payment Award Shares for which no such written request is made shall be evidenced by a book-entry record. Dividends on Stock Payment Award Shares evidenced by a stock certificate shall be paid in cash, and dividends on Stock Payment Award Shares evidenced by a book entry record shall be reinvested in Shares, in each case only as and when dividends are declared and paid to shareholders of record of Shares. ARTICLE X. Loans to Participants -15- The Committee is authorized to make loans to Participants, upon such terms and conditions as deemed appropriate by the Committee (including loans in connection with cashless exercises), for the purpose of enabling Participants to pay the Option Price for Shares or other purchase price of Awards made under the Plan. Such loans may include amounts necessary to pay Participant's tax liability in connection with an Award. ARTICLE XI. Change in Control The Committee, as constituted before a Change in Control, in its sole discretion may, as to any outstanding Award, either at the time the Award is made or any time thereafter, take any one or more of the following actions with respect to a Change in Control: (i) provide for the acceleration of any time periods relating to the exercise or realization of any such Award so that such Award may be exercised or realized in full on or before a date initially fixed by the Committee; (ii) provide for the purchase or settlement of any such Award by the Company, upon a Participant's request, for an amount of cash equal to the amount which could have been obtained upon the exercise of such Award or realization of such Participant's rights had such Award been currently exercisable or payable; (iii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iv) cause any such Award then outstanding to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation in such Change in Control. ARTICLE XII. Modification, Extension and Renewals of Awards Subject to the terms and conditions and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Awards, or, if authorized by the Board, accept the surrender of outstanding Awards (to the extent not yet exercised) granted under the Plan and authorize the granting of new Awards pursuant to the Plan in substitution therefor, and the substituted Awards may specify a longer term than the surrendered Awards or may contain any other provisions that are authorized by the Plan; provided, however, that the substituted Awards may not specify a lower exercise price than the surrendered Awards. The Committee may also modify the terms of any outstanding Agreement. Notwithstanding the foregoing, however, no modification of an Award, shall, without the consent of the Participant, adversely affect the rights or obligations of the Participant. ARTICLE XIII. Amendment, Modification and Termination of the Plan 13.1 Amendment, Modification and Termination. At any time and from time to --------------------------------------- time, the Board may terminate, amend, or modify the Plan. Such amendment or modification may be without shareholder approval except to the extent that such approval is required by the Code, pursuant to the rules under Section 16 of the Exchange Act, by any national securities exchange -16- or system on which the Stock is then listed or reported, by any regulatory body having jurisdiction with respect thereto or under any other applicable laws, rules or regulations. 13.2 Awards Previously Granted. No termination, amendment or modification ------------------------- of the Plan other than pursuant to Section 4.4 herein shall in any manner adversely affect any Award theretofore granted under the Plan, without the written consent of the Participant. ARTICLE XIV. Withholding 14.1 Tax Withholding. The Company shall have the power and the right to --------------- deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, State and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any grant, exercise, or payment made under or as a result of this Plan. 14.2 Stock Withholding. With respect to withholding required upon the ----------------- exercise of Nonqualified Stock Options, or upon the lapse of restrictions on Restricted Stock, or upon the occurrence of any other similar taxable event, participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares of Stock having a Fair Market Value equal to the amount required to be withheld. The value of the Shares to be withheld shall be based on Fair Market Value of the Shares on the date that the amount of tax to be withheld is to be determined. All elections shall be irrevocable and be made in writing, signed by the Participant on forms approved by the Committee in advance of the day that the transaction becomes taxable. ARTICLE XV. Successors All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company. ARTICLE XVI. General 16.1 Requirements of Law. The granting of Awards and the issuance of ------------------- Shares of Stock under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies as may be required. 16.2 Effect of Plan. The establishment of the Plan shall not confer upon -------------- any Key Employee or any Non-Employee Director any legal or equitable right against the Company, a Subsidiary, the Committee, or the employee directors, except as expressly provided in the Plan. -17- The Plan does not constitute an inducement or consideration for the employment of any Key Employee, nor is it a contract between the Company or any of its Subsidiaries and any Key Employee or any Non-Employee Director. Participation in the Plan shall not give any Key Employee any right to be retained in the service of the Company or any of its Subsidiaries. 16.3 Creditors. The interests of any Participant under the Plan or any --------- Agreement are not subject to the claims of creditors and may not, in any way, be assigned, alienated or encumbered. 16.4 Governing Law. The Plan, and all Agreements hereunder, shall be ------------- governed, construed and administered in accordance with and governed by the laws of the Commonwealth of Virginia and the intention of the Company is that ISOs granted under the Plan qualify as such under Section 422 of the Code. 16.5 Severability. In the event any provision of the Plan shall be held ------------ illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. -18- EX-10 10 EX10_10 Exhibit 10.10 WORKING COPY OF ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN (As Adopted Effective April 6, 1992) Including: 1. First Amendment 2. Second Amendment 3. Third Amendment 4. Fourth Amendment 5. Fifth Amendment 6. Adoption Agreement for Eskimo Inc. - Attached to Appendix C 7. Adoption Agreement for Sugar Creek Foods, Inc. - Attached to Appendix C 8. Acknowledgment of Appointment of Trustee by Thomas M. Mishoe, Jr. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I Definition of Terms ------------------- 1.1 Accrued Benefit..................................................... 1 1.2 Act................................................................. 1 1.3 Active Participant.................................................. 1 1.4 Actuarial Equivalent or Actuarial Value............................. 1 1.5 Adjustment Factor................................................... 2 1.6 Administrator....................................................... 2 1.7 Affiliate........................................................... 2 1.8 Annuity Starting Date............................................... 2 1.9 Beneficiary......................................................... 2 1.10 Board............................................................... 2 1.11 Code................................................................ 2 1.12 Compensation........................................................ 2 1.13 Compensation Limit.................................................. 3 1.14 Contract............................................................ 4 1.15 Effective Date...................................................... 4 1.16 Eligible Employee................................................... 4 1.17 Employee............................................................ 5 1.18 Employer............................................................ 5 1.19 Family Member....................................................... 6 1.20 Fund................................................................ 6 1.21 Highly Compensated Employee......................................... 6 1.22 Hour of Service..................................................... 10 1.23 Inactive Participant................................................ 10 1.24 Insurer............................................................. 10 1.25 Investment Manager.................................................. 10 1.26 Key Employee........................................................ 10 1.27 Leased Employee..................................................... 11 1.28 Non-Highly Compensated Employee..................................... 11 1.29 Non-Key Employee.................................................... 11 1.30 Normal Retirement Age............................................... 11 1.31 Participant......................................................... 12 1.32 Plan................................................................ 12 1.33 Plan Sponsor........................................................ 12 1.34 Plan Year........................................................... 12 1.35 Policy.............................................................. 12 1.36 QDRO................................................................ 12 1.37 Salaried Employee................................................... 12 1.38 Spouse.............................................................. 12 1.39 Statutory Compensation.............................................. 12 1.40 Super Top Heavy Plan................................................ 13 1.41 Top Heavy Plan...................................................... 13 1.42 Total Compensation.................................................. 13 1.43 Trustee............................................................. 13 1.44 Year of Benefit Service............................................. 13 1.45 Year of Broken Service.............................................. 13 1.46 Year of Service..................................................... 13
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Page ---- 1.47 Year of Vesting Service........................................................... 14 ARTICLE II Eligibility and Participation ----------------------------- 2.1 Eligibility and Date of Participation............................................. 14 2.2 Eligibility Service Definitions and Rules......................................... 14 ARTICLE III Funding ------- 3.1 Funding........................................................................... 15 3.2 Timing of Contributions by the Employer........................................... 15 3.3 Determination of Funding Requirements............................................. 15 3.4 No Duty of Trustee to Determine or Enforce Contributions.......................... 15 ARTICLE IV Determination of Accrued Benefit -------------------------------- 4.1 Accrued Benefit................................................................... 15 4.2 Accrued Benefit Service Rules..................................................... 17 4.3 Top Heavy Minimum Benefit......................................................... 17 4.4 Accrued Benefit Limitation........................................................ 19 4.5 Additional Accrued Benefit Limitations When Employer Maintains More Than One Plan.................................................................... 19 4.6 Effect of Certain Cash-Outs on Accrued Benefit.................................... 20 4.7 No Duplication of Benefits........................................................ 20 4.8 Special Rules for Reemployed Veterans............................................. 20 ARTICLE V Retirement Dates ---------------- 5.1 Normal Retirement Date............................................................ 21 5.2 Delayed Retirement Date........................................................... 21 5.3 Early Retirement Date............................................................. 21 5.4 Disability and Retirement, Death or Separation after Disability................... 21 ARTICLE VI Vesting ------- 6.1 Vesting at Retirement or Attainment of Normal Retirement Age...................... 23 6.2 Vesting in Accrued Benefit at Other Times......................................... 23 6.3 Vesting Service Rules............................................................. 23 6.4 Forfeiture and Restoration of Accrued Benefits.................................... 24 6.5 No Reduction in Certain Vested Accrued Benefits by Reason of Re-Employment........ 24
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Page ---- ARTICLE VII Death Benefits -------------- 7.1 Death after Annuity Starting Date................................................. 24 7.2 Death before Annuity Starting Date................................................ 24 7.3 Pre-Retirement Spouse's Death Benefit............................................. 24 7.4 Beneficiary Designation........................................................... 25 ARTICLE VIII Payment of Benefits ------------------- 8.1 Time of Payment................................................................... 25 8.2 Form of Accrued Benefit Payment................................................... 27 8.3 Form of Death Benefit Payment..................................................... 28 8.4 Benefit Cash-Out.................................................................. 28 8.5 Plan to Plan Direct Rollover as a Distribution Option............................. 28 8.6 Notice, Election and Consent Regarding Accrued Benefit Payment.................... 29 8.7 Special Rules for Benefits on Re-employment or Continued Employment after Normal Retirement Age....................................................... 31 8.8 Benefit Determination and Payment Procedure....................................... 32 8.9 Claims Procedure.................................................................. 33 8.10 Payments to Minors and Incompetents............................................... 34 8.11 Distribution of Benefit When Distributee Cannot Be Located........................ 34 8.12 Minimum Amount Paid Monthly....................................................... 35 ARTICLE IX Addition Restrictions and Limitations on Payments and Benefits -------------------------------------------------------------- 9.1 Pre-termination Limitations on Annual Payments to Certain Highly Compensated Employees.......................... 35 9.2 Restrictions on Benefits at Plan Termination...................................... 36 ARTICLE X The Fund -------- 10.1 Trust Fund and Exclusive Benefit.................................................. 36 10.2 Plan and Fund Expenses............................................................ 36 10.3 Reversions to the Employer........................................................ 37 10.4 No Interest Other Than Plan Benefit............................................... 37 10.5 Provisions Relating to Insurer.................................................... 37 10.6 Payments from the Fund............................................................ 38
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Page ---- ARTICLE XI Fiduciaries ----------- 11.1 Named Fiduciaries and Duties and Responsibilities................................. 38 11.2 Limitation of Duties and Responsibilities of Named Fiduciaries.................... 38 11.3 Service by Named Fiduciaries in More Than One Capacity............................ 38 11.4 Allocation or Delegation of Duties and Responsibilities Named Fiduciaries................................................................ 38 11.5 Investment Manager................................................................ 39 11.6 Assistance and Consultation....................................................... 39 11.7 Indemnification................................................................... 39 ARTICLE XII Powers and Duties of Trustee ---------------------------- 12.1 Trustee Powers and Duties......................................................... 39 12.2 Accounts.......................................................................... 41 12.3 Two or More Trustees.............................................................. 41 12.4 Management of Fund by Investment Manager.......................................... 42 12.5 Trustee Compensation and Expenses................................................. 42 12.6 Bond.............................................................................. 42 12.7 Trustee Resignation, Removal or Death an Appointment of Successor or Additional Trustee................................... 42 12.8 Establishment of Separate Trusts.................................................. 43 12.9 Automatic Successor Trustee by Corporate Transaction.............................. 44 ARTICLE XIII Plan Administration ------------------- 13.1 Appointment of Plan Administrator................................................. 44 13.2 Plan Sponsor as Plan Administrator................................................ 44 13.3 Compensation and Expenses......................................................... 44 13.4 Procedure if a Committee.......................................................... 44 13.5 Action by Majority Vote if a Committee............................................ 44 13.6 Appointment of Successors......................................................... 44 13.7 Additional Duties and Responsibilities............................................ 44 13.8 Power and Authority............................................................... 45 13.9 Availability of Records........................................................... 45 13.10 No Action with Respect to Own Benefit............................................. 45 13.11 Limitation on Powers and Authority................................................ 45 ARTICLE XIV Amendment and Termination of Plan --------------------------------- 14.1 Amendment......................................................................... 46 14.2 Merger, Consolidation or Transfer of Assets....................................... 46 14.3 Plan Permanence and Termination................................................... 46 14.4 Lapse in Contributions............................................................ 46 14.5 Termination Events................................................................ 46 14.6 Benefits and Vesting upon Termination............................................. 47
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Page ---- 14.7 Administration of Plan after Termination.......................................... 48 14.8 Distribution of Assets after Termination.......................................... 48 14.9 Effect of Employer Merger, Consolidation or Liquidation........................... 48 ARTICLE XV Miscellaneous ------------- 15.1 Headings.......................................................................... 49 15.2 Gender and Number................................................................. 49 15.3 Governing Law..................................................................... 49 15.4 Employment Rights................................................................. 49 15.5 Conclusiveness of Employer Records................................................ 49 15.6 Right to Require Information and Reliance Thereon................................. 49 15.7 Alienation and Assignment......................................................... 49 15.8 Notices and Elections............................................................. 49 15.9 Delegation of Authority........................................................... 50 15.10 Service of Process................................................................ 50 15.11 Construction...................................................................... 50 ARTICLE XVI Adoption of the Plan -------------------- 16.1 Initial Adoption and Failure to Obtain Qualification.............................. 50 16.2 Adoption by Additional Employers.................................................. 50
Appendices ---------- Appendix A - Elapsed Time Method of Determining Service Appendix B - Determination of Top Heavy Plan Status Appendix C - List of Participating Employers Appendix D - Actuarial Equivalents and Values Appendix E - List of Additional Excluded Positions -v- THIS PLAN AND TRUST AGREEMENT, made and entered into this ______ day of December, 1992, by and between ESKIMO PIE CORPORATION, a Delaware corporation, and other participating employers who may adopt this agreement as provided herein (hereinafter called the "Employer") and WILLIAM M. FARISS, JR. of Richmond, Virginia (hereinafter called the "Trustee"). WITNESSETH: ----------- THAT WHEREAS, the Employer by due corporate action has approved and authorized the execution of this defined benefit pension plan and its related trust provisions for its employees; and WHEREAS, it is deemed desirable that money or other property contributed for the payment of benefits hereunder be segregated and held pursuant hereto for the exclusive benefit of such employees as shall be included hereunder; and WHEREAS, the Trustee has consented to act as Trustee and to hold the assets contributed to effectuate the trust provisions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto declare and agree as follows: ARTICLE I Definition of Terms ------------------- The following words and terms as used herein shall have the meaning set forth below, unless a different meaning is clearly required by the context: 1.1 "Accrued Benefit": That benefit determined under the provisions of paragraph 4.1 to which a Participant is entitled. 1.2 "Act": The Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, or the corresponding sections of any subsequent legislation which replaces it, and, to the extent not inconsistent therewith, the regulations issued thereunder. 1.3 "Active Participant": A Participant who is an Eligible Employee. 1.4 "Actuarial Equivalent" or "Actuarial Value": (i) In the case of actual or deemed benefit payments to a Participant, a benefit of equivalent value to his Accrued Benefit commencing on the Participant's Normal Retirement Date (or as otherwise provided in subparagraph 4.1(a)), (ii) In the case of a Pre-Retirement Spouse's Death Benefit commencing to a Participant's Spouse, a benefit of equivalent value to such Death Benefit commencing on such Spouse's Earliest Commencement Date (as determined pursuant to paragraph 7.3), and (iii) For any other purpose, an amount or benefit of equivalent value to another benefit or amount, based on the form(s) (which term is intended to include the time(s)) of payment involved, all as determined pursuant to Appendix D and the applicable sections of the Plan. -1- 1.5 "Adjustment Factor": The cost of living adjustment factor prescribed by the Secretary of the Treasury or his delegate under Section 415(d) of the Code for years beginning after December 31, 1987, applied to such items and in such manner as the Secretary of the Treasury or his delegate shall prescribe. 1.6 "Administrator": The Plan Administrator provided for in ARTICLE XIII hereof. 1.7 "Affiliate": The Employer and each of the following business entities or other organizations (whether or not incorporated) which during the relevant period is treated (but only for the portion of the period so treated and for the purpose and to the extent required to be so treated) together with the Employer as a single employer pursuant to the following sections of the Code (as modified where applicable by Section 415(h) of the Code): (i) Any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer, (ii) Any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer, (iii) Any organization (whether or not incorporated) which is a member of an affiliated service group as defined in Section 414(m) of the Code) which includes the Employer, and (iv) Any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. 1.8 "Annuity Starting Date": The first day of the first period for which a benefit is paid as an annuity or in any other form (as opposed to the actual date of payment). Notwithstanding the foregoing, the Annuity Starting Date shall not be considered delayed because actual benefit payment is delayed for reasonable administrative reasons as long as all benefits due are actually made. Further, the Administrator may consider the Annuity Starting Date delayed for notice, election and consent purposes but not for payment purposes (which means that payment may be made retroactively to the Annuity Starting Date once the notice, election and consent requirements are satisfied). 1.9 "Beneficiary": The person or persons designated by a Participant or otherwise entitled pursuant to paragraph 7.4 to receive benefits under the Plan attributable to such Participant after the death of such Participant. 1.10 "Board": The present and any succeeding Board of Directors of the Plan Sponsor, unless such term is used with respect to a particular Employer and its Employees, in which event it shall mean the present and any succeeding Board of Directors of that Employer. 1.11 "Code": The Internal Revenue Code of 1986, as the same may be amended from time to time, or the corresponding section of any subsequent Internal Revenue Code, and, to the extent not inconsistent therewith, regulations issued thereunder. 1.12 "Compensation": 1.12(a) The sum of: (i) An Employee's earnings, exclusive of all awards or payments under any stock bonus, stock option, or stock purchase plan, or any plan involving stock appreciation rights, prizes, expense reimbursements and allowances, severance pay, imputed income, amounts contributed for the Employee pursuant to and benefits under the Plan or any other employee benefit plan or program of the Employer, or any other similar remuneration, as reportable in the Wages, Tips and Other Compensation Box (currently Box 10) on I.R.S. Form W-2 pursuant to Sections 6041, 6051 and 6052 of the Code received by or made available to him as an Eligible Employee directly from the Employer (but not from any Affiliate which is not a participating employer unless otherwise expressly provided) for a Plan Year, and -2- (ii) The Employee's elective salary reduction or similar contributions excluded from such earnings by reason of Sections 125, 402(a)(8) (or effective January 1, 1993, 402(e)(3)) and 402(h) of the Code and contributed as an Eligible Employee. Any such compensation in excess of the Compensation Limit for a Plan Year shall be disregarded. Compensation for a Plan Year shall be rounded to the nearest whole dollar. 1.12(b) For purposes of determining the Accrued Benefit of a Participant who is Disabled (as provided in paragraph 5.4) as an Eligible Employee, such Participant shall be deemed to have received Compensation during periods for which he is considered to be Disabled, as determined pursuant to paragraph 5.4, at his most recent actual or equivalent annual rate of Compensation in effect prior to his becoming Disabled. A Participant's "actual or equivalent hourly rate of Compensation" means his Compensation for the twelve (12) consecutive calendar month period ending prior to the calendar month in which his Disability commenced. 1.12(c) If a Participant becomes an Executive (as defined in paragraph 1.16) and thereafter ceases to be an Executive and thereupon or later becomes a Salaried Employee who is not an Executive, his compensation and service as an Executive shall be taken into account as compensation and service as an Eligible Employee solely for purposes for determining his Compensation and Average Compensation until such time, if ever, as he again becomes an Executive. This operating rule may apply more than once. 1.13 "Compensation Limit": $200,000 (as adjusted by the Adjustment Factor). 1.13(a) In determining the Compensation (or other amounts which may refer to the Compensation Limit) of any Employee who is a Highly Compensated Employee for purposes of applying the Compensation Limit in Plan Years beginning after December 31, 1988, the Compensation (or other amounts which may refer to the Compensation Limit) of his Family Members who are his spouse or any of his lineal descendants who have not attained the age of nineteen (19) by the end of the Plan Year (or other stated computation period) shall be aggregated with and treated as part of the Employee's Compensation (or any other amounts which may refer to the Compensation Limit). When Compensation (or any other amount which may refer to the Compensation Limit) is limited by the Compensation Limit, it shall be disregarded in the following order, determined on a Plan Year by Plan Year basis: (i) First, Compensation (or other amounts which may refer to the Compensation Limit) of Employees who are not participants in any qualified retirement plan maintained by any Affiliate shall be disregarded; and (ii) Then, Compensation (or other amounts which may refer to the Compensation Limit) shall be disregarded proportionately based on the applicable amount determined without regard to the Compensation Limit. 1.13(b) For purposes of applying the Compensation Limit: (i) The Compensation Limit applicable to each Plan Year (or other applicable computation period) beginning after December 31, 1988 shall be the Compensation Limit in effect for each such Plan Year (or other applicable computation period), determined without increases in the Compensation Limit for subsequent periods. (ii) The Compensation Limit applicable to each Plan Year (or other applicable computation period) beginning before January 1, 1989 shall be the Compensation Limit in effect for the first Plan Year (or other applicable computation period) beginning after December 31, 1988. 1.13(c) 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 -3- with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. 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. 1.13(d) Notwithstanding anything to the contrary in this paragraph, the family aggregation rules in this paragraph (providing for the aggregation of Highly Compensated Employees and Family Members for purposes of applying the Compensation Limit) shall cease to apply with respect to Plan Years beginning on or after January 1, 1997. 1.14 "Contract": A group annuity contract, deposit administration contract, immediate participation guarantee contract, or other investment- oriented or funding contract or agreement issued by an Insurer to hold the assets of the Plan. 1.15 "Effective Date": April 6, 1992, except that with respect to any Employer thereafter adopting the Plan as a participating employer, such date as may be set forth in its adoption agreement or in the Plan. The Administrator shall maintain as Appendix C to the Plan a list of the Effective Dates of participation of all Employers participating in the Plan. 1.16 "Eligible Employee": 1.16(a) A Salaried Employee who is not an Executive. In no event shall Leased Employees be considered as Eligible Employees or be eligible to actively participate in the Plan. 1.16(b) For purposes hereof, the term "Executive" means a person (i) who is the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, a Vice President, the Treasurer, the Secretary, or a General Manager of the Plan Sponsor or (ii) who holds a position described in Appendix B to the Plan, which Appendix and job descriptions may be modified or amended at any time by the Chief Executive Officer of the Plan Sponsor without Board approval and which exclusions shall be effective from the later of January 1, 1993, the effective date(s) of the addition of the exclusion(s) or the date an Employee holds any such position. 1.17 "Employee": Any individual employed in the service of the Employer as a common law employee, any sole proprietor or partner of a partnership constituting an Affiliate, and any Leased Employee (but only for the purpose and to the extent treated under Section 414(n) of the Code as an employee of the Employer). 1.18 "Employer": 1.18(a) The Plan Sponsor and each other employer heretofore or hereafter executing or adopting the Plan as a participating employer, collectively unless the context otherwise indicates, for as long as it remains a participating employer; and with respect to any Employee, any one or more of such Employers by which he is at any time employed (unless or to the extent otherwise specified by resolution of the Board or in a merger or acquisition agreement or plan approved by the Board or in any applicable asset transfer, plan merger or consolidation or adoption agreement). The Administrator shall maintain as Appendix C to the Plan a list of all such Employers who are, from time to time, participating employers in the Plan. 1.18(b) For purposes of determining: -4- (i) Service for all purposes of the Plan (other than for purposes of determining non-Top Heavy Plan benefit accrual, Eligible Employees and Years of Benefit Service unless otherwise specifically provided) and commencement of service and termination of employment with the Employer, (ii) Employees, Family Members, Highly Compensated Employees, Key Employees, and Leased Employees, (iii) Top Heavy Plan status, contributions and benefits, (iv) Statutory Compensation and Total Compensation, and (v) Any limitations of Accrued Benefits hereunder, the term "Employer" shall include each Affiliate which during any year commencing after September 2, 1974 is treated as an Affiliate and each predecessor employer which maintained this Plan (but not beyond the time it ceased to maintain the Plan) within the meaning of Section 414(a) of the Code, but only for the portion of any such year or years so treated and for the purpose and to the extent required to be so treated. 1.18(c) For purposes of determining compensation and service with any business entity, or predecessor thereto, which is merged into an Employer, or a predecessor thereto, or all or substantially all the assets or the operating assets acquired by an Employer, or predecessor thereto, compensation from and service with such business entity and predecessor thereto shall be treated as compensation from and service with an Employer to the extent provided by resolution of the Board or in any corporation or plan merger, consolidation or asset transfer agreement or any adoption agreement approved by the Board. 1.18(d) For purposes of determining service and compensation under the Plan, service with and compensation from Reynolds Metals Company, a Delaware corporation, and any of its "affiliates" (determined on the same basis as Affiliates are determined, but substituting Reynolds Metals Company for the Plan Sponsor) which was rendered or payable for service before April 6, 1992 shall be considered as service with the Employer for all purposes of the Plan. 1.18(e) Notwithstanding any other provision of the Plan: (i) Service with Sugar Creek Foods of Russellville, Inc., which was the predecessor by asset acquisition on February 28, 1994 to Sugar Creek Foods, Inc., shall not be considered service for any purpose of the Plan. (ii) Service with Sugar Creek Foods, Inc. prior to the January 1, 1996 Effective Date of the Plan with respect to it shall not be considered service for purposes of determining Years of Benefit Service under the Plan. (iii) Compensation from Sugar Creek Foods, Inc. for periods prior to the January 1, 1996 Effective Date of the Plan with respect to it shall not be considered Compensation for purposes of determining Accrued Benefits under subparagraph 4.1(a) of the Plan. 1.19 "Family Member": 1.19(a) With respect to a Plan Year, an individual (whether or not himself a Highly Compensated Employee) who is considered a family member described in Section 414(q)(6)(A) of the Code with respect to the Employer; and, to the extent not inconsistent therewith, an individual who is a member of the family (consisting, with respect to an Employee, of such Employee's spouse and lineal ascendants and descendants and the spouses of lineal ascendants and descendants) on any day of the Determination Year or Look-Back Year with respect to such Plan Year of a Highly Compensated Employee who is -5- either (i) a more than five percent (5%) owner of the Employer or (ii) in the group consisting of the ten (10) Highly Compensated Employees with the greatest Statutory Compensation for the relevant Determination Year or Look-Back Year. 1.19(b) For purposes hereof, the terms "Determination Year", "Look-Back Year", and "more than five percent (5%) owner of the Employer" have the same meaning provided herein for purposes of determining Highly Compensated Employees. 1.20 "Fund": The trust fund, including any separate trusts, created under and subject to the Plan, which shall be known as the "Eskimo Pie Corporation Salaried Retirement Trust". 1.21 "Highly Compensated Employee": 1.21(a) For Plan Years beginning before January 1, 1997, an individual who is considered a "highly compensated employee" with respect to the Employer within the meaning of Section 414(q) of the Code; and, to the extent not inconsistent therewith, any Employee who is considered a Highly Compensated Active Employee or a Highly Compensated Former Employee for the Determination Year ending with or within such Plan Year, defined as follows: (i) The term "Highly Compensated Active Employee" means, with respect to a Determination Year, an Employee who is an Active Employee during the Determination Year and who during the Determination Year or the Look-Back Year either: (A) Was at any time a more than five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees); (B) Received Statutory Compensation in excess of $75,000 (as adjusted by the Adjustment Factor); (C) Received Statutory Compensation in excess of $50,000 (as adjusted by the Adjustment Factor), and was a member of the twenty percent (20%) top-paid group of Employees; or (D) Was one of the fifty (50) (or if less, the greater of three (3) or ten percent (10%) of total Employees) officers of the Employer having the largest annual Statutory Compensation and having Statutory Compensation in excess of $45,000 (or fifty percent (50%) of any other amount, as adjusted by the Adjustment Factor, in effect under Section 415(b)(1)(A) of the Code), provided, however, that if no officers received Statutory Compensation for either such Plan Year in excess of such dollar amount, then the officer receiving the largest annual Statutory Compensation shall be a Highly Compensated Active Employee. Notwithstanding the foregoing, an Employee shall not be considered described in clauses (i)(B), (C) and (D) of this subparagraph for a Determination Year (although he may for a Look-Back Year) unless he also is one of the one hundred (100) Active Employees who receive the greatest Statutory Compensation for the Determination Year. (ii) The term "Highly Compensated Former Employee" means: (A) With respect to a Determination Year, a Former Employee who has had a Separation Year prior to the Determination Year and who was a Highly Compensated Active Employee for either such Separation Year or any Determination Year ending on or after his attainment of the age of fifty-five (55). (B) Notwithstanding the foregoing, an Employee shall not be treated as a Highly Compensated Former Employee by reason of having a Deemed Separation Year after such Employee actually separates from service with the Employer if, after such Deemed Separation Year and before his Actual Separation Year, his services for the Employer and Statutory Compensation for a Determination Year increase significantly so that the Employee is treated as having a Deemed Resumption of Employment. -6- (C) Notwithstanding the foregoing, a Former Employee who separated from service with the Employer before the beginning of the first Determination Year beginning on or after January 1, 1987 shall not be treated as a Highly Compensated Former Employee unless he is described in one or more of the following groups during either his Actual Separation Year (or the year immediately preceding his Actual Separation Year) or any Determination Year ending on or after his attainment of the age of fifty-five (55) (or the last Determination Year ending before his attainment of the age of fifty-five (55)): (I) He was at any time a more than five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees); or (II) His Statutory Compensation was in excess of $50,000. 1.21(b) For Plan Years beginning on or after January 1, 1997, an individual who is considered a "highly compensated employee" with respect to the Employer within the meaning of Section 414(q) of the Code; and, to the extent not inconsistent therewith, any Employee who is considered a Highly Compensated Active Employee or a Highly Compensated Former Employee for the Determination Year ending with or within such Plan Year, defined as follows: (i) The term "Highly Compensated Active Employee" means, with respect to a Determination Year, an Employee who is an Active Employee during the Determination Year and who either: (A) Was at any time a more than five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees) for the Determination Year or the Look-Back Year, or (B) Received Statutory Compensation in excess of $80,000 (as adjusted by the Adjustment Factor, but with the base period being the calendar quarter ending September 30, 1996) and, at the election (the "top-paid group election") of the Plan Sponsor in accordance with Section 414(q) of the Code, was a member of the twenty percent (20%) top-paid group of Employees for the Look-Back Year. The Plan Sponsor hereby makes the top-paid group election, provided, however, that the election shall be ineffective for any Determination Year beginning in a calendar year beginning on or after January 1, 1998 and before January 1, 2000 unless the Employer makes the top-paid group election with respect to the determination years beginning in such calendar year for all of the retirement plans (which for this purpose are plans qualified under Section 401(a) or 403(a) of the Code or described in Section 403(b) or 408(k) of the Code) sponsored by the Employer, and provided, further, that the election shall be ineffective for any Determination Year beginning in a calendar year beginning on or after January 1, 2000 unless the Employer makes the top-paid group election with respect to the determination years beginning in such calendar year for all of the retirement plans and nonretirement plans (which for this purpose are employee benefit arrangements to which the definition of highly compensated employees under Section 414(q) of the Code is applicable and which are not plans qualified under Section 401(a) or 403(a) of the Code or described in Section 403(b) or 408(k) of the Code) sponsored by the Employer. (ii) The term "Highly Compensated Former Employee" means: (A) With respect to a Determination Year, a Former Employee who has had a Separation Year prior to the Determination Year and who was a Highly Compensated Active Employee for either such Separation Year or any Determination Year ending on or after his attainment of the age of fifty-five (55) (based on the rules under Section 414(q) in effect for the applicable Separation Year or Determination Year). (B) Notwithstanding the foregoing, an Employee shall not be treated as a Highly Compensated Former Employee by reason of having a Deemed Separation Year after such Employee actually separates from service with the Employer if, after such Deemed Separation Year and before his Actual Separation -7- Year, his services for the Employer and Statutory Compensation for a Determination Year increase significantly so that the Employee is treated as having a Deemed Resumption of Employment. 1.21(c) For purposes hereof: (i) The term "Active Employee" means, with respect to a Determination Year, a current Employee who performs services for the Employer as an Employee at any time during the Determination Year. (ii) The term "Deemed Resumption of Employment" means an increase in both services performed for the Employer as an Employee and Statutory Compensation, based on the facts and circumstances, and at a minimum shall include an increase in Statutory Compensation to the extent that such increased Statutory Compensation would not result in a Deemed Separation Year. (iii) The term "Determination Year" means the Plan Year. (iv) The term "Former Employee" means, with respect to a Determination Year, a current or former Employee who performs no services for the Employer as an Employee during the Determination Year. (v) The term "Look-Back Year" means: (A) With respect to a Determination Year beginning before January 1, 1997, the year immediately preceding the Determination Year in question, provided, however, that if the Determination Year is the calendar year and the Administrator elects in accordance with Section 414(q) of the Code to determine the status of individuals as Highly Compensated Employees on the basis of a Look-Back Year and Determination Year which are the same year, then the Look-Back Year shall be the Determination Year. (B) With respect to a Determination Year beginning on or after January 1, 1997, the year immediately preceding the Determination Year in question. (vi) The term "Separation Year" means: (A) An "Actual Separation Year" which is a Determination Year in which a Former Employee last performed services for the Employer as an Employee prior to becoming a Highly Compensated Former Employee; or (B) A "Deemed Separation Year" which is a Determination Year prior to the Employee's attainment of the age of fifty-five (55) in which he is an Active Employee and in which his Statutory Compensation is less than fifty percent (50%) of his average annual Statutory Compensation for the three (3) consecutive calendar years preceding the Determination Year during which his Statutory Compensation was the highest (or the total period of the Employee's service with the Employer if less). A Deemed Separation Year is relevant for purposes of determining whether an Employee is a Highly Compensated Former Employee after he has an Actual Separation Year, but is not relevant for purposes of identifying him as an Active or Former Employee. 1.21(d) For purposes hereof: (i) The Adjustment Factor for a Determination Year or a Look-Back Year shall be applied on the basis of the calendar year in which such Determination Year or Look-Back Year begins. (ii) The Administrator may adopt any rounding or tie-breaking rules it desires in making relevant determinations so long as such rules are reasonable, non-discriminatory and uniformly and consistently applied. -8- (iii) An Employee is a member of the twenty percent (20%) top-paid group for a year if he is one of the top twenty percent (20%) of Active Employees for the year when ranked on the basis of descending Statutory Compensation for such year (whether or not the Employee in question is excluded in determining the number of Employees in the twenty percent (20%) top-paid group). For this purpose, if bargaining unit Employees are not taken into account in determining the number of Employees in the twenty percent (20%) top-paid group pursuant to clause (iv)(E) of this subparagraph, they also shall not be taken into account in determining other Employees who are in twenty percent (20%) top-paid group. (iv) For purposes of determining the number of persons in the twenty percent (20%) top-paid group and the number of persons who may be considered officers for a year, the following rules shall apply: (A) The number of Employees who are in the twenty percent (20%) top-paid group for a year is twenty percent (20%), rounded to the nearest integer, of the total number of Active Employees who are not excluded Employees for such year. (B) The number of Employees equal to ten percent (10%) of total Employees for a year is ten percent (10%), rounded to the nearest integer, of the total number of Active Employees who are not excluded Employees for such year. (C) All Former Employees for the year are excluded. (D) Employees who are non-resident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer that constitutes income from sources within the United States for the year are excluded. (E) Employees who are in a unit of employees covered by a collective bargaining agreement between the Employer and employee representatives for the year are excluded if and only if ninety percent (90%) or more of the total Employees for the year are covered by a collective bargaining agreement with the Employer and the Active Participants in the Plan do not include any such bargaining unit Employees. (F) Employees shall not be excluded on the basis of age or length of prior service. (v) If any Plan Year is a period of less than twelve (12) months, then any dollar amount referred to in this paragraph shall be prorated by multiplying the otherwise applicable dollar amount for such Plan Year by a fraction, the numerator of which is the number of months in such Plan Year and the denominator of which is twelve (12). 1.22 "Hour of Service": An hour for which an Employee is paid by the Employer, or entitled to payment, for the performance of duties, including each hour for which credit has not theretofore been given and for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to by the Employer. 1.23 "Inactive Participant": A Participant who is not an Eligible Employee. 1.24 "Insurer": Any insurance company which issues a Contract to hold assets of the Plan or a Policy to provide for payment of benefits under the Plan or to provide life insurance pursuant to the Plan. 1.25 "Investment Manager": A fiduciary of the Plan appointed to manage all or part of the assets of the Fund and serving pursuant to ARTICLE X and qualifying as an "investment manager" within the meaning of Section 3(38) of the Act. 1.26 "Key Employee": -9- 1.26(a) With respect to a Plan Year, any Employee or former Employee (or his Beneficiary if he is deceased) considered to be a "key employee" with respect to the Employer at the time in question within the meaning of Section 416(i)(1) of the Code; and to the extent not inconsistent therewith, any Employee or former Employee (or his Beneficiary if he is deceased) who at any time during such Plan Year, or any of the preceding four (4) Plan Years, is either: (i) One of the fifty (50) (or if less, the greater of three (3) or ten percent (10%) of total Employees, as determined for purposes of determining Highly Compensated Employees) officers of the Employer having the largest annual Statutory Compensation during any such Plan Year and having Statutory Compensation in excess of $45,000 (or fifty percent (50%) of any other amount, as adjusted by the Adjustment Factor, in effect for the relevant Plan Year under Section 415(b)(1)(A) of the Code); (ii) One of the ten (10) Employees having Statutory Compensation in excess of $30,000 (or any other amount, as adjusted by the Adjustment Factor, in effect for the relevant Plan Year under Section 415(c)(1)(A) of the Code) and owning more than a one-half percent (.5%) interest in the Employer, who owns the largest interests in the Employer, provided that if two such Employees have the same interest in the Employer, the Employee having the greater Statutory Compensation shall be treated as having a larger interest; (iii) A more than five percent (5%) owner of the Employer; or (iv) A more than one percent (1%) owner of the Employer having an annual Statutory Compensation of more than $150,000. 1.26(b) In determining ownership in the Employer for purposes hereof the constructive ownership rules of Section 318 of the Code (as modified by Section 416(i)(1)(B)(iii) of the Code) shall apply, and the rules of Sections 414(b), (c), (m) and (o) of the Code shall not apply. 1.27 "Leased Employee": 1.27(a) An individual who is considered a leased employee of the Employer within the meaning of Section 414(n)(2) of the Code and, to the extent not inconsistent therewith, any person: (i) Who, pursuant to an agreement between the recipient Employer and any other person (the "leasing organization"), has performed services for the recipient Employer or for the recipient Employer and related persons (determined in accordance with Section 414(n)(6) of the Code), (ii) Whose services are performed on a substantially full-time basis for a period of at least one year, and (iii) For years beginning before January 1, 1997, whose services are of a type historically performed by employees in the business field of the recipient Employer; and for years beginning after December 31, 1996, whose services are performed under the primary control or direction of the recipient Employer. 1.27(b) Notwithstanding the foregoing, if such leased employees constitute less than twenty percent (20%) of the Employer's non-highly compensated work force within the meaning of Section 414(n)(1)(C)(ii) of the Code, individuals otherwise considered to be Leased Employees shall not include those leased employees covered by a plan described in Section 414(n)(5) of the Code (unless otherwise provided by the terms of the Plan) and, to the extent not inconsistent therewith, which: (i) Is maintained by the leasing organization, (ii) Is a money purchase pension plan with a non-integrated employer contribution rate of at least seven and one-half percent (7-1/2%) of compensation in the case of services performed before January 1, 1987 or ten percent (10%) of compensation in the case of services performed after December 31, 1986, -10- (iii) Provides full and immediate vesting, and (iv) Provides for immediate participation by each employee of the leasing organization (other than employees who perform substantially all their services for the leasing organization or whose compensation from the leasing organization in each of the four (4) Plan Years ending with the Plan Year in question is less than $1,000). For purposes hereof, "compensation" means compensation as defined in Section 415(c)(3) of the Code, but determined without regard to Sections 125, 402(e)(3) and 402(h)(1)(B) of the Code and without regard to employer contributions made pursuant to salary reduction agreements under Section 403(b) of the Code for Plan Years beginning before January 1, 1998. 1.29 "Non-Key Employee": Any Employee (including the Beneficiary of such Employee) who is not a Key Employee. 1.30 "Normal Retirement Age": With respect to a Participant, the later of: (i) The age of sixty-five (65), or (ii) The Participant's attained age on the fifth anniversary of his first becoming an Employee. 1.31 "Participant": An Eligible Employee or other person qualified to participate in the Plan for so long as he is considered a Participant as provided in ARTICLE II hereof. 1.32 "Plan": This Agreement, including the Appendices hereto, as contained herein or duly amended. The defined benefit plan maintained pursuant hereto shall be known as the "Eskimo Pie Corporation Salaried Retirement Plan". 1.33 "Plan Sponsor": Eskimo Pie Corporation, a Delaware corporation (or its corporate successor). 1.34 "Plan Year": A year commencing upon the first day of January of each year. 1.35 "Policy": A group or individual policy, contract or other agreement (including a certificate) issued by an Insurer which is not a Contract and which is obtained to provide for the accumulation and/or payment of benefits under the Plan or to provide life insurance pursuant to the Plan. 1.36 "QDRO": A qualified domestic relations order within the meaning of Section 206(d)(3) of the Act and Section 414(p) of the Code and as determined by the Administrator pursuant to the Plan. 1.37 "Salaried Employee": Any common law employee of the Employer (exclusive of any Affiliate which is not a participating employer unless otherwise expressly provided) who is employed on a salaried basis. 1.38 "Spouse": For the purpose of qualifying to receive survivor annuity benefits under the Plan, an individual to whom a Participant was married: (i) On his Annuity Starting Date, or (ii) If he has not reached his Annuity Starting Date, throughout the one year period ending on his date of death. The determination of the marital status of a Participant shall be made pursuant to applicable local law; provided, however, that a Participant's former spouse shall continue to be considered married to the Participant, and a Participant's current spouse shall be considered not married to the Participant, to the extent provided under a QDRO. -11- 1.39 "Statutory Compensation": 1.39(a) For Plan Years beginning before January 1, 1998, an Employee's Total Compensation plus employee elective salary reduction or similar contributions excluded from Total Compensation by reason of Sections 125, 402(e)(3), 402(h), 403(b), 414(h)(2) and 457(b) of the Code. Statutory Compensation for a Plan Year (or other applicable computation period) shall be limited by the Compensation Limit for all purposes other than determining Family Members, Highly Compensated Employees and Key Employees. 1.39(b) For Plan Years beginning on or after January 1, 1998, an Employee's Total Compensation. Statutory Compensation for a Plan Year (or other applicable computation period) shall be limited by the Compensation Limit for all purposes other than determining Highly Compensated Employees and Key Employees. 1.40 "Super Top Heavy Plan": The Plan, if it would still be considered a Top Heavy Plan if ninety percent (90%) were substituted for sixty percent (60%) in each place it appears in the definition of a Top Heavy Plan. 1.41 "Top Heavy Plan": The Plan, for any Plan Year beginning after December 31, 1983, if the sum of the present values of the cumulative Accrued Benefits of Key Employees under the Plan, and the present values of the cumulative accrued benefits of Key Employees under all plans aggregated with it, exceeds sixty percent (60%) of the aggregate of the present value of the cumulative Accrued Benefits under this Plan and accrued benefits under such plan(s) at the applicable determination date. For purposes hereof, aggregation, accrued benefits (including Accrued Benefits) taken into account, the determination date and all other standards and criteria for determining top- heaviness under this Plan and such other plan(s) shall be determined under Section 416 of the Code. Subject to the foregoing, more specific rules for determining whether the Plan is a Top Heavy Plan are provided in Appendix B. 1.42 "Total Compensation": 1.42(a) For Plan Years (or Limitation Years, as applicable) beginning before January 1, 1998, the total earnings from the Employer reportable in the Wages, Tips and Other Compensation Box (currently Box 10) on I.R.S. Form W-2 pursuant to Sections 6041, 6051 and 6052 of the Code received by or made available to an Employee during any Plan Year or, for purposes of the limitations imposed by Section 415 of the Code, any Limitation Year (as defined in paragraph 4.5). 1.42(b) For Plan Years (or Limitation Years, as applicable) beginning on or after January 1, 1998, the total earnings from the Employer reportable in the Wages, Tips and Other Compensation Box (currently Box 10) on I.R.S. Form W-2 pursuant to Sections 6041, 6051 and 6052 of the Code received by or made available to an Employee during any Plan Year or, for purposes of the limitations imposed by Section 415 of the Code, any Limitation Year (as defined in paragraph 4.5) plus, to the extent not included therein, employee elective salary reduction or similar deferral contributions excluded from W-2 compensation by reason of Section 125, 402(g)(3) or 457(b) of the Code (and elective deferrals or contributions under any other sections of the Code covered by Section 415(c)(3)(D) of the Code). 1.43 "Trustee": William M. Fariss, Jr.; and any successor or additional Trustee or Trustees, including any Co-Trustee or Separate Trustee as provided in ARTICLE XII, appointed and serving in accordance herewith. 1.44 "Year of Benefit Service": 1.44(a) A Period of Service (as defined in Appendix A) as an Eligible Employee of one year, excluding all service before April 6, 1992. For purposes hereof, where a Period of Service as an Eligible Employee is longer than one year, it shall be treated as that number of Years of Benefit Service (and fractional part thereof) equal to the whole number of years (and fractional part thereof) in such Period of Service. 1.44(b) Notwithstanding anything to the contrary herein, if a Salaried Employee is an Executive (as defined in paragraph 1.16) during a Plan Year, no part of such Plan Year shall be taken into account in determining such person's Years of Benefit Service. -12- 1.45 "Year of Broken Service": A Break in Service (as defined in Appendix A) of one year. For purposes hereof, where a Break in Service is longer than one year, it shall be treated as that number of Years of Broken Service (and fractional part thereof) equal to the whole consecutive number of years (and fractional part thereof) in the Period of Severance. 1.46 "Year of Service": A year, based on the applicable computation period stated when used in the Plan and expressed in terms of a whole and partial year, which is included in a Period of Service (as defined in Appendix A). 1.47 "Year of Vesting Service": A Period of Service (as defined in Appendix A) of one year. For purposes hereof, when a Period of Service is longer than one year, it shall be treated as that number of Years of Vesting Service (and fractional parts thereof) equal to the whole number of years (and fractional parts thereof) in the Period of Service. ARTICLE II Eligibility and Participation ----------------------------- 2.1 Eligibility and Date of Participation. ------------------------------------- 2.1(a) Each Eligible Employee who has attained the age of twenty-one (21) years prior to an Entry Date shall become a Participant on the earlier of the following dates, provided he is then credited with at least one Year of Eligibility Service: (i) On the first Entry Date on which he is an Eligible Employee following his completion of such age and service requirements. (ii) If he is not an Eligible Employee on the first Entry Date following his completion of such age and service requirements, on the first day he thereafter becomes an Eligible Employee. Notwithstanding the foregoing, each Employee who is an Eligible Employee at the time of a "change in control" of the Plan Sponsor shall become a Participant in the Plan as of the date for such change in control. For purposes hereof, the term "change in control" means "Change in Control" as defined in the Plan Sponsor's 1996 Incentive Stock Plan. 2.1(b) An individual who was, but ceased to be, a Participant shall again be a Participant at the first to occur of the following: (i) If and when he again becomes an Eligible Employee, (ii) If all or part of his Accrued Benefit is considered cashed-out and forfeited pursuant to paragraph 4.6, if and when the cashed-out amount is reinstated pursuant thereto, or (iii) If his forfeited Accrued Benefit is restored pursuant to paragraph 6.4, if and when he again becomes an Employee. 2.1(c) An individual who becomes a Participant shall be or remain a Participant for so long as he remains an Eligible Employee and thereafter while he is entitled to future benefits under the terms of the Plan. 2.2 Eligibility Service Definitions and Rules. For purposes of this ----------------------------------------- ARTICLE II, the following terms shall have the following meanings: 2.2(a) The term "Entry Date" means the Effective Date of the Plan and thereafter the first day of each calendar month of each Plan Year. Notwithstanding the foregoing, the first Entry Date with respect to an Employee of an Employer -13- which adopts the Plan as a participating employer as of a date after the Effective Date of the Plan shall be the Effective Date of the adoption of the Plan as to such Employer. Additional Entry Dates may be provided in a participating employer's adoption agreement. 2.2(b) The term "Year of Eligibility Service" means a Period of Service (as defined in Appendix A) of one year. For purposes hereof, when a Period of Service is longer than one year, it shall be treated as that number of Years of Eligibility Service (and fractional parts thereof) equal to the whole number of years (and fractional parts thereof) in the Period of Service. ARTICLE III Funding ------- 3.1 Funding. ------- 3.1(a) All costs of benefits under the Plan shall be borne by contributions by the Employer and any assets transferred to the Plan. Such contributions by the Employer shall equal amounts actuarially determined to be sufficient to satisfy the requirements of Section 302 of the Act and Section 412 of the Code, but shall not exceed amounts deductible by the Employer under Section 404 of the Code. Each contribution shall be conditioned upon such deductibility. Funds released through the forfeiture of Accrued Benefits shall be applied first to pay administrative expenses of the Plan and Fund, if so directed by the Plan Sponsor, and then to reduce the Employer's contributions. Each Employer's contribution shall be in such amount as the Plan Sponsor shall determine. 3.1(b) In the event that any Employer is unable to make all or any part of any contribution to the Fund, the Plan Sponsor shall direct that one or more other Employers (including itself) contribute to the Fund on behalf of such Employer the amount prohibited by such limitation, and for purposes of administering the Plan such contribution shall be deemed made by the Employer on whose behalf it was made. 3.2 Timing of Contributions by the Employer. The contribution by the --------------------------------------- Employer for any Plan Year shall be made in quarterly payments and as otherwise required under Section 302 of the Act and Section 412 of the Code, provided that the total amount of the contribution with respect to any taxable year of the Employer shall be paid not later than the date, including extensions thereof, on which the Employer's federal income tax return for such taxable year is due to be filed. 3.3 Determination of Funding Requirements. The amount of the ------------------------------------- Employer's contribution for any Plan Year shall be determined by the enrolled actuary for the Plan who shall be selected by, and may from time to time be changed by, the Plan Sponsor. The Trustee shall provide to the Plan's enrolled actuary and the Plan Sponsor, or to its duly appointed representative, such information regarding the income, disbursements and value of the Fund as may be reasonably required for the purpose of making such determination. The Plan Sponsor and the Plan's enrolled actuary shall select the appropriate funding method and assumptions for determining the amount of the Employer's contribution. 3.4 No Duty of Trustee to Determine or Enforce Contributions. The -------------------------------------------------------- Trustee shall not be required to determine the amount of the Employer's contribution for any Plan Year or to enforce the duty of the Employer to make such contributions; but the Trustee shall provide the Employer with such information as it may reasonably require to determine the amount of its contribution. ARTICLE IV Determination of Accrued Benefit -------------------------------- 4.1 Accrued Benefit. --------------- -14- 4.1(a) The Accrued Benefit of a Participant shall be an amount, expressed in the form of a single life annuity payable monthly for the life of the Participant, commencing upon his Normal Retirement Date or as otherwise provided in this subparagraph 4.1(a), and equal to the amount determined under the Benefit Formula, calculated as follows: (i) A Participant who retires on his Normal Retirement Date shall be entitled to his Accrued Benefit calculated under the Benefit Formula to his Normal Retirement Date. (ii) A Participant whose employment with the Employer terminates after his Normal Retirement Date shall be entitled to an Accrued Benefit commencing on his Delayed Retirement Date (or, where applicable, his other benefit commencement date determined as though he had separated from service and had a Delayed Retirement Date) equal to the sum of: (A) His Accrued Benefit calculated under the Benefit Formula to his Normal Retirement Date, and (B) The sum of the greater, determined for each Plan Year (or portion thereof) ending after his Normal Retirement Date, of: (I) The excess, if any, of (a) his Accrued Benefit calculated under the Benefit Formula as of the end of such Plan Year (or if earlier and as applicable, his Delayed Retirement Date or his other benefit commencement date determined as though he had separated from service and had a Delayed Retirement Date) over (b) his Accrued Benefit calculated as of the end of the immediately preceding Plan Year (or his Normal Retirement Date, if later), or (II) The excess, if any, of (a) the Actuarial Equivalent of his Accrued Benefit calculated under the Benefit Formula as of the end of the immediately preceding Plan Year (or his Normal Retirement Date, if later), where the Actuarial Equivalent adjustment is determined as of the end of such Plan Year (or, where applicable, his Delayed Retirement Date or his other benefit commencement date determined as though he had separated from service and had a Delayed Retirement Date) over (b) his Accrued Benefit calculated as of the end of the immediately preceding Plan Year (or his Normal Retirement Date, if later). (iii) A Participant who retires on his Early Retirement Date shall be entitled to his Accrued Benefit calculated under the Benefit Formula to his Early Retirement Date. (iv) The Accrued Benefit of each other Participant shall be calculated under the Benefit Formula as of the applicable date for which such determination is made. 4.1(b) Notwithstanding the foregoing, the amount of a Participant's Accrued Benefit derived from contributions by the Employer, expressed in the form of a single life annuity payable monthly for his life and commencing on his Normal Retirement Date, shall not be less than the Actuarial Equivalent of any Top Heavy Minimum Benefit required to be provided by the Plan to him under paragraph 4.3. 4.1(c) For purposes hereof: (i) A Participant's "Average Compensation" is the average of his Compensation for the five (5) consecutive Plan Years within the last ten (10) Plan Years prior to the date as of which his Accrued Benefit is determined (or if earlier, when he last is an Eligible Employee), during each of which he has Compensation and is credited with a full Year of Service as an Eligible Employee (with the Plan Year as the computation period) and which produce the highest average or, if they are less than five (5) such consecutive Plan Years, for all Plan Years during each of which he has Compensation and is credited with a full Year of Service as an Eligible Employee (based on the Plan Year). Plan Years shall be deemed to be consecutive even though interrupted by one or more Plan Years for -15- each of which the Employee had no Compensation or was not credited with a full Year of Service as an Eligible Employee (based on the Plan Year). For purposes hereof: (A) Average Compensation shall be rounded to the nearest whole dollar. (B) If a Participant becomes an Executive (as defined in paragraph 1.16) and thereafter ceases to be an Executive and thereupon or later becomes a Salaried Employee who is not an Executive, his compensation and service as an Executive shall be taken into account as compensation and service as an Eligible Employee solely for purposes for determining his Compensation and Average Compensation until such time, if ever, as he again becomes an Executive. This operating rule may apply more than once. (ii) The "Benefit Formula" is the greater of: (A) One-twelfth (1/12) of the product obtained by multiplying one and one-half percent (1-1/2%) of a Participant's Average Compensation by his Years of Benefit Service, or (B) The product obtained by multiplying Thirty-Six Dollars ($36) by the Participant's Years of Benefit Service. 4.2 Accrued Benefit Service Rules. For purposes of determining the ----------------------------- Accrued Benefit of a Participant under subparagraph 4.1(a), all Years of Benefit Service shall be included. 4.3 Top Heavy Minimum Benefit. ------------------------- 4.3(a) If the Plan is or has been a Top Heavy Plan, each Participant who is credited with at least one Year of Service (determined on the basis of a Plan Year as the computation period), who is not covered by a collective bargaining agreement under which retirement benefits were the subject of good faith bargaining with the Employer and who is a Non-Key Employee during the period the Plan is a Top Heavy Plan shall be entitled to a Top Heavy Minimum Benefit. For purposes hereof: (i) The Top Heavy Minimum Benefit is an amount, expressed in the form of a single life annuity payable monthly for the life of the Participant (with no ancillary benefits) commencing at his Normal Retirement Date, equal to one-twelfth (1/12) of the product obtained by multiplying: (A) His Top Heavy Average Compensation, by (B) The product (not in excess of twenty percent (20%)) obtained by multiplying his aggregate full Years of Top Heavy Service by two percent (2%). (ii) If such a Participant's employment with the Employer terminates after his Normal Retirement Date, he shall be entitled to the greater of: (A) His Top Heavy Minimum Benefit calculated under clause (i) of this subparagraph to and commencing at his termination of employment with the Employer, or (B) The Actuarial Equivalent his Top Heavy Minimum Benefit commencing upon his termination of employment and calculated to his Normal Retirement Date or, if later, the end of the Plan Year immediately preceding the determination date. (iii) If the Plan is a Top Heavy Plan during more than one continuous period of time, the rules of this paragraph 4.3 shall be applied separately to each such period of time, but the maximum aggregate Top Heavy -16- Minimum Benefit provided hereunder shall not exceed twenty percent (20%) of his highest Top Heavy Average Compensation in such periods of time. 4.3(b) For purposes of determining a Participant's Top Heavy Minimum Benefit, the term "Top Heavy Average Compensation" means the average of an Employee's Total Compensation for the five (5) consecutive Plan Years (or all consecutive Plan Years if there are not five (5) such Plan Years) during which he has Total Compensation and is credited with a full Year of Service (with the Plan Year as the computation period) and which produce the highest average, computed as of the end of any Plan Year during which the Plan is a Top Heavy Plan (but not thereafter) and without taking into account Total Compensation for any Plan Year to the extent that it exceeds the Compensation Limit. Plan Years shall be deemed to be consecutive even though interrupted by one or more Plan Years for each of which the Employee had no Total Compensation or was not credited with a full Year of Service (based on the Plan Year). 4.3(c) For purposes of determining a Participant's Top Heavy Minimum Benefit, the term "Year of Top Heavy Service" means each Plan Year for which the Participant is credited with a Year of Service determined on the basis of the Plan Year as the computation period, counting only Hours of Service as an Eligible Employee, and excluding the following service, to the extent not inconsistent with Section 416 of the Code: (i) Any Year of Service credited for Plan Years beginning before January 1, 1984. (ii) Any Year of Service credited for a Plan Year for which the Plan is not a Top Heavy Plan. (iii) Any Year of Service credited for a Plan Year for which the Participant is a Key Employee. (iv) Any Year of Service credited for a Plan Year for which the Participant is not an Active Participant (or does not accrue a benefit under the Plan) for reasons other than because his compensation is less than a stated amount or because of his failure to make mandatory contributions to the Plan. 4.3(d) It is the specific intent of this paragraph that only the minimum required benefit under Section 416 of the Code be provided and, notwithstanding any other provision hereof, the aggregate benefits provided for a Participant by this paragraph and the corresponding provisions of all other qualified retirement plans maintained by the Employer shall not exceed such minimum required for such Participant. For purposes hereof: (i) In the event such minimum for such Participant would otherwise be exceeded, the minimum benefit provided by this paragraph and such other corresponding provisions of a defined benefit plan shall be reduced pro rata until only the minimum required for such Participant is provided. (ii) In applying this subparagraph to the accrued benefit provided by a defined contribution plan, the following rules shall apply: (A) No such accrued benefit attributable to salary reduction contributions under Section 401(k) of the Code considered made by the Employer or matching contributions within the meaning of Section 401(m)(4)(A) of the Code shall be taken into account. (B) No such accrued benefit under a plan which does not provide payment of benefits in the form of a life annuity as the normal form of payment or which is not subject to the survivor annuity requirements of Section 417 of the Code shall be taken into account. (C) Otherwise, any minimum required benefit under this paragraph shall be reduced under a floor offset approach by the Actuarial Value of such accrued benefit attributable to contributions by the Employer under such plans by applying the Actuarial Equivalent factors hereunder for cash-outs to convert the amount of such accrued benefit determined at the earlier of the commencement of benefits under this Plan or under such other plan into a Top Heavy Minimum Benefit. -17- 4.4 Accrued Benefit Limitation. -------------------------- 4.4(a) To the extent not otherwise provided herein or to the extent inconsistent with the provisions hereof and except as prohibited by applicable regulations under the Code, the applicable limitations on contributions and benefits under Section 415, as modified where applicable by Section 416 of the Code, are incorporated by reference and shall control over any contrary or omitted provisions in the Plan. As applicable to this Plan, the limitations on benefit of Section 415 of the Code generally limit a Participant's annual benefit (as defined in Section 415 of the Code) to the lesser of $90,000 (as adjusted by the Adjustment Factor) or 100% of his highest three consecutive year average Total Compensation. 4.4(b) To the extent a death benefit with respect to a Participant is determined on the basis of his Accrued Benefit, or a projection thereof, such death benefit shall be determined on a basis which appropriately reflects the limitations imposed by Section 415 of the Code. 4.4(c) Notwithstanding the foregoing, adjustments in the $90,000 limit under Section 415 of the Code shall only be applicable to benefits provided by this Plan with respect to a Participant who is an Employee or Disabled (as provided in paragraph 5.4) at the time the adjustment is effective. 4.4(d) In complying with the limitations of Section 415 of the Code, all other transitional rules under any law enacting or amending Section 415, or Section 416 as applicable to Section 415, of the Code shall be applicable as determined by the Plan Sponsor. 4.5 Additional Accrued Benefit Limitations When Employer Maintains -------------------------------------------------------------- More Than One Plan. - ------------------ 4.5(a) If any Participant is or has been a participant in more than one Qualified Defined Benefit Plans (whether or not terminated), the limitations contained in paragraph 4.4 and this paragraph shall apply as if all such plans were one plan. In such case, the annual benefits (as defined in Section 415 of the Code) payable to the Participant under this Plan and such other plan(s) shall be reduced proportionately so that the total annual benefits payable to the Participant under this Plan (if a Qualified Defined Benefit Plan) and such other plan(s) do not exceed the Maximum Permissible Benefit. 4.5(b) If any Participant is or has been a Participant in both a Qualified Defined Benefit Plan and a Qualified Defined Contribution Plan, then the annual additions (as defined in Section 415 of the Code) for such Participant shall be reduced (after the accrued benefit, the annual benefit, the projected annual benefit and the rate of accrual under all Qualified Defined Benefit Plans are reduced) to the extent necessary so that the sum of the defined benefit plan fraction (as defined in Section 415 of the Code) and the defined contribution plan fraction (as defined in Section 415 of the Code) shall not exceed 1.0 for such Participant for any Plan Year and in order to achieve the objective of compliance with the applicable rules of limitation contained in Section 415(e) of the Code and, if the Plan is a Top Heavy Plan or a Super Top Heavy Plan, in Section 416(h) of the Code. Notwithstanding anything to the contrary in this paragraph, the limitations provision of this subparagraph shall not apply with respect to Limitation Years beginning on or after January 1, 2000. 4.5(c) Solely for purposes of paragraphs 4.4 and 4.5, the following words and terms shall have the meaning set forth below in this subparagraph: (i) The term "Limitation Year" means the calendar year and is the year used to apply the limitations of section 415 of the Code. (ii) The term "Qualified Defined Contribution Plan" shall mean any plan maintained by the Employer or portion thereof described or treated as a defined contribution plan within the meaning of Sections 414(i) and 415(k) of the Code, including, but not limited to, defined contribution plans qualified under Section 401(a) of the Code, tax sheltered annuity contracts described in Section 403(b) of the Code, simplified employee pension plans described in Section 408(k) of the Code, any employee contribution portion of and any cost-of-living protection arrangement under a defined benefit plan qualified under Section 401(a) of the Code, any individual medical account under a pension or -18- annuity plan within the meaning of Section 415(l) of the Code, and any welfare benefit fund within the meaning of Section 419(e) of the Code. (iii) The term "Qualified Defined Benefit Plan" shall mean any plan maintained by the Employer or portion thereof described or treated as a defined benefit plan within the meaning of Sections 414(j) and 415(k) of the Code. 4.6 Effect of Certain Cash-Outs on Accrued Benefit. ---------------------------------------------- 4.6(a) In the case of a Participant who has ceased to be an Employee and who has received not later than one year after he incurs a Year of Broken Service either: (i) A distribution of the Actuarial Value of his entire non- forfeitable Accrued Benefit which includes an amount not exceeding $3,500 in the case of a distribution during Plan Years Beginning on or after January 1, 1985 and before January 1, 1998 or $5,000 in the case of a distribution during Plan Years beginning on or after January 1, 1998 and representing the Actuarial Value of his entire non-forfeitable Accrued Benefit derived from contributions by the Employer at the time of such distribution, or (ii) A distribution which he voluntarily elects to receive and which represents all or a portion of the Actuarial Value of his non-forfeitable Accrued Benefit at the time of such distribution, the Accrued Benefit (including any Top Heavy Minimum Benefit) of such Participant which is derived from contributions by the Employer shall be determined at any time thereafter without regard to his service with respect to which such distribution was made. 4.6(b) If a Participant who has no non-forfeitable interest in his Accrued Benefit ceases to be an Employee, he shall be deemed to have had his Accrued Benefit cashed-out pursuant to the provisions of subparagraph 4.6(a) and his Accrued Benefit shall be forfeited. If a Participant who is affected by the provisions of this subparagraph again becomes an Employee before he incurs five (5) consecutive Years of Broken Service commencing after the date of the deemed distribution and forfeiture (but in no event after the date of termination of the Plan), his forfeited Accrued Benefit shall be restored. 4.7 No Duplication of Benefits. Notwithstanding any other provision -------------------------- of the Plan, the total Actuarial Value of the Accrued Benefit which may be earned by any Participant shall not exceed the Actuarial Value of his Accrued Benefit under the Plan, calculated without regard to any prior distributions of his Accrued Benefit, and then reduced by the Actuarial Value of any prior distributions not repaid to the Plan. 4.8 Special Rules for Reemployed Veterans. ------------------------------------- 4.8(a) Notwithstanding any provision of the Plan to the contrary, benefits and service credit with respect to qualified military service shall be provided in accordance with Section 414(u) of the Code. To the extent not inconsistent with the foregoing, effective December 12, 1994, the following special rules shall apply in case of Reemployed Veterans notwithstanding any other provision of the Plan: (i) A Reemployed Veteran shall not be considered to have incurred a Year of Broken Service by reason of his Qualified Military Service. (ii) Qualified Military Service of a Reemployed Veteran shall be counted as service for vesting and benefit accrual under the Plan. (iii) Compensation to be used for purposes of determining benefit accrualwith respect to a period of Qualified Military Service shall mean the Compensation (as otherwise defined in the Plan but based on rate of pay) -19- which the Reemployed Veteran would have received but for his Qualified Military Service. If a Reemployed Veteran's pay is not readily determinable, the Reemployed Veteran's Compensation shall then be his average Compensation for the 12-month period (or actual shorter period of employment) immediately preceding his Qualified Military Service. 4.8(b) For purposes of this paragraph, the following terms have the following meanings: (i) "Qualified Military Service" means any service in the uniformed services (as defined in chapter 43 of title 38, United States Code) by any individual if such individual is entitled to reemployment rights under such chapter with respect to such service and to the Employer. (ii) "Reemployed Veteran" means a person who is or, but for his Qualified Military Service, would have been a Participant at some time during his Qualified Military Service and who is entitled to the restoration benefits and protections of the USERRA with respect to his Qualified Military Service and the Plan. (iii) "USERRA" means the Uniformed Services Employment and Reemployment Rights Act of 1994. ARTICLE V Retirement Dates ---------------- 5.1 Normal Retirement Date. The Normal Retirement Date of a ---------------------- Participant shall be the first day of the calendar month coinciding with or next following the date on which the Participant attains his Normal Retirement Age. 5.2 Delayed Retirement Date. A Participant who continues in the ----------------------- active employment of the Employer beyond his Normal Retirement Date shall continue to participate in the Plan, and his Delayed Retirement Date shall be the first day of the calendar month coinciding with or next following the date of termination of his employment with the Employer. 5.3 Early Retirement Date. A Participant who has attained the age of --------------------- fifty-five (55) years or more while a Salaried Employee or Disabled (as provided in paragraph 5.4) and has completed at least ten (10) Years of Vesting Service as determined for vesting purposes under paragraph 6.3 may retire from the employment of the Employer prior to his Normal Retirement Date and his Early Retirement Date shall be the first day of the calendar month coinciding with or next following the date of such retirement. 5.4 Disability and Retirement, Death or Separation after Disability. --------------------------------------------------------------- 5.4(a) If a Participant becomes Disabled while a Salaried Employee with at least one Year of Vesting Service, the determination of the Participant's Accrued benefit and Death Benefit, as applicable, shall be subject to the special rules contained in this paragraph. 5.4(b) For purposes hereof: (i) With respect to a Participant, the existence of a "Disability" or the status of being "Disabled": (A) Shall begin and be considered present during the period for which an Employee or former Employee is determined by the applicable fiduciary to be disabled for purposes of entitlement to disability benefits under any long term disability plan which is maintained by the Employer and under which he is covered, and for which he receives such benefits prior to his Normal Retirement Date, provided the cause of such disability occurred when the Employee was both a Salaried Employee and credited with one Year of Vesting Service, but -20- (B) Shall end in any event on the earlier of (I) the date he ceases to be Disabled (as determined above), whether by death or otherwise, or (II) his Normal Retirement Date. (ii) The Administrator shall have the right to require proof of continuing Disability. (iii) Failure by the Participant to provide such evidence as may from time to time be required by the Administrator prior to such Participant's attainment of his Normal Retirement Date shall result in the discontinuance of his Disability status and the termination of his status as Disabled under the Plan. (iv) The determination of Disability shall be made by the Administrator in accordance with standards uniformly applied to all Participants, on the advice of one or more physicians appointed or approved by the Plan Sponsor if deemed necessary or advisable by the Administrator, and the Administrator shall have the right to require further medical examinations from time to time to determine whether there has been any change in the Participant's physical condition. 5.4(c) If the period of a Participant's Disability continues until his Normal Retirement Date, the Participant shall be considered for purposes of the Plan to have retired on such date and to be entitled to his Accrued Benefit determined in accordance with paragraph 4.1 as a Participant who retires on his Normal Retirement Date. 5.4(d) If the period of a Participant's Disability ceases before the Participant's Normal Retirement Date but after the later of the Participant's attainment of the age of fifty-five (55) years or completion of ten (10) Years of Vesting Service as determined for vesting purposes under paragraph 6.3, other than by reason of the Participant's death, and the Participant does not return to active employment with the Employer, the Participant shall be considered for purposes of the Plan to have retired with the first day of the month thereafter as his Early Retirement Date and to be entitled to his Accrued Benefit determined in accordance with paragraph 4.1 as a Participant who retires on his Early Retirement Date. 5.4(e) If the period of a Participant's Disability ceases before the later of the Participant's attainment of the age of fifty-five (55) years or completion of ten (10) Years of Vesting Service as determined for vesting purposes under paragraph 6.3, and the Participant does not return to active employment with the Employer, the Participant's entitlement to his Accrued Benefit shall be determined as though he terminated employment with the Employer at such time. 5.4(f) If the period of a Participant's Disability ceases by reason of his death, the only benefit payable under the Plan shall be the Pre-Retirement Spouse's Death Benefit, if any, to which his Spouse is entitled. ARTICLE VI Vesting ------- 6.1 Vesting at Attainment of Normal Retirement Age. The Accrued ---------------------------------------------- Benefit of a Participant shall be fully vested and non-forfeitable upon the Participant's having attained his Normal Retirement Age while employed by the Employer or while Disabled (as provided in paragraph 5.4). 6.2 Vesting in Accrued Benefit at Other Times. ----------------------------------------- 6.2(a) At any time when a Participant is not fully vested in his Accrued Benefit under paragraph 6.1, he shall have a non-forfeitable interest in a percentage of his Accrued Benefit derived from contributions by the Employer depending upon the number of Years of Vesting Service with which he is credited at such time in accordance with the schedule below: Years of Vesting Service Non-Forfeitable Percentage ------------------------ -------------------------- Less than 5 0% 5 or more 100% -21- 6.2(b) In addition to the vesting provisions provided in subparagraph 6.2(a), for each Plan Year the Plan is a Top Heavy Plan, the following schedule shall also apply with respect to each Participant's Accrued Benefit derived from contributions by the Employer, and each Participant to whom such schedule applies shall be entitled to the greater of the non-forfeitable interest in such Accrued Benefit determined under subparagraph 6.2(a) or the following schedule: (i) A Participant who is credited with an Hour of Service during the period that the Plan is a Top Heavy Plan and who is not covered by a collective bargaining agreement under which retirement benefits were the subject of good faith bargaining with the Employer shall have a non- forfeitable interest in his Accrued Benefit derived from contributions by the Employer and the percentage of such non-forfeitable interest shall depend upon the number of Years of Vesting Service with which he is credited in accordance with the schedule below: Years of Vesting Service Non-Forfeitable Percentage ------------------------ -------------------------- Less than 3 0% 3 or more 100% (ii) In the event the Plan is a Top Heavy Plan for a Plan Year or Years and subsequently ceases to be a Top Heavy Plan, the vesting provisions of this subparagraph as applicable to the last such Plan Year the Plan is a Top Heavy Plan during such period shall continue to apply only to such Participants who were credited with at least three (3) Years of Vesting Service at the end of the last such Plan Year. 6.2(c) Notwithstanding the foregoing, a Participant (including those for whom immediate commencement of participation in the Plan is provided under subparagraph 2.1(a) as a result of a "change in control" of the Plan Sponsor) who is an Employee at the time of a "change in control" of the Plan Sponsor shall have a 100% non-forfeitable interest in his Accrued Benefit. For purposes hereof, the term "change in control" means "Change in Control" as defined in the Plan Sponsor's 1996 Incentive Stock Plan. 6.3 Vesting Service Rules. For the purpose of computing a --------------------- Participant's non-forfeitable right to a percentage of his Accrued Benefit derived from contributions by the Employer, all Years of Vesting Service shall be included. 6.4 Forfeiture and Restoration of Accrued Benefits. A Participant's ---------------------------------------------- Accrued Benefit in excess of his non-forfeitable Accrued Benefit shall be forfeited by such Participant upon the first to occur of his ceasing to be an Employee (or, if applicable, Disabled as provided in paragraph 5.4) or his death; provided, however, that, subject to the provisions of the Plan requiring prior service to be disregarded, any such forfeited Accrued Benefit of a Participant shall be restored upon such individual's thereafter again becoming an Employee prior to the date of any termination of the Plan with respect to such Participant or Employee. In no event shall forfeited Accrued Benefits or assets of the Fund released as a result of any forfeiture of Accrued Benefits be applied or used to increase the Accrued Benefit of any Participant. 6.5 No Reduction in Certain Vested Accrued Benefits by Reason of Re- --------------------------------------------------------------- Employment. Notwithstanding any provisions hereof to the contrary, in the case - ---------- of a Participant who has a non-forfeitable interest in his Accrued Benefit under the Plan and who separates from the service of the Employer whether by retirement, disability or other termination, the dollar amount of his non- forfeitable interest in his Accrued Benefit at the time of his separation from service and the commencement of his benefit payments thereafter shall not be reduced by reason of his re-employment (except as may be provided in the event of a suspension or deferral of benefit payments pursuant to paragraph 8.7 hereof). -22- ARTICLE VII Death Benefits -------------- 7.1 Death after Annuity Starting Date. If a Participant dies after --------------------------------- his Annuity Starting Date, the only benefits payable under the Plan after his death shall be those, if any, provided under the form of payment being made to him at his death. 7.2 Death before Annuity Starting Date. If a Participant dies before ---------------------------------- his Annuity Starting Date, no benefit shall be paid under the Plan except any Death Benefit which may be provided under this ARTICLE VII. 7.3 Pre-Retirement Spouse's Death Benefit. ------------------------------------- 7.3(a) In the event that a Participant has a Spouse and dies before his Annuity Starting Date at a time when he has a non-forfeitable interest in his Accrued Benefit, then the Spouse of such Participant shall be entitled to receive as a Death Benefit under the Plan (referred to as the "Pre-Retirement Spouse's Death Benefit") a survivor annuity, expressed in the form of a single life annuity payable monthly for the life of such Spouse commencing on the Spouse's Earliest Commencement Date, equal to the Pre-Retirement Spouse's Annuity if the Participant had died on the day following his Annuity Starting Date under the appropriate one of the following assumptions: (i) If the Participant dies after attaining his Earliest Retirement Age, it shall be assumed both that he retired and that his Annuity Starting Date occurred as of the first day of the month in which he died, but the benefit payment amount of the Pre-Retirement Spouse's Death Benefit shall be calculated as first day of the month immediately following the month in which he died, or (ii) If the Participant dies on or before attaining his Earliest Retirement Age, it shall be assumed that he merely separated from the service of the Employer on the date of his death but survived until his Earliest Retirement Age which was also his Annuity Starting Date. If the Participant was actually separated from the service of the Employer at his death, such assumption shall not increase his or her Spouse's benefit entitlement or accelerate the time of payment or the date which is the Participant's Earliest Retirement Age. 7.3(b) For purposes hereof: (i) A Participant's "Earliest Retirement Age" is the earliest date under the Plan as of which he could elect to commence receiving his Accrued Benefit, on the assumption that he had merely separated from the service of the Employer on the date of his death and had continued to survive. (ii) A Spouse's "Earliest Commencement Date" is the first day of the first month in which the Participant would have reached his Earliest Retirement Age or, if he has already reached that date at his death, the first day of the month immediately following the month in which the Participant died. (iii) The "Pre-Retirement Spouse's Annuity" means the survivor annuity to which the Spouse would have been entitled under the Joint and 50% Spouse Survivor Annuity form of payment described in subparagraph 8.2(a). 7.4 Beneficiary Designation. ----------------------- 7.4(a) Subject to the rights of his Spouse to receive a survivor life annuity under paragraph 8.2 or a Pre-Retirement Spouse's Death Benefit under subparagraph 7.3 (for which purposes the Participant's Spouse shall be considered a Beneficiary) and the right of his Spouse to consent to specific non-spouse Beneficiaries, if any, under subparagraph 8.6(b), each Participant shall have the right to notify the Administrator in writing of any designation of a Beneficiary to receive, if alive, benefits under the Plan in the event of his death. Such designation may be changed from time to time by notice in writing to the Administrator, subject where specifically required to consent by his Spouse. -23- 7.4(b) If a Participant dies without having designated a Beneficiary, or if the Beneficiary so designated has predeceased the Participant or, except when his Beneficiary is his Spouse entitled to a survivor life annuity or Pre- Retirement Spouse's Death Benefit, cannot be located by the Administrator within one year after the date when the Administrator commenced making a reasonable effort to locate such Beneficiary, then his surviving spouse, or if none, then his descendants, per stirpes, or if none, then the executor or the administrator --- ------- of his estate shall be deemed to be his Beneficiary. 7.4(c) Any Beneficiary designation may include multiple, contingent or successive Beneficiaries and may specify the proportionate distribution to each Beneficiary. If a Beneficiary shall survive the Participant, but shall die before the entire benefit payable to such Beneficiary has been distributed, then absent any other provision by the Participant, the unpaid amount of such benefit shall be distributed to the estate of the deceased Beneficiary. If multiple Beneficiaries are designated, absent provisions by the Participant, those named or the survivors of them shall share equally any benefits payable under the Plan. Any Beneficiary, including the Participant's spouse, shall be entitled to disclaim any benefit otherwise payable to him under the Plan. ARTICLE VIII Payment of Benefits ------------------- 8.1 Time of Payment. --------------- 8.1(a) The non-forfeitable Accrued Benefit of a Participant shall become payable to the Participant, if then alive, at the earliest of the following applicable times: (i) The Participant's Normal or Delayed Retirement Date on which he retires under the Plan. (ii) The Participant's Normal Retirement Date if he is not then an Employee for reasons other than death. (iii) The April 1 (sometimes referred to as the "Required Beginning Date") following the calendar year in which occurs the later of the following applicable event (the "Required Beginning Event"): (A) The date the Participant attains the age seventy and one- half (70-1/2), or (B) Effective January 1, 1997 if the Participant's non- forfeitable Accrued Benefit is not in pay status on December 31, 1996 and the Participant is not a 5% Owner, the date the Participant retires from the service of the Employer or otherwise ceases to be employed by the Employer. For purposes hereof a "5% Owner" means a Participant who is a more than five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees) with respect to the Plan Year ending in the calendar year in which the Participant attains the age seventy and one-half (70-1/2) (a "5% Owner"). As an alternative to the foregoing, a Participant who is not a 5% Owner and who reaches age seventy and one-half (70-1/2) while employed by the Employer and on or before December 31, 1999 may elect to begin to receive his non-forfeitable Accrued Benefit at the April 1 of the calendar year following the calendar year in which he attains the age of seventy and one- half (70-1/2). The non-forfeitable Accrued Benefit of a Participant for each Plan Year after his Accrued Benefit commences pursuant to this clause shall commence to be paid as soon as possible after each such Plan Year. (iv) The first day of any calendar month designated by the Participant if he is neither an Employee nor Disabled (as provided in paragraph 5.4), which date shall not be earlier than: (A) His Early Retirement Date, nor later than his Normal Retirement Date, if the Participant retires on his Early Retirement Date, or -24- (B) The date on which the Participant attains the age required for Early Retirement, nor later than his Normal Retirement Date, if the Participant has satisfied the service requirement for Early Retirement. In order for payment to begin, the Participant must file a written application therefor with the Administrator no later than thirty (30) days (or such other date as the Administrator may determine or permit on a uniform and non-discriminatory basis) before such designated date. (v) The sixtieth (60th) day after the end of the Plan Year in which occurs the later of: (A) The date on which the Participant attains his Normal Retirement Age, or (B) The date on which he ceases to be an Employee. 8.1(b) The Pre-Retirement Spouse's Death Benefit with respect to a Participant shall become payable to his Spouse at the following applicable time: (i) The date which would have been the Participant's Normal Retirement Date, if he dies before then. (ii) The date which would have been the Participant's next available Delayed Retirement Date, if he dies on or after his Normal Retirement Date. (iii) The first day of any calendar month coinciding with or following the Participant's Spouse's Earliest Commencement Date (as determined pursuant to subparagraph 7.3(b)), if his Spouse requests in writing payment in annuity form at that time and if earlier than the time for payment otherwise provided under this subparagraph. Any such request shall be filed with the Administrator at least thirty (30) days (or such other date as the Administrator may determine or permit on a uniform and non-discriminatory basis) before the date such Death Benefit is requested to be paid. 8.1(c) Notwithstanding the foregoing provisions of this paragraph, payment may be delayed for a reasonable period of time in the event the recipient cannot be located or is not competent to receive the benefit payment, there is a dispute as to the proper recipient of such benefit payment, additional time is needed to calculate the Accrued Benefit or Death Benefit, or additional time is necessary to properly explain the recipient's options. 8.2 Form of Accrued Benefit Payment. A Participant shall be paid the ------------------------------- non-forfeitable Accrued Benefit to which he is entitled in one of the forms hereafter provided in this paragraph 8.2, commencing as provided in paragraph 8.1, and having the same Actuarial Value as the form stated in subparagraph 4.1(a). 8.2(a) Accrued Benefit payments to a Participant who has a Spouse shall be in the form of a joint and survivor annuity which provides for the payment to the Participant entitled thereto of equal monthly amounts on the first day of each calendar month during his lifetime and continuing thereafter for the lifetime of his Spouse at the rate of fifty percent (50%) of such monthly amounts payable to the Participant. This annuity is sometimes referred to herein as a "Joint and 50% Spouse Survivor Annuity". 8.2(b) Accrued Benefit payments to a Participant who does not have a Spouse shall be in the form of a single annuity for the life of the Participant, payable in equal monthly amounts on the first day of each calendar month during the lifetime of such Participant. This annuity is sometimes referred to herein as a "Single Life Annuity". 8.2(c) Each Participant shall have the right to elect in accordance with the provisions of subparagraph 8.6(c) and, except in the case of a Joint and 75% or 100% Spouse Survivor Annuity described in clause (iii) below, with the consent of his Spouse (where necessary as determined under subparagraph 8.6(b)), in lieu of the normal form of benefit provided in subparagraph 8.2(a) or (b), to receive his non-forfeitable Accrued Benefit in one of the following optional forms: -25- (i) The Single Life Annuity for the life of the Participant described in subparagraph 8.2(b). (ii) A single annuity for the life of the Participant payable in equal monthly amounts on the first day of each calendar month during the lifetime of the Participant, but with one hundred twenty (120) monthly payments guaranteed and with any portion of the unpaid guaranteed payments at the Participant's death payable as a continuing term certain annuity to his Beneficiary. This annuity is sometimes referred to herein as a "Ten- Year Certain and Life Annuity". (iii) A joint and survivor annuity in the form described in subparagraph 8.2(a), but continuing as a survivor annuity for the life of the Participant's Spouse at (A) seventy-five percent (75%) or (B) one hundred percent (100%) of the amount of each monthly payment to the Participant. These annuities are sometimes referred to herein as a "Joint and 75% Spouse Survivor Annuity" and a "Joint and 100% Spouse Survivor Annuity", respectively. 8.2(d) If the Participant's Annuity Starting Date occurs after the January 1 of the calendar year in which the Participant's Required Beginning Event (as defined in clause (iii) of subparagraph 8.1(a)) occurs, the following rules shall apply: (i) If the Participant has ceased to be employed by the Employer by such Annuity Starting Date, the amount payable shall be calculated as of the Participant's termination of such employment. (ii) If the Participant has not ceased to be employed by the Employer by such Annuity Starting Date, the amount payable shall be calculated as of the immediately preceding December 31. (iii) Thereafter, the Participant's additional Accrued Benefit attributable to active participation in the Plan for Plan Years ending in or after the calendar year in which his Annuity Starting Date occurs shall be calculated as of the December 31 immediately preceding the January 1 as of which such additional benefit will commence to be paid. 8.2(e) To the extent the payment provisions of the Plan are inconsistent with and violative of the requirements of Section 401(a)(9) of the Code, the provisions of Section 401(a)(9) of the Code are hereby incorporated by reference and shall control. 8.3 Form of Death Benefit Payment. The Pre-Retirement Spouse's Death ----------------------------- Benefit shall be paid in the form of a single annuity for the life of the Spouse entitled thereto payable in equal monthly amounts on the first day of each calendar month during the lifetime of the Spouse, commencing as provided in paragraph 8.1 and having the same Actuarial Value as the form stated in subparagraph 7.3(a). 8.4 Benefit Cash-Out. ---------------- 8.4(a) Notwithstanding the time and form of payment provided for elsewhere in this ARTICLE VIII and in lieu of payment pursuant to paragraph 8.2 (but only at or prior to the time the benefit would otherwise commence to be paid thereunder), the Actuarial Value of the non-forfeitable Accrued Benefit of a Participant (determined as of the date of termination of employment or required benefit commencement) shall be paid in the form of a lump sum in cash (a "cash-out") as soon as reasonably practicable (generally during the last month of each Plan Year) after the Participant's termination of employment with the Employer or, if earlier, any required time for benefit commencement under subparagraph 8.1(a) if the Actuarial Value of such Participant's entire non- forfeitable Accrued Benefit does not, and did not at the time of any prior payment thereof, exceed $3,500 (or $5,000 for Plan Years beginning on or after January 1, 1998). 8.4(b) Notwithstanding the time and form of payment provided for elsewhere in this ARTICLE VIII and in lieu of payment pursuant to paragraph 8.3 (but only at or prior to the time the benefit would otherwise commence to be paid thereunder), the Actuarial Value of the Pre-Retirement Spouse's Death Benefit with respect to a Participant (determined as of the date of the Participant's death) shall be paid in the form of a lump sum in cash (a "cash- out") as soon as reasonably practicable (generally during the last month of each Plan Year) after the Participant's death if the Actuarial Value of the -26- Pre-Retirement Spouse's Death Benefit with respect to such Participant does not exceed $3,500 (or $5,000 for Plan Years beginning on or after January 1, 1998). 8.5 Plan to Plan Direct Rollover as a Distribution Option. ----------------------------------------------------- 8.5(a) Notwithstanding any contrary provision of the Plan, but subject to any de minimis or other exceptions or limitations provided for under Section 401(a)(31) of the Code, effective for distributions made from the Plan after December 31, 1992, any prospective recipient of a distribution from the Plan which constitutes an "eligible rollover distribution" (to the extent otherwise includible in the recipient's gross income) may direct the Trustee to pay the distribution directly to an individual retirement plan or another "eligible retirement plan" as defined in Section 401(a)(31)(D) of the Code. The term "eligible rollover distribution" has the meaning assigned to it in Section 401(a)(31)(C) of the Code and, to the extent not inconsistent therewith, means any distribution other than: (i) A distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made either for the life (or life expectancy) of the Participant or the joint lives (or joint life expectancies) of the Participant and his Beneficiary who is an individual or for a specified period of ten (10) or more years, or (ii) A distribution to the extent it is required under the minimum distribution requirement of Section 401(a)(9) of the Code. 8.5(b) Any such direction shall be filed with the Administrator in such form and at such time as the Administrator may require and shall adequately specify the eligible retirement plan to which the payment shall be made. 8.5(c) The Trustee shall make payment as directed only if the proposed transferee plan will accept the payment. 8.5(d) Any such plan to plan transfer shall be considered a distribution option under this Plan and shall be subject to all the usual distribution rules of this Plan (including but not limited to the requirement of spousal consent, where applicable, and an advance explanation of the option). 8.5(e) Within a reasonable time (generally not more than ninety (90) nor less than thirty (30) days) before the Annuity Starting Date of a prospective recipient of an eligible rollover distribution from the Plan, the Administrator shall by mail or personal delivery provide the prospective recipient with a written explanation of the rollover and tax rules required by Section 402(f) of the Code. 8.6 Notice, Election and Consent Regarding Accrued Benefit Payment. -------------------------------------------------------------- Any election authorized by subparagraph 8.2(c) and any designation or consent to a date for payment by a Participant shall be in writing, shall clearly indicate the election or designation being made or the consent being given, and shall be filed with the Administrator within the time and in accordance with the procedures provided in the following subparagraphs to this paragraph. 8.6(a) Within a reasonable time (generally not more than ninety (90) nor less than thirty (30) days) before a Participant's Annuity Starting Date, the Administrator shall by mail or personal delivery provide the Participant with a written explanation of: (i) The terms and conditions of the applicable forms of payment, including his normal form of payment under subparagraph 8.2(a) or (b), as the case may be, and including the relative financial effects of the applicable forms of payment, (ii) The Participant's right to make, and the effect of, an election to waive his normal form of payment under subparagraph 8.2(a) or (b), as the case may be, by electing another form of payment for his Accrued Benefit, (iii) The rights of the Participant's Spouse regarding any such election as provided in subparagraph 8.6(b), -27- (iv) The Participant's right to make, and the effect of, a revocation of an election to waive his normal form of payment under subparagraph 8.2(a) or (b), as the case may be, and (v) The Participant's right to delay receipt of his non-forfeitable Accrued Benefit until such later date allowed under paragraph 8.1, including the right to modify or revoke any election thereunder. 8.6(b) Any election by a Participant regarding the form of his benefit payment where consent by his Spouse is specifically required shall be subject to the following rules: (i) Such election shall not be given effect unless either: (A) The Participant's Spouse consents in writing thereto and the Spouse's consent acknowledges the effect of such election and is witnessed by a representative of the Plan or a notary public (or the equivalent) or both if required by the Administrator, or (B) It is established to the satisfaction of the Administrator that such consent may not be obtained because there is no Spouse, because the Spouse cannot be located, because the Participant has been abandoned by the Spouse (which fact shall be determined under applicable law and evidenced by a court order so specifying), or because of such other circumstances as may be provided under Section 417(a)(2)(B) of the Code. For purposes hereof, a representative of the Plan is any officer of the Employer, the Administrator or any other person designated as such in writing by any of the foregoing. (ii) If a Spouse consents to a Participant's election, such consent regarding a form of payment under which benefits could be paid to the Participant's Beneficiary shall either be in the form of: (A) A limited consent which acknowledges the specific non-spouse Beneficiary or class of non-spouse Beneficiaries (including any multiple, contingent or successive Beneficiary or class of Beneficiaries), if any, and the applicable form(s) of payment under the Plan (including the form of payment to the Beneficiary), or (B) If permitted by the Administrator on a uniform and non- discriminatory basis, a general consent which acknowledges the Spouse's right (and awareness thereof) to limit consent only to a specific Beneficiary or class of Beneficiaries or a specific form of payment (if there is more than one) and in which the Spouse voluntarily elects to relinquish one or both of such rights. (iii) If a Spouse consents to a Participant's election, any change (other than a timely revocation by the Participant of an election regarding the form of payment of his Accrued Benefit or a change to a form of payment that does not require a spousal consent) by the Participant to his Beneficiary designation or the form of payment to his Beneficiary shall require the further consent of his Spouse in accordance with the applicable provisions of this subparagraph (unless the Spouse has given a general consent which expressly permits changes therein by the Participant without any requirement of further consent by the Spouse). (iv) Any such consent by a Spouse may not be revoked by such Spouse but shall be automatically revoked in connection with a revocation or election or consent change by the Participant. (v) Any such consent by a Spouse, or the establishment that the consent of a Spouse need not be obtained, shall be effective only with respect to such Spouse. -28- 8.6(c) A Participant's designation of, consent to or election of payment before his Normal Retirement Date under paragraph 8.1 and his election authorized by subparagraph 8.2(c) (together with any necessary consent by his Spouse) must be filed with the Administrator during the ninety (90) day period ending on his Annuity Starting Date. If the written explanation required by subparagraph 8.6(a) is not provided to the Participant at least thirty (30) days before the scheduled Annuity Starting Date, the Annuity Starting Date may be deferred by the Administrator until at least thirty (30) days after the written explanation is provided. Such election may be revoked in writing during such election period, and another election may be made during such election period, at any time and any number of times. 8.6(d) If a Participant elects an optional form of payment under subparagraph 8.2(c) and dies before his Annuity Starting Date, the elected form of payment shall not be given effect and no benefit under the Plan shall be payable with respect to the Participant except the Death Benefit as may be provided under ARTICLE VII. 8.6(e) If a Participant elects an optional form of payment under subparagraph 8.2(c) which provides for a life annuity to a contingent annuitant after his death and if the contingent annuitant dies before the Participant's Annuity Starting Date, such optional form of payment shall not be given effect and such Participant's Accrued Benefit shall be paid in the form otherwise applicable to or subsequently elected by him. 8.6(f) Notwithstanding the other distribution timing rules herein, such distribution may commence less than thirty (30) days after any notice or explanation required by subparagraph 8.6(a) is given, provided that: (i) The Administrator clearly informs the recipient that, where applicable, the recipient has a right to a period of at least thirty (30) days after receiving the notice or explanation to consider the decision of whether or not to elect or consent to a distribution (and, if applicable, a particular distribution option), (ii) The recipient, after receiving the notice or explanation, affirmatively elects a distribution, and (iii) If the distribution is one to which Section 417 of the Code applies, the distribution commences more than seven (7) days after the notice or explanation is given. 8.7 Special Rules for Benefits on Re-employment or Continued Employment ------------------------------------------------------------------- after Normal Retirement Age. - --------------------------- 8.7(a) Notwithstanding any other provision of the Plan: (i) If a Participant is re-employed by the Employer during any Plan Year, benefit payments to which he is then entitled and being paid shall continue to be paid as if he were not so re-employed. Such Participant shall be considered to become a new Participant in the Plan immediately on his re-employment as an Eligible Employee and shall be treated as a new Participant with respect to any additional Accrued benefit he earns. Upon such Participant's subsequent death, retirement, other termination of employment with the Employer or required commencement of benefits while employed by the Employer, such Participant's additional non-forfeitable Accrued Benefit or Death Benefit, as the case may be, shall be determined and paid as though he were a new Participant with respect to such period of re-employment. (ii) If a Participant is re-employed by the Employer during any Plan Year, benefit payments to which he is not then being paid shall not commence to be paid until his subsequent cessation of employment or as otherwise required under clause (iii) of subparagraph 8.1(a). (iii) If a Participant continues in the employment of the Employer at a time when his benefits under the Plan are required to be in pay status by reason of clause (iii) of subparagraph 8.1(a), his benefits under the Plan with respect to his prior employment and payment thereof shall not be affected by such continued employment, but any additional benefit under the Plan to which he may be entitled by reason of such continued employment shall be added -29- to his previously earned benefits as of the end of each Plan Year in which the same is accrued and shall thereafter be paid in the same manner and at the same time as his benefits earned with respect to his prior employment. 8.7(b) Notwithstanding any other provision of the Plan, if a Participant continues in the employment of the Employer after his Normal Retirement Date, his benefit entitlement shall be subject to the following rules: (i) Benefit payments to which such Participant is entitled under the Plan if he had terminated employment with the Employer and which are not then in pay status shall be deferred, and the amounts otherwise payable during such continued employment shall be forfeited, during the period of such employment, subject, however, to the benefit commencement requirements of subparagraph 8.1(a). In connection with this deferral: (A) The Administrator shall deliver to the Participant a Notice of Benefit Deferral, which shall be delivered by first class mail or by personal delivery. (B) If a Participant's benefit payments are deferred pursuant to this subparagraph, such benefit payments shall commence no later than the first day of the third calendar month following the calendar month in which the Participant ceases to be employed by the Employer or, if earlier, the required time for payment under subparagraph 8.1(a). The initial payment upon such commencement shall include the payment scheduled to occur in the calendar month of such commencement and, if applicable, any amounts withheld during the period between the Participant's cessation of employment and the calendar month of such commencement. (ii) Upon such Participant's subsequent death, retirement, other termination of employment with the Employer or commencement of benefits while employed by the Employer, such Participant's non-forfeitable Accrued Benefit or Death Benefit, as the case may be, shall be commenced in the form then applicable or elected (subject to appropriate actuarial adjustment, if any, and to increase in the same for any additional benefits earned under the Plan). (iii) Each Participant shall have the right to request a determination under the claims procedure set forth in paragraph 8.9 hereof whether specific contemplated employment constitutes service subject to the rules of this subparagraph. (iv) For purposes hereof, the term "Notice of Benefit Deferral" means either: (A) A written notice which states that the Participant's benefit payments are deferred and which contains (I) the reason and a general description of the authority for the deferral, together with a copy of the applicable Plan provisions containing the benefit deferral rules, (II) the method by which a deferral may be reviewed, which shall be the claims procedure set forth in paragraph 8.9 hereof, and (III) a statement that the applicable Department of Labor regulations may be found in Section 2530.203-3 of the Code of Federal Regulations, or (B) A written notice which refers the Participant to the relevant pages of the Plan's summary plan description concerning deferral of benefit rules if (I) the summary plan description contains information which substantially is the same as that required under clause (A) above, (II) the Participant is informed how to obtain a copy of the summary plan description, or the relevant pages thereof, and (III) any request by the Participant for referenced information is fulfilled within a reasonable period of time, not to exceed thirty (30) days. 8.8 Benefit Determination and Payment Procedure. ------------------------------------------- 8.8(a) The Administrator shall make all determinations concerning eligibility for benefits under the Plan, the time or terms of payment, and the forms or manner of payment to the Participant or the Participant's Beneficiary, in the event of the death of a Participant. The Administrator shall promptly notify the Trustee of each such determination that benefit -30- payments are due or should cease to be made and provide to the Trustee all other information necessary to allow the Trustee to carry out said determination, whereupon the Trustee shall pay or cease to pay such benefits from the Fund in accordance with the Administrator's determination. 8.8(b) Benefit payment due to the Participant or his Beneficiary, in the event of the death of the Participant, shall be determined as of the Annuity Starting Date. Any payments actually commencing more than two (2) months after the Annuity Starting Date shall bear interest for each whole month during which not paid at the applicable interest rate used for determining the Actuarial Equivalent of the Accrued Benefit under the Plan. 8.8(c) In making the determinations described in subparagraph 8.8(a), the Administrator shall take into account the terms of any QDRO received with respect to the non-forfeitable Accrued Benefit of the Participant or any Death Benefit with respect to the Participant. The time and form of payment with respect to the QDRO and the time and form of payment chosen by the Participant or his Beneficiary or required by the Plan shall not be altered by the terms of the QDRO (except as required under Section 414(p)(4) of the Code). The Administrator shall make all determinations regarding benefit payments to be made pursuant to a QDRO. Any benefit payment which may be subject to the terms of a domestic relations order received by the Administrator shall be suspended during the period the Administrator is considering whether the order is a QDRO. In the event that benefits are in pay status at the time that a domestic relations order is received, the Administrator shall promptly notify the Trustee of the amount, if any, of the benefit payments that must be suspended for the period required by the Administrator to determine the status of the order. Upon the completion of the Administrator's review or other determination of the status of the order, the Administrator shall promptly notify the Trustee of the time benefit payments are to commence or resume, and of the identity of, and the amount and form of benefits to be paid to the person or persons to whom payment is to be made. 8.8(d) The Administrator shall have the right to direct the Trustee to purchase from an Insurer and either hold in the Fund or distribute to any Participant or his Beneficiary entitled thereto a Policy which will provide the annuity or other benefits under the Plan to which such Participant or his Beneficiary is entitled or elects to receive, provided proper application therefor is delivered to the Trustee. In the event such Policy provides for a deferred, as opposed to an immediate, annuity, it shall provide annuity or other benefits at the time and in the form required under the Plan, and in the event such Policy is distributed to a Participant or his Beneficiary, it shall provide for an election as to each time and form of payment provided in the Plan (unless otherwise determined by the Administrator), which election shall be subject where applicable to the requirement of spousal consent described in subparagraph 8.6(b) and shall be consistent with the other applicable requirements of paragraph 8.1, 8.4 and 8.6 determined as of the annuity starting date under the Policy. Each such Policy shall be owned by and transferable only by the Trustee and, if distributed, shall provide that the Participant or his Beneficiary entitled thereto is the retirement payee and death beneficiary thereunder. Any such Policy may contain such feature or features, including, but not limited to, whether guaranteed or not guaranteed or participating or not participating, as the Administrator deems advisable in its discretion. 8.9 Claims Procedure. ---------------- 8.9(a) A Participant or Beneficiary (the "claimant") shall have the right to request any benefit under the Plan by filing a written claim for any such benefit with the Administrator on a form provided by the Administrator for such purpose. The Administrator shall give such claim due consideration and shall either approve or deny it in whole or in part. Within ninety (90) days following receipt of such claim by the Administrator, notice of any approval or denial thereof, in whole or in part, shall be delivered to the claimant or his duly authorized representative or such notice of denial shall be sent by mail to the claimant or his duly authorized representative at the address shown on the claim form or such individual's last known address. The aforesaid ninety (90) day response period may be extended to one hundred eighty (180) days after receipt of the claimant's claim if special circumstances exist and if written notice of the extension to one hundred eighty (180) days indicating the special circumstances involved and the date by which a decision is expected to be made is furnished to the claimant within ninety (90) days after receipt of the claimant's claim. Any notice of denial shall be written in a manner calculated to be understood by the claimant and shall: (i) Set forth a specific reason or reasons for the denial, -31- (ii) Make specific reference to the pertinent provisions of the Plan on which any denial of benefits is based, (iii) Describe any additional material or information necessary for the claimant to perfect the claim and explain why such material or information is necessary, and (iv) Explain the claim review procedure of subparagraph 8.9(b). If a notice of approval or denial is not provided to the claimant within the applicable ninety (90) day or one hundred eighty (180) day period, the claimant's claim shall be considered denied for purposes of the claim review procedure of subparagraph 8.9(b). 8.9(b) A Participant or Beneficiary whose claim filed pursuant to subparagraph 8.9(a) has been denied, in whole or in part, may, within sixty (60) days following receipt of notice of such denial, or following the expiration of the applicable period provided for in subparagraph 8.9(a) for notifying the claimant of the decision on the claim if no notice of denial is provided, make written application to the Administrator for a review of such claim, which application shall be filed with the Administrator. For purposes of such review, the claimant or his duly authorized representative may review Plan documents pertinent to such claim and may submit to the Administrator written issues and comments respecting such claim. The Administrator may schedule and hold a hearing. The Administrator shall make a full and fair review of any denial of a claim for benefits and issue its decision thereon promptly, but no later than sixty (60) days after receipt by the Administrator of the claimant's request for review, or one hundred twenty (120) days after such receipt if a hearing is to be held or if other special circumstances exist and if written notice of the extension to one hundred twenty (120) days is furnished to the claimant within sixty (60) days after the receipt of the claimant's request for a review. Such decision shall be in writing, shall be delivered or mailed by the Administrator to the claimant or his duly authorized representative in the manner prescribed in subparagraph 8.9(a) for notices of approval or denial of claims, and shall: (i) Include specific reasons for the decision, (ii) Be written in a manner calculated to be understood by the claimant, and (iii) Contain specific references to the pertinent Plan provisions on which the decision is based. The Administrator's decision made in good faith shall be final. 8.10 Payments to Minors and Incompetents. If a Participant or Beneficiary ----------------------------------- entitled to receive any benefits hereunder is a minor or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, or is deemed so by the Administrator, benefits will be paid to such person as the Administrator may designate for the benefit of such Participant or Beneficiary. Such payments shall be considered a payment to such Participant or Beneficiary and shall, to the extent made, be deemed a complete discharge of any liability for such payments under the Plan. 8.11 Distribution of Benefit When Distributee Cannot Be Located. The ---------------------------------------------------------- Administrator shall make all reasonable attempts to determine the identity and/or whereabouts of a Participant or Participant's spouse entitled to a survivor life annuity or Pre-Retirement Spouse's Death Benefit under the Plan or a Participant's Beneficiary entitled to any other benefit under the Plan, including the mailing by certified mail of a notice to the last known address shown on the Employer's, the Administrator's or the Trustee's records. If the Administrator is unable to locate such a person entitled to benefits hereunder, or if there has been no claim made for such benefits, the Trustee shall continue to hold the benefit due such person, subject to any applicable statute of escheats. 8.12 Minimum Amount Paid Monthly. Notwithstanding any other provisions of --------------------------- this ARTICLE VIII, monthly benefits equal to Ten Dollars ($10.00) or less need not be paid monthly, but may be accumulated and paid annually on the last day of each Plan Year. -32- ARTICLE IX Additional Restrictions and Limitations on Payments and Benefits ---------------------------------------------------------------- 9.1 Pre-termination Limitations on Annual Payments to Certain Highly ---------------------------------------------------------------- Compensated Employees. In the event of the payment of benefits prior to the - --------------------- termination of the Plan, the Annual Payment to each Participant who is among the twenty-five (25) Highly Compensated Employees who have the greatest Statutory Compensation and his Beneficiary shall be limited as follows: 9.1(a) No Annual Payment may exceed the sum of: (i) An amount determined as if payments had been made in the form of a Single Life Annuity (as defined in subparagraph 8.2(b)) which is the Actuarial Equivalent of the sum of the Participant's Accrued Benefit and any other Restricted Benefit under the Plan (other than a Social Security Supplement), and (ii) The amount of the payments to which the Participant is entitled to receive for the Plan Year under a Social Security Supplement. 9.1(b) The limitation described in subparagraph 9.1(a) shall not apply if one of the following conditions is met: (i) The value of the assets of the Plan equals or exceeds one hundred ten percent (110%) of the value of Current Liabilities of the Plan after the payment to such Participant or Beneficiary of all Restricted Benefits otherwise due under the Plan, (ii) The Actuarial Value of such individual's Restricted Benefit is less than one percent (1%) of the Current Liabilities of the Plan, or (iii) The Actuarial Value of such individual's Restricted Benefit does not, and did not at the time of any prior payment thereof, exceed $3,500 (or $5,000 for Plan Years beginning on or after January 1, 1998). 9.1(c) For purposes of this paragraph: (i) "Annual Payment" means the sum of the value of all distributions of Restricted Benefits, whether in cash or in assets, made with respect to a Plan Year to or on behalf of a Participant. (ii) "Current Liabilities" shall be determined pursuant to Section 412(l)(7) of the Code for purposes of determining the required and/or permissible contributions under Section 302 of the Act and Sections 412 and 404 of the Code and in a manner consistent with Inc. Tax Reg. Section 1.401(a)(4)-5(b). (iii) "Restricted Benefit" means all benefits due under the Plan (whether vested Accrued Benefits, Death Benefits or other benefits), including loans in excess of the amount set forth in Section 72(p)(2)(A) of the Code, any periodic income, any withdrawal values payable to a living Participant and any death benefits not provided for by insurance on the life of the Participant but excluding Death Benefits provided for by insurance on the life of the Participant and the value of current life insurance protection provided under the Plan to a Participant. (iv) "Social Security Supplement" means a Participant's benefit which both commences and terminates before the Participant's Social Security Retirement Age and does not exceed the old age insurance benefit under the Federal Social Security Act to which the Participant is entitled. For purposes hereof, "Social Security Retirement Age" means the age used as the retirement age for the Participant under Section 216(l) of the Federal Social Security Act, except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(l)(2) of such Act were sixty-two (62). As of the Effective Date of this Restatement of the Plan, the Social Security Retirement Age is determined on the basis of a Participant's calendar year of birth as follows: Social Security Calendar Retirement Age Year of Birth -------------- ------------- 65 Before 1938 66 After 1937, but before 1955 67 After 1954 (v) The value of the assets of the Plan and the Current Liabilities shall be determined as of the same date for purposes of applying this paragraph. 9.2 Restrictions on Benefits at Plan Termination. In the event of the -------------------------------------------- termination of the Plan, the Restricted Benefits (as defined in paragraph 9.1) of the Highly Compensated Employees shall be limited to a benefit which is non- discriminatory as determined under Section 401(a)(4) of the Code. ARTICLE X The Fund -------- 10.1 Trust Fund and Exclusive Benefit. The Trustee shall receive all -------------------------------- contributions under and all assets transferred to the Plan and shall invest and administer them as a trust fund (the "Fund") for the exclusive benefit of the Participants and Beneficiaries hereunder in accordance with the Plan. Except as otherwise expressly provided herein, no part of the corpus or income of the Fund shall revert to or be used or enjoyed by the Employer or be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries and the defrayal of reasonable expenses of the Plan and Fund. The rights of all persons hereunder are subject to the terms of the Plan. 10.2 Plan and Fund Expenses. Unless or to the extent not paid by the ---------------------- Employer without being advanced subject to reimbursement (which shall make such payments as directed by the Plan Sponsor) or unless prohibited by the Act or the Code, all expenses of the Plan and the Fund, including reasonable legal, accounting, actuarial, custodial, brokerage, consulting and other fees and expenses incurred in the establishment, amendment, administration and termination of the Plan or the Fund and/or the compensation of the Trustee and other fiduciaries of the Plan to the extent provided under the Plan, and all taxes of any nature whatsoever, including interest and penalties, assessed against or imposed upon the Fund or the income thereof shall be paid out of the Fund and shall constitute a charge upon the Fund. The Plan Sponsor may cause the Employer to advance any or all such expenses and/or taxes on behalf of the Fund, subject to the Employer's right of reimbursement from the Fund if so directed by the Plan Sponsor and to the applicable prohibited transaction provisions of the Act and the Code. 10.3 Reversions to the Employer. -------------------------- 10.3(a) If a contribution by the Employer is made under a mistake of fact, upon written direction by the Plan Sponsor, the Trustee shall return to the Employer an amount equal to such mistaken contribution, less any losses attributable to such mistaken contribution, within one year after payment of such contribution. If a contribution by the Employer is made conditioned upon its deductibility for federal income tax purposes and there is a final determination of the disallowance of a deduction under Section 404 of the Code for such contribution or portion thereof, upon written direction by the Plan Sponsor, the Trustee shall return to the Employer an amount equal to the amount of such contribution or portion thereof so disallowed, less any losses attributable to such contribution, within one year after such final determination. 10.3(b) If it is finally determined by the Internal Revenue Service or a court of competent jurisdiction on review of the Internal Revenue Service's determination that the Plan as initially adopted (if an application for a determination is timely -34- filed with the Internal Revenue Service by the date, including extensions thereof, on which the Employer's federal income tax return for its taxable year in which the Plan was adopted is due to be filed) does not qualify under Section 401 of the Code, the Trustee shall return to the Employer within one year after the date of notice of such disqualification all assets attributable to its contributions to the Plan received by the Trustee and made since the date the Plan was adopted, except to the extent otherwise directed by the Plan Sponsor. 10.3(c) After the termination of the Plan as a whole and after all fixed and contingent liabilities of the Fund to Participants and their Beneficiaries have been satisfied, any remaining assets of the Fund shall be distributed to the Employer as the Plan Sponsor may direct. 10.4 No Interest Other Than Plan Benefit. Nothing contained herein shall ----------------------------------- be deemed to give any Participant or Beneficiary any interest in any specific part of the Fund or any interest other than his right to receive benefits in accordance with the provisions of the Plan. 10.5 Provisions Relating to Insurer. ------------------------------ 10.5(a) No Insurer shall be deemed a party to the Plan or responsible for the validity thereof. 10.5(b) No Insurer shall be required to determine either: (i) That a person for whom the Trustee applies for a Policy is, in fact, eligible for participation or entitled to benefits under the Plan, (ii) Any fact necessary for the proper issuance of any Policy or Contract, or (iii) The proper distributions or further application of any moneys paid by it to the Trustee in accordance with the written direction of the Trustee; and with respect to each of the foregoing, the Insurer shall be fully indemnified and protected in relying upon the advice and direction of the Trustee. 10.5(c) Any notice, direction, application or other communication whatsoever shall be accepted by the Insurer as duly authorized and executed if signed by the Trustee. The Insurer shall be fully protected in assuming that the Trustee is as shown in the latest notification received by it at its home office. 10.5(d) Except as may be otherwise provided in any binding receipt issued by the Insurer, there shall be no coverage and no annuity or death benefit payable under any Policy to be purchased from any Insurer until such Policy shall have been issued and the premium therefor shall have been paid. 10.6 Payments from the Fund. The Trustee shall make all payments from ---------------------- the Fund which become due hereunder in accordance with the written instructions or directions of the Administrator. In directing the Trustee to make any payments or deliveries out of the Fund, the Administrator shall follow the provisions of the Plan. The Trustee acting in accordance with such instructions or directions shall be fully protected and indemnified by the Employer in relying upon any such written instruction or direction which the Trustee reasonably and in good faith believes to be proper. ARTICLE XI Fiduciaries ----------- 11.1 Named Fiduciaries and Duties and Responsibilities. ------------------------------------------------- -15- 11.1(a) Authority to control and manage the operation and administration of the Plan shall be vested in the following, who, together with their membership, if any, shall be the Named Fiduciaries under the Plan with those powers, duties, and responsibilities specifically allocated to them by the Plan: (i) Trustee - The Trustee in connection with its fiduciary ------- obligations relating to the Plan and the Fund. (ii) Plan Sponsor - The Plan Sponsor in connection with its ------------ fiduciary obligations and rights relating to the Plan and the Fund. (iii) Plan Administrator - The Plan Administrator in connection ------------------ with its fiduciary obligations and rights relating to the Plan and the Fund. 11.1(b) In addition, the Board shall be a Named Fiduciary for the sole purpose of appointing, or terminating the appointment of, an Investment Manager. 11.2 Limitation of Duties and Responsibilities of Named Fiduciaries. The -------------------------------------------------------------- duties and responsibilities, and any liability therefor, of the Named Fiduciaries provided for in paragraph 11.1 shall be severally limited to the duties and responsibilities specifically allocated to each such Named Fiduciary in accordance with the terms of the Plan, and there shall be no joint duty, responsibility, or liability among any such groups of Named Fiduciaries in the control and management of the operation and administration of the Plan. 11.3 Service by Named Fiduciaries in More Than One Capacity. Any person ------------------------------------------------------ or group of persons may serve in more than one Named Fiduciary capacity with respect to the Plan (including both service as Trustee and Plan Administrator). 11.4 Allocation or Delegation of Duties and Responsibilities by Named ---------------------------------------------------------------- Fiduciaries. By written agreement filed with the Plan Administrator and the - ----------- Plan Sponsor, the duties and responsibilities of the Trustee with respect to the management and control of the assets of the Fund may, with the written consent of the Plan Sponsor, be allocated among the Trustees (if there are two or more persons so serving) and any other duties and responsibilities of any Named Fiduciary may be allocated among Named Fiduciaries or may, with the consent of the Plan Sponsor, be delegated to persons other than Named Fiduciaries. The delegation permitted under this paragraph includes the Trustee's right to select a custodian to hold the assets of the Fund. Any written agreement shall specifically set forth the duties and responsibilities so allocated or delegated, shall contain reasonable provisions for termination, and shall be executed by the parties thereto. 11.5 Investment Manager. The Board may appoint one or more Investment ------------------ Managers to manage all or any portion of the Fund. The appointment of any such Investment Manager shall be by written agreement, which shall specify the scope of the powers and duties of such Investment Manager, shall contain reasonable provisions for the termination of such appointment, may require or allow any Investment Manager to perform asset custodial services for all or part of the Fund, and shall be executed by the parties thereto and acknowledged by the Trustee. An Investment Manager appointed pursuant to any such agreement shall acknowledge therein its status as a fiduciary with respect to the Plan. 11.6 Assistance and Consultation. A Named Fiduciary, and any delegate --------------------------- named pursuant to paragraph 11.4, may engage agents to assist in its duties and may consult with counsel, who may be counsel for the Employer, with respect to any matter affecting the Plan or its obligations and responsibilities hereunder, or with respect to any action or proceeding affecting the Plan. All compensation and expenses of such agents and counsel shall be paid or reimbursed from the Fund, except to the extent prohibited by the Act or the Code and except to the extent paid or reimbursed by the Employer. 11.7 Indemnification. The Employer shall indemnify and hold harmless any --------------- individual who is a Named Fiduciary or a member of a Named Fiduciary under the Plan and any other individual to whom duties of a Named Fiduciary are delegated pursuant to paragraph 11.4, to the extent permitted by law, from and against any liability, loss, cost or expense arising from their good faith action or inaction in connection with their responsibilities under the Plan. -36- ARTICLE XII Powers and Duties of Trustee ---------------------------- 12.1 Trustee Powers and Duties. Subject to the following provisions of ------------------------- this ARTICLE XII, the Trustee shall commingle and jointly invest, or where specifically provided herein shall segregate and separately invest, the assets of the Fund, without distinction between corpus and income. 12.1(a) The Trustee shall hold the Fund in trust, shall have the following general powers granted in this paragraph, subject to the directions, limitations, restrictions or prohibitions imposed hereunder, and, except as otherwise specifically provided herein, shall have exclusive authority and discretion in its management and control of the Fund. (i) The Trustee shall invest and reinvest the Fund in such stocks, stock options (whether or not covered), warrants and rights, puts, calls, stock-index futures, bonds, securities, commodities, commodity futures and options, real estate mortgages, real estate investment trusts or funds, real estate, partnership interests, mutual funds, closed-end investment companies, regulated investment companies or trusts, common, collective or group trust funds (except as otherwise limited hereunder) and other investments, and in such proportion, as may be deemed suitable for the purposes and the funding policy hereof. (ii) Such investments shall not be restricted to property and securities of the character authorized for investment by trustees under any present or future laws, with the exception of the Act. (iii) To the extent permitted by law, the Trustee is expressly authorized to invest and reinvest the Fund and to execute any joinder or similar agreement therefor on behalf of the Plan: (A) In any general common trust fund qualifying under Section 584 of the Code and maintained by any person, including but not limited to the Trustee or any affiliate of the Trustee in the same bank holding system affiliated group, as defined in Section 1504 of the Code, as the Trustee (if the Trustee and any such affiliate are banks or trust companies supervised by a state or federal agency) and/or the Investment Manager or any affiliate of the Investment Manager; (B) In any other collective or group trust fund maintained by any person, including but not limited to any such bank or trust company and/or the Investment Manager or any affiliate of the Investment Manager, and consisting solely of assets of qualified retirement trusts and/or individual retirement accounts exempt from federal income taxation under the Code, as the Trustee or, where applicable, the Investment Manager in its discretion may determine (whether or not the Trustee or, where applicable, the Investment Manager is such a bank or trust company), provided such collective or group trust is so qualified and exempt under the Code; (C) In qualifying employer securities, qualifying employer real property, or both, as defined by Section 407(d)(4) and (5) of the Act, the aggregate fair market value of which does not exceed ten percent (10%) of the fair market value of the assets of the Fund; (D) In Contracts or Policies (not containing or providing life insurance) issued to provide or fund benefits under the Plan, and in Policies of life insurance on the lives of Participants if the Plan expressly provides for the purchase of such Policies and the Administrator so directs, (whether or not the Insurer is the Plan Sponsor or any affiliate of the Plan Sponsor, or the Investment Manager or any affiliate of the Investment Manager, if an insurance company); or (E) In whole or in part in deposits with any bank or similar financial institution supervised by the United States or a State, regardless of whether such bank or other institution is a Trustee or other fiduciary hereunder, provided such deposits shall bear a reasonable rate of interest, except that funds may be -37- deposited in non-interest bearing accounts to such extent and for such time as may be reasonably required for the orderly administration of the Plan. (iv) If an investment is made in a common, collective or group trust, the Trustee is expressly authorized to incorporate the terms thereof as an investment medium under and as a part of the Plan, and the terms of such trust shall govern the investment, disposition and distribution of the assets of such trust. 12.1(b) Subject to the requirements imposed by law, and in furtherance and not in limitation of the Trustee's investment authority, the Trustee shall have all powers and authority necessary or advisable to carry out the provisions of the Plan, and all inherent, implied and statutory powers now or subsequently provided by law, including specifically the power to do any of the following: (i) To deal with all or any part of the Fund, including, without limitation, to invest, reinvest and change investment; (ii) To acquire any property by purchase, subscription, lease or other means; (iii) To sell for cash or on credit, convey, lease for long or short terms, or convert, redeem or exchange all or any part of the Fund; (iv) To borrow money for the purpose of the Fund, and for any sum so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the Fund; (v) To enforce by suit or otherwise, or to waive its rights on behalf of the Fund, and to defend claims asserted against him or the Fund; (vi) To compromise, adjust and settle any and all claims against or in favor of it or the Fund; (vii) To renew, extend or foreclose any mortgage or other security; (viii) To bid in property on foreclosure; (ix) To take deeds in lieu of foreclosure, with or without paying a consideration therefor; (x) To vote, or give proxies to vote, any stock or other security, and to oppose, participate in and consent to the reorganization, merger, consolidation or readjustment of the finances of any enterprise, to pay assessments and expenses in connection therewith, and to deposit securities under deposit agreements; (xi) To hold Plan assets unregistered (including in bearer form), or to register them in its own name, in street name or in the names of nominees who are within the jurisdiction of the district courts of the United States and are either banks or trust companies that are subject to supervision by the United States or a state thereof, brokers or dealers registered under the Securities Exchange Act of 1934, clearing agencies as defined in Section 3(a)(23) of the Securities Exchange Act of 1934, permissible nominees of any of the foregoing, or any other persons or entities permitted to act as nominee for the Trustee under Section 403 of the Act, provided the books and records of the Fund shall at all times reflect that the Fund is the beneficial owner of such securities; (xii) To make, execute, acknowledge and deliver any and all instruments that it shall deem necessary or appropriate to carry out the powers herein granted; and generally to exercise any of the powers of an owner with respect to all or any part of the Fund; and (xiii) Generally to exercise any of the powers of an owner with respect to all or any portion of the Fund. -38- Except as provided in the Act, no person dealing with the Trustee shall be bound to see to the application of any money or property paid or delivered to the Trustee or to inquire into the validity or propriety of any transaction. 12.1(c) The Trustee shall not have the power or duty to inquire into the correctness of the amount tendered to it as required by the Plan nor to enforce the payment of contributions thereunder by the Employer. The Trustee shall be responsible only for such sums and assets that it actually receives as Trustee. 12.1(d) In the exercise of its authority under this paragraph 12.1, the Trustee shall take cognizance of and be inhibited by those limitations and prohibitions contained in Section 406 of the Act and the prohibited transaction provisions of Section 4975 of the Code, for which no exemption is applicable. 12.2 Accounts. The Trustee shall keep true and accurate accounts of all -------- investments, receipts, and disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by any person or persons designated by the Plan Sponsor. Within sixty (60) days after the removal or resignation of the Trustee and as of each Valuation Date, the Trustee shall file with the Plan Sponsor a valuation of the assets of the Trust, and an accounting of its transactions since the last previous such accounting. In addition, the Plan Sponsor may require an accounting from the Trustee at any other reasonable time. No employee and no person other than those designated by the Plan Sponsor shall have the right to demand or be entitled to any accounting by the Trustee except as otherwise provided by law. 12.3 Two or More Trustees. Except in the case of the appointment of a -------------------- Separate Trustee pursuant to paragraph 12.8, in the event two or more persons are at any time serving as Trustee hereunder, such Trustees shall jointly manage and control the Fund; provided, however, that pursuant to paragraph 11.4 such Trustees may enter into an agreement in writing with respect to the allocation of specific responsibilities, obligations or duties among themselves. Any written agreement entered into pursuant to this paragraph shall be attached to and made a part of the Plan. 12.4 Management of Fund by Investment Manager. In the event an ---------------------------------------- Investment Manager is appointed for all or part of the assets of the Fund, the Trustee shall follow the directions of the Investment Manager in managing and controlling the assets of the Fund subject to the direction and control of the Investment Manager. The Investment Manager shall be governed by the powers and restrictions imposed on the Trustee in its management and control of the Fund. 12.5 Trustee Compensation and Expenses. The Trustee shall be paid such --------------------------------- reasonable compensation and shall be reimbursed for its reasonable expenses as shall from time to time be agreed upon by the Plan Sponsor and the Trustee. 12.6 Bond. Except as may be provided under Section 412 of the Act, the ---- Trustee shall not otherwise be required to give any bond or other security for the faithful performance of its duties hereunder. 12.7 Trustee Resignation, Removal or Death and Appointment of Successor ------------------------------------------------------------------ or Additional Trustee. - --------------------- 12.7(a) In the event the Trustee or Trustees serving hereunder have been named Trustee by virtue of any office they may hold in connection with their employment by the Plan Sponsor or any other Employer, upon leaving any such office, such Trustee shall at once cease to be a Trustee and shall be discharged from all further duties and responsibilities as Trustee. Upon acceptance in writing of its status as Trustee hereunder by the successor in office of any such Trustee, he shall become a Trustee hereunder. 12.7(b) The Trustee may resign at any time upon delivering to the Plan Sponsor a written notice of such resignation to take effect not less than sixty (60) days after the delivery thereof unless the Plan Sponsor shall accept as adequate a shorter notice. The Trustee may be removed by the Plan Sponsor, by mailing notice by registered mail addressed to the Trustee at his last known address, or by delivery of same to the Trustee to take effect not less than sixty (60) days after mailing or delivery of such notification unless notice of a shorter duration shall be accepted as adequate. The Administrator shall be notified by the Plan Sponsor of any such resignation or removal. -39- 12.7(c) In case of the resignation or removal of a Trustee, such Trustee shall transfer, assign, convey and deliver to the successor or other Trustee the trust estate as it may then be constituted and shall execute all documents necessary for transferring the trust estate. 12.7(d) The Plan Sponsor shall forthwith appoint a successor Trustee in case of resignation, removal or death of all Trustees appointed and then serving. Any successor Trustee shall qualify as such by executing, acknowledging, and delivering to the Plan Sponsor an instrument accepting such appointment hereunder in such form as may be satisfactory to the Plan Sponsor, which form shall become a part of this Trust document, and thereupon such successor Trustee shall become vested with the rights, powers, discretion, duties and obligation of its predecessor Trustee. The Administrator shall be notified by the Plan Sponsor of any such successor Trustee. 12.7(e) In the event of the resignation, removal or death of a Trustee, the surviving Trustee shall continue to be a Trustee hereunder. 12.7(f) The Plan Sponsor may at any time and from time to time appoint one or more additional Trustees. The Administrator shall be notified by the Plan Sponsor of any such additional Trustee or Trustees. 12.7(g) The Trustee may, with the written consent of the Plan Sponsor, or shall, at the written direction of the Plan Sponsor, or the Plan Sponsor may by written direction, appoint a bank with trust powers or a trust company (including any Trustee) as a Co-Trustee for the custody and/or investment of all or a portion of the assets of the Fund and enter into a trust agreement with such bank, and the Trustee shall thereafter deliver assets of the Fund to such bank or trust company for such custody and/or investment in accordance with such written consent or direction of the Plan Sponsor. Any such trust agreement shall be attached to the Plan. For purposes hereof and except as otherwise required by Section 405(b)(2) of the Act with respect to co-fiduciary responsibility and liability: (i) The duties and responsibilities with respect to the assets of the Fund held by any Co-Trustee appointed pursuant to this subparagraph shall be allocated solely to such Co-Trustee, and such Co-Trustee shall have no duties or responsibilities with respect to the other assets of the Fund by reason of its appointment pursuant to this subparagraph; and (ii) Conversely, any Trustee which is not appointed as such Co- Trustee for such assets of the Fund shall have no duties and responsibilities with respect to the assets of the Fund held by such Co- Trustee pursuant to this subparagraph. Any appointment of a Co-Trustee pursuant to this subparagraph shall automatically be considered an allocation of duties and responsibilities under paragraph 4.4 without further action being required and is intended to be an allocation described in Section 405(b)(1) of the Act. The Administrator shall be notified by the Plan Sponsor of any appointment of a Co-Trustee pursuant to this subparagraph. 12.8 Establishment of Separate Trusts. -------------------------------- 12.8(a) The Plan Sponsor may establish one or more separate trusts and appoint a bank with trust powers or a trust company (including any Trustee) as a Separate Trustee for the custody and/or investment of all or a portion of the assets of the Fund and enter into a separate trust agreement with such bank or trust company and the Trustee shall thereafter deliver assets of the Fund to such bank or trust company for such custody and/or investment in accordance with such separate trust agreement and any written directions of the Plan Sponsor. If agreed to by the parties, this Agreement shall be considered a separate trust agreement for the purpose of establishing one or more separate trusts pursuant to this paragraph. Otherwise, any such trust agreement shall be attached to the Plan. 12.8(b) For purposes hereof: -40- (i) The duties and responsibilities of the Separate Trustee with respect to the assets of the Fund held pursuant to the separate trust agreement shall be allocated solely to such Separate Trustee, and such Separate Trustee shall have no duties or responsibilities with respect to the other assets of the Fund by reason of its appointment pursuant to this subparagraph; and (ii) Conversely, any Trustee which is not appointed as such Separate Trustee for such assets of the Fund shall have no duties and responsibilities with respect to the assets of the Fund held by such Separate Trustee pursuant to this subparagraph. 12.8(c) Any appointment of a Separate Trustee pursuant to this subparagraph is intended to be an establishment of a separate trust as described in Section 405(b)(3) of the Act. Upon the establishment of such a separate trust, any Trustee currently serving as a sole Trustee shall automatically become a Separate Trustee in accordance with the provisions of this paragraph. 12.8(d) The Administrator shall be notified by the Plan Sponsor of any appointment of a Separate Trustee pursuant to this paragraph. 12.9 Automatic Successor Trustee by Corporate Transaction. If any ---------------------------------------------------- corporate Trustee at any time shall be merged, or consolidated with, or shall sell or transfer substantially all of its assets and business to another employer, domestic or foreign, or shall be in any manner reorganized or reincorporated, then the resulting or acquiring employer shall be substituted ipso facto for such corporate Trustee without the execution of any instrument - ---- ----- and without any action upon the part of the Plan Sponsor, any Participant or Beneficiary, or any other person having or claiming to have an interest in the Fund. ARTICLE XIII Plan Administration ------------------- 13.1 Appointment of Plan Administrator. The Plan Sponsor may appoint one --------------------------------- or more persons to serve as the Plan Administrator (the "Administrator") for the purpose of carrying out the duties specifically imposed on the Administrator by the Plan, the Act and the Code. In the event more than one person is appointed, the persons shall form an administrative committee for the Plan. The person or committeemen serving as Administrator shall serve for indefinite terms at the pleasure of the Plan Sponsor, and may, by sixty (60) days prior written notice to the Plan Sponsor, terminate such appointment. The Plan Sponsor shall inform the Trustee of any such appointment or termination and the Trustee may assume that any person appointed continues in office until notified of any change. 13.2 Plan Sponsor as Plan Administrator. In the event that no ---------------------------------- Administrator is appointed or in office pursuant to paragraph 13.1, the Plan Sponsor shall be the Administrator. 13.3 Compensation and Expenses. Unless otherwise determined and paid by ------------------------- the Employer (as directed by the Plan Sponsor), the person or committeemen serving as the Administrator shall serve without compensation for service as such. All expenses of the Administrator shall be paid as provided in paragraph 10.2, provided no compensation shall be paid the Administrator from the Fund to the extent prohibited by the Code or the Act. 13.4 Procedure if a Committee. If the Administrator is a committee, it ------------------------ shall appoint from its members a Chairman and a Secretary. The Secretary shall keep records as may be necessary of the acts and resolutions of such committee and be prepared to furnish reports thereof to the Trustee. Except as otherwise provided, all instruments executed on behalf of such committee may be executed by its Chairman or Secretary and the Trustee may assume that such committee, its Chairman or Secretary are the persons who were last designated as such to the Trustee in writing by the Plan Sponsor. -41- 13.5 Action by Majority Vote if a Committee. If the Administrator is a -------------------------------------- committee, its action in all matters, questions and decisions shall be determined by a majority vote of its members qualified to act thereon. They may meet informally or take any action without the necessity of meeting as a group. 13.6 Appointment of Successors. Upon the death, resignation or removal ------------------------- of a person serving as, or on a committee which is, the Administrator, the Plan Sponsor may, but need not, appoint a successor. 13.7 Additional Duties and Responsibilities. The Administrator shall -------------------------------------- have the following duties and responsibilities in addition to those expressly provided elsewhere in the Plan: 13.7(a) The Administrator shall be responsible for the fulfillment of all relevant reporting and disclosure requirements set forth in the Act and the Code, including but not limited to the preparation of necessary plan descriptions, summary plan descriptions, annual reports, summary annual reports, employee benefit statements, notice of forfeitability of benefits, notice of special tax treatment (rollover, five-year or ten-year averaging and capital gains) for distributions, and other statements or reports, the distribution thereof to Participants and their Beneficiaries and the filing thereof with the appropriate governmental officials and agencies. 13.7(b) The Administrator shall maintain and retain necessary records respecting administration of the Plan and matters upon which disclosure is required under the Act and the Code. 13.7(c) The Administrator shall make any elections for the Plan under the Act or the Code. 13.7(d) The Administrator shall provide to Participants and Beneficiaries such notices, including but not limited to the notice to interested parties, and information as are required by the Plan, the Act and the Code. 13.7(e) The Administrator shall make all determinations regarding eligibility for participation in and benefits under the Plan. 13.7(f) The Administrator shall establish and communicate to the Trustee a funding policy consistent with the current and long-term financial needs of the Plan with respect to the ages of the Participants in the Plan and other such relevant information; provided, however, that nothing in this subparagraph shall be construed as granting to the Plan Administrator any power or authority with respect to the control and management of the Fund. 13.7(g) The Administrator shall have the right to settle claims against the Plan and to make such equitable adjustments in a Participant's or Beneficiary's rights or entitlements under the Plan as it deems appropriate in the event an error or omission is discovered or claimed in the operation or administration of the Plan. 13.8 Power and Authority. ------------------- 13.8(a) The Administrator is hereby vested with all the power and authority necessary in order to carry out its duties and responsibilities in connection with the administration of the Plan, including the power to interpret the provisions of the Plan. For such purpose, the Administrator shall have the power to adopt rules and regulations consistent with the terms of the Plan. 13.8(b) The Administrator shall exercise its power and authority in its discretion. It is intended that a court review of the Administrator's exercise of its power and authority with respect to matters relating to claims for benefits by, and to eligibility for participation in and benefits of, Participants and Beneficiaries shall be made only on an arbitrary and capricious standard. 13.9 Availability of Records. The Employer and the Trustee shall, at the ----------------------- request of the Administrator, make available necessary records or other information they possess which may be required by the Administrator in order to carry out its duties hereunder. -42- 13.10 No Action with Respect to Own Benefit. No Administrator who is a ------------------------------------- Participant shall take any part as the Administrator in any discretionary action in connection with his participation as an individual. Such action shall be taken by the remaining Administrator, if any, or otherwise by the Plan Sponsor. 13.11 Limitation on Powers and Authority. The Administrator shall have no ---------------------------------- power in any way to modify, alter, add to or subtract from any provisions of the Plan. -43- ARTICLE XIV Amendment and Termination of Plan --------------------------------- 14.1 Amendment. The Plan may be amended in whole or in part at any time --------- by action of the Board; provided, however, that: (i) Except to the extent permitted or required by the Act or the Code, neither the Accrued Benefit (nor any subsidy, early retirement benefit, optional form of payment or any other benefit considered to be an accrued benefit for purposes of Section 411(d)(6)(B) of the Code) of a Participant, nor the percentage thereof which is non-forfeitable, at the time of any such amendment shall be adversely affected thereby. (ii) Except to the extent permitted or required by the Act or the Code, no such amendment shall have the effect of revesting in the Employers any part of the Fund prior to the termination of the Plan and the satisfaction of all fixed and contingent liabilities thereunder with respect to Participants and their Beneficiaries. (iii) The duties and obligations of the Trustee hereunder shall not be increased nor its compensation decreased without its written consent. 14.2 Merger, Consolidation or Transfer of Assets. The merger or ------------------------------------------- consolidation of or transfer of assets or liabilities between this Plan and any other plan shall be permitted upon action by the Board or as expressly provided elsewhere in the Plan so long as, immediately after such merger, consolidation or transfer of assets or liabilities, each Participant who is or may become eligible to receive an accrued benefit of any type from this Plan (or whose Beneficiaries may be eligible to receive any such benefit) would, if such surviving or transferee plan was then terminated, be entitled to receive an accrued benefit at least equal to the accrued benefit to which such Participant (and each such Beneficiary) would have been entitled had this Plan terminated immediately prior to such merger, consolidation or transfer of assets or liabilities. 14.3 Plan Permanence and Termination. The Employers have established the ------------------------------- Plan with the intention and expectation that they will be able to make their contributions indefinitely, but none of the Employers are or shall be under any obligation or liability to any Participant or Employee to continue their contributions or to maintain the Plan for any given length the time, and each may in its sole and absolute discretion discontinue its contributions or otherwise terminate its participation in the Plan at any time without any such liability for such discontinuance or termination. 14.4 Lapse in Contributions. Failure by any Employer to make ---------------------- contributions to the Fund in any year or years, unless the same shall be coupled with any other event causing a termination of its participation in the Plan, shall not terminate the Plan or operate to vest the rights of any Participants or to accelerate any payments or distributions to or for the benefit of any Participants or their Beneficiaries. 14.5 Termination Events. ------------------ 14.5(a) The Plan shall terminate in whole or in part as the case may be upon the happening of any of the following events: (i) With respect to any Employer, action by its Board terminating the Plan as to it and specifying the date of such termination. Notice of such termination shall be delivered to the Trustee and the Administrator. (ii) With respect to any Employer other than the Plan Sponsor, upon its ceasing to be an Affiliate of the Plan Sponsor. (iii) With respect to any Employer, its adjudication as a bankrupt or its general assignment to or for the benefit of its creditors or its dissolution, unless within sixty (60) days after such event a successor employer shall assume the terms and conditions hereof in writing. -44- (iv) Termination of the Plan pursuant to Section 4042 of the Act. (v) Termination or partial termination of the Plan within the meaning of Section 411(d)(3) of the Code, provided, however, that in the case of a partial termination, paragraphs 14.5 through 14.8 shall only apply to that part of the Plan which is partially terminated. (vi) Action by the Board of the Plan Sponsor terminating the Plan as a whole and specifying the date of such termination. Notice of such termination shall be delivered to the Trustee, the Administrator and all Employers. 14.5(b) For purposes of paragraphs 14.6 through 14.8 hereof, any action by the Board terminating the Plan shall also specify whether the Plan is thereafter to be operated as a "terminated plan" or a "frozen plan". Such terms are defined as follows: (i) A "terminated plan" is one that has been formally terminated, has ceased crediting service for benefit accrual purposes and vesting, and has been or is distributing Plan assets to Participants and Beneficiaries entitled thereto as soon as administratively possible. For purposes hereof, a Plan will be considered a terminated plan when Plan assets are required to be distributed pursuant to paragraph 14.8 hereof. (ii) A "frozen plan" is one in which benefit accruals have ceased but all Plan assets are not being distributed to Participants or Beneficiaries entitled thereto as soon as administratively possible. For purposes hereof, a Plan will be considered a frozen plan when Plan assets are not required to be distributed pursuant to paragraph 14.8 hereof. If a Plan is a frozen plan, it must continue to provide for accrual of Top Heavy Minimum Benefits as required under Section 416 of the Code. 14.6 Benefits and Vesting upon Termination. ------------------------------------- 14.6(a) In the event of a termination or a partial termination of the Plan, so much of the Plan as has been terminated shall be automatically amended without any action required by the Plan Sponsor or any other person as of and immediately prior to the effective time of such termination by reducing or eliminating the incidental and ancillary benefits, other than Pre-Retirement Spouse's Death Benefits, of Participants and their Beneficiaries under so much of the Plan as has terminated, but only if payment thereof has not commenced or is not subject only to the expiration of a waiting period, to the fullest extent permitted by paragraph 14.1. 14.6(b) Under no circumstances shall all or any portion of the Accrued Benefit of any such Participant under the Plan to the extent terminated (except Top Heavy Minimum Benefits required by Section 416 of the Code) be increased by reason of continued service as an Employee with any Employer with respect to which the Plan has been terminated. 14.6(c) Each affected Participant's Accrued Benefit shall be non- forfeitable upon the effective date of any termination or partial termination of the Plan within the meaning of Section 411(d)(3) of the Code or, if the Board so resolves, after any other termination. However, no Participant or Beneficiary shall have any recourse toward payment or satisfaction of an Accrued Benefit or any Death Benefit or other benefit liability under so much of the Plan as has terminated from any source other than assets of the Fund or the Pension Benefit Guaranty Corporation. 14.7 Administration of Plan after Termination. Upon the effective date ---------------------------------------- of the complete or partial termination of the Plan, the Trustee shall continue to administer the assets used to fund the Accrued Benefits of all Participants and Beneficiaries as part of the Fund, and, where an allocation of assets is required under paragraph 14.8, shall pay or provide for all accrued expenses of the Plan and the Fund and shall value the assets held by the Fund, both as of such date. Where applicable, the Administrator shall suspend benefit payments and take all reasonable efforts to recoup overpaid benefits to the extent required by or permitted under the Act, including Section 4044 thereof if applicable, and shall use the -45- assets of the Plan to fund the Accrued Benefits and any Death Benefits or other benefit liabilities under the Plan in the manner provided in, but only if required by, Section 4044 of the Act. 14.8 Distribution of Assets after Termination. ---------------------------------------- 14.8(a) In the event the Plan is considered a terminated plan, the Administrator shall forthwith allocate the assets of the Fund to fund the Accrued Benefits and any Death Benefits or other benefit liabilities which may thereafter be payable under the Plan in the manner provided in Section 4044 of the Act if applicable, or otherwise on the basis of the relative Actuarial Values of such benefits. 14.8(b) After the allocation referred to in subparagraph 14.8(a), the Trustee shall then distribute or pay to the Participants or their Beneficiaries entitled thereto, in accordance with such allocation of assets, but subject to the applicable time and form of benefit payment provisions in ARTICLE VIII (which if the Board so directs shall include for such purpose a lump sum payment option conditioned upon any spousal consent thereto required by the Code or the Act), and subject to such action as may be taken by the Pension Benefit Guaranty Corporation pursuant to the Act, either a lump sum amount equal to their respective allocations (in cash or in assets valued at current fair market value, or both) or Policies to provide such Accrued Benefits or Death Benefits, purchased as provided in the Plan, or a combination of the foregoing, upon the happening of any of the following events which occur on or after or result in the termination of the Plan: (i) Delivery to the Trustee of a notice executed on behalf of the Employer by authority of the Board directing that such distribution or payment be made, which direction may be made with respect to the entire Fund or with respect to assets needed to fund the benefits of Participants affected by a partial termination of the Plan. (ii) Adjudication of the Plan Sponsor as a bankrupt or general assignment by the Plan Sponsor to or for the benefit of creditors or dissolution of the Plan Sponsor, unless, within sixty (60) days after such event, either a successor or other employer shall assume the terms and conditions hereof in writing, or the Trustee (or a successor Trustee appointed within such sixty (60) day period) shall agree to continue to hold and administer the Fund as provided in paragraph 14.7 and additionally, unless otherwise agreed with or directed by the Plan Sponsor, to assume all the powers and duties imposed upon the Named Fiduciaries under the Plan. In assuming such powers and duties, the Trustee (or any successor Trustee) shall be vested with all authority granted by the Plan without any limitation imposed upon such authority by the Plan except the requirement that its actions shall be governed by the other provisions of the Plan and by the Act and the Code. If the Trustee (or any successor Trustee) shall so agree to continue the trust, all expenses of the Plan and the Fund and reasonable compensation to the Trustee (or any successor Trustee) and any successor shall be paid from the Fund. In the event of the death, resignation or removal of the Trustee (or any successor Trustee) who shall have so agreed to continue the trust, a court of competent jurisdiction over the Fund shall appoint a successor or the benefits payable under the Plan shall forthwith be distributed as hereinabove provided at the direction of such court. 14.9 Effects of Employer Merger, Consolidation or Liquidation. -------------------------------------------------------- Notwithstanding the foregoing provisions of this ARTICLE XIV, the merger or liquidation of any Employer into any other Employer or the consolidation of two (2) or more of the Employers shall not cause the Plan to terminate with respect to the merging, liquidating or consolidating Employers, provided that the Plan has been adopted or is continued by and has not terminated with respect to the surviving or continuing Employer. ARTICLE XV Miscellaneous ------------- 15.1 Headings. The headings in the Plan have been inserted for -------- convenience of reference only and are to be ignored in any construction of the provisions hereof. -46- 15.2 Gender and Number. In the construction of the Plan, the masculine ----------------- shall include the feminine or neuter and the singular shall include the plural and vice-versa in all cases where such meanings would be appropriate. 15.3 Governing Law. The Plan and the Fund created hereunder shall be ------------- construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia, and any federal law pre-empting the same. Unless federal law specifically addresses the issue, federal law shall not pre-empt applicable state law preventing an individual or person claiming through him from acquiring property or receiving benefits as a result of the death of a decedent where such individual caused the death. 15.4 Employment Rights. Participation in the Plan shall not give any ----------------- employee the right to be retained in the Employer's employ nor, upon dismissal or upon his voluntary termination of employment, to have any right or interest in the Fund other than as herein provided. 15.5 Conclusiveness of Employer Records. The records of the Employer ---------------------------------- with respect to age, service, employment history, compensation, absences, illnesses and all other relevant matters shall be conclusive for purposes of the administration of the Plan. 15.6 Right to Require Information and Reliance Thereon. The Employer, ------------------------------------------------- Administrator and Trustee shall have the right to require any Participant, Beneficiary or other person receiving benefit payments to provide it with such information, in writing, and in such form as it may deem necessary to the administration of the Plan and may rely thereon in carrying out its duties hereunder. Any payment to or on behalf of a Participant or Beneficiary in accordance with the provisions of the Plan in good faith reliance upon any such written information provided by a Participant or any other person to whom such payment is made shall be in full satisfaction of all claims by such Participant and his Beneficiary; and any payment to or on behalf of a Beneficiary in accordance with the provisions of the Plan in good faith reliance upon any such written information provided by such Beneficiary or any other person to whom such payment is made shall be in full satisfaction of all claims by such Beneficiary. 15.7 Alienation and Assignment. Except as otherwise permitted by the ------------------------- Act and the Code and as expressly permitted by the Plan or the Administrator, no benefit hereunder shall be subject in any manner to alienation, sale, anticipation, transfer, assignment, pledge, encumbrance, garnishment, attachment, execution or levy of any kind. As provided in the Act and the Code, this prohibition shall not apply to any QDRO entered on or after January 1, 1985, and the Administrator shall have all rights granted thereunder in determining the existence of such an order, in establishing and following procedures therefor and in complying with any such order. The Administrator shall treat any domestic relations order entered before January 1, 1985 as a QDRO entered on January 1, 1985 if the Plan is paying benefits pursuant to such order on January 1, 1985 or if the Administrator in its discretion deems such treatment warranted. 15.8 Notices and Elections. All notices required to be given in --------------------- writing and all elections required to be made in writing, under any provision of the Plan, shall be invalid unless made on such forms as may be provided or approved by the Administrator and, in the case of a notice or election by a Participant or Beneficiary, unless executed by the Participant or Beneficiary giving such notice or making such election. 15.9 Delegation of Authority. Whenever the Plan Sponsor or any ----------------------- Employer is permitted or required to perform any act, such act may be performed by any of its officers or any other person duly authorized by its Chief Executive Officer, its President or its Board of Directors. 15.10 Service of Process. The Administrator, as well as the Trustee, ------------------ shall be the agent for service of process on the Plan. 15.11 Construction. This Plan is created for the exclusive benefit of ------------ Employees of the Employer and their Beneficiaries and shall be interpreted and administered in a non-discriminatory manner consistent with its being an employees' defined benefit pension plan and trust as defined in Sections 401 and 414 of the Code. -47- ARTICLE XVI Adoption of the Plan -------------------- 16.1 Initial Adoption and Failure to Obtain Qualification. If it is ---------------------------------------------------- finally determined by the Internal Revenue Service or by a court of competent jurisdiction on review of the Internal Revenue Service's determination that the Plan does not qualify initially under Section 401 of the Code, the Plan shall have no force or effect and the Trustee shall return to the Employer all assets attributable to its contribution received by the Trustee as provided in ARTICLE III. Upon return of such contributions, the Plan shall terminate and the Trustee shall be discharged from all obligations under the Plan. 16.2 Adoption by Additional Employers. Any employer which is an Affiliate -------------------------------- and which, with the consent of the Board, desires to adopt the Plan, may do so by executing the Plan or an adoption agreement in a form authorized and approved by such employer's Board of Directors and the Board. In the event that such Affiliate has established and has been maintaining a defined benefit plan for the benefit of its employees which qualifies under Section 401 or 404(a)(2) of the Code, an adoption or other agreement may provide, subject to the requirements of paragraph 14.2, that such plan is amended and restated by the provisions of this Plan (such prior plan being deemed a predecessor plan to this Plan) or that such plan is to be merged or consolidated with this plan; and, in such event, the assets of such plan shall be paid over to the Trustee to be administered as a part of the Fund pursuant to the provisions of this Plan. IN WITNESS WHEREOF, the Employer, pursuant to the resolution duly adopted by its Board of Directors, has caused its name to be signed to this Plan and Trust Agreement by its duly authorized officer with its corporate seal hereunto affixed and attested by its Secretary or Assistant Secretary, and the Trustee has caused his name to be signed and his seal hereunto affixed as of the day and year above written. -48- ESKIMO PIE CORPORATION, Plan Sponsor and participating Employer By:____________________________(SEAL) Its___________________________ Attest: ___________________________ Its_______________________ _______________________________(SEAL) WILLIAM M. FARISS, JR., Trustee -49- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Appendix A Elapsed Time Method of Determining Service ------------------------------------------ A-1.1 Elapsed Time Method of Determining Service. The following ------------------------------------------ definitions and rules shall apply in determining service under the "Elapsed Time" method of determining service: A-1.1(a) For purposes hereof, the following terms have the following meanings: (i) "Break in Service": The period of time commencing on an Employee's Severance Date and ending on his first Re-employment Commencement Date thereafter. In the case of an individual who is absent from work on a Maternity or Paternity Absence, the 12-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a Break in Service for purposes of eligibility to participate or vesting under the Plan. (ii) "Employment Commencement Date": The date on which an Employee first completes an Hour of Service for the performance of duties. (iii) "Leave of Absence": Any absence authorized by a participating Employer under rules established by the participating Employer and uniformly applied to all persons similarly situated, provided, however, that the Employee resumes active employment with the participating Employer within the period specified in the authorization for the leave of absence. (iv) "Maternity or Paternity Absence": An absence commencing on or after the first day of the first Plan Year beginning after December 31, 1984: (A) By reason of pregnancy of the individual, (B) By reason of the birth of a child of the individual, (C) By reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (D) For the purpose of caring for such child for a period beginning immediately following such birth or placement. Notwithstanding the foregoing, no Maternity or Paternity Absence shall be considered to exist unless the Employee furnishes to the Administrator such timely information as the Administrator may reasonably require to establish that the absence from work is for one of the foregoing reasons or purposes and the number of days for which there was such an absence. (v) "Period of Service": The period of time beginning on an Employee's Employment Commencement Date or Re-employment Commencement Date, as the case may be, and ending on his first Severance Date thereafter. (vi) "Re-employment Commencement Date": The date on which an Employee first completes an Hour of Service for the performance of duties after a Break in Service. (vii) "Severance Date": The earlier of (A) or (B) as set forth below, except as otherwise provided below: -A-1- (A) The date on which an Employee ceases to be employed by the Employer by reason of resignation, discharge, retirement, or death; or (B) The first anniversary of the first day of a period during which the Employee is continuously absent from service with the Employer (with or without pay) for any reason other than resignation, discharge, retirement, or death, such as vacation, holiday, sickness, Disability (as provided in paragraph 5.4) or other disability, layoff, or Leave of Absence. (C) In no event shall a Severance Date occur during a period of absence described below: (I) Leave of Absence, provided the Employee returns to employment with the Employer at the expiration of such leave; (II) Temporary layoff for the convenience of the Employer, provided the Employee is recalled to employment with the Employer and returns to such employment when recalled; or (III) Any period during which the Employee is Disabled (as provided in paragraph 5.4). Notwithstanding the foregoing definitions, if an Employee's Period of Service ends, and a Break in Service begins, and if such Employee is re- employed before incurring a one year Break in Service, no Break in Service shall be considered to have occurred, and the period of time otherwise treated as a Break in Service shall be considered a Period of Service, for eligibility, vesting and forfeiture purposes (e.g., Years of Eligibility Service, Years of Vesting Service, and Years of Broken Service). However, the period which otherwise would be considered a Break in Service shall not be considered a Period of Service for benefit accrual purposes (e.g., Years of Benefit Service). A-1.1(b) The following rules shall apply in determining service: (i) A stated Break in Service (such as "one year" or "five years") means a continuous Break in Service of the stated required time. (ii) Separate Periods of Service not disregarded under the break in service rules of the Plan shall be aggregated in determining completion of any stated required Period of Service, and such aggregation shall be calculated on the basis that three hundred sixty-five (365) days equals a whole year. (iii) When comparing the length of a Period of Service to a Break in Service for purposes of the Plan, whole and partial years shall be compared, with partial years being based on days in the period. (iv) Partial or fractional years shall be calculated to three (3) decimal places. (v) A "full" or "whole" year means a complete year, every day of which constitutes a Period of Service. (vi) Nothing contained in the service counting provisions of this paragraph shall be construed to alter, amend, modify, invalidate, impair or supersede any law of the United States or any valid rule or regulation issued under any such law so as to deny an individual credit for service in the employment of the Employer where such credit is required by any federal law other than the Act. (vii) Periods for which severance pay (including any termination allowance which is severance pay) is paid shall not be considered service under the Plan unless the payee's employment relationship has not been ended, and in no event shall any such period be taken into account for benefit accrual purposes (e.g., Years of Benefit Service). -A-2- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Appendix B Determination of Top Heavy Plan Status -------------------------------------- B-1.1 Introduction. The Plan will be a Top Heavy Plan for any Plan Year ------------ beginning after December 31, 1983 if the sum of the present values of the cumulative accrued benefits of Key Employees under the Plan, and the present values of the cumulative accrued benefits of Key Employees under all plans aggregated with it, exceeds sixty percent (60%) of the aggregate of the present value of the cumulative Accrued Benefits under the Plan and accrued benefits under such plan(s) at the applicable determination date. For purposes hereof, aggregation, accrued benefits (including Accrued Benefits) taken into account, the determination date and all other standards and criteria for determining top- heaviness under this Plan and such other plan(s) shall be determined under Section 416 of the Code. Subject to the foregoing, the determination of Top Heavy Plan status shall be made each Plan Year in accordance with the rules and definitions contained in this Appendix. B-1.2 Determination Date. The determination date with respect to a plan ------------------ means the last day of its preceding plan year or, in the case of the first plan year of a plan, the last day of such first plan year. B-1.3 Value of Accrued Benefits. ------------------------- B-1.3(a) The value of an accrued benefit at a determination date is the value thereof at the most recent valuation date occurring within the twelve (12) month period ending on the determination date, plus, in the case of a defined contribution plan, an appropriate adjustment for contributions made or due thereafter and on or before the determination date. B-1.3(b) If the plan is a defined benefit plan, the present value of accrued benefits thereunder shall be determined on the basis of the actuarial assumptions stated in such plan for such purpose or, if none are stated, on the basis of the applicable actuarial equivalent benefit payment factors of such plan, in any case taking into account post-retirement mortality, interest, non- proportional subsidies (the benefits of which are assumed to commence at the age when the benefit is most valuable), pre-retirement mortality and future increases in cost of living, but not taking into account proportional subsidies, future withdrawals or salary increases, future increases in the maximum dollar limitation of Section 415 of the Code, and benefits not relating to retirement. B-1.3(c) If the plan is a defined contribution plan, the value of an accrued benefit shall be determined as follows: (i) An individual's account balance in a plan not subject to Section 412 of the Code is the sum of his actual account balance on the applicable valuation date and all contributions actually made after the applicable valuation date but on or before the determination date; provided, however, for such a plan's first plan year, the amount determined in the preceding sentence shall be added to the amount of any contributions made after the determination date that are allocated as of a date in that first plan year. (ii) An individual's account balance in a defined contribution plan that is subject to Section 412 of the Code is the sum of his account balance on the applicable valuation date, all contributions due as of the determination date (that is, contributions that would be allocated as of a date not later than the determination date, even though those amount are not yet required to be contributed), and, for the plan year that contains the determination date, all amounts actually contributed (or due to be contributed) after the extended payment period in Section 412(c)(10) of the Code. B-1.3(d) The accrued benefit of a Non-Key Employee shall be determined (i) under the method which is uniformly used for accrual purposes for all plans of the Employer or (ii) if there is no method described in clause (i), as if such benefit accrued not more rapidly than the slowest applicable accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code. B-1.4 Accrued Benefits Excluded from Determination. In determining the -------------------------------------------- value of accrued benefits, there shall be excluded: -B-1- (i) Any rollover contribution or plan-to-plan transfer initiated by the participant and made after December 31, 1983 so long as the rollover contribution or transfer was not derived from a plan maintained by the Employer, (ii) Any accumulated deductible employee contributions, (iii) The accrued benefit of any individual who was a Key Employee for a prior plan year but who is no longer a Key Employee, and (iv) For plan years beginning after December 31, 1984, the accrued benefit of any individual who has not performed service for any Employer maintaining the plan at any time during the five (5) plan year period ending on the determination date. B-1.5 Distributions and Transfers Taken into Account in Determination. --------------------------------------------------------------- In determining the value of accrued benefits, there shall be included any distributions made under the plan at any time during the five (5) plan year period ending on the determination date: (i) Including distributions from any terminated plan which if it had not been terminated would have been required to be aggregated with this Plan under clause (i) or (ii) of subparagraph 1.6(b) of this Appendix, but (ii) Excluding: (A) Distributions made on account of death, to the extent the benefits do not exceed the present value of accrued benefits existing immediately prior to death (in the case of a defined contribution plan, a distribution made on account of death is the participant's accrued account balance (including the cash value of life insurance policies)), and (B) Distributions and plan-to-plan transfers which are rolled over into a plan maintained by the Employer or initiated by the participant. B-1.6 Aggregation of Plans. -------------------- B-1.6(a) When aggregating plans, the value of accrued benefits shall be calculated with reference to the determination dates of such aggregated plans that fall within the same calendar year. When aggregating defined benefit plans the same actuarial assumptions shall be used with respect to all such plans and, if the stated assumptions of such plans are not the same, the plan sponsor(s) of such plans shall select and agree on one plan's assumptions. B-1.6(b) The plans to be aggregated with this Plan for purposes hereof for a plan year are: (i) Each other plan intended to meet the applicable requirements of Section 401(a)(10)(B) of the Code and maintained by the Employer and each simplified employee pension plan maintained by the Employer in which a Key Employee participates for the plan year containing the determination date with respect to such plan year or for any of the preceding four (4) plan years, (ii) Each other qualified or simplified employee pension plan of the Employer which, during the applicable five (5) plan year period described in clause (i) of this subparagraph, enables any such plan described in clause (i) of this subparagraph to meet the requirements of Section 401(a)(4) or 410 of the Code, and (iii) Solely in the discretion of the Employer, any additional qualified or simplified employee pension plan(s) of the Employer if the plans described in clauses (i) and (ii) of this subparagraph would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code with such plan(s) being included in the aggregation group. -B-2- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Appendix C (As of January 1, 1996) List of Participating Employers ------------------------------- Effective Date Effective Date Place of of Commencement of Termination Name Incorporation of Participation of Participation ---- ------------- ---------------- ---------------- Eskimo Pie Corporation Delaware April 6, 1992 ---- Eskimo Inc. Virginia January 1, 1995 ---- Sugar Creek Foods, Inc. Virginia January 1, 1996 ---- -C-1- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Adoption Agreement ------------------ This ADOPTION AGREEMENT, executed the __ day of _______, 1994 by ESKIMO INC., a Virginia corporation, (hereinafter referred to as the "Adopting Employer") with the consent of the Board of Directors (the "Board") of ESKIMO PIE CORPORATION ("Eskimo Pie"), a Delaware corporation, provides: WHEREAS, Eskimo Pie maintains a defined benefit pension plan and trust in the form of the Eskimo Pie Corporation Salaried Retirement Plan under agreement dated December 29, 1992, as amended, (the "Plan"), which Plan permits participation therein by other corporations with the approval of the Board; and WHEREAS, the Adopting Employer is an affiliate of Eskimo Pie, is eligible to adopt the Plan with the consent of the Board, and desires to evidence its adoption of and participation in the Plan and the consent of the Board thereto. NOW, THEREFORE, in consideration of the premises and of the mutual undertakings contained in the Plan, which are hereby incorporated herein by reference: 1. Adoption of the Plan. The Adopting Employer does hereby evidence its -------------------- adoption of the Plan as a participating employer for the benefit of its employees who are or from time to time will be eligible under the provisions of the Plan to participate therein, commencing with the Plan Year containing the Effective Date of the Plan as to the Adopting Employer. 2. Agreement to Be Governed by the Plan. The Adopting Employer agrees ------------------------------------ that it shall be an "Employer" and a participating employer, as defined in the Plan, commencing January 1, 1995, and as such it shall henceforth comply with and be governed by the provisions of the Plan as they pertain to an Employer, as now contained in the Plan or as hereafter altered or added by amendment to the Plan. 3. Effective Date of Adoption as to the Adopting Employer. The Adopting ------------------------------------------------------ Employer agrees that this adoption of the Plan shall be effective for all purposes of the Plan as of and from January 1, 1995; and that wherever in the Plan the term "Effective Date of the Plan" is now used, it shall with respect to the Adopting Employer mean January 1, 1995. 4. Updated Appendix C. An updated Appendix C to the Plan, listing the ------------------ Adopting Employer as a participating employer, is attached hereto and is hereby made a part of the Plan. IN WITNESS WHEREOF, the Adopting Employer has caused its name to be signed and its seal affixed hereto by its duly authorized officers; and the consent hereto by the Board is evidenced by the signature of its duly authorized representative. ESKIMO INC., Adopting Employer By:___________________________________ (SEAL) Its_________________________________ ATTEST: ______________________________ Its___________________________ The Board of Directors of ESKIMO PIE CORPORATION consents. -C-2- ____________________________________ Title:___________________________ -C-3- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Adoption Agreement ------------------ This ADOPTION AGREEMENT, executed the __ day of _______, 1995 by SUGAR CREEK FOODS, INC., a Virginia corporation, (hereinafter referred to as the "Adopting Employer") with the consent of the Board of Directors (the "Board") of ESKIMO PIE CORPORATION ("Eskimo Pie"), a Delaware corporation, provides: WHEREAS, Eskimo Pie maintains a defined benefit pension plan and trust in the form of the Eskimo Pie Corporation Salaried Retirement Plan under agreement dated December 29, 1992, as amended (the "Plan"), which Plan permits participation therein by other corporations with the approval of the Board; and WHEREAS, the Adopting Employer is an affiliate of Eskimo Pie, is eligible to adopt the Plan with the consent of the Board, and desires to evidence its adoption of and participation in the Plan and the consent of the Board thereto. NOW, THEREFORE, in consideration of the premises and of the mutual undertakings contained in the Plan, which are hereby incorporated herein by reference: 1. Adoption of the Plan. The Adopting Employer does hereby evidence its -------------------- adoption of the Plan as a participating employer for the benefit of its employees who are or from time to time will be eligible under the provisions of the Plan to participate therein, commencing with the Plan Year containing the Effective Date of the Plan as to the Adopting Employer. 2. Agreement to Be Governed by the Plan. The Adopting Employer agrees that ------------------------------------ it shall be an "Employer" and a participating employer, as defined in the Plan, commencing January 1, 1996, and as such it shall henceforth comply with and be governed by the provisions of the Plan as they pertain to an Employer, as now contained in the Plan or as hereafter altered or added by amendment to the Plan. 3. Effective Date of Adoption as to the Adopting Employer. The Adopting ------------------------------------------------------ Employer agrees that this adoption of the Plan shall be effective for all purposes of the Plan as of and from January 1, 1996; and that wherever in the Plan the term "Effective Date of the Plan" is now used, it shall with respect to the Adopting Employer mean January 1, 1996. 4. Pre-March 1, 1994 Service. Service with Sugar Creek Foods of ------------------------- Russellville, Inc., which was the predecessor by asset acquisition on February 28, 1994 to the Adopting Employer, shall not be considered service for any purpose of the Plan. 5. Pre-January 1, 1996 Benefit Accrual Service. Notwithstanding any other ------------------------------------------- provision of the Plan, service with the Adopting Employer prior to the January 1, 1996 Effective Date of the Plan with respect to it shall not be considered service for purposes of determining Years of Benefit Service under the Plan. 6. Pre-January 1, 1996 Compensation. Notwithstanding any other provision -------------------------------- of the Plan, compensation from the Adopting Employer for periods prior to the January 1, 1996 Effective Date of the Plan with respect to it shall not be considered Compensation for purposes of determining Accrued Benefits under subparagraph 4.1(a) of the Plan. 7. Exclusion of President and General Manager from Participation. The ------------------------------------------------------------- President and the General Manager of the Adopting Employer shall be listed on Appendix B of the Plan as being excluded from being considered Eligible Employees and shall be excluded from participation in the Plan. 8. Updated Appendix C. An updated Appendix C to the Plan, listing the ------------------ Adopting Employer as a participating employer, is attached hereto and is hereby made a part of the Plan. -C-4- IN WITNESS WHEREOF, the Adopting Employer has caused its name to be signed and its seal affixed hereto by its duly authorized officers; and the consent hereto by the Board is evidenced by the signature of its duly authorized representative. SUGAR CREEK FOODS, INC., Adopting Employer By:___________________________ (SEAL) Its_________________________ ATTEST: ________________________ Its_____________________ The Board of Directors of ESKIMO PIE CORPORATION consents. _________________________ Title: ________________ -C-5- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Appendix D Actuarial Equivalents and Values -------------------------------- D-1.1 General Factors and Definitions. ------------------------------- D-1.1(a) Actuarial Equivalents and Values, and all actuarial calculations regarding benefit equivalencies under the Plan (except as expressly otherwise provided), shall be determined on the basis of: (i) Interest at an assumed rate of eight and one-half percent (8.5%), compounded annually, and (ii) The 1984 Unisex Pension Mortality Table, which factors are sometimes referred to herein as the "actuarial factors" or separately as the "interest factor" or the "mortality factor", respectively. D-1.1(b) For purposes hereof, the term "Applicable Interest Rate" means the applicable interest rate or rates (deferred or immediate whichever is appropriate) which would be used as of the first day of the Plan Year in which the distribution occurs or commences by the Pension Benefit Guaranty Corporation for purposes of determining the present value of the Participant's benefit under the Plan pursuant to Part 2619 of 29 Code of Federal Regulations if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. D-1.1(c) For purposes hereof, the term "Maximum Interest Rate" means: (i) The Applicable Interest Rate if the Actuarial Value of the benefit (using such rate or rates) is not in excess of $25,000; or (ii) One hundred twenty percent (120%) of the Applicable Interest Rate if the Actuarial Value of the benefit exceeds $25,000 (as determined under clause (i)). D-1.1(d) For purposes hereof, the term "GATT Interest Rate" means the annual rate of interest on 30-year Treasury securities in effect as of the first day of the Plan Year for which an Actuarial Equivalent or Value is determined, as published by the Secretary of the Treasury for purposes of determining present values pursuant to Section 417(e)(3)(A) of the Code, based on a look- back month of the second calendar month preceding the Plan Year for which the Actuarial Equivalent or Value is determined. D-1.1(e) For purposes hereof, the term "GATT Mortality Table" means the mortality table in effect as of the first day of the calendar month for which an Actuarial Equivalent or Value is determined, as prescribed by the Secretary of the Treasury for purposes of determining present values pursuant to Section 417(e)(3)(A) of the Code. D-1.2 Development and Use of Tables. The Administrator is authorized to ----------------------------- develop, and utilize on a uniform basis consistently applied, tables for determinations of Actuarial Equivalents and Values. Any such table or tables may include more than one age for a factor, shall round factors to the nearest decimal, shall provide for linear proration based on either nearest or completed months of age or any other reasonable determination of age, shall provide factors based on either nearest or attained age or any other reasonable determination of age, and may include such other interpolations and variables, all as determined by the Administrator in its discretion. Any such table or tables shall produce substantially consistent results applied in a non- discriminatory manner. D-1.3 Correction of Errors. In determining Actuarial Equivalents or -------------------- Values for the purpose of correcting or recouping erroneous payments, the amount to be paid or recouped may be determined on a uniform and non-discriminatory -D-1- basis consistently applied either by application of the appropriate factors to provide an amount as of the actual date of payment or recoupment or by application of the appropriate factors to provide a value as of the date of the erroneous underpayment or overpayment, to which shall be added interest at the applicable rate to the date of payment or recoupment, as determined in the discretion of and on a uniform and non-discriminatory basis by the fiduciary of the Plan determining how the error should be corrected. D-1.4 Special Actuarial Factors and Rules. Notwithstanding the provisions ----------------------------------- of subparagraph 1.1(a) of this Appendix, the rules and factors set forth in this paragraph shall be used to determine Actuarial Equivalents and Values under the circumstances described herein. D-1.4(a) In the case of the valuation of a benefit for purposes of paragraph 4.6 of the Plan, in the case of the cash-out of a benefit in a lump sum payment pursuant to paragraph 8.4 of the Plan and in the case of the determination and payment of benefits on termination of the Plan (except to the extent any otherwise applicable special actuarial adjustment factor hereunder is considered an accrued benefit under Section 411(d)(6)(B) of the Code, in which case the special actuarial factor otherwise applicable at such times shall apply and, if directed by the Plan Sponsor, any special actuarial factor hereunder otherwise available, but not then applicable at such time, shall apply), the Actuarial Equivalent or Value shall be based on: (i) For Plan Years beginning before January 1, 2000, the appropriate mortality factor determined pursuant to subparagraph 1.1(a) of this Appendix and the Maximum Interest Rate, or (ii) For Plan Year beginning on or after January 1, 2000, the GATT Mortality Table and the GATT Interest Rate. D-1.4(b) In the case of the valuation or payment of an Accrued Benefit or a Pre-Retirement Spouse's Death Benefit which is not covered by subparagraph 1.4(a) of this Appendix and which is paid in a form other than a Single Life Annuity, a Joint and 50% (or more) Spouse Survivor Annuity, a Ten-Year Certain and Life Annuity, or any non-decreasing annuity (determined without regard to decreases on account of Social Security supplements or qualified disability payments as defined in Section 411(a)(9) of the Code) payable for a period not less than the life of the Participant or, in the case of a Pre-Retirement Spouse's Death Benefit, the life of the Participant's Spouse, the Actuarial Equivalent or Value adjustment shall not be less favorable to the recipient than a factor based on: (i) For Plan Years beginning before January 1, 2000, the appropriate mortality factor determined pursuant to subparagraph 1.1(a) of this Appendix and the Maximum Interest Rate, or (ii) For Plan Years beginning on or after January 1, 2000, the GATT Mortality Table and the GATT Interest Rate. D-1.4(c) There shall be no actuarial increase in a Participant's Accrued Benefit determined under subparagraph 4.1(a) of the Plan for the commencement or re-commencement of the Participant's benefit after his Normal Retirement Date except in the following instances: (i) There shall be an appropriate actuarial increase in any required Top Heavy Minimum Benefit under paragraph 4.3 of the Plan. (ii) There shall be an appropriate actuarial increase in the case of a Participant whose benefit payment is deferred while employed after his Normal Retirement Date (as provided in subparagraph 8.7(b) of the Plan) for each and any calendar month of such deferral for which he is not credited with forty (40) or more Hours of Service for which he is directly or indirectly paid or entitled to payment. For this purpose, the term "Hour of Service" shall include each hour for which an Employee is paid by the Employer, or entitled to payment, for the performance of duties for the Employer or for periods during which no duties are required to be performed, including each hour for which credit has not theretofore been given and for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to by the Employer. Hours of Service shall be determined for this purpose without regard to -D-2- the 501 hour limit on any single continuous period of absence. Otherwise, the hour of service calculation and crediting rules of (S) 2530.200b-2 of the U.S. Department of Labor Regulations are incorporated herein by this reference for this purpose. (iii) If a Participant (other than a five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees) with respect to the Plan Year ending in the calendar year in which the Participant attains the age seventy and one-half (70-1/2)) retires in a calendar year beginning on or after January 1, 1997 which is after the calendar year he attains age 70-1/2, the Participant's Accrued Benefit shall be actuarially increased based on the appropriate actuarial factors provided herein to take into account the period after both January 1, 1997 and his attainment of the age 70-1/2, if any, in which he was not receiving benefit payments under the Plan. In the event, an actuarial increase is required hereunder in connection with the suspension, commencement or re-commencement of a Member's benefit after his Normal Retirement Date, the Actuarial Equivalent adjustment or Value shall be determined on the basis of an increase in the Member's Accrued Benefit of five- twelfths of one percent (5/12%) for each month for which an adjustment is due during the first fifteen (15) years after the Member's Normal Retirement Date and thereafter shall be determined on the basis of the interest and mortality factors in subparagraph 1.1(a) of this Appendix. D-1.4(d) In the case of a benefit commencing in annuity form before a Participant's Normal Retirement Date, the Actuarial Equivalent or Value thereof shall be determined by reducing the benefit to which the Participant would be entitled at his Normal Retirement Date by five-twelfths of one percent (5/12%) for each month by which his Annuity Starting Date precedes his Normal Retirement Date. D-1.5 Application to Pre-Retirement Spouse's Death Benefit. The Pre- ---------------------------------------------------- Retirement Spouse's Death Benefit shall be calculated to the Spouse's Earliest Commencement Date pursuant to paragraph 7.3 of the Plan as though the Participant had commenced to receive his Accrued Benefit as an annuity prior to his death. After the dollar amount of the Pre-Retirement Spouse's Death Benefit is determined, any actuarial adjustment or determination shall be made by applying the appropriate actuarial factors to the dollar amount of such Death Benefit commencing at the Spouse's Earliest Commencement Date based on the form of payment as hereinabove provided in the case of payment to a Participant. -D-3- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Appendix E (As of January 1, 1996) List of Additional Excluded Positions ------------------------------------- Description of Position Effective Date of Exclusion - ----------------------- --------------------------- President of Sugar Creek Foods, Inc. January 1, 1996 General Manager of Sugar Creek Foods, Inc. January 1, 1996 -E-1- ESKIMO PIE CORPORATION SALARIED RETIREMENT PLAN Acknowledgment of Appointment of Trustee ---------------------------------------- Eskimo Pie Corporation, as the plan sponsor of the following named employee benefit plan and related trust fund maintained for the benefit of its employees, hereby evidences its appointment of the following person to serve as trustee (sometimes referred to as the "Trustee") of the trust fund for the plan: 1. Name of Plan: Eskimo Pie Corporation Salaried Retirement Plan ------------ 2. Name of Trust Fund: Eskimo Pie Corporation Salaried Retirement Trust ------------------ 3. Name of Trustee Appointed: Thomas M. Mishoe, Jr. ------------------------- 4. Effective Date: This acknowledgment evidences the appointed person's -------------- appointment effective as of July 31, 1996. The appointment shall automatically terminate if and when the appointed person ceases to be employed by the plan sponsor or any of its affiliates. IN WITNESS WHEREOF, the plan sponsor of the plan, by its duly authorized representative, has executed this instrument. Dated: ________________ ESKIMO PIE CORPORATION By_________________________________ David B. Kewer Its President and Chief Executive Officer ATTEST: ______________________________ Its___________________________ By execution hereof, the above named person acknowledges his acceptance of his appointment as trustee of the plan and the trust fund. ___________________________________ Thomas M. Mishoe, Jr. EX-10 11 EX10_17 Exhibit 10.17 WORKING COPY OF ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST (As Restated Effective January 1, 1997) Including: 1. First Amendment 2. Second Amendment 3. Third Amendment TABLE OF CONTENTS
Page ---- ARTICLE I Definition of Terms ------------------- 1.1 Accrued Benefit................................................... 1 1.1(a) After-Tax Account................................................. 1 1.1(b) Matching Account or Matching Accounts............................. 2 1.1(c) Pre-Tax Account................................................... 2 1.1(d) Profit Sharing Account or Profit Sharing Accounts................. 2 1.1(e) QNEC Account...................................................... 3 1.1(f) Rollover Account.................................................. 3 1.2 Act............................................................... 3 1.3 Active Participant................................................ 3 1.4 Adjustment Factor................................................. 3 1.5 Administrator..................................................... 3 1.6 Affiliate......................................................... 3 1.7 Beneficiary....................................................... 4 1.8 Board............................................................. 4 1.9 Code.............................................................. 4 1.10 Company Stock..................................................... 4 1.11 Compensation...................................................... 4 1.12 Compensation Limit................................................ 4 1.13 Contract.......................................................... 5 1.14 Covered Participant............................................... 5 1.15 Custodian......................................................... 5 1.16 Date of Hire...................................................... 5 1.17 Effective Date.................................................... 5 1.18 Eligible Employee................................................. 6 1.19 Employee.......................................................... 6 1.20 Employer.......................................................... 6 1.21 Family Member..................................................... 7 1.22 Fund.............................................................. 7 1.23 Highly Compensated Employee....................................... 8 1.24 Hour of Service................................................... 10 1.25 Inactive Participant.............................................. 10 1.26 Insurer........................................................... 10 1.27 Investment Manager................................................ 10 1.28 Key Employee...................................................... 10 1.29 Leased Employee................................................... 11 1.30 Non-Highly Compensated Employee................................... 12 1.31 Non-Key Employee.................................................. 12 1.32 Normal Retirement Age............................................. 12 1.33 Participant....................................................... 12 1.34 Plan.............................................................. 12
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Page ---- 1.35 Plan Sponsor............................................................................. 12 1.36 Plan Year................................................................................ 12 1.37 Policy................................................................................... 12 1.38 QDRO..................................................................................... 12 1.39 Spouse................................................................................... 12 1.40 Statutory Compensation................................................................... 13 1.41 Super Top Heavy Plan..................................................................... 13 1.42 Top Heavy Plan........................................................................... 13 1.43 Total Compensation....................................................................... 13 1.44 Trustee.................................................................................. 14 1.45 Valuation Date........................................................................... 14 1.46 Year of Broken Service................................................................... 14 1.47 Year of Vesting Service.................................................................. 14 ARTICLE II Eligibility and Participation ----------------------------- 2.1 Eligibility and Date of Participation as a Regular Participant........................... 14 2.2 Eligibility for Rollover Contributions as a Rollover Eligible Participant................ 15 2.3 Length of Participation.................................................................. 15 ARTICLE III Funding ------- 3.1 Amount and Timing of Employer Contributions.............................................. 15 3.2 Special Rules for Employer's Share of and Form of Contribution........................... 17 3.3 Participant After-Tax and Pre-Tax Contributions.......................................... 18 3.4 Elective Deferral Dollar Limitation on Pre-Tax Contributions............................. 18 3.5 Participant Rollover Contributions....................................................... 19 3.6 Procedure for and Time of Making Participant Contributions............................... 19 3.7 Use of Forfeitures and Unallocated Annual Additions...................................... 20 3.8 No Duty of Trustee to Determine or Enforce Contributions................................. 20 ARTICLE IV Participants' Accounts and Adjustments -------------------------------------- 4.1 Accounts................................................................................. 21 4.2 Allocation of Contributions.............................................................. 22 4.3 Dollar/25% Limitations on Annual Additions............................................... 22 4.4 Additional Limitations on Annual Additions Where Employer Maintains More Than One Plan... 23 4.5 Special Account for Unallocated Annual Additions......................................... 24 4.6 Valuation of Assets and Allocation of Valuation Adjustments.............................. 25 4.7 Determination of Account Balances........................................................ 27 4.8 Suspense Accounts........................................................................ 28
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Page ---- 4.9 Equitable Adjustment in Case of Error or Omission......................................... 29 4.10 Special Rules for Reemployed Veterans..................................................... 29 4.11 Limitation on and Distribution of After-Tax, Pre-Tax and Matching Contributions Made by or on behalf of Highly Compensated Employees..................................... 31 ARTICLE V Retirement Dates ---------------- 5.1 Normal Retirement Date.................................................................... 31 5.2 Delayed Retirement Date................................................................... 31 5.3 Early Retirement Date..................................................................... 31 5.4 Disability Retirement Date................................................................ 31 ARTICLE VI Vesting ------- 6.1 Vesting at Retirement or Attainment of Normal Retirement Age.............................. 32 6.2 Vesting at Death.......................................................................... 32 6.3 Vesting in Matching and Profit Sharing Active Accounts at Other Times..................... 32 6.4 Vesting in Accrued Benefit Other Than Matching and Profit Sharing Active Accounts......... 33 6.5 Vesting Service Rules..................................................................... 33 6.6 Forfeiture and Restoration of Matching and Profit Sharing Active Accounts................. 33 ARTICLE VII Death Benefits -------------- 7.1 Death after Benefit Commencement Date..................................................... 34 7.2 Death before Benefit Commencement Date.................................................... 34 7.3 Beneficiary Designation................................................................... 34 7.4 Consent to Beneficiary Designation........................................................ 34
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Page ---- ARTICLE VIII Payment of Benefits ------------------- 8.1 Time of Payment........................................................................... 35 8.2 Form of Payment When Participant Is the Initial Recipient................................. 38 8.3 Form of Payment When Beneficiary Is the Initial Recipient................................. 38 8.4 Payment Definitions and Rules............................................................. 38 8.5 Plan to Plan Direct Rollover as a Distribution Option..................................... 39 8.6 Notice, Election and Consent Procedures Regarding Accrued Benefit Payment................. 40 8.7 Benefit Determination and Payment Procedure............................................... 41 8.8 Claims Procedure.......................................................................... 41 8.9 Payments to Minors and Incompetents....................................................... 42 8.10 Distribution of Benefit When Distributee Cannot Be Located................................ 42 ARTICLE IX Withdrawals and Loans --------------------- 9.1 In-Service Non-Hardship Withdrawals from After-Tax Optional Account and/or Rollover Account....................................... 43 9.2 In-Service Non-Hardship Withdrawals from Matching Optional Account and/or Profit Sharing Account.................................. 43 9.3 In-Service Non-Hardship Withdrawals from After-Tax Basic Account, Pre-Tax Optional Account and/or QNEC Account............................................. 43 9.4 In-Service Hardship Withdrawals from After-Tax Basic Account, Pre-Tax Account, Matching Account and/or Profit Sharing Account.......................... 43 9.5 Withdrawal Restrictions and Procedure..................................................... 45 9.6 Payment of Withdrawals.................................................................... 45 9.7 No Withdrawal Restoration................................................................. 46 9.8 Loans..................................................................................... 46 9.9 Instructions to Trustee................................................................... 49 ARTICLE X The Fund -------- 10.1 Trust Fund and Exclusive Benefit.......................................................... 49 10.2 Plan and Fund Expenses.................................................................... 49 10.3 Reversions to the Employer................................................................ 50 10.4 No Interest Other Than Plan Benefit....................................................... 50 10.5 Payments from the Fund.................................................................... 50 10.6 Fund Divisions............................................................................ 50 10.7 Participant Investment Directions......................................................... 51 10.8 Investment Authority of the Administrator................................................. 52 10.9 Provisions Relating to Insurer............................................................ 53
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Page ---- ARTICLE XI Fiduciaries ----------- 11.1 Named Fiduciaries and Duties and Responsibilities......................................... 53 11.2 Limitation of Duties and Responsibilities of Named Fiduciaries............................ 54 11.3 Service by Named Fiduciaries in More Than One Capacity.................................... 54 11.4 Allocation or Delegation of Duties and Responsibilities by Named Fiduciaries.............. 54 11.5 Investment Manager........................................................................ 54 11.6 Assistance and Consultation............................................................... 54 11.7 Indemnification........................................................................... 54 11.8 Funding Policy............................................................................ 55 11.9 Standard of Conduct....................................................................... 55 ARTICLE XII The Trust Fund -------------- 12.1 Trustee Powers and Duties................................................................. 55 12.2 Accounts.................................................................................. 58 12.3 Two or More Trustees...................................................................... 58 12.4 Management of Fund by Investment Manager.................................................. 58 12.5 Trustee Compensation and Expenses......................................................... 58 12.6 Bond...................................................................................... 58 12.7 Trustee Resignation, Removal or Death and Appointment of Successor or Additional Trustee.. 58 12.8 Establishment of Separate Trusts.......................................................... 59 12.9 Automatic Successor Trustee by Corporate Transaction...................................... 60 ARTICLE XIII Plan Administration ------------------- 13.1 Appointment of Plan Administrator......................................................... 60 13.2 Plan Sponsor as Plan Administrator........................................................ 61 13.3 Compensation and Expenses................................................................. 61 13.4 Procedure if a Committee.................................................................. 61 13.5 Action by Majority Vote if a Committee.................................................... 61 13.6 Appointment of Successors................................................................. 61 13.7 Additional Duties and Responsibilities.................................................... 61 13.8 Power and Authority....................................................................... 62 13.9 Availability of Records................................................................... 62 13.10 No Action with Respect to Own Benefit..................................................... 62 13.11 Limitation on Powers and Authority........................................................ 62 ARTICLE XIV Amendment and Termination of Plan ---------------------------------
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Page ---- 14.1 Amendment................................................................................. 62 14.2 Merger, Consolidation or Transfer of Assets............................................... 62 14.3 Plan Permanence and Termination........................................................... 63 14.4 Lapse in Contributions.................................................................... 63 14.5 Termination Events........................................................................ 63 14.6 Termination Allocations and Separate Accounts............................................. 64 14.7 Holding of Separate Accounts.............................................................. 65 14.8 Distribution of Separate Accounts after Termination....................................... 65 14.9 Effect of Employer Merger, Consolidation or Liquidation................................... 66 ARTICLE XV Matters Relating to Company Stock --------------------------------- 15.1 Voting Directions......................................................................... 66 15.2 Acquisitions and Dispositions of Company Stock............................................ 67 15.3 Sales Prohibited if Registration or Qualification Required................................ 68 15.4 Limitation on Insiders' Interests in Company Stock........................................ 68 15.5 No Guarantee of Values.................................................................... 68 15.6 Legend Regarding Securities Laws Restriction on Sale or Transfer.......................... 68 15.7 Confidentiality of Participant Directions regarding and Holdings of Company Stock......... 68 ARTICLE XVI Miscellaneous ------------- 16.1 Headings.................................................................................. 69 16.2 Gender and Number......................................................................... 69 16.3 Governing Law............................................................................. 69 16.4 Employment Rights......................................................................... 69 16.5 Conclusiveness of Employer Records........................................................ 69 16.6 Right to Require Information and Reliance Thereon......................................... 69 16.7 Alienation and Assignment................................................................. 70 16.8 Notices and Elections..................................................................... 70 16.9 Delegation of Authority................................................................... 70 16.10 Service of Process........................................................................ 70 16.11 Construction.............................................................................. 70 ARTICLE XVII Adoption of the Plan -------------------- 17.1 Restated Adoption and Failure to Obtain Qualification..................................... 71 17.2 Adoption by Additional Employers......................................................... 71
-vi- Appendices ---------- Appendix A - Determination of Hours of Service Appendix B - Determination of Top Heavy Plan Status Appendix C - List of Participating Employers Appendix D - Rules Pertaining to Limitations on After-Tax, Pre-Tax and Matching Contributions Appendix E - List of Named Fund Divisions -vii- THIS PLAN AND TRUST is executed as of the date noted below by ESKIMO PIE CORPORATION, a Virginia corporation (the "Plan Sponsor"), for itself and for other participating employers who may participate in the Plan as provided herein (collectively or individually hereinafter called the "Employer"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Separate Trustee for all Fund divisions other than the Company Stock Fund and as Custodian for the Company Stock Fund, and THOMAS M. MISHOE, JR., as Separate Trustee for the Company Stock Fund; WITNESSETH: ---------- THAT, WHEREAS, effective April 6, 1992, the Plan Sponsor adopted the Eskimo Pie Corporation Savings Plan and a related trust for its employees, which Plan and trust have been subsequently amended and restated; and WHEREAS, effective January 1, 1995, Eskimo, Inc. and Sugar Creek Foods, Inc. adopted the Plan; and WHEREAS, the Plan Sponsor deems it desirable to further amend and restate the Plan and related trust as hereinafter set forth (sometimes referred to as this "Restatement of the Plan"); and NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree that the Plan, as it affects any rights in respect to any person entitled to benefits under the Plan on or after January 1, 1997, shall be amended and restated in its entirety as herein set forth, provided, however, that any new provision of this Restatement of the Plan shall have no force and effect if the Internal Revenue Service determines that it causes the Plan to cease to meet the applicable qualification requirements of a defined contribution plan under Section 401 of the Internal Revenue Code unless the same is amended to so qualify: (i) The Accrued Benefit (including any benefit considered as an accrued benefit for purposes of Section 411(d)(6)(B) of the Code) of any Participant (or the benefit payable to his Beneficiary) shall not be decreased by virtue of this Restatement of the Plan. (ii) The non-forfeitable percentage of the Accrued Benefit of any Participant shall not be decreased by virtue of this Restatement of the Plan. (iii) The form of payment of benefits in pay status on December 31, 1995 shall not be affected by virtue of this Restatement of the Plan, except as may be expressly provided herein in the case of re-employment or continued employment. ARTICLE I Definition of Terms ------------------- The following words and terms as used herein shall have the meaning set forth below, unless a different meaning is clearly required by the context: 1.1 "Accrued Benefit": The sum of the balances of the following accounts of a Participant under the Plan as of the most recent Valuation Date (or as otherwise provided herein): 1.1(a) "After-Tax Account": The account of a Participant in the Fund attributable to his After-Tax Contributions, consisting of his After-Tax Basic Account and his After-Tax Optional Account as follows: (i) "After-Tax Basic Account": The Participant's account in the Fund attributable to his After-Tax Basic Contributions to the Plan. This account was last referred to as the "Mandatory Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. (ii) "After-Tax Optional Account": The Participant's account in the Fund attributable to his After-Tax Optional Contributions to the Plan. This account was last referred to as the "Employee Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. 1.1(b) "Matching Account" or "Matching Accounts": The account or accounts of a Participant in the Fund attributable to Matching and Supplemental Contributions by the Employer, consisting of his Matching Active Account and his Matching Non-forfeitable Account as follows: (i) "Matching Active Account": The Participant's account in the Fund attributable to allocations of Matching and Supplemental Contributions by the Employer made with respect to his service since his most recent forfeiture and loss of forfeiture restoration rights under the Plan or, if he has incurred no forfeiture and loss of forfeiture restoration rights under the Plan, since his commencement of participation in the Plan. (ii) "Matching Non-forfeitable Account": In the case of a Participant who has incurred a forfeiture and loss of forfeiture restoration rights under the Plan, the vested portion of his Matching Active Account transferred to this account and attributable to allocations of Matching and Supplemental Contributions by the Employer and made with respect to his service prior to such forfeiture and loss of forfeiture restoration rights. Each Matching Active and Non-forfeitable Account shall be subdivided into two accounts. One account shall be known as the "Company Stock Matching Account" and consists of contributions made thereto for periods after February, 1997 allocated thereto pursuant to subparagraph 3.2(c) which are required to be invested in the Company Stock Fund; and the other account shall be known as the "Unrestricted Matching Account" and consists of contributions which are not required to, but may, be invested in the Company Stock Fund. The Matching Account was last referred to as the "Regular Matching Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. 1.1(c) "Pre-Tax Account": The account of a Participant in the Fund attributable to his Pre-Tax Contributions (whether Basic or Optional). This account was last referred to as the "Deferral Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. 1.1(d) "Profit Sharing Account" or "Profit Sharing Accounts": The account or accounts of a Participant in the Fund attributable to Profit Sharing, Supplemental and Top Heavy Contributions by the Employer, consisting of his Profit Sharing Active Account and his Profit Sharing Non-forfeitable Account as follows: (i) "Profit Sharing Active Account": The Participant's account in the Fund attributable to allocations of Profit Sharing, Supplemental and Top Heavy Contributions by the Employer made with respect to his service since his most recent forfeiture and loss of forfeiture restoration rights under the Plan or, if he has incurred no such forfeiture and loss of forfeiture restoration rights, since his commencement of participation in the Plan. (ii) "Profit Sharing Non-forfeitable Account": In the case of a Participant who has incurred a forfeiture and loss of forfeiture restoration rights under the Plan, the vested portion of his Profit Sharing Active Account transferred to this account and attributable to allocations of Profit Sharing, Supplemental and Top Heavy Contributions by the Employer made with respect to his service prior to such forfeiture and loss of forfeiture restoration rights. Each Profit Sharing Active and Non-forfeitable Account shall be subdivided into two accounts. One account shall be known as the "Company Stock Profit Sharing Account" and consists of contributions made thereto for periods after February, 1997 allocated thereto pursuant to subparagraph 3.2(c) which are required to be invested in the Company Stock Fund; and the other - 2 - account shall be known as the "Unrestricted Profit Sharing Account" and consists of contributions which are not required to, but may, be invested in the Company Stock Fund. This account was last referred to as the "Employer Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. 1.1(e) "QNEC Account": The account of a Participant in the Fund attributable to QNEC Contributions by the Employer. The QNEC Account shall be subdivided into two accounts. One account shall be known as the "Company Stock QNEC Account" and consists of contributions made thereto for periods after February, 1997 allocated thereto pursuant to subparagraph 3.2(c) which are required to be invested in the Company Stock Fund; and the other account shall be known as the "Unrestricted QNEC Account" and consists of contributions which are not required to, but may, be invested in the Company Stock Fund. This account was last referred to as the "Qualified Nonelective Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. 1.1(f) "Rollover Account": The account of a Participant in the Fund attributable to his Rollover Contributions. This account was last referred to as the "Rollover Contributions Account" in the Plan as in effect immediately prior to this Restatement of the Plan. 1.2 "Act": The Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, or the corresponding sections of any subsequent legislation which replaces it, and, to the extent not inconsistent therewith, the regulations issued thereunder. 1.3 "Active Participant": A Participant who is an Eligible Employee. There are two classes of Active Participants - Regular Participants (described in paragraph 2.1) who are eligible to make After-Tax, Pre-Tax and Rollover Contributions and receive a share of any contributions by the Employer to the Plan or forfeitures, and Rollover Eligible Participants (described in paragraph 2.2) who are only eligible to and have made one or more Rollover Contributions to the Plan. 1.4 "Adjustment Factor": The cost of living adjustment factor prescribed by the Secretary of the Treasury or his delegate under Section 415(d) of the Code for years beginning after December 31, 1987, applied to such items and in such manner as the Secretary of the Treasury or his delegate shall prescribe. 1.5 "Administrator": The Plan Administrator provided for in ARTICLE XIII hereof. 1.6 "Affiliate": The Employer and each of the following business entities or other organizations (whether or not incorporated) which during the relevant period is treated (but only for the portion of the period so treated and for the purpose and to the extent required to be so treated) together with the Employer as a single employer pursuant to the following sections of the Code (as modified where applicable by Section 415(h) of the Code): (i) Any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer, (ii) Any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer, (iii) Any organization (whether or not incorporated) which is a member of an affiliated service group as defined in Section 414(m) of the Code) which includes the Employer, and (iv) Any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. - 3 - 1.7 "Beneficiary": The person or persons designated by a Participant or otherwise entitled pursuant to paragraph 7.3 to receive benefits under the Plan attributable to such Participant after the death of such Participant. 1.8 "Board": The present and any succeeding Board of Directors of the Plan Sponsor, unless such term is used with respect to a particular Employer and its Employees, in which event it shall mean the present and any succeeding Board of Directors of that Employer. 1.9 "Code": The Internal Revenue Code of 1986, as the same may be amended from time to time, or the corresponding section of any subsequent Internal Revenue Code, and, to the extent not inconsistent therewith, regulations issued thereunder. 1.10 "Company Stock": The common stock of the Plan Sponsor. 1.11 "Compensation": An Employee's: (i) Regular base salary for salaried employees, (ii) Straight time earnings for all hours worked and paid non-work hours, which shall include shift differential, vacation, sick, jury, witness, bereavement and non-worked holiday pay, for hourly employees, (iii) Guaranteed commissions for salespersons who are not compensated strictly on a commissioned basis (i.e., who have a guaranteed base), and (iv) Ninety percent (90%) of commissions for salespersons who are compensated strictly on a commissioned basis (i.e., who have no guaranteed base), payable to the Employee for services as an Eligible Employee and while a Regular Participant, directly from the Employer (but not from any Affiliate which is not a participating employer unless otherwise expressly provided) for a Plan Year, including in any case employee elective salary reduction or similar contributions under a cafeteria plan described in Section 125 of the Code and employee elective salary reduction or similar contributions (such as Pre-Tax Contributions) under a cash or deferred arrangement described in Section 401(k) of the Code (to the extent not already included therein), and not including in any case any contribution by the Employer to or benefits under this Plan or any other employee benefit plan or trust in connection therewith, nor any amount otherwise paid as compensation but finally determined not to be deductible as compensation in determining the Employer's federal taxable income. Any such compensation in excess of the Compensation Limit for a Plan Year shall be disregarded. 1.12 "Compensation Limit": 1.12(a) $150,000 (as adjusted in $10,000 increments by the applicable Adjustment Factor determined on the basis of a base period of the calendar quarter beginning October 1, 1993). 1.12(b) For purposes of applying the Compensation Limit: (i) The Compensation Limit applicable to each Plan Year (or other applicable computation period) shall be the Compensation Limit in effect for each such Plan Year (or other applicable computation period), determined without increases in the Compensation Limit for subsequent periods. (ii) If any Plan Year is a period of less than twelve (12) months, then any dollar limitation referred to in this paragraph shall be prorated by multiplying the otherwise applicable dollar limitation for such Plan Year by a - 4 - fraction, the numerator of which is the number of months in such Plan Year and the denominator of which is twelve (12). (iii) The Compensation Limit shall be applied on a plan by plan basis, except that a group of plans which are treated as a single plan for applicable non-discrimination purposes under Section 410(b) of the Code shall share a single Compensation Limit. 1.13 "Contract": A group annuity contract, deposit administration contract, immediate participation guarantee contract, or other investment- oriented or funding contract or agreement issued by an Insurer to hold the assets of the Plan. 1.14 "Covered Participant": With respect to a Plan Year, a Regular Participant: (i) Who is an Eligible Employee on the last day of such Plan Year, or (ii) Who died or retired under the Plan while an Eligible Employee during such Plan Year. 1.15 "Custodian": Any custodian for any separate trust constituting part of the Fund and established pursuant to paragraph 12.8. For periods prior to March 31, 1997, none; for periods on or after March 31, 1997, First Union National Bank of North Carolina, serving in the capacity as a Separate Trustee (as provided in paragraph 12.8) First Union National Bank of North Carolina for the Company Stock Fund, for so long as and to the extent serving; or any successor or additional person(s) or entity(ies) appointed pursuant hereto as Custodian of any separate trust constituting part of the Fund and currently serving. 1.16 "Date of Hire": The date on which an Employee is first credited with an Hour of Service, determined without regard to any cessation of employment. 1.17 "Effective Date": (i) The Effective Date of the Plan is April 6, 1992. (ii) The Effective Date of this Restatement of the Plan is January 1, 1997, provided, however, that any provision which is contained in this Restatement of the Plan (as the same may be amended) and which is required to be effective before January 1, 1997 in order to retain the qualification of the Plan under Section 401 of the Code shall nevertheless be effective as of its required effective date under the Code. (iii) With respect to any employer adopting the Plan as a participating employer as of a date after the Effective Date of this Restatement of the Plan, the Effective Date of the Plan as to such Employer is the same as may be set forth in its adoption agreement or in the Plan. The Administrator shall maintain as Appendix C to the Plan a list of the Effective Dates of participation of all Employers participating in the Plan. 1.18 "Eligible Employee": 1.18(a) Any common law employee of the Employer other than: (i) An employee who is a non-resident alien and who receives no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code), - 5 - (ii) An employee who is included in a unit of persons covered by a collective bargaining agreement between representatives of such unit and the Employer, unless such collective bargaining agreement provides for participation in the Plan, or (iii) An employee who is classified by the Employer under its standard personnel policies and practices as a straight-time hourly paid employee. 1.18(b) For purposes hereof, a "straight-time hourly paid employee" generally is an employee whose pay is calculated on an hourly basis and who normally is not compensated for time off due to holidays, vacation or illness. 1.18(c) In no event shall Leased Employees be considered as Eligible Employees or be eligible to actively participate in the Plan. 1.19 "Employee": Any individual employed in the service of the Employer as a common law employee, any sole proprietor or partner of a partnership constituting an Affiliate, and any Leased Employee (but only for the purpose and to the extent treated under Section 414(n) of the Code as an employee of the Employer). 1.20 "Employer": 1.20(a) The Plan Sponsor and each other employer heretofore or hereafter executing or adopting the Plan as a participating employer, collectively unless the context otherwise indicates, for as long as it remains a participating employer; and with respect to any Employee, any one or more of such Employers by which he is at any time employed (unless or to the extent otherwise specified by resolution of the Board or in a merger or acquisition agreement or plan approved by the Board or in any applicable asset transfer, plan merger or consolidation or adoption agreement). The Administrator shall maintain as Appendix C to the Plan a list of all such Employers who are, from time to time, participating employers in the Plan. 1.20(b) For purposes of determining: (i) Service for all purposes of the Plan (other than for purposes of determining non-Top Heavy Plan benefit accrual, Eligible Employees, Covered Participants and Years of Benefit Service unless otherwise specifically provided) and commencement of service and termination of employment with the Employer, (ii) Employees, Family Members, Highly Compensated Employees, Key Employees, and Leased Employees, (iii) Top Heavy Plan status, contributions and benefits, (iv) Statutory Compensation and Total Compensation, (v) Any limitations of contributions and forfeitures or on loans hereunder, and (vi) Maintenance of or participation in other qualified plans under Section 401(a) of the Code, tax sheltered annuities under Section 403(b) of the Code, simplified employee pensions under Section 408(k) of the Code, and any other plan required or, as applicable, permitted to be aggregated with this Plan for purposes of the Code, the term "Employer" shall include each Affiliate which during any year commencing after December 31, 1975 is treated as an Affiliate and each predecessor employer which maintained this Plan (but not beyond the time it ceased to maintain the Plan) within the meaning of Section 414(a) of the Code, but only for the portion of any such year or years so treated and for the purpose and to the extent required to be so treated. - 6 - 1.20(c) For purposes of determining compensation and service with any business entity, or predecessor thereto, which is merged into an Employer, or a predecessor thereto, or all or substantially all the assets or the operating assets acquired by an Employer, or predecessor thereto, compensation from and service with such business entity and predecessor thereto shall be treated as compensation from and service with an Employer to the extent provided by resolution of the Board or in any corporation or plan merger, consolidation or asset transfer agreement or any adoption agreement approved by the Board. 1.20(d) For purposes of determining service and compensation under the Plan, service with and compensation from Reynolds Metals Company, a Delaware corporation, and any of its "affiliates" (determined on the same basis as Affiliates are determined, but substituting Reynolds Metals Company for the Plan Sponsor) which was rendered or payable for service before April 6, 1992 shall be considered as service with the Employer for all purposes of the Plan. 1.20(e) Notwithstanding anything to the contrary in the forgoing, service prior to March 1, 1994 with Sugar Creek Foods of Russellville, Inc. (which is the predecessor to Sugar Creek Foods, Inc.) shall not be considered service with an Employer or Affiliate for purposes of the Plan 1.21 "Family Member": 1.21(a) With respect to a Plan Year, an individual (whether or not himself a Highly Compensated Employee) who is considered a family member described in Section 414(q)(6)(A) of the Code with respect to an Employer; and, to the extent not inconsistent therewith, an individual who is a member of the family (consisting, with respect to an Employee, of such Employee's spouse and lineal ascendants and descendants and the spouses of lineal ascendants and descendants) on any day of the Determination Year or Look-Back Year with respect to such Plan Year of a Highly Compensated Employee who is either (i) a more than five percent (5%) owner of the Employer or (ii) in the group consisting of the ten (10) Highly Compensated Employees with the greatest Statutory Compensation for the relevant Determination Year or Look-Back Year. 1.21(b) For purposes hereof, the terms "Determination Year", "Look-Back Year", and "more than five percent (5%) owner of the Employer" have the same meaning provided herein for purposes of determining Highly Compensated Employees. 1.22 "Fund": The trust fund, including any separate trusts, created under and subject to the Plan. The Fund shall be held in divisions (sometimes referred to as "divisions of the Fund", "Fund divisions" or "investments funds" herein) as described in paragraph 10.6 and Appendix E to the Plan. 1.23 "Highly Compensated Employee": 1.23(a) For Plan Years beginning on or after January 1, 1997, an individual who is considered a "highly compensated employee" with respect to the Employer within the meaning of Section 414(q) of the Code; and, to the extent not inconsistent therewith, any Employee who is considered a Highly Compensated Active Employee or a Highly Compensated Former Employee for the Determination Year ending with or within such Plan Year, defined as follows: (i) The term "Highly Compensated Active Employee" means, with respect to a Determination Year, an Employee who is an Active Employee during the Determination Year and who either: (A) Was at any time a more than five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees) for the Determination Year or the Look-Back Year, or (B) Received Statutory Compensation in excess of $80,000 (as adjusted by the Adjustment Factor, but with the base period being the calendar quarter ending September 30, 1996) and, at the election of the Plan Sponsor or the Administrator in accordance with Section 414(q) of the Code, was a member of the twenty percent (20%) top-paid group of Employees for the Look-Back Year. - 7 - (ii) The term "Highly Compensated Former Employee" means: (A) With respect to a Determination Year, a Former Employee who has had a Separation Year prior to the Determination Year and who was a Highly Compensated Active Employee for either such Separation Year or any Determination Year ending on or after his attainment of the age of fifty-five (55). (B) Notwithstanding the foregoing, an Employee shall not be treated as a Highly Compensated Former Employee by reason of having a Deemed Separation Year after such Employee actually separates from service with the Employer if, after such Deemed Separation Year and before his Actual Separation Year, his services for the Employer and Statutory Compensation for a Determination Year increase significantly so that the Employee is treated as having a Deemed Resumption of Employment. 1.23(b) For purposes hereof: (i) The term "Active Employee" means, with respect to a Determination Year, a current Employee who performs services for the Employer as an Employee at any time during the Determination Year. (ii) The term "Deemed Resumption of Employment" means an increase in both services performed for the Employer as an Employee and Statutory Compensation, based on the facts and circumstances, and at a minimum shall include an increase in Statutory Compensation to the extent that such increased Statutory Compensation would not result in a Deemed Separation Year. (iii) The term "Determination Year" means the Plan Year. (iv) The term "Former Employee" means, with respect to a Determination Year, a current or former Employee who performs no services for the Employer as an Employee during the Determination Year. (v) The term "Look-Back Year" means, with respect to a Determination Year, the immediately preceding year to the Determination Year in question, provided, however, that if the Determination Year is the calendar year and the Administrator elects in accordance with Section 414(q) of the Code to determine the status of individuals as Highly Compensated Employees on the basis of a Look-Back Year and Determination Year which are the same year, then the Look-Back Year shall be the Determination Year. (vi) The term "Separation Year" means: (A) An "Actual Separation Year" which is a Determination Year in which a Former Employee last performed services for the Employer as an Employee prior to becoming a Highly Compensated Former Employee; or (B) A "Deemed Separation Year" which is a Determination Year prior to the Employee's attainment of the age of fifty-five (55) in which he is an Active Employee and in which his Statutory Compensation is less than fifty percent (50%) of his average annual Statutory Compensation for the three (3) consecutive calendar years preceding the Determination Year during which his Statutory Compensation was the highest (or the total period of the Employee's service with the Employer if less). A Deemed Separation Year is relevant for purposes of determining whether an Employee is a Highly Compensated Former Employee after he has an Actual Separation Year, but is not relevant for purposes of identifying him as an Active or Former Employee. 1.23(c) For purposes hereof: - 8 - (i) The Adjustment Factor for a Determination Year or a Look-Back Year shall be applied on the basis of the calendar year in which such Determination Year or Look-Back Year begins. (ii) The Administrator may adopt any rounding or tie-breaking rules it desires in making relevant determinations so long as such rules are reasonable, non-discriminatory and uniformly and consistently applied. (iii) An Employee is a member of the twenty percent (20%) top-paid group for a year if he is one of the top twenty percent (20%) of Active Employees for the year when ranked on the basis of descending Statutory Compensation for such year (whether or not the Employee in question is excluded in determining the number of Employees in the twenty percent (20%) top-paid group). For this purpose, if bargaining unit Employees are not taken into account in determining the number of Employees in the twenty percent (20%) top-paid group pursuant to clause (iv)(E) of this subparagraph, they also shall not be taken into account in determining other Employees who are in twenty percent (20%) top-paid group. (iv) For purposes of determining the number of persons in the twenty percent (20%) top-paid group and the number of persons who may be considered officers for a year, the following rules shall apply: (A) The number of Employees who are in the twenty percent (20%) top-paid group for a year is twenty percent (20%), rounded to the nearest integer, of the total number of Active Employees who are not excluded Employees for such year. (B) The number of Employees equal to ten percent (10%) of total Employees for a year is ten percent (10%), rounded to the nearest integer, of the total number of Active Employees who are not excluded Employees for such year. (C) All Former Employees for the year are excluded. (D) Employees who are non-resident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer that constitutes income from sources within the United States for the year are excluded. (E) Employees who are in a unit of employees covered by a collective bargaining agreement between the Employer and employee representatives for the year are excluded if and only if ninety percent (90%) or more of the total Employees for the year are covered by a collective bargaining agreement with the Employer and the Active Participants in the Plan do not include any such bargaining unit Employees. (F) Employees shall not be excluded on the basis of age or length of prior service. (v) If any Plan Year is a period of less than twelve (12) months, then any dollar amount referred to in this paragraph shall be prorated by multiplying the otherwise applicable dollar amount for such Plan Year by a fraction, the numerator of which is the number of months in such Plan Year and the denominator of which is twelve (12). 1.24 "Hour of Service": (i) Each hour for which an Employee is paid by the Employer, or entitled to payment, for the performance of duties for the Employer or for periods during which no duties are required to be performed, including each hour for which credit has not theretofore been given and for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to by the Employer, and - 9 - (ii) Solely for purposes of determining Years of Broken Service, each hour of absence from work for which credit is expressly given under the Plan, all as more specifically provided in Appendix A. 1.25 "Inactive Participant": A Participant who is not an Eligible Employee. 1.26 "Insurer": Any insurance company which issues a Contract to hold assets of the Plan or a Policy to provide for payment of benefits under the Plan. 1.27 "Investment Manager": A fiduciary of the Plan appointed to manage all or part of the assets of the Fund and serving pursuant to ARTICLE XI and qualifying as an "investment manager" within the meaning of Section 3(38) of the Act. 1.28 "Key Employee": 1.28(a) With respect to a Plan Year, any Employee or former Employee (or his Beneficiary if he is deceased) considered to be a "key employee" with respect to the Employer at the time in question within the meaning of Section 416(i)(1) of the Code; and to the extent not inconsistent therewith, any Employee or former Employee (or his Beneficiary if he is deceased) who at any time during such Plan Year, or any of the preceding four (4) Plan Years, is either: (i) One of the fifty (50) (or if less, the greater of three (3) or ten percent (10%) of total Employees, as determined for purposes of determining Highly Compensated Employees) officers of the Employer having the largest annual Statutory Compensation during any such Plan Year and having Statutory Compensation in excess of $45,000 (or fifty percent (50%) of any other amount, as adjusted by the Adjustment Factor, in effect for the relevant Plan Year under Section 415(b)(1)(A) of the Code); (ii) One of the ten (10) Employees having Statutory Compensation in excess of $30,000 (or any other amount, as adjusted by the Adjustment Factor, in effect for the relevant Plan Year under Section 415(c)(1)(A) of the Code) and owning more than a one-half percent (.5%) interest in the Employer, who owns the largest interests in the Employer, provided that if two such Employees have the same interest in the Employer, the Employee having the greater Statutory Compensation shall be treated as having a larger interest; (iii) A more than five percent (5%) owner of the Employer; or (iv) A more than one percent (1%) owner of the Employer having an annual Statutory Compensation of more than $150,000. 1.28(b) In determining ownership in the Employer for purposes hereof the constructive ownership rules of Section 318 of the Code (as modified by Section 416(i)(1)(B)(iii) of the Code) shall apply, and the rules of Sections 414(b), (c), (m) and (o) of the Code shall not apply. 1.29 "Leased Employee": 1.29(a) An individual who is considered a leased employee of the Employer within the meaning of Section 414(n)(2) of the Code and, to the extent not inconsistent therewith, any person: (i) Who, pursuant to an agreement between the recipient Employer and any other person (the "leasing organization"), has performed services for the recipient Employer or for the recipient Employer and related persons (determined in accordance with Section 414(n)(6) of the Code), - 10 - (ii) Whose services are performed on a substantially full-time basis for a period of at least one year, and (iii) For years beginning before January 1, 1997, whose services are of a type historically performed by employees in the business field of the recipient Employer; and for years beginning after December 31, 1996, whose services are performed under the primary control or direction of the recipient Employer. 1.29(b) Notwithstanding the foregoing, if such leased employees constitute less than twenty percent (20%) of the Employer's non-highly compensated work force within the meaning of Section 414(n)(1)(C)(ii) of the Code, individuals otherwise considered to be Leased Employees shall not include those leased employees covered by a plan described in Section 414(n)(5) of the Code (unless otherwise provided by the terms of the Plan) and, to the extent not inconsistent therewith, which: (i) Is maintained by the leasing organization, (ii) Is a money purchase pension plan with a non-integrated employer contribution rate of at least seven and one-half percent (7-1/2%) of compensation in the case of services performed before January 1, 1987 or ten percent (10%) of compensation in the case of services performed after December 31, 1986, (iii) Provides full and immediate vesting, and (iv) Provides for immediate participation by each employee of the leasing organization (other than employees who perform substantially all their services for the leasing organization or whose compensation from the leasing organization in each of the four (4) Plan Years ending with the Plan Year in question is less than $1,000). For purposes hereof, "compensation" means compensation as defined in Section 415(c)(3) of the Code, but determined without regard to Sections 125, 402(e)(3) and 402(h)(1)(B) of the Code and without regard to employer contributions made pursuant to salary reduction agreements under Section 403(b) of the Code for Plan Years beginning before January 1, 1998. 1.30 "Non-Highly Compensated Employee": Any Employee who is not a Highly Compensated Employee. 1.31 "Non-Key Employee": Any Employee (including the Beneficiary of such Employee) who is not a Key Employee. 1.32 "Normal Retirement Age": The age of sixty-five (65) years. 1.33 "Participant": An Eligible Employee or other person qualified to participate in the Plan for so long as he is considered a Participant as provided in ARTICLE II hereof. There are two classes of Participants - Active Participant and Inactive Participants. 1.34 "Plan": This Plan and Trust Agreement, including the Appendices hereto, as contained herein or duly amended. The Plan maintained pursuant hereto shall be known as the "Eskimo Pie Corporation Savings Plan". 1.35 "Plan Sponsor": Eskimo Pie Corporation, a Virginia corporation (or its corporate successor). 1.36 "Plan Year": The year commencing upon the first day of January of each year 1.37 "Policy": A group or individual policy, contract or other agreement (including a certificate) issued by an Insurer which is not a Contract and which is obtained to provide for the accumulation and/or payment of benefits under the Plan. - 11 - 1.38 "QDRO": A qualified domestic relations order within the meaning of Section 206(d)(3) of the Act and Section 414(p) of the Code and as determined by the Administrator pursuant to the Plan. 1.39 "Spouse": 1.39(a) For the purpose of entitlement to receive death benefits as a Spouse under subparagraph 7.3(a) of the Plan and consenting to a Beneficiary designation as a Spouse under subparagraph 7.3(a) and paragraph 7.4 of the Plan, the individual to whom the Participant was married throughout the one year period ending on the date of his death. 1.39(b) The determination of the marital status of a Participant shall be made pursuant to applicable local law; provided, however, that a Participant's former spouse shall continue to be considered married to the Participant, and a Participant's current spouse shall be considered not married to the Participant, to the extent provided under a QDRO. - 12 - 1.40 "Statutory Compensation": 1.40(a) For Plan Years beginning before January 1, 1998, an Employee's Total Compensation plus employee elective salary reduction or similar contributions excluded from Total Compensation by reason of Sections 125, 402(e)(3), 402(h), 403(b), 414(h)(2) and 457(b) of the Code. Statutory Compensation for a Plan Year (or other applicable computation period) shall be limited by the Compensation Limit for all purposes other than determining Family Members, Highly Compensated Employees and Key Employees. 1.40(b) For Plan Years beginning on or after January 1, 1998, an Employee's Total Compensation. Statutory Compensation for a Plan Year (or other applicable computation period) shall be limited by the Compensation Limit for all purposes other than determining Highly Compensated Employees and Key Employees. 1.41 "Super Top Heavy Plan": The Plan, if it would still be considered a Top Heavy Plan if ninety percent (90%) were substituted for sixty percent (60%) in each place it appears in the definition of a Top Heavy Plan. 1.42 "Top Heavy Plan": The Plan, for any Plan Year beginning after December 31, 1983, if the sum of the present values of the cumulative Accrued Benefits of Key Employees under the Plan, and the present values of the cumulative accrued benefits of Key Employees under all plans aggregated with it, exceeds sixty percent (60%) of the aggregate of the present value of the cumulative Accrued Benefits under this Plan and accrued benefits under such plan(s) at the applicable determination date. For purposes hereof, aggregation, accrued benefits (including Accrued Benefits) taken into account, the determination date and all other standards and criteria for determining top- heaviness under this Plan and such other plan(s) shall be determined under Section 416 of the Code. Subject to the foregoing, more specific rules for determining whether the Plan is a Top Heavy Plan are provided in Appendix B. 1.43 "Total Compensation": 1.43(a) For Plan Years (or Limitation Years, as applicable) beginning before January 1, 1998, the total compensation from the Employer received by or made available to an Employee during any Plan Year or, for purposes of the limitations imposed by Section 415 of the Code, any Limitation Year (as defined in paragraph 4.3): (i) Including, but not limited to, wages, salary, earned income (in the case of self-employed individuals), vacation pay, sick pay, overtime pay, bonuses and commissions, and as reportable to the Internal Revenue Service on Form W-2 (or its successor), where applicable, for federal income tax purposes, but (ii) Excluding paid or reimbursed expenses, contributions or benefits under a simplified employee pension plan, contributions (to the extent not includible in the Employee's gross income when contributed) or benefits under this or any other plan of deferred compensation (other than an unfunded, non-qualified plan), contributions or benefits under any other employee benefit plan or arrangement (to the extent excludible from or not includible in gross income), now, heretofore or hereafter adopted, amounts paid or received or deemed received in connection with stock options or rights, other amounts which receive special tax benefits, or any amount otherwise paid as compensation but finally determined not to be deductible as compensation in determining the Employer's federal taxable income. 1.43(b) For Plan Years (or Limitation Years, as applicable) beginning on or after January 1, 1998, the total compensation from the Employer received by or made available to an Employee during any Plan Year or, for purposes of the limitations imposed by Section 415 of the Code, any Limitation Year (as defined in paragraph 4.3): (i) Including, but not limited to, wages, salary, earned income (in the case of self-employed individuals), vacation pay, sick pay, overtime pay, bonuses and commissions, and as reportable to the Internal Revenue Service on Form W-2 (or its successor), where applicable, for federal income tax purposes, but - 13 - (ii) Including employee elective salary reduction or similar deferral contributions excluded from W-2 compensation by reason of Section 125, 402(g)(3) or 457(b) of the Code (and elective deferrals or contributions under any other sections of the Code covered by Section 415(c)(3)(D) of the Code), and (iii) Excluding, except as otherwise expressly included by clause (ii) above, paid or reimbursed expenses, contributions or benefits under a simplified employee pension plan, contributions (to the extent not includible in the Employee's gross income when contributed) or benefits under this or any other plan of deferred compensation (other than an unfunded, non-qualified plan), contributions or benefits under any other employee benefit plan or arrangement (to the extent excludible from or not includible in gross income), now, heretofore or hereafter adopted, amounts paid or received or deemed received in connection with stock options or rights, other amounts which receive special tax benefits, or any amount otherwise paid as compensation but finally determined not to be deductible as compensation in determining the Employer's federal taxable income. 1.44 "Trustee": For periods prior to March 31, 1997, First Union National Bank of North Carolina, serving in the capacity as sole Trustee; for periods on or after March 31, 1997, First Union National Bank of North Carolina, serving in the capacity as a Separate Trustee (as provided in paragraph 12.8) for all Fund divisions other than the Company Stock Fund, and Thomas M. Mishoe, Jr., serving in the capacity as a Separate Trustee (as provided in paragraph 12.8) for the Company Stock Fund, for so long as and to the extent each is serving under such Trustee; or any other Trustee, Separate Trustees (as provided in paragraph 12.8), any Co-Trustee (as provided in subparagraph 15.1(e)), or any successor or additional person(s) or entity(ies) appointed pursuant hereto as trustee of the Fund and currently serving. Any reference to a Trustee herein is intended to be a reference to any sole Trustee, any separate Trustee or any Co- Trustee then serving unless the context indicates otherwise. 1.45 "Valuation Date": Each business day (based on the days the underlying investment funds are valued and transactions are effectuated in the applicable financial markets) of the Plan Year, or such other dates (which must be at least annually) as the Administrator may designate from time to time. 1.46 "Year of Broken Service": A Plan Year (which is the computation period), commencing with or after the date an individual becomes an Employee, during which such Employee is not credited with more than five hundred (500) Hours of Service. 1.47 "Year of Vesting Service": A Plan Year (which is the computation period), commencing with or after the date an individual becomes an Employee, during which such Employee is credited with at least one thousand (1,000) Hours of Service. ARTICLE II Eligibility and Participation ----------------------------- 2.1 Eligibility and Date of Participation as a Regular Participant. -------------------------------------------------------------- 2.1(a) Each individual who has met the age and service requirements for participation in the Plan and has become a Participant in the Plan entitled to make After-tax and Pre-Tax Contributions and receive a share of any contributions by the Employer (that is, he is a Regular Participant) on the day before the Effective Date of this Restatement of the Plan shall continue to be a Regular Participant in the Plan at the Effective Date of this Restatement of the Plan. 2.1(b) Each other Eligible Employee who is not a Regular Participant at the Effective Date of this Restatement of the Plan shall become a Regular Participant on the earlier of the following dates: - 14 - (i) The first day of the first calendar month (A) which occurs both twelve (12) months after his Date of Hire and by which he has attained the age of twenty one (21) years and (B) on which he is an Eligible Employee, or (ii) If he is not an Eligible Employee on the date referred to in clause (i) above, on the first day he becomes an Eligible Employee thereafter. 2.1(c) An individual who was, but ceased to be, a Regular Participant shall again be a Regular Participant if and when he again becomes an Eligible Employee. 2.1(d) An individual who becomes a Regular Participant shall be or remain a Regular Participant for so long as he remains an Eligible Employee. 2.2 Eligibility for Rollover Contributions as a Rollover Eligible ------------------------------------------------------------- Participant. Notwithstanding the foregoing, an Employee who is not a Regular - ----------- Participant shall be eligible to become a Rollover Eligible Participant whenever he is an Eligible Employee. An Eligible Employee who is not a Regular Participant may become a Rollover Eligible Participant by making a Rollover Contribution to the Plan. A Rollover Eligible Participant shall not be eligible to make After-Tax or Pre-Tax Contributions or receive a share of any contributions by the Employer or forfeitures unless and until he becomes a Regular Participant pursuant to paragraph 2.1 A Participant shall cease to be a Rollover Eligible Participant when he becomes a Regular Participant. 2.3 Length of Participation. An individual who becomes a Participant ----------------------- shall be or remain a Participant for so long as he remains an Eligible Employee and thereafter while he is entitled to future benefits under the terms of the Plan. ARTICLE III Funding ------- 3.1 Amount and Timing of Employer Contributions. ------------------------------------------- 3.1(a) With respect to each Allocation Period of a Plan Year, each Employer shall make a Matching Contribution to the Fund on behalf of each Regular Participant who has made After-Tax and/or Pre-Tax Contributions to the Plan at any time during such Allocation Period in the amount equal to fifty-percent (50%) of the lesser of (i) the Regular Participant's aggregate After-Tax and Pre-Tax Contributions for such Allocation Period or (ii) six percent (6%) of his Compensation for such Allocation Period. The "Allocation Period" is each calendar month. 3.1(b) With respect to each Plan Year, each Employer's Profit Sharing Contribution to the Fund shall be such amount, if any, as the Plan Sponsor may determine. 3.1(c) With respect to each Plan Year, each Employer's QNEC Contribution to the Fund shall be such amount, if any, as the Plan Sponsor may determine. QNEC Contributions are intended to be non-elective contributions within the meaning of Section 401(m)(4)(C) of the Code (that is, employer contributions (other than matching contributions) which an Employee may not elect to have paid to him instead of being contributed to the Plan, which are subject to the restrictions on distributions contained in Section 401(k)(2)(B) of the Code (generally prohibiting distribution before separation from service, death, or disability unless, if the Plan permits such payment, the Employee has a hardship or has reached age fifty-nine and one-half (59-1/2) or after plan termination), and which are immediately fully vested and non-forfeitable. 3.1(d) For any Plan Year for which the Plan is a Top Heavy Plan, the Plan Sponsor shall cause a Top Heavy Contribution by the Employer to be made on behalf of each Non-Key Employee who is a Regular Participant for such Plan Year, who is an Eligible Employee on the last day of such Plan Year and who is not covered by a collective bargaining agreement under which retirement benefits were the subject of good faith bargaining with the Employer so that the total - 15 - allocation of contributions by the Employer (other than Supplemental Contributions to the Plan and similar contributions to other plans) and forfeitures for each such Non-Key Employee is at least equal to the lesser of: (i) Three percent (3%) of his Top Heavy Compensation for such Plan Year, or (ii) Such lesser percentage of his Top Heavy Compensation for such Plan Year which is equal to the percentage of Top Heavy Compensation of the Key Employee for such Plan Year for whom an allocation of contributions by the Employer (other than Supplemental Contributions to this Plan and similar contributions to other plans) and forfeitures under this Plan and any other qualified defined contribution plan or simplified employee pension plan maintained by the Employer is made which is the highest such percentage for such Plan Year (calculated by aggregating all such contributions and forfeitures); provided, however, that this clause (ii) shall not apply if this Plan enables a defined benefit plan to meet the requirements of Section 401(a)(4) or 410 of the Code. For purposes hereof, contributions considered made by the Employer which are attributable to a salary reduction or similar arrangement (such as Pre-Tax Contributions) and matching contributions within the meaning of Section 401(m) of the Code (such as Matching Contributions) shall only be taken into account for purposes of determining the highest percentage of any Key Employee pursuant to clause (ii) of this subparagraph. For purposes hereof, "Top Heavy Compensation" means a Regular Participant's Total Compensation, not in excess of the Compensation Limit, for a Plan Year. 3.1(e) With respect to each Plan Year, the Employer shall make a Supplemental Contribution to the Fund on behalf of Participants in such amount as may be required pursuant to paragraph 6.6. 3.1(f) In no event shall the sum of the Matching, QNEC, Profit Sharing and Top Heavy Contributions made by the Employer and the Pre-Tax Contributions considered made by the Employer for purposes of Section 404 of the Code for any taxable year of the Employer exceed the maximum amount deductible from the Employer's income for such taxable year under the Code, including the maximum amount deductible under the "carry over" provisions relating to contributions in previous years of more or less than the maximum amount permissible and any amount deductible as a contribution on behalf of an Affiliate, in which latter case any such contribution shall be deemed, for purposes of this Plan, to have been made by such Affiliate. Each contribution by the Employer shall be conditioned on its deductibility. If a reduction is thereby required, the excess amount shall be reduced in the following manner: (i) First, to the extent directed by the Plan Sponsor by the date, including extensions thereof, on which its federal income tax return is due to be filed for such taxable year, the Pre-Tax Contributions for such taxable year of the Eligible Participants (as defined in Appendix D to the Plan) who are Highly Compensated Employees for such taxable year shall first be refunded to such Eligible Participant and shall be considered as gross income to the Participant. Among such Participants, the reduction shall be effected by reducing contributions in order of the highest Deferral Percentages (as defined in Appendix D to the Plan), (ii) Then, the Profit Sharing Contribution for such taxable year shall be reduced, (iii) Then, the QNEC Contribution for such taxable year shall be reduced, (iv) Then, the Matching Contribution for such taxable year shall be reduced, (v) Then, the Top Heavy Contribution for such taxable year shall be reduced, and (vi) Then the Supplemental Contributions for such taxable year shall be reduced, - 16 - to the extent necessary to reduce the excess amount to zero. Unless otherwise directed by the Plan Sponsor, any such reductions (other than those referred to in clause (i) of this subparagraph) shall be effected pro rata based on the entire class of contributions for such taxable year to be reduced. 3.1(g) The contribution by the Employer for any Plan Year may be made in one or more payments at any time, subject to the prohibition of paragraph 4.5, provided that the total amount of the contribution with respect to any taxable year of the Employer shall be paid not later than the date, including extensions thereof, on which the Employer's federal income tax return for such taxable year is due to be filed. Notwithstanding the foregoing, if a contribution is not timely made, it may still be allocated as a contribution for the Plan Year for which contributed if so directed by the Plan Sponsor. 3.2 Special Rules for Employer's Share of and Form of Contribution. -------------------------------------------------------------- 3.2(a) Unless some other allocation of the contributions by the Employer is directed by the Plan Sponsor, each Employer shall contribute to the Fund for each Plan Year: (i) That portion of the Matching Contribution made with respect to each Participant's After-Tax and Pre-Tax Contributions for an Allocation Period (as defined in subparagraph 3.1(a)) determined by multiplying the Matching Contribution for such Participant for such Allocation Period by a fraction, the numerator of which is the After-Tax and Pre-Tax Contribution made by such Participant out of his Compensation payable by it for such Allocation Period and the denominator of which is the aggregate After-Tax and Pre-Tax Contributions of such Participant for such Allocation Period; plus (ii) That portion of the QNEC Contribution for a Plan Year determined to be made by it; plus (iii) That portion of the Profit Sharing Contribution for a Plan Year determined to be made by it; plus (iv) That portion of the Supplemental and Top Heavy Contribution for a Plan Year equal to its proportion of the Matching Contribution made by it for such Plan Year. 3.2(b) Notwithstanding the foregoing allocation provisions of subparagraph 3.2(a), if or to the extent an Employer is unable for any reason to make its share of the contribution for a Plan Year, such share or portion thereof shall be made by the other participating Employers for such Plan Year either in proportion to their relative shares of their otherwise due contribution for such Plan Year or in such proportion or amount as the Plan Sponsor otherwise directs. 3.2(c) The contributions made by the Employer for any Allocation Period (as defined in subparagraph 3.1(a)) beginning on or after March 1, 1997 or any Plan Year may be made in cash and in cash, Company Stock or some combination thereof, as determined by the Plan Sponsor. If a contribution is made by the Employer in cash, the Plan Sponsor may direct the Trustee to treat the cash contribution as a contribution made for the purpose of acquiring Company Stock by directing that it be allocated to the Company Stock Fund; and such cash contributions and all contributions made in the form of Company Stock shall be considered to be Company Stock contributions for purposes of allocations under the Plan. It is the intent that Company Stock contributions (and cash contributions treated as Company Stock contributions) shall be allocated to the Company Stock Fund, and the appropriate Company Stock Matching Account, Company Stock Profit Sharing Account, or Company Stock QNEC Account, without regard to any Participant contribution investment direction otherwise then in effect. 3.3 Participant After-Tax and Pre-Tax Contributions. Subject to ----------------------------------------------- applicable suspensions as provided in ARTICLE IX, Regular Participants may make After-Tax Contributions and Pre-Tax Contributions as follows: 3.3(a) Each Regular Participant may make After-Tax Contributions and/or Pre- Tax Contributions to the Plan through payroll deduction while he is an Eligible Employee. - 17 - (i) The aggregate amount of a Regular Participant's After-Tax Contributions and Pre-Tax Contributions for any payroll period shall be an amount equal to the product obtained by multiplying (A) such Participant's rate of contribution by (B) his Compensation for such payroll period. (ii) A Regular Participant's rate of contribution may be any rate, in whole multiples of one percent (1%), from one percent (1%) through twelve percent (12%). (iii) Each Regular Participant shall designate the type(s) of contribution, whether After-Tax or Pre-Tax, and rate(s) thereof he is making. 3.3(b) For each payroll period contributed, each Regular Participant's After-Tax and Pre-Tax Contributions made by payroll deduction contributions shall automatically be designated as follows, subject however to such other designation by the Participant as the Administrator may from time to time permit and subject further to redesignation as provided in other applicable provisions of the Plan. (i) Such Pre-Tax Contributions shall be designated as "Pre-Tax Basic Contributions" to the extent of the lesser of (A) six percent (6%) of the Regular Participant's Compensation for such payroll period or (B) the amount of such Pre-Tax Contributions; (ii) Such After-Tax Contributions shall be designated as "After-Tax Basic Contributions" to the extent of the lesser of (A) the excess of six percent (6%) of the Regular Participant's Compensation for such payroll period over the amount of his Pre-Tax Basic Contributions for such payroll period or (B) the amount of such After-Tax Contributions for such payroll period; and (iii) The balance of the After-Tax Contributions and Pre-Tax Contributions of the Regular Participant for such payroll period shall be designated as "After-Tax Optional Contributions" and "Pre-Tax Optional Contributions", respectively. 3.3(c) All Pre-Tax Contributions are intended to be payments to the Plan by the Employer under a cash or deferred arrangement described in Section 401(k) of the Code, and any reference herein to such contributions as employee or Participant contributions is for convenience only and is not intended as a designation of such contributions as employee contributions within the meaning of Section 414(h)(1) of the Code. 3.4 Elective Deferral Dollar Limitation on Pre-Tax Contributions. The ------------------------------------------------------------ aggregate amount of a Participant's Pre-Tax Contributions made to the Plan for a Plan Year shall not exceed the applicable limits thereon under Section 402(g) of the Code and in Appendix D to the Plan. 3.5 Participant Rollover Contributions. ---------------------------------- 3.5(a) Any Participant who is an Eligible Employee may make or direct there to be made a Rollover Contribution in the form of a lump sum in cash. 3.5(b) For purposes hereof, a "Rollover Contribution" is a qualifying rollover amount distributed from or attributable to a distribution, including a plan to plan direct rollover of an eligible rollover distribution under Section 402(c) of the Code, from a plan qualified under Section 401 or 403(a) of the Code. Notwithstanding the foregoing, no Rollover Contribution may consist of any amount constituting "accumulated deductible employee contributions" within the meaning of Section 72(o)(5)(B) of the Code or an eligible rollover distribution from an annuity contract described in Section 403(b)(1) of the Code, a custodial account described in Section 403(b)(7) of the Code or a retirement income account described in the Section 402(e) of the Code. - 18 - 3.5(c) The Administrator may require as a condition of any such Rollover Contribution that the Participant, and/or the trustee, custodian or issuer of any plan, trust, bond, annuity or account from which the amount to be rolled over or transferred is attributable, make such certification as the Administrator deems necessary respecting the qualification of the distributing or transferor plan, trust, or annuity, the amount and nature of the distribution or transfer, the qualification of the Rollover Contribution as a rollover amount with respect to this Plan, and any other information the Administrator may reasonably require. 3.5(d) In the event it is discovered that any Rollover Contribution made by or on behalf of a Participant is not a qualifying rollover amount or an eligible rollover distribution or otherwise is a contribution or transfer which is not permitted to be received as a Rollover Contribution under the Plan, the Accrued Benefit of the Participant attributable to such non-qualifying Rollover Contribution shall be returned to the Participant (or if deceased, his Beneficiary). 3.6 Procedure for and Time of Making Participant Contributions. ---------------------------------------------------------- 3.6(a) A Participant's contributions which may be made by payroll deduction shall commence to be made starting as of the effective date of his application to make such contribution. A Participant who is an Eligible Employee may commence making payroll deduction contributions initially as of the date he first becomes a Participant and thereafter he may commence, change the rate or recommence his payroll deduction contributions as of the first day of any calendar month (or at such other time as the Administrator may permit on a uniform and non-discriminatory basis) by delivering a payroll deduction election to the Administrator no later than the fifteenth (15th) day of the calendar month immediately preceding the date it is to become effective (or such shorter period as the Administrator may permit on a uniform and non-discriminatory basis) and prior to the time the amounts in question are payable or otherwise made available to the Participant. 3.6(b) A Participant may terminate his payroll deduction contributions as of the end of any calendar month (or at such other time as the Administrator may permit on a uniform and non-discriminatory basis) by delivering an election to the Administrator at least fifteen (15) days (or such other period as the Administrator may permit on a uniform and non-discriminatory basis) before the end of the calendar month (or other time) such contributions will be terminated, which notice shall specify the date of termination. A Participant who has voluntarily terminated his payroll deduction contributions to the Plan may recommence his payroll deduction contributions as of the first day of any calendar month (or at such other time as the Administrator may permit on a uniform and non-discriminatory basis) by delivering a new payroll deduction election to the Administrator no later than the fifteenth (15th) day of the calendar month immediately preceding the date it is to become effective (or such shorter period as the Administrator may permit on a uniform and non- discriminatory basis) and prior to the time that the amounts in question are payable or otherwise made available to the Participant. 3.6(c) If a Participant ceases to be an Eligible Employee, his contributions to the Plan shall cease to be made. Except as otherwise prohibited herein, if such individual again becomes an Eligible Employee, he shall again be entitled to recommence his payroll deduction contributions at a rate designated by him as of the date he again becomes an Eligible Employee by delivering a new payroll deduction election to the Administrator no later than the fifteenth (15th) day of the calendar month immediately preceding the date it is to become effective (or such shorter period as the Administrator may permit on a uniform and non- discriminatory basis) and prior to the time that the amounts in question are payable or otherwise made available to the Participant. 3.6(d) A Participant's Rollover Contributions shall be made by delivering the same to the Administrator together with an appropriate contribution election. 3.6(e) Each Participant shall when electing to make contributions designate the rate and type(s) of contribution in the applicable election. 3.6(f) Participant contributions received by the Administrator or withheld by the Employer shall be paid over to the Trustee as soon as is reasonably practical after the applicable election is received in the case of lump sum contributions and as - 19 - soon as is reasonably practical after the amount can be segregated from the general assets of the Employer and in no event later than the fifteen (15) business days after the calendar month of contribution, in the case of payroll deduction contributions. In all events, After-Tax and Pre-Tax Contributions shall be paid over to the Trustee not later than the end of the Plan Year immediately following the Plan Year for which withheld by the Employer. 3.6(g) Notwithstanding anything to the contrary herein, the Administrator may on a non-discriminatory basis at any time and from time to time: (i) Permit changes by Participants in the rate of their payroll deduction contributions prospectively, and/or (ii) Unilaterally and prospectively limit After-Tax and/or Pre-Tax Contributions which may be made to the Plan, to the extent considered advisable by the Administrator in order to satisfy the requirements of paragraphs 4.3 and/or 4.11 and/or to prevent the sum of Pre-Tax Contributions by Participants and Matching, QNEC, Profit Sharing and Top Heavy Contributions by the Employer for a taxable year of the Employer from exceeding the amount thereof deductible for such taxable year by the Employer for federal income tax purposes. 3.7 Use of Forfeitures and Unallocated Annual Additions. Forfeitures --------------------------------------------------- shall be held in the Fund and applied to reduce the next due contributions by the Employer in the Plan Year following the Plan Year in which the forfeiture occurs on a pro rata basis without regard to which Employer's contributions the forfeitures are attributable as hereinafter provided until exhausted, and to the extent thus used to reduce contributions by the Employer shall be treated as a contribution by the Employer for purposes of administering the Plan. In lieu of the foregoing use of forfeitures, forfeitures may be used to pay Plan administrative expenses if so directed by the Plan Sponsor. In no event shall any such forfeitures be used to otherwise increase the benefits to which a Participant is entitled under the Plan. In the event that the amount of forfeitures at any time exceed the required contribution, such excess forfeitures shall be held in the special account in the Fund provided for in subparagraph 4.5 and applied to reduce future contributions by the Employer. 3.8 No Duty of Trustee to Determine or Enforce Contributions. The -------------------------------------------------------- Trustee shall not be required to determine the amount of any contribution for any Plan Year or to enforce the duty of the Employer to make or pay over such contributions; but the Trustee shall provide the Employer with such information as it may reasonably require to determine the amount of its contribution. ARTICLE IV Participants' Accounts and Adjustments -------------------------------------- 4.1 Accounts. -------- 4.1(a) The Administrator shall establish and maintain on the books of the Fund for all Participants and all other persons having an interest therein separate accounts reflecting the Accrued Benefit of each Participant. Such accounts of each Participant shall be separate with respect to the Accrued Benefit of such Participant represented by his accounts in each Fund division. 4.1(b) As of each Valuation Date (or as otherwise provided herein), accounts shall generally be adjusted in accordance with the applicable provisions of the Plan as follows: - 20 - (i) Benefit payments, withdrawals and other distributions and transfers out of the Fund shall be determined and allocated. (ii) The net increase or decrease in value of accounts and Fund divisions shall be determined and allocated. (iii) Contributions, amounts held in the special account under paragraph 4.5 and direct transfers shall be allocated. (iv) Company Stock acquisitions by purchase or internal adjustment shall be determined and allocated. (v) Other adjustments required under the Plan shall be made. 4.1(c) The Administrator shall establish procedures for, and may thereafter from time to time modify such procedures for, accounting for interests in each Fund division. Such procedures may include dollar or unit accounting for one or more of the Fund divisions. 4.1(d) The Administrator shall establish procedures for, and may thereafter from time to time modify such procedures for, making the adjustments to accounts required under the Plan. Such procedures shall include records of the cost or other basis of Company Stock. 4.1(e) Whenever the Plan's Valuation Date is daily, the Administrator may utilize such rules as it deems appropriate for crediting valuation and other adjustments to Participants' accounts and the Fund divisions and for determining balances therein which reflect the time amounts are actually received or charged, rather than the time as of which an allocation is normally provided for under the Plan. 4.1(f) If the Administrator determines in making any valuation, allocation or other adjustments to any Participant's account under the provisions of the Plan that the strict application of the provisions of the Plan will not produce equitable and non-discriminatory allocations among the Participants' accounts, it may modify any procedures specified in the Plan for the purpose of achieving an equal and non-discriminatory allocation in accordance with the general concepts and purposes of the Plan; provided, however, that any such modification shall not be inconsistent with the provisions of Section 401(a)(4) and, where applicable, Section 401(k) or (m) of the Code and other qualification and excise tax sections of the Code applicable to the Plan. 4.2 Allocation of Contributions. Subject to the applicable limitations --------------------------- contained herein: 4.2(a) Each Regular Participant's Pre-Tax Contributions to the Fund for a Plan Year shall be allocated to his Pre-Tax Account as of the last Valuation Date of the period in such Plan Year for which such contributions are made. 4.2(b) Each Participant's Rollover Contribution shall be allocated to his Rollover Account when made. 4.2(c) The Employer's Matching Contribution to the Fund made on behalf of a Regular Participant for an Allocation Period (as defined in subparagraph 3.1(a)) shall be allocated to the Matching Active Account (including the Company Stock Matching Account or the Unrestricted Matching Account, as applicable) of such Participant as of the last Valuation Date of the Allocation Period for which such contribution is made. 4.2(d) Each Employer's Profit Sharing Contribution to the Fund for a Plan Year shall be allocated as of the last Valuation Date of such Plan Year among the Profit Sharing Active Accounts (including the Company Stock Profit Sharing Account or the Unrestricted Profit Sharing Account, as applicable) of the Covered Participants for such Plan Year in proportion to their Compensation for such Plan Year. 4.2(e) The Employer's QNEC Contribution to the Fund for a Plan Year shall be allocated as of the last Valuation Date of such Plan Year among the QNEC Accounts (including the Company Stock QNEC Account or the QNEC Account, as - 21 - applicable) of the Regular Participants who are Non-Highly Compensated Employees for such Plan Year in proportion to their Compensation for such Plan Year. 4.2(f) The Employer's Top Heavy Contribution to the Fund made on behalf of a Regular Participant for a Plan Year shall be allocated to the Profit Sharing Active Account (including the Company Stock Profit Sharing Account or the Unrestricted Profit Sharing Account, as applicable) of such Participant as of the last Valuation Date of such Plan Year. 4.2(g) Each Employer's Supplemental Contribution made to the Fund on behalf of a Participant for each Plan Year and amounts repaid to the Plan by the Participant pursuant to paragraph 6.6 shall be allocated to the account of such Participant as of the last Valuation Date of such Plan Year and when repaid, respectively, from which forfeited or distributed (including the Company Stock Matching Account or the Unrestricted Matching Account, as applicable, and the Company Stock Profit Sharing Account or the Unrestricted Profit Sharing Account, as applicable). 4.2(h) If a contribution by the Employer is made in cash and Company Stock, the same proportions of each shall be allocated to each Participant receiving an allocation of the contribution in question. 4.3 Dollar/25% Limitations on Annual Additions. ------------------------------------------ 4.3(a) Notwithstanding any other provision of the Plan, the sum of all Annual Additions (as defined in subparagraph 4.3(c)) allocated to the accounts of any Participant for any Limitation Year may not exceed the lesser of: (i) $30,000 (referred to herein as the "Dollar Limitation"), or (ii) Twenty-five percent (25%) of such Participant's Total Compensation for such Limitation Year, which limitations are jointly referred to herein as the "Dollar/25% Limitations". 4.3(b) The Dollar Limitation shall be automatically adjusted by the Adjustment Factor, from time to time, to reflect any annual cost of living adjustments and any such adjustment (which with the original Dollar Limitation is referred to herein as the "adjusted Dollar Limitation") shall be effective for the Limitation Year which ends with or within the calendar year for which such increase is effective. 4.3(c) The term "Annual Additions" means the sum of the following amounts allocated to a Participant's account under the Plan for a Limitation Year: (i) All contributions by the Employer other than Supplemental Contributions; (ii) All forfeitures other than those used to restore accounts pursuant to paragraph 6.6; (iii) All After-Tax Contributions and Pre-Tax Contributions by Participants; and (iv) Any other amounts defined as "annual additions" under Section 415 of the Code. Notwithstanding anything to the contrary herein, amounts repaid by a Participant pursuant to paragraph 6.6 in order to have a forfeiture restored and amounts which are excluded from being "annual additions" under Section 415 of the Code shall not be considered Annual Additions for purposes hereof. 4.3(d) For purposes hereof, the term "Limitation Year" means the Plan Year. - 22 - 4.3(e) For purposes hereof, the rules of Section 415 of the Code are incorporated by reference for purposes of determining "Annual Additions" and applying the "Dollar/25% Limitations". 4.4 Additional Limitations on Annual Additions Where Employer Maintains ------------------------------------------------------------------- More Than One Plan. - ------------------ 4.4(a) If any Participant is or has been a participant in another Qualified Defined Contribution Plan or in a Qualified Defined Benefit Plan (whether or not terminated), the limitations contained in paragraph 4.3 shall be appropriately adjusted when and as required by Section 415 of the Code, as modified where applicable by Section 416 of the Code, which provisions are incorporated by reference and shall control over any contrary or omitted or inconsistent provisions in the Plan. 4.4(b) If any Participant is or has been a participant in more than one Qualified Defined Contribution Plan (whether or not terminated), the limitations under Section 415 of the Code apply as if all such Qualified Defined Contribution Plans were one plan. The following rules shall also apply: (i) In the event that the Dollar/25% Limitations would otherwise be exceeded for a Limitation Year, the applicable limitation shall be applied for such Participant by limiting the allocation of Annual Additions to the accounts of such Participant in the following order: first, allocations under all plans not hereinafter described, then profit sharing plan allocations, then stock bonus plan allocations, then money purchase pension plan allocations, then target benefit plan allocations, then employee stock ownership plan allocations, then tax credit employee stock ownership plan allocations, and lastly welfare benefit fund and individual medical benefit account allocations. (ii) If such Participant is a participant in two or more plans of the same type, the applicable limitation shall be applied to non- contributory plans or aspects thereof first and thereafter to contributory plans or aspects thereof and shall be applied pro rata among such plans or aspects thereof in the same limitation category on the basis of allocations thereunder before operation of the applicable limitation. 4.4(c) If any Participant is or has been a Participant in both a Qualified Defined Benefit Plan and a Qualified Defined Contribution Plan, then the Annual Additions for such Participant shall be reduced (after the accrued benefit, the annual benefit, the projected annual benefit and the rate of accrual under all Qualified Defined Benefit Plans are reduced) to the extent necessary so that the sum of the defined benefit plan fraction (not to exceed one) and the defined contribution plan fraction (not to exceed one) determined pursuant to section 415(e) of the Code shall not exceed 1.0 for such Participant for any Plan Year and in order to achieve the objective of compliance with the applicable rules of limitation contained in Section 415(e) of the Code and, if the Plan is a Top Heavy Plan or a Super Top Heavy Plan, in Section 416(h) of the Code. Notwithstanding anything to the contrary in this paragraph, the limitations provision of this subparagraph shall not apply with respect to Plan Years beginning on or after January 1, 2000. 4.4(d) Solely for purposes of paragraphs 4.3, 4.4 and 4.5, the following words and terms shall have the meaning set forth below in this subparagraph: (i) The term "Qualified Defined Contribution Plan" means any plan maintained by the Employer or portion thereof described or treated as a defined contribution plan within the meaning of Sections 414(i) and 415(k) of the Code, including, but not limited to, defined contribution plans qualified under Section 401(a) of the Code, tax sheltered annuity contracts described in Section 403(b) of the Code, simplified employee pension plans described in Section 408(k) of the Code, any employee contribution portion of and any cost-of-living protection arrangement under a defined benefit plan qualified under Section 401(a) of the Code, any individual medical account under a pension or annuity plan within the meaning of Section 415(l) of the Code, and any welfare benefit fund within the meaning of Section 419(e) of the Code. (ii) The term "Qualified Defined Benefit Plan" means any plan maintained by the Employer or portion thereof described or treated as a defined benefit plan within the meaning of Sections 414(j) and 415(k) of the Code. - 23 - 4.4(e) In complying with the limitations of Section 415 of the Code, all other transitional rules under any law enacting or amending Section 415, or Section 416 as applicable to Section 415, of the Code shall be applicable as determined by the Plan Sponsor. 4.5 Special Account for Unallocated Annual Additions. ------------------------------------------------ 4.5(a) In the event a Participant's Annual Additions for a Plan Year exceed his Dollar/25% Limitations of paragraph 4.3, the excess Annual Additions of such Participant shall be eliminated by refunding to him that amount of his After-Tax and Pre-Tax Contributions for the Plan Year which are included in the Annual Additions taken into account under the provisions of paragraph 4.3 in the following order: (i) First, there shall be returned to such Participant first that amount of his After-Tax Optional Contributions, if any, and then of his Pre- Tax Optional Contributions, if any (including in each case any income allocable thereto for such Limitation Year), and (ii) Then, there shall be returned to such Participant first that amount of his After-Tax Basic Contributions, if any, and then of his Pre-Tax Basic Contributions, if any, (including in each case any income allocable thereto for such Limitation Year), and by the loss of Matching Contributions otherwise to be allocated to him with respect to such After-Tax and Pre-Tax Contributions, to the extent necessary to achieve compliance with the Dollar/25% Limitations of paragraph 4.3. Any such After-Tax and Pre-Tax Contributions so returned shall be disregarded for purposes of determining Excess Elective Deferrals in Appendix D to the Plan, actual deferral percentages under Section 401(k) of the Code (and Deferral Percentages in Appendix D to the Plan) and, if ever recharacterized and then returned, actual contribution percentages under Section 401(m) of the Code (and Contribution Percentages in Appendix D to the Plan). After the return to such Participant of any After-Tax and Pre-Tax Contributions and loss of Matching Contributions pursuant to the preceding provisions of this subparagraph, any elimination of allocations to his accounts made in accordance with this subparagraph shall be made first from Profit Sharing Contributions allocated to him, next from QNEC Contributions allocated to him, and then from Top Heavy Contributions allocated to him for such Plan Year. 4.5(b) Any Annual Additions allocable to Participants' accounts for the Plan Year which consist of the Profit Sharing Contribution or QNEC Contributions and which exceed the Dollar/25% Limitations of paragraph 4.3 shall be withdrawn for the affected Participants' accounts and retained as an undesignated account on the books of the Fund for allocation among the accounts of the Participants as a part of the Employer's contribution next due for the next following Plan Year. Any such amounts so used shall be treated for allocation purposes of the Plan as a part of the contribution by the Employer. 4.5(c) The undesignated special account maintained pursuant to this paragraph shall be adjusted at each Valuation Date for its share of net increase or decrease in value of the Fund, and such account shall be held in such Fund divisions as the Administrator shall direct. 4.5(d) Notwithstanding any other provisions of the Plan, no contributions by the Employer which would constitute amounts subject to the Dollar/25% Limitations of paragraph 4.3 for a Plan Year may be made to the Plan until any balance at the beginning of such Plan Year in the undesignated account maintained pursuant to this paragraph 4.5 has been allocated among the accounts of Participants. 4.6 Valuation of Assets and Allocation of Valuation Adjustments. ----------------------------------------------------------- Earnings, losses and valuation change adjustments (referred to herein collectively as the "net increase or decrease in value" or as the "valuation adjustments") shall be made at least annually to Participants' accounts as hereinafter provided. - 24 - 4.6(a) As of and within a reasonable time after each Valuation Date and as of the date of any transfer out of or benefit payment from a segregated account in the Loan Fund, the Trustee shall value the assets held in each such affected segregated account in the Loan Fund and the Administrator shall adjust each such account to reflect its net increases and decreases in value since the last valuation thereof. Expenses incurred and paid out of Plan assets in connection with the administration and investment by such a segregated account shall be charged to the segregated account incurring the same in such non-discriminatory manner as determined by the Administrator. 4.6(b) Within a reasonable time after each Valuation Date, the Trustee shall determine the value of assets (including Company Stock) held by the Fund in unsegregated accounts in each Fund division other than the Loan Fund as of such Valuation Date and the Administrator shall then adjust each such account on the books of the Fund proportionately to reflect the net increase or decrease in such value since the last Valuation Date. Such valuation and adjustments shall be made separately with respect to each such Fund division and with respect to each of the Participant's accounts in such Fund division. Solely for purposes of determining such net increase or decrease in value and the proportionate adjustment to each such account, the rules set forth in either (i) or (ii) below will apply with respect to "post-valuation additions" and "post-valuation reductions". "Post-valuation additions" are the amounts of the following additions or allocations made to such accounts as of a date after the last Valuation Date: contributions by the Employer; transfers from accounts in another Fund division; Participant contributions; Participant loan repayments; and direct transfers. "Post-valuation reductions" are the amounts of distributions or other payments which have been made from the Fund and charged to such accounts and transfers to accounts in another Fund division since the last Valuation Date. (i) Except as otherwise provided in clause (ii) of this subparagraph, in determining such values and in making such adjustments there shall not be taken into consideration any post-valuation additions or reductions. (ii) Notwithstanding the foregoing provisions of clause (i), if the Administrator shall so determine, the determination of such values and adjustments shall be made by considering a portion of any one or more individual items of post-valuation additions which have not been distributed or otherwise paid out of the Fund since the last Valuation Date and a portion of any one or more individual items of post-valuation reductions for transfers to accounts in another Fund division on a uniform and non- discriminatory basis to reflect their contribution to the net increase or decrease in value. The portion of any such item taken into account for such purposes shall be determined in one of the following two ways: (A) By multiplying such item by a fraction, the numerator of which is the number of whole calendar months (or payroll periods or calendar weeks or days as determined by the Administrator) since the last Valuation Date during which such item was held in an account in the Fund and the denominator of which is the number of whole calendar months (or payroll periods or calendar weeks or days) since the last Valuation Date; or (B) By multiplying such item by a fraction, the numerator of which is one and the denominator of which is the number of whole calendar months since the last Valuation Date. 4.6(c) The valuation adjustment contemplated by this paragraph shall be made before amounts are forfeited from accounts each Plan Year. 4.6(d) Notwithstanding anything to the contrary in the foregoing: (i) In making such adjustments, expenses of the Plan and Fund in connection with any Participant or Beneficiary (such as for loan fees or charges) may, after direction of the Administrator on a uniform and non- discriminatory basis and then only if permitted by the Act and the Code, be charged directly to the account of the Participant or Beneficiary to whom the expense relates. - 25 - (ii) In making such adjustments, expenses allocable to each Fund division as a whole shall be borne by such Fund division as a whole, and expenses allocable to the Fund as a whole shall be borne by each Fund division on a pro rata basis (determined on the basis of account balances to which such adjustments are made). Such allocation of expenses shall be made in the manner determined by the Administrator. (iii) At each Valuation Date, the Administrator in its discretion shall cause any negative balance in each Participant's account in the Fund to be eliminated by means of a transfer thereto of amounts held in the same classification of account of the Participant in another Fund division, and a corresponding pro rata transfer from the accounts of other Participants between Fund divisions. (iv) Promissory notes of Participants or Beneficiaries held by the Trustee in the Loan Fund shall be valued at the face amount of their unpaid principal balances and, in the event the accrual method of accounting is used for such purpose, any interest accrued but unpaid thereon; and other assets of the Fund shall be valued at their fair market value as of each Valuation Date or other valuation thereof. 4.6(e) The Administrator shall select the method of accounting (either the cash method or the accrual method or some permissible combination thereof) to be used for purposes hereof. 4.6(f) The value of the assets shall be at their fair market value as of the Valuation Date and such other valuation thereof; provided, however, that the value of some or all Policies and Contracts may be their cash surrender value as of their respective last anniversary or other valuation date coinciding with or immediately preceding the Valuation Date if so directed by the Administrator. 4.6(g) Whenever the Plan accounting is based on daily Valuation Dates, contributions creditable to Participants' accounts shall be accounted for on as received basis by the Trustee and the valuation adjustments to Participants' accounts shall be effected on such basis and subject to such rules and procedures as the Administrator may determine to reflect daily accounting (without regard to the proration or partial allocation rules or other inconsistent rules of the foregoing provisions of this paragraph). 4.7 Determination of Account Balances. --------------------------------- 4.7(a) The value of any account on the books of the Fund at any time shall be that amount determined by adding the amount of all contributions which have been allocated to such account and all adjustments and transfers (including all acquisitions of Company Stock made by cash purchase) by which such account has been increased, and further by subtracting all amounts forfeited from such account, all adjustments by which such account has been decreased and all distributions, other payments and transfers (including all cash payments from it to purchase Company Stock) made from such account, all as provided in the Plan. 4.7(b) In determining account balances in the Company Stock Fund: (i) As of each Valuation Date, the Administrator shall allocate to each such account the number of full shares and the fractional interest (calculated to the second, third or fourth decimal place, as determined by the Administrator) of Company Stock transferred to or acquired by the account and shall decrease the number thereof at the last preceding Valuation Date by the shares or interest sold by, distributed from or otherwise removed from such account. (ii) In the event of a Company Stock dividend or Company Stock split or a change in the number of shares of Company Stock held by the Plan as a result of a reorganization or other recapitalization of the Plan Sponsor, there shall be credited to each affected account a proportionate number of full and fractional shares of Company Stock - 26 - received by the Plan as a result of such dividend, split or other change based on the number of shares and fraction thereof in such account as of the Valuation Date (or such date as the Administrator may direct) coinciding with or next following the ex-dividend or record date as applicable. 4.7(c) A record of the basis of the shares of Company Stock and fractions thereof shall be maintained as follows unless another method permitted by Section 402 of the Code is directed to be used by the Administrator: (i) The basis of Company Stock purchased by the Trustee shall be the actual cost of the Company Stock to the Trustee. The basis of all other Company Stock acquired by the Trustee (including Company Stock contributed by the Employer to the Fund) shall be the fair market value of the Company Stock on the date of the acquisition. (ii) All shares of Company Stock that are held unallocated in the special account maintained pursuant to paragraph 4.5 shall retain their original basis, without regard to when the shares are allocated to the accounts of the Participants. (iii) As of each Valuation Date, the basis of all Company Stock that is made available for allocation to the accounts of the Participants shall be calculated by averaging the basis of all Company Stock to be allocated as of that date, as determined pursuant to clauses (i) and (ii) above. (iv) The basis of all Company Stock allocated to an account of a Participant shall be calculated by averaging the basis of all Company Stock allocated to such account as of that date, determined as hereinabove provided. 4.7(d) Unless otherwise directed by the Administrator for Plan administrative purposes such as making benefit payments or causing substantially the same proportions of each account balance in the Company Stock Fund to be held in cash and in Company Stock, acquisitions and dispositions of Company Stock by Participants' accounts shall generally be effected pro rata based on account balances held in the Company Stock Fund and available for the period used. 4.8 Suspense Accounts. ----------------- 4.8(a) If any in-service withdrawal or other distribution of an Accrued Benefit is made to a Participant from his Matching or Profit Sharing Active Account before such Participant has a non-forfeitable right to his entire Accrued Benefit and before such Participant has permanently forfeited and lost his restoration rights under the Plan pursuant to subparagraph 6.6(b) (referred to herein as the "requisite break in service"), the balance of such Matching or Profit Sharing Active Account after each such distribution shall be maintained as a suspended portion of his Matching or Profit Sharing Active Account until either: (i) Such Participant has incurred the requisite break in service, in which event his non-forfeitable interest in each such suspended portion shall be designated as or added to his Matching or Profit Sharing Non- forfeitable Account pursuant to subparagraph 6.3(c), or (ii) Such Participant has become entitled to a non-forfeitable interest in his entire Accrued Benefit, in which event such portion shall no longer be suspended. In no event shall any contributions or forfeitures be allocated to that part of a Participant's Matching or Profit Sharing Active Account which has been so suspended, but such suspended portion shall nevertheless be adjusted to reflect the increases or decreases in the value of the Fund pursuant to paragraph 4.6. 4.8(b) A Participant's non-forfeitable interest at any relevant time in any suspended portion of his Matching or Profit Sharing Active Account shall be determined by first determining: - 27 - (i) A "factor", which is the ratio of the value of such suspended portion at such relevant time to the value of the balance in such suspended portion immediately after such distribution, and (ii) The "adjusted distribution", which is the product obtained by multiplying such factor by the sum of the last adjusted distribution, if any, plus the amount of the distribution which brought about the suspension of such portion of such account. The Participant's non-forfeitable interest in any suspended portion of his Matching or Profit Sharing Active Account at any relevant time shall equal the excess of: (iii) The product obtained by multiplying such Participant's non- forfeitable percentage, determined under subparagraph 6.3 at such relevant time, by the sum obtained by adding the adjusted distribution to the value of the suspended portion at such relevant time, over (iv) The adjusted distribution. 4.9 Equitable Adjustment in Case of Error or Omission. ------------------------------------------------- 4.9(a) When an error or omission is discovered in the account of a Participant, the Administrator shall be authorized to make such equitable adjustments as are practical and as are determined by it as of the Plan Year in which the error or omission is discovered or corrected, including but not limited to actual retroactive reallocations, reallocations based on reasonable estimates, and other corrections described in this paragraph. 4.9(b) In the event that the error or omission is the erroneous forfeiture from a Participant's account or the failure to permit contributions to be made or to properly allocate contributions, forfeitures or valuation adjustments to a Participant's account, the Plan Sponsor in its sole discretion may contribute or cause there to be contributed by any Employer funds or assets to the Plan or may permit a make-up contribution by the Participant to be made to correct such error or omission and such funds, assets or contributions shall be allocated to the account or accounts of any such affected Participant as the Administrator may direct the Trustee in writing. Any such contributed amounts (other than the portion thereof intended to compensate for previously unallocated investment gain which shall not be considered an allocation subject to the Dollar/25% Limitations of paragraph 4.3) shall be considered allocated to the Participant's account for the Plan Year or Limitation Year to which they relate, rather than the Plan Year or Limitation Year in which actually made, for purposes of such limitations. 4.9(c) In the event that the error or omission is the understatement or overstatement of Fund earnings and losses, the Administrator is expressly authorized to determine the appropriate equitable adjustment on the basis of a standard of materiality therefor. If the understatement or overstatement does not exceed the standard, the Administrator may direct that no correction in the allocation for the valuation period of the understatement or overstatement be made and that such error or omission be corrected solely by treating the amount of the understatement or overstatement as additional earnings or loss for a subsequent valuation period (which generally shall be the valuation period immediately following the valuation period as of which both the error or omission is discovered and a determination is made of the equitable adjustment to correct the error or omission). Unless otherwise determined in writing by the Administrator, the standard of materiality for purposes hereof for a monthly valuation period shall be an aggregate amount (determined on a monthly basis) equal to the greater of Three Dollars ($3.00) per Participant in the affected Fund division or one tenth of one percent (.1%) of the fair market value of the affected Fund division at the Valuation Date of the understatement or overstatement. This subparagraph shall apply to all such errors or omissions not yet corrected as of the Effective Date of this Restatement of the Plan. 4.10 Special Rules for Reemployed Veterans. ------------------------------------- - 28 - 4.10(a) Effective December 12, 1994, notwithstanding any other provision of the Plan, the following special rules shall apply in order to provide Make-up Contributions to the Plan on behalf of Reemployed Veterans: (i) Make-up Contributions shall be made to the Plan by the Employer on behalf of a Reemployed Veteran, and allocated to the appropriate account of the affected Participant's Accrued Benefit, in such amount and at such time or times as is required by the USERRA. (ii) Make-up Contributions with respect to a Reemployed Veteran shall not be subject to any otherwise applicable contribution limits under Sections 402(g), 402(h), 403(b), 408, 415, or 457 of the Code or any otherwise limit on deductible contributions under Sections 404(a) or 404(h) of the Code as applied with respect to the Plan Year or taxable year, as applicable to the relevant section of the Code, in which the contribution is made. A Make-up Contribution shall not be taken into account in applying the contribution or deductible contribution limits to any other contribution made during the Plan Year or taxable year, as applicable to the relevant section of the Code. Make-up Contributions shall not exceed the aggregate amount of contributions that would have been permitted under the Plan contribution and deductible contribution limits for the Plan Year or taxable year, as applicable to the relevant section of the Code, to which the contribution relates had the Reemployed Veteran continued to be employed by the Employer during the period of his Qualified Military Service. (iii) Make-up Contributions shall not be treated as contributions for purposes of determining Top Heavy Contributions required to be made by the Employer for either the Plan Year in which they are made or for the Plan Year to which they relate. (iv) Compensation to be used for purposes of determining Make-up Contributions with respect to a period of Qualified Military Service shall mean the Compensation (as otherwise defined in the Plan but based on rate of pay) which the Reemployed Veteran would have received but for his Qualified Military Service. If a Reemployed Veteran's pay is not readily determinable, the Reemployed Veteran's Compensation shall then be his average Compensation for the 12-month period (or actual shorter period of employment) immediately preceding his Qualified Military Service. (v) The following service counting rules shall apply: (A) A Reemployed Veteran shall not be considered to have incurred a Year of Broken Service by reason of his Qualified Military Service. (B) Qualified Military Service of a Reemployed Veteran shall be counted as service for vesting and benefit accrual under the Plan. (vi) A Reemployed Veteran shall be entitled to Matching Contributions that are contingent on elective deferrals or employee contributions for the period of his Qualified Military Service only if he timely makes those contributions following his return to the Employer's service as provided in this paragraph. 4.10(b) Notwithstanding any other provision of the Plan, a Reemployed Veteran shall be entitled to make After-Tax and Pre-Tax Contributions for the period of his Qualified Military Service following his return to the Employer's service as follows: (i) Such contributions must be made during the period which begins on the date of reemployment with the Employer following such Qualified Military Service and is equal to the lesser of (A) three times the Reemployed Veteran's period of Qualified Military Service or (B) five (5) years. - 29 - (ii) The amount of such contributions shall be determined by the Reemployed Veteran but shall not exceed the maximum amount which the Reemployed Veteran could have made during the period of his Qualified Military Service in accordance with the applicable limitations and rules of the Plan as though the Reemployed Veteran had continued to be employed by the Employer and received the Compensation during such period in the amount determined pursuant to this paragraph. (iii) The maximum amount of such contributions determined in clause (ii) above shall be reduced by the amount of any such contributions actually made for during the Reemployed Veteran's period of Qualified Military Service. 4.10(c) For purposes of this paragraph, the following terms have the following meanings: (i) "Make-up Contributions" means the contributions which are required to be made to the Plan for a Reemployed Veteran pursuant to the USERRA and Section 414(u) of the Code. These contributions generally are the contributions by the Employer that would have accrued to the Reemployed Veteran under the Plan, but for his absence due to his Qualified Military Service. Neither the Make-up Contribution obligation nor this paragraph requires that (A) any earnings be credited to the account of a Reemployed Veteran with respect to any Make-up Contribution before such contribution is actually made or (B) the Plan provide for any make-up allocation of any forfeitures that occurred during the period of a Reemployed Veteran's Qualified Military Service. (ii) "Qualified Military Service" means any service in the uniformed services (as defined in chapter 43 of title 38, United States Code) by any individual if such individual is entitled to reemployment rights under such chapter with respect to such service and to the Employer. (iii) "Reemployed Veteran" means a person who is or, but for his Qualified Military Service, would have been a Participant at some time during his Qualified Military Service and who is entitled to the restoration benefits and protections of the USERRA with respect to his Qualified Military Service and the Plan. (iv) "USERRA" means the Uniformed Services Employment and Reemployment Rights Act of 1994. 4.11 Limitation on and Distribution of After-Tax, Pre-Tax and Matching ----------------------------------------------------------------- Contributions Made by or on behalf of Highly Compensated Employees. After-Tax, - ------------------------------------------------------------------ Pre-Tax and Matching Contributions made by or on behalf of Highly Compensated Employees shall be subject to the non-discrimination rules of Sections 401(k) and (m) of the Code and shall be limited, refunded or forfeited as provided in Appendix D to the Plan. ARTICLE V Retirement Dates ---------------- 5.1 Normal Retirement Date. The Normal Retirement Date of a Participant ---------------------- shall be the first day of the calendar month coinciding with or next following the date on which the Participant attains his Normal Retirement Age. 5.2 Delayed Retirement Date. A Participant who continues in the active ----------------------- employment of the Employer beyond his Normal Retirement Date shall continue to participate in the Plan, and his Delayed Retirement Date shall be the first day of the calendar month coinciding with or next following the date of termination of his employment with the Employer. 5.3 Early Retirement Date. A Participant who has attained the age of --------------------- fifty-five (55) years or more while an Eligible Employee and has completed at least ten (10) Years of Vesting Service as determined for vesting purposes under paragraph 6.5 may retire from the employment of the Employer prior to his Normal Retirement Date and his Early Retirement Date shall be the first day of the calendar month coinciding with or next following the date of such retirement. - 30 - 5.4 Disability Retirement Date. A Participant who becomes Disabled while -------------------------- employed by the Employer and ceases to be employed by the Employer as a result of his Disability shall be considered to retire on Disability Retirement for purposes of this Plan and his Disability Retirement Date shall be the first day of the calendar month coinciding with or next following the date of such retirement. 5.4(b) For purposes hereof: (i) With respect to a Participant, the existence of a "Disability" or the status of being "Disabled" means the occurrence of either (A) the Participant's inability, because of a physical or mental impairment, either to perform the duties of his customary employment or to engage in any gainful activity for an indefinite period or (B) the Participant's permanent loss or loss of use of a member of function of the body or permanent disfigurement. (ii) The Administrator shall have the right to require proof of Disability. (iii) Failure by the Participant to provide such evidence as may be required by the Administrator shall result in the determination that the Participant is not Disabled under the Plan. (iv) The determination of Disability shall be made by the Administrator in accordance with standards uniformly applied to all Participants, on the advice of one or more physicians appointed or approved by the Plan Sponsor if deemed necessary or advisable by the Administrator, and the Administrator shall have the right to require further medical examinations from time to time to determine whether there has been any change in the Participant's physical condition. ARTICLE VI Vesting ------- 6.1 Vesting at Retirement or Attainment of Normal Retirement Age. ------------------------------------------------------------ 6.1(a) Upon either: (i) A Participant's having attained his Normal Retirement Age while employed by the Employer, (ii) His satisfaction of the age and service requirements for Early Retirement while an Eligible Employee, or (iii) His retirement from the employment of the Employer on his Disability Retirement Date, the Accrued Benefit of such Participant shall be fully vested and non- forfeitable. 6.2 Vesting at Death. If a Participant dies while employed by the ---------------- Employer, the Accrued Benefit of such Participant shall be fully vested and non- forfeitable. 6.3 Vesting in Matching and Profit Sharing Active Accounts at Other --------------------------------------------------------------- Times. At any time when a Participant is not fully vested in his Matching and Profit Sharing Active Accounts under paragraphs 6.1 or 6.2, he shall have a non- forfeitable interest in a percentage of his Matching and Profit Sharing Active Accounts depending upon the number of his Years of Vesting Service with which he is credited at such time in accordance with the applicable schedule below: Years of Vesting Service Non-Forfeitable Percentage ------------------------ -------------------------- - 31 - Less than 3 0% 3 or more 100% Notwithstanding the foregoing, a Participant who is an Employee at the time of a "change in control" of the Plan Sponsor shall have a non-forfeitable interest in a percentage of his Matching and Profit Sharing Active Accounts. For purposes hereof, the term "change in control" means "Change in Control" as defined in the Plan Sponsor's 1996 Incentive Stock Plan. 6.4 Vesting in Accrued Benefit Other Than Matching and Profit Sharing ----------------------------------------------------------------- Active Accounts. A Participant shall at all times have a fully vested and non- - --------------- forfeitable interest in his Accrued Benefit other than his Matching and Profit Sharing Active Accounts. 6.5 Vesting Service Rules. For purposes of computing a Participant's --------------------- non-forfeitable right to his Matching and Profit Sharing Active Accounts, all Years of Vesting Service, whether or not consecutive, shall be included. 6.6 Forfeiture and Restoration of Matching and Profit Sharing Active ---------------------------------------------------------------- Accounts. - -------- 6.6(a) The balance of a Participant's Matching and Profit Sharing Active Accounts in excess of his non-forfeitable interest therein shall be forfeited as of the earlier (his "Forfeiture Date") of: (i) The last day of the Plan Year in which he incurs five (5) consecutive Years of Broken Service (a "Forfeiture Break in Service), or (ii) The date he dies, or (iii) The date he receives payment of his entire non-forfeitable Accrued Benefit under the Plan (a "cash-out"). After a Participant's Forfeiture Date (and the loss of his right of restoration described in subparagraph 6.6(b), if applicable), his non-forfeitable interest in his Matching or Profit Sharing Active Account, if any, shall then be designated as or added to his Matching or Profit Sharing Non-forfeitable Account and no further allocations of any part of the Matching, Profit Sharing or Top Heavy Contributions by the Employer or of any forfeitures shall be made to such account thereafter. 6.6(b) If a Participant incurs a Forfeiture Date because of a cash-out and again becomes an Employee prior to the termination of the Plan (the date of which is referred to herein as the "Re-employment Date"), an amount equal to such forfeited account balance (without increase or decrease for valuation adjustments in the Fund after the forfeiture) shall be restored to his Matching and Profit Sharing Active Accounts through a Supplemental Contribution made by the Employer for such Plan Year in which both: (i) While an Employee, he repays to the Fund the amount of the distributions from his Matching and Profit Sharing Accounts, and (ii) Such repayment is made before the earlier of (A) the date he incurs five (5) consecutive Years of Broken Service after the date of his cash-out or (B) the date which is five (5) years after his Re-employment Date (at which earlier date his restoration right expires). 6.6(c) For purposes of this paragraph, a Participant who has no non- forfeitable interest in his Accrued Benefit shall be deemed to have been cashed- out pursuant to the provisions of this paragraph upon his ceasing to be an Employee and shall be deemed to have repaid such cashed-out benefit upon his Re- employment Date provided that such Re-employment Date occurs before his restoration right expires. - 32 - 6.6(d) If a Participant incurs a Forfeiture Date, and if he later is entitled to an allocation of Matching, Profit Sharing or Top Heavy Contributions or forfeitures, new Matching and Profit Sharing Active Accounts shall be established for such Participant. 6.6(e) If a Participant incurs a forfeiture because of a Forfeiture Break in Service or he incurs a forfeiture because of a cash-out and his restoration rights with respect to a separately established Matching or Profit Sharing Account expire, Years of Vesting Service after the occurrence of his Forfeiture Break in Service or the expiration of his restoration rights, respectively, shall not be taken into consideration in determining the amount of such Participant's vested interest in such separately established Matching and Profit Sharing Active or Non-forfeitable Accounts. ARTICLE VII Death Benefits -------------- 7.1 Death after Benefit Commencement Date. If a Participant dies after ------------------------------------- his Accrued Benefit has begun to be paid to him, the only benefits payable under the Plan after his death shall be those, if any, provided under the form of payment being made to him at his death. 7.2 Death before Benefit Commencement Date. If a Participant dies before -------------------------------------- his Accrued Benefit has begun to be paid to him, his non-forfeitable Accrued Benefit under the Plan shall be paid to his Beneficiary at the time and in the manner described in ARTICLE VIII. 7.3 Beneficiary Designation. ----------------------- 7.3(a) Subject to the rights of his Spouse as hereinafter provided, each Participant shall have the right to notify the Administrator in writing of any designation of a Beneficiary to receive, if alive, benefits under the Plan in the event of his death. Such designation may be changed from time to time by notice in writing to the Administrator. Notwithstanding anything to the contrary in the foregoing, the Beneficiary of any Participant shall be the Participant's surviving Spouse, if any, and no contrary Beneficiary designation shall be given effect unless the Beneficiary designation is consented to by the Participant's Spouse. 7.3(b) If a Participant dies without having designated a Beneficiary, or if the Beneficiary so designated has predeceased the Participant or, except when his Beneficiary is his Spouse, cannot be located by the Administrator within one year after the date when the Administrator commenced making a reasonable effort to locate such Beneficiary, then his surviving spouse, or if none, then his surviving children, including adopted children, in equal shares, or if none, then his surviving parents in equal shares, or if none, then his estate shall be deemed to be his Beneficiary. 7.3(c) Unless otherwise provided by the Administrator, any Beneficiary designation may include multiple, contingent or successive Beneficiaries and may specify the proportionate distribution to each Beneficiary. If a Beneficiary shall survive the Participant, but shall die before the entire benefit payable to such Beneficiary has been distributed, then absent any other provision by the Participant, the unpaid amount of such benefit shall be distributed to the estate of the deceased Beneficiary. If multiple Beneficiaries are designated, absent provisions by the Participant, those named or the survivors of them shall share equally any benefits payable under the Plan. Any Beneficiary, including the Participant's spouse, shall be entitled to disclaim any benefit otherwise payable to him under the Plan. 7.4 Consent to Beneficiary Designation. Any Beneficiary designation by ---------------------------------- the Participant for purposes of paragraph 7.3 and shall be subject to the following rules: 7.4(a) Such Beneficiary designation shall not be given effect unless either: - 33 - (i) The Participant's Spouse consents in writing to the designation and the Spouse's consent acknowledges the effect of the designation and is witnessed by a representative of the Plan or a notary public (or the equivalent) or both if required by the Administrator, or (ii) It is established to the satisfaction of the Administrator that such consent may not be attained because there is no Spouse, because the Spouse cannot be located, because the Participant has been abandoned by the Spouse (which fact shall be determined under applicable law and evidenced by a court order so specifying), or because of such other circumstances as may be provided under Section 417(a)(2)(B) of the Code. For purposes hereof, a representative of the Plan is any officer of the Employer, the Administrator or any other person designated as such in writing by any of the foregoing. 7.4(b) If a Spouse consents to a Participant's Beneficiary designation, such consent shall either be in the form of: (i) A limited consent which acknowledges any specific non-Spouse Beneficiary or class of non-Spouse Beneficiaries (including any multiple, contingent or successive Beneficiary or class of Beneficiaries), if any, or (ii) If permitted by the Administrator on a uniform non- discriminatory basis, a general consent which acknowledges the Spouse's right (and awareness thereof) to limit consent only to a specific Beneficiary or class of Beneficiaries and in which the Spouse voluntarily elects to relinquish such right. 7.4(c) If a Spouse consents to a Participant's Beneficiary designation, any change of the Beneficiary thereunder (other than a revocation altogether of the designation) by the Participant shall require the further consent of his Spouse in accordance with the applicable provisions of this subparagraph (unless the consent of the Spouse expressly permits such change by the Participant without any requirement of further consent by the Spouse). However, reaffirmation of the Spouse's consent to the designation shall not be required. 7.4(d) Any such consent by a Spouse, or the establishment that the consent of a Spouse may not be obtained, shall be effective only with respect to such Spouse. 7.4(e) Any such consent by a Spouse shall continue to be effective for so long as the Participant's designation remains in force and may not be revoked by the Spouse. ARTICLE VIII Payment of Benefits ------------------- 8.1 Time of Payment. --------------- 8.1(a) The non-forfeitable Accrued Benefit of a Participant shall become payable to the Participant, if then alive, or otherwise to his Beneficiary, no earlier than his cessation of employment with the Employer and at a time determined by the Administrator in accordance with the following rules: (i) The non-forfeitable Accrued Benefit of the Participant shall normally commence to be paid as soon as practicable after: (A) The Participant separates from the service of the Employer for any reason; or - 34 - (B) If later, and the Participant's non-forfeitable Accrued Benefit exceeds, or at the time of any prior distribution exceeded, $3,500 (or $5,000 for Plan Years beginning after December 31, 1998), the earlier of (I) the date on which the Participant delivers to the Administrator a written consent to payment or (II) the date on which the Participant attains age sixty-five (65). (ii) Notwithstanding the foregoing, the non-forfeitable Accrued Benefit of a Participant shall not commence to be paid later than the sixtieth (60th) day after the end of the Plan Year in which occurs the later of the: (A) The date on which the Participant attains the age of sixty-five (65), or (B) The date he ceases to be employed by the Employer. (iii) Notwithstanding the foregoing, the non-forfeitable Accrued Benefit of a Participant shall commence to be paid by the April 1 (sometimes referred to as the "Required Beginning Date") following the calendar year in which occurs the later of the following applicable event (the "Required Beginning Event"): (A) The date the Participant attains the age seventy and one-half (70-1/2), or (B) Effective January 1, 1997 if the Participant's non-forfeitable Accrued Benefit is not in pay status on December 31, 1996 and the Participant is not a 5% Owner, the date the Participant retires from the service of the Employer or otherwise ceases to be employed by the Employer. For purposes hereof a "5% Owner" means a Participant who is a more than five percent (5%) owner of the Employer (as defined for purposes of determining Key Employees) with respect to the Plan Year ending in the calendar year in which the Participant attains the age seventy and one-half (70-1/2) (a "5% Owner"). As an alternative to the foregoing, a Participant who is not a 5% Owner and who reaches age seventy and one-half (70-1/2) while employed by the Employer and on or before December 31, 1999 may elect to begin to receive his non- forfeitable Accrued Benefit at any time after he attains the age of seventy and one-half (70-1/2) and at or before the April 1 of the calendar year following the calendar year in which he attains the age of seventy and one- half (70-1/2). The non-forfeitable Accrued Benefit of a Participant for each Plan Year after his Accrued Benefit commences pursuant to this clause shall commence to be paid as soon as possible after each such Plan Year. (iv) Notwithstanding the foregoing other than clause (iii), except as provided in ARTICLE IX, the non-forfeitable Accrued Benefit of a Participant shall not commence to be paid before the earlier of: (A) The date such Participant ceases to be employed by the Employer by reason of death, disability, retirement or other separation from service, (B) The date of transfer of such Participant to the employment of a corporate employer which is not an Affiliate acquiring by sale or other disposition of substantially all the assets used in a trade or business conducted by a selling corporate Affiliate which employed the Participant, (C) The date of sale or other disposition of a corporate Affiliate's interest in a subsidiary to an entity or person which is not an Affiliate when such Participant continues employment with such subsidiary, or (D) The date of termination of the Plan without the establishment of a successor plan as determined for purposes of Section 401(k) of the Code. A "successor plan" generally means any other defined contribution plan (other than an employee stock ownership plan as defined in Section 409 or 4975(e)(7) of the Code, other than a simplified employee pension plan described in Section 408(k) of the Code, and other than a plan under which fewer than two percent (2%) of the Employees eligible to participate in the Plan at the date - 35 - of its termination are or were eligible to participate at any time during the twenty-four (24) month period beginning twelve (12) months before its termination) maintained by the Employer which is in existence at the date of termination of the Plan or established within the 12-month period after all benefits under the Plan are distributed. Clauses (iv)(B), (C) and (D) of this subparagraph shall not apply unless the distribution occurring by reason of an event described therein is a Lump Sum Payment. Clauses (iv)(B) and (C) of this subparagraph shall not apply unless the Plan continues to be maintained by the selling Affiliate or any other Affiliate after the sale or other disposition referred to therein, unless the purchaser does not after the sale or other disposition adopt or maintain the Plan or another plan with the Plan is merged or consolidated or to which Plan assets are transferred (other than by means of a rollover contribution), and unless the distribution occurs in connection with the sale or other disposition (which means that the distribution normally is made no later than the end of the second calendar year after the calendar year in which the sale or other disposition occurred). 8.1(b) The non-forfeitable Accrued Benefit of a Participant who dies before such Accrued Benefit commences to be paid to him shall become payable to his Beneficiary as soon as practicable after the Participant's death. 8.1(c) Notwithstanding the foregoing provisions of this paragraph, a Participant whose non-forfeitable Accrued Benefit exceeds, or at the time of any prior distribution exceeded, $3,500 (or $5,000 for Plan Years beginning after December 31, 1998), or the Beneficiary of a Participant who dies before his non- forfeitable Accrued Benefit becomes payable and whose non-forfeitable Accrued Benefit entitlement exceeds $3,500 (or $5,000 for Plan Years beginning after December 31, 1998), may elect a later date on which such Accrued Benefit shall become payable if such Accrued Benefit exceeds, at the time of the distribution or any prior distribution, $3,500 (or $5,000 for Plan Years beginning after December 31, 1998). Such later date shall not be later than: (i) In the case of an election by a Participant, the latest time for payment under clause (iii) of subparagraph 8.1(a); (ii) In the case of an election by a Beneficiary who is the Participant's spouse, the later of: (A) The end of the fifth (5th) calendar year following the calendar year in which the Participant's death occurs, or (B) The end of the calendar year in which the Participant would have attained the age of seventy and one-half (70-1/2); and (iii) In the case of an election by a Beneficiary who is not the Participant's spouse, the end of the fifth (5th) calendar year following the calendar year in which the Participant's death occurs. Such election shall be in writing, executed and filed with the Administrator at least thirty (30) days (or such shorter period as the Administrator may permit on a uniform and non-discriminatory basis) before the date such Accrued Benefit otherwise becomes payable, and it shall set forth and shall be conditioned upon the payment of such Accrued Benefit in a form provided herein. Any such election may be revoked or modified at any time. 8.1(d) The non-forfeitable Accrued Benefit of a Participant which is payable to an "alternate payee" (as defined in Section 414(p) of the Code) who is the Participant's spouse (including a former spouse) pursuant to a QDRO may be paid in a Lump Sum Payment (as defined in paragraph 8.4), as soon as practicable after the QDRO is delivered to the Administrator and determined to be a QDRO or at such later time as may be provided in such QDRO, where the Participant has neither attained the earliest retirement age under Section 414(p) of the Code or separated from the service of the Employer. - 36 - 8.1(e) Notwithstanding the foregoing provisions of this paragraph, payment may be delayed for a reasonable period in the event the recipient cannot be located or is not competent to receive the benefit payment, there is a dispute as to the proper recipient of such benefit payment, additional time is needed to complete the Plan valuation adjustments and allocations, or additional time is necessary to properly explain the recipient's options. 8.2 Form of Payment When Participant Is the Initial Recipient. The non- --------------------------------------------------------- forfeitable Accrued Benefit of a Participant payable to him pursuant to paragraph 8.1 shall be paid to him in the form of a Lump Sum Payment (as defined in paragraph 8.4). Payments due after a Participant's death shall be made to his Beneficiary. 8.3 Form of Payment When Beneficiary Is the Initial Recipient. In the --------------------------------------------------------- event of a Participant's death before his Accrued Benefit is entirely paid to him, the Participant's remaining non-forfeitable Accrued Benefit payable pursuant to paragraph 8.1 shall be paid to his Beneficiary in the form of a Lump Sum Payment (as defined in paragraph 8.4). Payments due after a Beneficiary's death shall be made to the successor Beneficiary. 8.4 Payment Definitions and Rules. ----------------------------- 8.4(a) The term "Lump Sum Payment" generally means a single payment of the entire or, as applicable, the designated portion of the entire, non-forfeitable Accrued Benefit. A non-forfeitable Accrued Benefit of a Participant payable in the form of a Lump Sum Payment shall be determined as of the Valuation Date (or other time of valuation hereunder) immediately preceding the date of payment to which shall be added any contributions or other adjustments allocated after such Valuation Date (or other time of valuation hereunder) and from which shall be subtracted any distributions or other adjustments since such Valuation Date (or other time of valuation hereunder). In the event an Accrued Benefit is to be paid in a Lump Sum Payment and the amount thereof has not been determined, the Administrator is authorized to make one or more interim payments prior to the time the amount of such Lump Sum Payment is finally determined. 8.4(b) All payments of a Participant's non-forfeitable Accrued Benefit held in Fund divisions other than the Loan Fund or the Company Stock Fund shall be made in cash. 8.4(c) All payments of a Participant's non-forfeitable Accrued Benefit held in the Company Stock Fund shall be made by the transfer of either cash or whole shares of Company Stock and cash in lieu of a fractional share, as follows: (i) If the number of shares which would otherwise be distributed is less than twenty-five (25) (as adjusted automatically from time to time to reflect Company Stock dividends or splits or other capitalization changes occurring after March 31, 1997), payment shall normally be made entirely in cash. (ii) If the number of shares to be distributed is twenty-five (25) (as adjusted automatically from time to time to reflect Company Stock dividends or splits or other capitalization changes occurring after March 31, 1997) or more, payment shall normally be made in whole shares and cash in lieu of a fractional share. (iii) Notwithstanding the normal form of payment, the recipient shall be entitled to elect either method of payment. Such election shall be filed with the Administrator at least thirty (30) days (or such shorter period as the Administrator may permit on a uniform and non-discriminatory basis) before the benefit payment date. Any election may be revoked and another election made any number of times. (iv) Any whole shares of Company Stock which are converted to cash for payment purposes shall be disposed of at current fair market value at or about the time of payment by sale to the Plan Sponsor or on the open market or transfer to other Participants' accounts. Any whole or fractional shares which are acquired with the portion of the account which normally would be paid in cash shall be acquired at current fair market value at or about the time of payment by purchase from the Plan Sponsor or on the open market or transfer from other Participants' account. Notwithstanding the provisions of paragraphs 4.6 and 4.7, the basis attributable to the Stock acquired with the cash - 37 - portion from a stockholder other than the Plan or from the Plan Sponsor shall not be determined pursuant to paragraphs 4.6 and 4.7, but shall equal its cost, if so directed by the Administrator. 8.4(d) All payments of a Participant's non-forfeitable Accrued Benefit held in the Loan Fund shall be made by offset against the Participant's non- forfeitable Accrued Benefit by distribution of the Participant's promissory note(s) marked paid and satisfied. 8.4(e) To the extent the payment provisions of the Plan are inconsistent with and violative of the requirements of Section 401(a)(9) of the Code, the provisions of Section 401(a)(9) of the Code are hereby incorporated by reference and shall control. 8.5 Plan to Plan Direct Rollover as a Distribution Option. ----------------------------------------------------- 8.5(a) Notwithstanding any contrary provision of the Plan, but subject to any de minimis or other exceptions or limitations provided for under Section 401(a)(31) of the Code, any prospective recipient (whether a Participant, a surviving spouse, a current or former spouse who is an alternate payee under a QDRO or any other person eligible to make a rollover) of a distribution from the Plan which constitutes an "eligible rollover distribution" (to the extent otherwise includible in the recipient's gross income) may direct the Trustee to pay the distribution directly to an "eligible retirement plan". 8.5(b) For purposes hereof, the following terms have the meanings assigned to them in Section 401(a)(31) of the Code and, to the extent not inconsistent therewith, shall have the following meanings: (i) The term "eligible retirement plan" means a defined contribution plan which is either an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code (other than an endowment contract), 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 prospective recipient's eligible rollover distribution; provided, however, that in the case of an eligible rollover distribution payable to a Participant's surviving spouse, an "eligible retirement plan" means only an individual retirement account or individual retirement annuity. (ii) The term "eligible rollover distribution" means any distribution other than: (A) A distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made either for the life (or life expectancy) of the recipient or the joint lives (or joint life expectancies) of the recipient and his beneficiary who is an individual or for a specified period of ten (10) or more years, or (B) A distribution to the extent it is required under the minimum distribution requirement of Section 401(a)(9) of the Code. Effective January 1, 2000 pursuant to an administrative delay in application of this sentence permitted by the Internal Revenue Service and utilized by the Administrator, that portion of any hardship withdrawal attributable to Pre-Tax Contributions (and any other contributions which the Internal Revenue Service treats as subject to the rule of this sentence) shall not constitute an eligible rollover distribution. 8.5(c) Any such direction shall be filed with the Administrator in such form and at such time as the Administrator may require and shall adequately specify the eligible retirement plan to which the payment shall be made. 8.5(d) The Trustee shall make payment as directed only if the proposed transferee plan will accept the payment. - 38 - 8.5(e) Any such plan to plan transfer shall be considered a distribution option under this Plan and shall be subject to all the usual distribution rules of this Plan (including but not limited to the requirement of spousal consent, where applicable, and an advance explanation of the option). 8.5(f) The Administrator is authorized in its discretion, applied on a uniform and non-discriminatory basis, to apply any discretionary de minimis or other discretionary exceptions or limitations provided for under Section 401(a)(31) of the Code in effecting or declining to effect plan to plan transfers hereunder. 8.5(g) Within a reasonable time (generally not more than ninety (90) nor less than thirty (30) days) before the benefit payment date of a prospective recipient of an eligible rollover distribution from the Plan, the Administrator shall provide the prospective recipient with a written explanation of the rollover and tax rules required by Section 402(f) of the Code. 8.6 Notice, Election and Consent Procedures Regarding Accrued Benefit ----------------------------------------------------------------- Payment. - ------- 8.6(a) Any election and any designation regarding, and any consent to, payment given by a Participant or Beneficiary shall be in writing, shall clearly indicate the election or designation being made or the consent being given, and shall be filed with the Administrator and in accordance with the procedures provided in the following subparagraphs to this paragraph. 8.6(b) Within a reasonable time (generally not more than ninety (90) nor less than thirty (30) days, or any shorter period permitted under the Code) before a Participant's non-forfeitable Accrued Benefit is to be paid to him, the Administrator shall by mail or personal delivery provide the Participant with a written explanation of: (i) The terms and conditions of the applicable form of payment, including the financial effects of the form of payment. (ii) The Participant's right to delay receipt of his non- forfeitable Accrued Benefit until such later date, if any, allowed under paragraph 8.1, including the right to modify or revoke any election thereunder. 8.6(c) Within a reasonable time before the non-forfeitable Accrued Benefit of a Participant who died prior to commencement of payment of his Accrued Benefit is to be paid, the Administrator shall by mail or personal delivery provide the Participant's Beneficiary with a written explanation of: (i) The terms and conditions of the applicable form of payment. (ii) The Beneficiary's right to delay receipt of the Participant's non-forfeitable Accrued Benefit until such later date, if any, allowed under paragraph 8.1, including the right to modify or revoke any election thereunder. 8.6(d) If a distribution is one to which Sections 401(a)(11) and 417 of the Code do not apply (and it is intended that those sections do not apply to distributions from this Plan), such distribution may commence to be made less than thirty (30) days (or any shorter period permitted under the Code) after any required notice pursuant to this paragraph or paragraph 8.5 is given so long as: (i) The Administrator clearly informs the recipient that, where applicable, the recipient has a right to a period of at least thirty (30) days (or any shorter period permitted under the Code) after receiving the notice to consider the decision of whether or not to elect or consent to a distribution (and, if applicable, a particular distribution option), and (ii) The recipient, after receiving the notice, affirmatively elects a distribution. - 39 - 8.7 Benefit Determination and Payment Procedure. ------------------------------------------- 8.7(a) The Administrator shall make all determinations concerning eligibility for benefits under the Plan, the time or terms of payment, and the forms or manner of payment to the Participant or the Participant's Beneficiary, in the event of the death of a Participant. The Administrator shall promptly notify the Trustee of each such determination that benefit payments are due or should cease to be made and provide to the Trustee all other information necessary to allow the Trustee to carry out said determination, whereupon the Trustee shall pay or cease to pay such benefits from the Fund in accordance with the Administrator's determination. 8.7(b) In making the determinations described in subparagraph 8.7(a), the Administrator shall take into account the terms of any QDRO received with respect to the non-forfeitable Accrued Benefit of the Participant. The time and form of payment with respect to the QDRO and the time and form of payment chosen by the Participant or his Beneficiary or required by the Plan shall not be altered by the terms of the QDRO (except as required under Section 414(p)(4) of the Code or, if payment is made in the form of a Lump Sum Payment (as defined in paragraph 8.4), as permitted under subparagraph 8.1(d)). The Administrator shall make all determinations regarding benefit payments to be made pursuant to a QDRO. Any benefit payment which may be subject to the terms of a domestic relations order received by the Administrator shall be suspended during the period the Administrator is considering whether the order is a QDRO. In the event that benefits are in pay status at the time that a domestic relations order is received, the Administrator shall promptly notify the Trustee of the amount, if any, of the benefit payments that must be suspended for the period required by the Administrator to determine the status of the order. Upon the completion of the Administrator's review or other determination of the status of the order, the Administrator shall promptly notify the Trustee of the time benefit payments are to commence or resume, and of the identity of, and the amount and form of benefits to be paid to the person or persons to whom payment is to be made. 8.8 Claims Procedure. ---------------- 8.8(a) A Participant or Beneficiary (the "claimant") shall have the right to request any benefit under the Plan by filing a written claim for any such benefit with the Administrator on a form provided by the Administrator for such purpose. The Administrator shall give such claim due consideration and shall either approve or deny it in whole or in part. Within ninety (90) days following receipt of such claim by the Administrator, notice of any approval or denial thereof, in whole or in part, shall be delivered to the claimant or his duly authorized representative or such notice of denial shall be sent by mail to the claimant or his duly authorized representative at the address shown on the claim form or such individual's last known address. The aforesaid ninety (90) day response period may be extended to one hundred eighty (180) days after receipt of the claimant's claim if special circumstances exist and if written notice of the extension to one hundred eighty (180) days indicating the special circumstances involved and the date by which a decision is expected to be made is furnished to the claimant within ninety (90) days after receipt of the claimant's claim. Any notice of denial shall be written in a manner calculated to be understood by the claimant and shall: (i) Set forth a specific reason or reasons for the denial, (ii) Make specific reference to the pertinent provisions of the Plan on which any denial of benefits is based, (iii) Describe any additional material or information necessary for the claimant to perfect the claim and explain why such material or information is necessary, and (iv) Explain the claim review procedure of subparagraph 8.8(b). If a notice of approval or denial is not provided to the claimant within the applicable ninety (90) day or one hundred eighty (180) day period, the claimant's claim shall be considered denied for purposes of the claim review procedure of subparagraph 8.8(b). - 40 - 8.8(b) A Participant or Beneficiary whose claim filed pursuant to subparagraph 8.8(a) has been denied, in whole or in part, may, within sixty (60) days following receipt of notice of such denial, or following the expiration of the applicable period provided for in subparagraph 8.8(a) for notifying the claimant of the decision on the claim if no notice of denial is provided, make written application to the Administrator for a review of such claim, which application shall be filed with the Administrator. For purposes of such review, the claimant or his duly authorized representative may review Plan documents pertinent to such claim and may submit to the Administrator written issues and comments respecting such claim. The Administrator may schedule and hold a hearing. The Administrator shall make a full and fair review of any denial of a claim for benefits and issue its decision thereon promptly, but no later than sixty (60) days after receipt by the Administrator of the claimant's request for review, or one hundred twenty (120) days after such receipt if a hearing is to be held or if other special circumstances exist and if written notice of the extension to one hundred twenty (120) days is furnished to the claimant within sixty (60) days after the receipt of the claimant's request for a review. Such decision shall be in writing, shall be delivered or mailed by the Administrator to the claimant or his duly authorized representative in the manner prescribed in subparagraph 8.8(a) for notices of approval or denial of claims, and shall: (i) Include specific reasons for the decision, (ii) Be written in a manner calculated to be understood by the claimant, and (iii) Contain specific references to the pertinent Plan provisions on which the decision is based. The Administrator's decision made in good faith shall be final. 8.9 Payments to Minors and Incompetents. If a Participant or Beneficiary ----------------------------------- entitled to receive any benefits hereunder is a minor or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, or is deemed so by the Administrator, benefits will be paid to such person as the Administrator may designate for the benefit of such Participant or Beneficiary. Such payments shall be considered a payment to such Participant or Beneficiary and shall, to the extent made, be deemed a complete discharge of any liability for such payments under the Plan. 8.10 Distribution of Benefit When Distributee Cannot Be Located. The ---------------------------------------------------------- Administrator shall make all reasonable attempts to determine the identity and/or whereabouts of a Participant or Participant's Spouse or a Participant's Beneficiary entitled to any other benefit under the Plan, including the mailing by certified mail of a notice to the last known address shown on the Employer's, the Administrator's or the Trustee's records. If the Administrator is unable to locate such a person entitled to benefits hereunder, or if there has been no claim made for such benefits, the Trustee shall continue to hold the benefit due such person, subject to any applicable statute of escheats. ARTICLE IX Withdrawals and Loans --------------------- 9.1 In-Service Non-Hardship Withdrawals from After-Tax Optional Account ------------------------------------------------------------------- and/or Rollover Account. A Participant who is employed by the Employer may make - ----------------------- non-hardship withdrawals in whole or in part from his After-Tax Optional Account and/or Rollover Account. 9.2 In-Service Non-Hardship Withdrawals from Unrestricted Matching -------------------------------------------------------------- Account and/or Unrestricted Profit Sharing Account. A Participant who is - -------------------------------------------------- employed by the Employer and who has attained the age of twenty-one (21) years and is 100% vested in his Accrued Benefit may make non-hardship withdrawals in whole or in part from his Unrestricted Matching Account and/or Unrestricted Profit Sharing Account. - 41 - 9.3 In-Service Non-Hardship Withdrawals from After-Tax Basic Account, ----------------------------------------------------------------- Pre-Tax Account and/or Unrestricted QNEC Account. A Participant who is employed - ------------------------------------------------ by the Employer and who has attained the age of fifty-nine and one-half (59-1/2) years may make non-hardship withdrawals in whole or in part from his After-Tax Basic Account, Pre-Tax Account and/or Unrestricted QNEC Account. 9.4 In-Service Hardship Withdrawals from After-Tax Basic Account, Pre-Tax --------------------------------------------------------------------- Account, Unrestricted Matching Account and/or Unrestricted Profit Sharing - ------------------------------------------------------------------------- Account. - ------- 9.4(a) A Participant who is employed by the Employer and who suffers a Severe Hardship may, upon written request approved by the Administrator, make a hardship withdrawal from his After-Tax Basic Account, Unrestricted Matching Account (to the extent vested), Unrestricted Profit Sharing Account (to the extent vested), and all or that portion of the balance of his Pre-Tax Contributions then considered held in his Pre-Tax Account, which the Administrator deems appropriate to relieve such hardship. Unless the Administrator provides for a different ordering, Severe Hardship withdrawals shall be made first from the Participant's After-Tax Basic Account, then from his Pre-Tax Account, then from his Unrestricted Matching Account, and lastly from his Unrestricted Profit Sharing Account. 9.4(b) "Severe Hardship" of a Participant for purposes of this paragraph shall be determined by the Administrator upon review of each situation and in accordance with the following objective standard and means an immediate and heavy need for financial assistance in meeting obligations incurred or to be incurred by the Participant, taking into account the Participant's other reasonably available resources, as provided below. A Severe Hardship shall be considered to exist only where the conditions of both of the following clauses (i) and (ii) are satisfied: (i) The immediate and heavy need requirement shall be considered satisfied only where the need is on account of any of the following: (A) Medical expenses (to the extent not reimbursable or compensable by any plan, program, insurance or otherwise) described in Section 213(d) of the Code of the Participant, the Participant's spouse or any of the Participant's dependents (as defined in Section 152 of the Code). (B) Acquisition (excluding mortgage payments) of a dwelling unit which within a reasonable time is to be used (determined at the time the withdrawal is made) as the principal residence of the Participant. (C) Payment of tuition and related educational fees for the next twelve (12) months of post-secondary education for the Participant, the Participant's spouse, the Participant's children or any of the Participant's dependents (as defined in Section 152 of the Code). (D) Prevention of eviction of the Participant from his principal residence or the foreclosure on the mortgage of the Participant's principal residence. The amount of the immediate and heavy financial need may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the Severe Hardship distribution. (ii) The other reasonably available resources requirement shall be considered satisfied only when all of the following occur: (A) The distribution from the Plan does not exceed the amount of the immediate and heavy need plus the projected income tax liability on the amount to be withdrawn (taking into account the following described currently available funds). - 42 - (B) The Participant has obtained all currently available distributions, other than Severe Hardship under this Plan and comparable hardship distributions under other qualified plans, under this Plan and all other qualified plans maintained by the Employer. (C) The Participant has obtained all currently available non- taxable loans under this Plan and all other qualified plans maintained by the Employer. (D) The Participant agrees to a suspension of his Elective Deferrals (as defined in Appendix D to the Plan) to this Plan and all his employee contributions (other than mandatory employee contributions to a defined benefit plan and rollover contributions to any plan) to all other qualified plans and non-qualified plans of deferred compensation (other than health or welfare benefit plans) maintained by the Employer, including, but not limited to stock option, stock purchase and similar plans, for a period of one year after receipt of the Severe Hardship distribution and all applicable plans so provide. (E) The Participant agrees that his Elective Deferrals (as defined in Appendix D to the Plan) to this Plan and all other qualified plans maintained by the Employer for the calendar year immediately following the calendar year in which the Severe Hardship distribution is made shall be limited to the excess of (I) the Elective Deferral Dollar Limit (as defined in Appendix D to the Plan) for such next calendar year over (II) the amount of such Participant's Elective Deferrals to this Plan and such other qualified plans maintained by the Employer for the calendar year in which the Severe Hardship distribution is made. The Participant contribution suspension and limitation requirements of clauses (ii)(D) and (E) are hereby imposed on any Severe Hardship withdrawal or similar hardship authorized in any other qualified plan maintained by the Employer and shall be deemed agreed to by any Participant requesting a Severe Hardship withdrawal or such other similar hardship withdrawal. 9.4(c) The one year Participant contribution suspension referred to in clause (ii)(D) of subparagraph 9.3(b) shall be imposed for twelve (12) months beginning on the first day of the payroll period next following the date of withdrawal. For purposes hereof, separate periods of suspension under this paragraph shall run concurrently. 9.4(d) A Participant who is an Eligible Employee may recommence his contributions to the Plan after his applicable period of suspension has expired on the first day of any calendar month thereafter by his delivering a new payroll deposit election form to the Administrator no later than the fifteenth (15th) day (or such shorter period as the Administrator on a uniform and non- discriminatory basis may determine) of the month immediately preceding the calendar month it is to become effective, designating the date, rate and type or types of such recommencement of contributions. 9.4(e) For purposes hereof, unless otherwise provided in the applicable asset transfer, plan merger or consolidation or adoption agreement, the remaining period of any suspension from participation under any plan which is merged into this Plan at the time of such merger shall be considered a period of suspension under this paragraph during which Participants may not contribute to the Plan. 9.5 Withdrawal Restrictions and Procedure. ------------------------------------- 9.5(a) A Participant shall not make more than two (2) non-hardship withdrawals in any Plan Year. Withdrawals from more than one account made at the same time shall only count as one withdrawal. 9.5(b) The amount of any withdrawal from any such account shall not be less than $100, unless the Participant's account balance is less than $100 in which case the then balance in the account may only be withdrawn or unless such withdrawal would require a suspension from active participation in which case the amount which would not cause a suspension may be withdrawn. - 43 - 9.5(c) All withdrawals shall be made only by filing a written withdrawal request form with the Administrator in which the amount of withdrawal and the account(s) and the Fund division(s) from which the withdrawal is to be made and, if applicable, the Severe Hardship and such other information (including but not limited to certifications regarding no other cash resources and/or no other resources for purposes of determining the existence of a Severe Hardship) pertaining thereto as the Administrator may deem appropriate are stated. 9.5(d) Notwithstanding any of the other provisions of this ARTICLE IX, the Administrator may on a uniform and non-discriminatory basis at any time and from time to time suspend or limit the withdrawal rights under this ARTICLE IX (except to the extent prohibited by Section 411(d)(6) of the Code). 9.6 Payment of Withdrawals. ---------------------- 9.6(a) All non-hardship withdrawals shall be made within a reasonable time and at such time or times as are determined by the Administrator after the Participant's non-hardship withdrawal request is delivered to the Administrator or his hardship withdrawal request is approved by the Administrator, as the case may be, and shall be made in cash. 9.6(b) The amount of any withdrawal shall be determined on the basis of the value of the Participant's accounts from which the withdrawal is made as of the most recent Valuation Date for which the valuation adjustments under paragraph 4.5 have been completed prior to the date of payment of the withdrawal, decreased by any withdrawals or other distributions since such Valuation Date. 9.6(c) Unless otherwise determined by the Administrator from time to time on a uniform and non-discriminatory basis applied prospectively or, to the extent otherwise permitted by the Administrator, as specifically designated by the Participant in his withdrawal request, each withdrawal by a Participant shall be made in the following order, with availability being determined on the basis of the circumstances (such as hardship, severe hardship, non-hardship, the age of the Participant, the time contributions have been in the Plan, the length of the Participant's active participation in the Plan as provided herein) surrounding the withdrawal: (i) First from his accounts in the following order: (A) First his After-Tax Account, with withdrawals being made first from his After-Tax Optional and then from his After-Tax Basic Account, (B) Then his Rollover Account, (C) Then his Pre-Tax Account, (D) Then his Unrestricted QNEC Account, and (E) Then his Unrestricted Matching Account (to the extent vested), with withdrawals being made first from his Matching Non-forfeitable Account and then from his Matching Active Account, (F) Lastly his Unrestricted Profit Sharing Account (to the extent vested), with withdrawals being made first from his Profit Sharing Non-forfeitable Account and then from his Profit Sharing Active Account. Withdrawals are not available from a Participant's Company Stock QNEC Account, Company Stock Matching Account or Company Stock Profit Sharing Account. (ii) Then with the withdrawals being made first from the Fund division(s) in each account in the following: - 44 - (A) First the First Union Stable Portfolio Group Trust (B) Then the Evergreen Short-Intermediate Bond Fund: Class Y, (C) Then the Fidelity Puritan Fund, (D) Then the First Union Enhanced Stock Market Fund, (E) Then the Fidelity Advisor Growth Opportunities Fund: Class A, (F) Lastly the Company Stock Fund. 9.6(d) Whenever withdrawals are permitted from the Company Stock Fund (if at all), they shall be made in cash and not in the form of Company Stock. 9.6(e) All withdrawals shall be subject to the plan to plan rollover transfer distribution option provided in paragraph 8.5. 9.7 No Withdrawal Restoration. No restoration of amounts withdrawn shall ------------------------- be permitted. 9.8 Loans. ----- 9.8(a) Loans from the Fund may be made to Participants (such term for purposes of this paragraph is intended to include deceased Participants' Beneficiaries who are entitled to the Participant's non-forfeitable Accrued Benefit for purposes of making loans from the Plan) who are employed by the Employer or who otherwise are "parties in interest" (as defined in Section 3(14) of the Act) on written application therefor delivered to the Administrator, subject to the following rules: (i) Loans must be adequately secured, which may include or consist of use of a Participant's non-forfeitable Accrued Benefit as security, provided however that: (A) Not more than fifty percent (50%) of a Participant's non- forfeitable Accrued Benefit may be considered adequate security for such purpose, and (B) Any pledge and assignment of a Participant's non-forfeitable Accrued Benefit shall be ineffective and void for any period of time during which the loan fails to comply with the provisions of Section 4975(d)(1) of the Code and Section 408(b)(1) of the Act. (ii) Loans must be approved by the Administrator in accordance with a uniform, non-discriminatory policy established, and which thereafter may be modified or suspended from time to time, by the Administrator. The Administrator's loan policy shall be considered a part of the Plan and shall at a minimum contain: (A) A procedure for applying for loans, (B) The basis on which loans will be approved or denied, (C) Limitations, if any, on the types and amounts of loans available, (D) The procedure for determining a reasonable interest rate, - 45 - (E) The types of collateral which may secure a loan, (F) The events constituting a default and the steps that will be taken to preserve the Plan assets in the event of a default. (iii) Loans must be available to all Participants on a reasonably equivalent basis. (iv) Loans must not be made available to Highly Compensated Employees in an amount of and/or percentage of their non-forfeitable Accrued Benefits or some combination thereof greater than that made available to other Participants. (v) Loans must not exceed with respect to any Participant (when added to the outstanding balance of all loans to the Participant from the Plan and all other qualified employer plans of the Employer and of each Affiliate) the lesser of: (A) $50,000, reduced by the excess of (I) the Participant's highest aggregate outstanding balance in the preceding twelve (12) months under this Plan and such other plans over (II) his aggregate outstanding balance under this Plan and such other plans on the date on which the loan in question is made, (B) One-half of the sum of the Participant's non-forfeitable Accrued Benefit under this Plan and non-forfeitable accrued benefits (exclusive of his accumulated deductible employee contributions within the meaning of Section 72(o)(5)(B) of the Code) under such other plans, or (C) With respect to loans from this Plan only, his vested Accrued Benefit (exclusive of amounts held in his Company Stock Matching Account, Company Stock Profit Sharing Account and Company Stock QNEC Account) which is not held in the Loan Fund. (vi) Loans must bear a reasonable rate of interest (which means a commercially reasonable rate of interest), which may be fixed or variable and which may vary between Participants based on the term of the loan, the security provided and such other considerations deemed desirable by the Administrator. (vii) Notwithstanding the foregoing, unless the Secretary of Labor or his delegate grants an administrative exemption from the prohibited transaction rules with respect to such loan, no loan shall be made to any Participant who is a shareholder-employee (as defined in Section 1379 of the Code, as in effect on the day before the date of enactment of the Subchapter S Revision Act of 1982) of the Employer or who is a member of the family (as defined in Section 267(c)(4) of the Code) of such a shareholder-employee. 9.8(b) The loan policy of the Administrator shall include considerations such as creditworthiness and may include financial need and any other considerations deemed desirable by the Administrator. 9.8(c) All loans shall require repayment by substantially level amortization with payments not less frequently than quarterly and shall otherwise be repaid in the manner and within a specified period of time as determined by the Administrator, but in no event to exceed ten (10) years for "home loans" or five (5) years for all other loans. For purposes hereof a "home loan" is any loan used to acquire any dwelling unit which within a reasonable time is to be used (determined at the time the loan is made) as a principal residence of the Participant. 9.8(d) The Employer shall cooperate with the Administrator and the Trustee in enforcing prompt repayment of all such loans and installments thereon. The entire balance of principal and interest then due on all such loans upon which a Participant is then liable shall be deducted by offset from any distributions or benefits paid to or with respect to such Participant from the Loan fund and shall be applied to the payment of such balance. - 46 - 9.8(e) Every loan applicant shall receive a clear statement of the charges involved in each loan transaction. This statement shall include the dollar amount and annual interest rate of the finance charge. 9.8(f) Notwithstanding the foregoing, the Administrator may on a non- discriminatory basis, among other things, set minimum loan amounts (not to exceed $1,000), minimum repayment amounts, more restrictive loan limits, and/or a maximum number of outstanding loans for any Participant at any one time, may impose a loan processing and/or administrative charge, may restrict accounts from which loans are made, may require repayment by payroll deduction, and may suspend loan rights from time to time. 9.8(g) Upon the making of a loan to a Participant pursuant to this paragraph, the Trustee shall transfer to a segregated account for the Participant in the Loan Fund an amount equal to the principal amount of such loan (unless otherwise determined by the Administrator from time to time on a uniform and non-discriminatory basis applied prospectively and stated in the Plan's loan policy): (i) First from his accounts in the following order: (A) First his After-Tax Account, with transfers being made first from his After-Tax Optional and then from his After-Tax Basic Account, (B) Then his Rollover Account, (C) Then his Pre-Tax Account, (D) Then his Unrestricted QNEC Account, and (E) Then his Unrestricted Matching Account (to the extent vested), with transfers being made first from his Matching Non-forfeitable Account and then from his Matching Active Account, (F) Lastly his Unrestricted Profit Sharing Account (to the extent vested), with transfers being made first from his Profit Sharing Non- forfeitable Account and then from his Profit Sharing Active Account, and Loans are not available from a Participant's Company Stock QNEC Account, Company Stock Matching Account or Company Stock Profit Sharing Account. (ii) Then with the transfers being made first from the Fund division(s) other than the Company Stock Fund and the Loan Fund in each such tier of accounts on a pro rata basis and then from the Company Stock Fund. 9.8(h) Notwithstanding any other provision of the Plan, if a loan repayment obligation is suspended for any part of a Participant's service in the uniformed services of the United States (as defined in chapter 43 of title 38, United States Code), whether or not Qualified Military Service (as defined in paragraph 4.10), such suspension shall not be taken into account for purposes of Sections 72(p), 401(a) or 4975(d)(1) of the Code and, if the Administrator permits, for purposes of the loan term and similar rules of the Plan. 9.8(i) In the event of a Participant's default where the default continues after any applicable grace or catch-up period, if any, permitted by the Administrator on a uniform and non-discriminatory basis, the Administrator shall treat the loan as an offset against the Participant's non-forfeitable Accrued Benefit by distribution of the Participant's promissory note(s) marked paid and satisfied. - 47 - 9.9 Instructions to Trustee. The Administrator, upon determination ----------------------- that a requested withdrawal or loan is permissible under the Plan, shall immediately notify the Trustee, who shall pay from the Fund the amount of the withdrawal or loan in accordance with the Administrator's instructions and, in the case of a withdrawal, shall deduct the amount thereof from the Participants' account in the Fund or transfer the amount to a segregated account in the Fund as designated by the Administrator. ARTICLE X The Fund -------- 10.1 Trust Fund and Exclusive Benefit. The Trustee shall receive all -------------------------------- contributions under and all assets transferred to the Plan and shall invest and administer them as a trust fund (the "Fund") for the exclusive benefit of the Participants and Beneficiaries hereunder in accordance with the Plan. Except as otherwise expressly provided herein, no part of the corpus or income of the Fund shall revert to or be used or enjoyed by the Employer or be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries and the defrayal of reasonable expenses of the Plan and Fund. The rights of all persons hereunder are subject to the terms of the Plan. 10.2 Plan and Fund Expenses. Unless or to the extent not paid by the ---------------------- Employer without being advanced subject to reimbursement (which shall make such payments as directed by the Plan Sponsor) or unless prohibited by the Act or the Code, all expenses of the Plan and the Fund, including reasonable legal, accounting, custodial, brokerage, consulting and other fees and expenses incurred in the establishment, amendment, administration and termination of the Plan or the Fund and/or the compensation of the Trustee and other fiduciaries of the Plan to the extent provided under the Plan, and all taxes of any nature whatsoever, including interest and penalties, assessed against or imposed upon the Fund or the income thereof shall be paid out of the Fund and shall constitute a charge upon the Fund. The Plan Sponsor may cause the Employer to advance any or all such expenses and/or taxes on behalf of the Fund, subject to the Employer's right of reimbursement from the Fund if so directed by the Plan Sponsor and to the applicable prohibited transaction provisions of the Act and the Code. 10.3 Reversions to the Employer. -------------------------- 10.3(a) If a contribution by the Employer is made under a mistake of fact, upon written direction by the Plan Sponsor, the Trustee shall return to the Employer an amount equal to such mistaken contribution, less any losses attributable to such mistaken contribution, within one year after payment of such contribution. If a contribution by the Employer is made conditioned upon its deductibility for federal income tax purposes and there is a final determination of the disallowance of a deduction under Section 404 of the Code for such contribution or portion thereof, upon written direction by the Plan Sponsor, the Trustee shall return to the Employer an amount equal to the amount of such contribution or portion thereof so disallowed, less any losses attributable to such contribution, within one year after such final determination. Notwithstanding anything to the contrary in the foregoing, any such return shall be limited to an amount which would not cause the balance of any Participant's account to be reduced to less than the balance such Participant's account would have been had such amount not been contributed. 10.3(b) If the Internal Revenue Service determines that the Plan does not initially qualify under Section 401 of the Code with respect to any Employer which has adopted the Plan provided it has submitted an application for a determination within one year after its adoption of the Plan, the Trustee shall return to such Employer (unless otherwise directed to be distributed to Participants or, if deceased, their Beneficiaries) and to its Participants (or if deceased, their Beneficiaries) within one year after the date of notice of such disqualification, all assets attributable to contributions which the Trustee has received from such Employer and its Participants, respectively, and shall return to the predecessor funding agent or distribute to Participants or, if deceased, their Beneficiaries, all assets attributable to funds of any predecessor plan received by the Trustee, all as directed by the Plan Sponsor. Upon such return, the Plan shall terminate with respect to such Employer. - 48 - 10.3(c) After the termination of the Plan as a whole and after all fixed and contingent liabilities of the Fund to Participants and their Beneficiaries have been satisfied, any remaining assets of the Fund held pursuant to paragraph 4.5 shall be distributed to the Employer as the Plan Sponsor may direct. 10.4 No Interest Other Than Plan Benefit. Nothing contained herein ----------------------------------- shall be deemed to give any Participant or Beneficiary any interest in any specific part of the Fund or any interest other than his right to receive benefits in accordance with the provisions of the Plan. 10.5 Payments from the Fund. The Trustee shall make all payments from ---------------------- the Fund which become due hereunder in accordance with the written instructions or directions of the Administrator. In directing the Trustee to make any payments or deliveries out of the Fund, the Administrator shall follow the provisions of the Plan. The Trustee acting in accordance with such instructions or directions shall be fully protected and indemnified by the Employer in relying upon any such written instruction or direction which the Trustee reasonably and in good faith believes to be proper. 10.6 Fund Divisions. -------------- 10.6(a) The Fund shall be held in divisions (sometimes referred to as "divisions of the Fund", "Fund divisions" or "investments funds" herein) as hereinafter provided, and each account under the Plan shall be subdivided to reflect its interest in each Fund division. 10.6(b) The Fund divisions which shall be maintained in the Fund are as follows: (i) Company Stock Fund - The Company Stock Fund shall be ------------------ established effective March 31, 1997 and shall be a pooled investment fund consisting of and invested primarily in Company Stock and such short-term temporary investments and such cash balances as the Trustee deems appropriate. It is generally expected that after accumulating a reasonable reserve for day to day administration, Company Stock will represent approximately at least 95% of the total assets of the Company Stock Fund, and cash reserves and temporary investments represent the remaining assets. (ii) Loan Fund - The Loan Fund shall consist of loans made to --------- Participants pursuant to paragraph 9.8, which shall be considered directed investments of each such Participant, of principal and interest payments thereon. (A) As provided in paragraph 9.8, an amount equal to the principal amount of a loan to a Participant shall be segregated from such Participant's account or accounts within the other Fund divisions. (B) Payments of the principal of and payments of interest on a loan to a Participant shall be transferred upon payment pro rata: (I) To the Participant's unsegregated accounts in the Fund in the reverse order from which funds were transferred from such accounts to the Participant's segregated account in the Loan Fund for purposes of making such loan, and (II) To the Fund divisions determined on the basis of the Participant's contribution investment direction then in effect under paragraph 10.7. (iii) Named Fund Divisions in Appendix E - The regulated investment ---------------------------------- companies, collective trust funds and/or mutual funds authorized for investment as provided in Appendix E to the Plan, which appendix may be modified from time to time by the Plan Sponsor. 10.7 Participant Investment Directions. --------------------------------- - 49 - 10.7(a) Except as otherwise provided in the applicable plan asset transfer or merger agreement, in the case of the direct transfer of assets to the Plan on behalf of a Participant, such transferred assets (or the proceeds from the sale thereof) which are allocated to his Directable Accounts shall initially be invested in the Available Fund Divisions, in whole multiples of the Permitted Direction Percentage (but not exceeding one hundred percent (100%) in the aggregate), as directed by the Participant (or, if deceased, his Beneficiary) for whom transferred in accordance with the direction filing requirements therefor established by the Administrator. 10.7(b) Upon becoming a Participant without a contribution investment direction in force, or upon a Participant's making a Rollover Contribution or repayment pursuant to paragraph 6.6 without a contribution investment direction in force, he may direct that such contribution or repayment and his allocable share of future Directable Contributions be invested, in whole multiples of the Permitted Direction Percentage (but not exceeding one hundred percent (100%) in the aggregate), in the Available Investment Funds by filing a "contribution investment direction" with the Administrator at such time. 10.7(c) In accordance with procedures established by the Administrator from time to time: (i) Contribution Investment Direction - A Participant may make a --------------------------------- "contribution investment direction" by directing that whole multiples of the Permitted Direction Percentage (but not exceeding one hundred percent (100%) in the aggregate) of his allocable share of future Directable Contributions be invested in the Available Fund Divisions. Any such contribution investment direction shall be effected for contributions made after each subsequent Contribution Investment Direction Change Date for which such direction is timely delivered to the Administrator (or its designee); and/or (ii) Account Balance Investment Direction - A Participant (or, if ------------------------------------ deceased, his Beneficiary) may make an "account balance investment direction" by directing that whole multiples of the Permitted Direction Percentage (but not exceeding one hundred percent (100%) in the aggregate) of his Directable Accounts be invested in the Available Fund Divisions. Any such account balance investment direction shall be effective as of and for the Account Balance Investment Direction Change Date for which such direction is timely delivered to the Administrator (or its designee). 10.7(d) If or to the extent a Participant (or if deceased, his Beneficiary) has no investment direction in effect, his Directable Contributions and Directable Accounts shall be invested in the Fund division designated as the Default Fund in Appendix E to the Plan. 10.7(e) For purposes of this paragraph and subject to the provisions of subparagraph 10.7(e): (i) The term "Account Balance Investment Direction Change Date" means each Valuation Date. (ii) The term "Available Fund Divisions" means the Company Stock Fund and the named investment funds listed in Appendix E. (iii) The term "Directable Accounts" means all accounts, or parts of accounts, of the Participant other than those parts held in the Company Stock Matching Account, the Company Stock Profit Sharing Account, the Company Stock QNEC Account, or the Loan Fund. (iv) The term "Directable Contributions" means (A) all contributions made by the Participant and (B) all contributions made by the Employer (other than contributions by the Employer required to be invested in the Company Stock Fund pursuant to subparagraph 3.2(c) - that is, contributions allocated to the Company Stock Matching Account, the Company Stock Profit Sharing Account, or the Company Stock QNEC Account,). (v) The term "Contribution Investment Direction Change Date" means each Valuation Date. - 50 - (vi) The term "Permitted Direction Percentage" means five percent (5%) or any lesser percentage or any dollar amount permitted by the Administrator from time to time. 10.7(f) The Plan is intended to constitute a plan described in Section 404(c) of the Act and Title 29 of the Code of Federal Regulations Section 2550- 404c-1 under which Participants may direct investments. It is intended that fiduciaries of the Plan shall act accordingly and may thereby be relieved of liability for investment losses which are the result of Participant and Beneficiary investment directions regarding allocation of accounts and contributions among the available divisions of the Fund to the maximum extent permitted under Section 404(c) of the Act. 10.8 Investment Authority of the Administrator. ----------------------------------------- 10.8(a) The Administrator may on a uniform and non-discriminatory basis require the entire Accrued Benefit (other than that held in the Company Stock Matching Account) of one or more Participants and/or Beneficiaries be invested in the Default Fund designated in Appendix E to the Plan in the event that the person cannot be located or is not competent to make an investment direction or that there is a dispute as to the proper recipient of the Participant's Accrued Benefit. 10.8(b) The Administrator may on a uniform and non-discriminatory basis from time to time may set or change the advance notice requirement for effecting investment directions, may limit the number of investment direction changes made in a Plan Year, may limit investment directions which be can made by telephone, and generally may change any of the investment direction procedures. 10.8(c) The Administrator in its discretion may suspend from time to time and at any time the maintenance and/or offering of any Fund division as a Participant directed investment alternative hereunder, whereupon, and notwithstanding anything to the contrary herein, no investment directions pursuant hereto shall be permitted in such Fund division for the period of any such suspension. 10.9 Provisions Relating to Insurer. ------------------------------ 10.9(a) No Insurer shall be deemed a party to the Plan or responsible for the validity thereof. 10.9(b) No Insurer shall be required to determine either: (i) That a person for whom the Trustee applies for a Policy is, in fact, eligible for participation or entitled to benefits under the Plan, (ii) Any fact necessary for the proper issuance of any Policy or Contract, or (iii) The proper distributions or further application of any moneys paid by it to the Trustee in accordance with the written direction of the Trustee; and with respect to each of the foregoing, the Insurer shall be fully indemnified and protected in relying upon the advice and direction of the Trustee. 10.9(c) Any notice, direction, application or other communication whatsoever shall be accepted by the Insurer as duly authorized and executed if signed by the Trustee. The Insurer shall be fully protected in assuming that the Trustee is as shown in the latest notification received by it at its home office. ARTICLE XI - 51 - Fiduciaries ----------- 11.1 Named Fiduciaries and Duties and Responsibilities. Authority to ------------------------------------------------- control and manage the operation and administration of the Plan shall be vested in the following, who, together with their membership, if any, shall be the Named Fiduciaries under the Plan with those powers, duties, and responsibilities specifically allocated to them by the Plan: 11.1(a) Trustee - The Trustee in connection with its fiduciary obligations ------- relating to the Plan and the Fund. 11.1(b) Plan Sponsor - The Plan Sponsor in connection with its fiduciary ------------ obligations and rights relating to the Plan and the Fund. 11.1(c) Plan Administrator - The Plan Administrator in connection with its ------------------ fiduciary obligations and rights relating to the Plan and the Fund. 11.1(d) Board - The Board in connection with its fiduciary obligations and ----- rights relating to the Plan and the Fund. 11.2 Limitation of Duties and Responsibilities of Named Fiduciaries. The -------------------------------------------------------------- duties and responsibilities, and any liability therefor, of the Named Fiduciaries provided for in paragraph 11.1 shall be severally limited to the duties and responsibilities specifically allocated to each such Named Fiduciary in accordance with the terms of the Plan, and there shall be no joint duty, responsibility, or liability among any such groups of Named Fiduciaries in the control and management of the operation and administration of the Plan. 11.3 Service by Named Fiduciaries in More Than One Capacity. Any person ------------------------------------------------------ or group of persons may serve in more than one Named Fiduciary capacity with respect to the Plan (including both service as Trustee and Plan Administrator). 11.4 Allocation or Delegation of Duties and Responsibilities by Named ---------------------------------------------------------------- Fiduciaries. By written agreement filed with the Plan Administrator and the - ----------- Plan Sponsor, the duties and responsibilities of the Trustee with respect to the management and control of the assets of the Fund may, with the written consent of the Plan Sponsor, be allocated among the Trustees (if there are two or more persons so serving) and any other duties and responsibilities of any Named Fiduciary may be allocated among Named Fiduciaries or may, with the consent of the Plan Sponsor, be delegated to persons other than Named Fiduciaries. The delegation permitted under this paragraph includes the Trustee's right to select a custodian (other than a Custodian for any separate trust established pursuant to paragraph 12.8) to hold the assets of the Fund. Any written agreement shall specifically set forth the duties and responsibilities so allocated or delegated, shall contain reasonable provisions for termination, and shall be executed by the parties thereto. 11.5 Investment Manager. ------------------ 11.5(a) The Board may appoint one or more Investment Managers to manage all or any portion of the Fund. The appointment of any such Investment Manager shall be by written agreement, which shall specify the scope of the powers and duties of such Investment Manager, shall contain reasonable provisions for the termination of such appointment, may require or allow any Investment Manager to perform or to select the person performing asset custodial services for all or part of the Fund, and shall be executed by the parties thereto and acknowledged by the Trustee. An Investment Manager appointed pursuant to any such agreement shall acknowledge therein its status as a fiduciary with respect to the Plan. 11.5(b) In the event an Investment Manager is appointed for all or part of the assets of the Fund, the Trustee shall follow the directions of the Investment Manager in managing and controlling the assets of the Fund subject to the direction and control of the Investment Manager. The Investment Manager shall be governed by the powers and restrictions imposed on the Trustee in its management and control of the Fund. - 52 - 11.6 Assistance and Consultation. A Named Fiduciary, and any delegate --------------------------- named pursuant to paragraph 11.4, may engage agents to assist in its duties and may consult with counsel, who may be counsel for the Employer, with respect to any matter affecting the Plan or its obligations and responsibilities hereunder, or with respect to any action or proceeding affecting the Plan. All compensation and expenses of such agents and counsel shall be paid or reimbursed from the Fund, except to the extent prohibited by the Act or the Code and except to the extent paid or reimbursed by the Employer. 11.7 Indemnification. The Employer shall indemnify and hold harmless --------------- any individual who is a Named Fiduciary or a member of a Named Fiduciary under the Plan and any other individual to whom duties of a Named Fiduciary are delegated pursuant to paragraph 11.4, to the extent permitted by law, from and against any liability, loss, cost or expense arising from their good faith action or inaction in connection with their responsibilities under the Plan. 11.8 Funding Policy. The Board shall establish and communicate to the -------------- Trustee a funding policy consistent with the current and long-term financial needs of the Plan with respect to the ages of the Participants in the Plan and other such relevant information; provided, however, that nothing in this subparagraph shall be construed as granting to the Board any power or authority with respect to the control and management of the Fund. 11.9 Standard of Conduct. ------------------- 11.9(a) The Named Fiduciaries and all other fiduciaries under the Plan shall each discharge their duties with respect to the Plan and the Fund solely in the interest of the Participants and Beneficiaries, in accordance with the applicable provisions of the Act and the Code and: (i) For the exclusive purpose of providing benefits to Participants and Beneficiaries, and defraying reasonable expenses of administering the Plan and the Fund to the extent permitted by the Plan and any separate trust or custodial agreement; (ii) With the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (iii) By diversifying investments of the Fund in accordance with the requirements of the Act so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (iv) In accordance with the terms of the Plan and any other plan documents insofar as they are consistent with the Act. 11.9(b) In the exercise of their authority under the Plan, the Named Fiduciaries and all other fiduciaries under the Plan shall take cognizance of and be inhibited by those limitations and prohibitions contained in Section 406 of the Act and the prohibited transaction provisions of Section 4975 of the Code, for which no exemption is applicable. ARTICLE XII The Trust Fund -------------- 12.1 Trustee Powers and Duties. Subject to the following provisions of ------------------------- this ARTICLE XII, the Trustee shall commingle and jointly invest, or where specifically provided herein shall segregate and separately invest, the assets of the Fund, without distinction between corpus and income. - 53 - 12.1(a) The Trustee shall hold the Fund in trust, shall have the following general powers granted in this paragraph, subject to the directions, limitations, restrictions or prohibitions imposed hereunder, and, except as otherwise specifically provided herein, shall have exclusive authority and discretion in its management and control of the Fund. (i) The Trustee shall invest and reinvest the Fund in such stocks, stock options (whether or not covered), warrants and rights, puts, calls, stock-index futures, bonds, securities, commodities, commodity futures and options, loans to Participants if and subject to conditions expressly authorized in the Plan, real estate mortgages, real estate investment trusts or funds, real estate, partnership interests, mutual funds, closed-end investment companies, regulated investment companies or trusts, common, collective or group trust funds (except as otherwise limited hereunder) and other investments, and in such proportion, as may be deemed suitable for the purposes and the funding policy hereof. (ii) Such investments shall not be restricted to property and securities of the character authorized for investment by trustees under any present or future laws, with the exception of the Act. (iii) To the extent permitted by law, the Trustee is expressly authorized to invest and reinvest the Fund and to execute any joinder or similar agreement therefor on behalf of the Plan: (A) In any general common trust fund qualifying under Section 584 of the Code and maintained by any person, including but not limited to the Trustee or any affiliate of the Trustee in the same bank holding system affiliated group, as defined in Section 1504 of the Code, as the Trustee (if the Trustee and any such affiliate are banks or trust companies supervised by a state or federal agency) and/or the Investment Manager or any affiliate of the Investment Manager; (B) In any other collective or group trust fund maintained by any person, including but not limited to any such bank or trust company and/or the Investment Manager or any affiliate of the Investment Manager, and consisting solely of assets of qualified retirement trusts and/or individual retirement accounts exempt from federal income taxation under the Code, as the Trustee or, where applicable, the Investment Manager in its discretion may determine (whether or not the Trustee or, where applicable, the Investment Manager is such a bank or trust company), provided such collective or group trust is so qualified and exempt under the Code; (C) In whole or in part in qualifying employer securities (subject however to any applicable securities registration requirements), qualifying employer real property, or both, as defined by Section 407(d)(4) and (5) of the Act; (D) In Contracts or Policies (not containing or providing life insurance) issued to provide or fund benefits under the Plan, and in Policies of life insurance on the lives of Participants if the Plan expressly provides for the purchase of such Policies and the Administrator so directs, (whether or not the Insurer is the Plan Sponsor or any affiliate of the Plan Sponsor, or the Investment Manager or any affiliate of the Investment Manager, if an insurance company); (E) In whole or in part in deposits with any bank or similar financial institution supervised by the United States or a State, regardless of whether such bank or other institution is a Trustee or other fiduciary hereunder, provided such deposits shall bear a reasonable rate of interest, except that funds may be deposited in non-interest bearing accounts to such extent and for such time as may be reasonably required for the orderly administration of the Plan; or (F) In any mutual fund, closed-end investment company, regulated investment company or trust, or similar pooled investment medium, whether on not maintained by or advised by the Trustee or any affiliate of the Trustee or the Investment Manager or any affiliate of the Investment Manager. - 54 - (iv) If an investment is made in a common, collective or group trust, the Trustee is expressly authorized to incorporate the terms thereof as an investment medium under and as a part of the Plan, and the terms of such trust shall govern the investment, disposition and distribution of the assets of such trust. 12.1(b) Subject to the requirements imposed by law, and in furtherance and not in limitation of the Trustee's investment authority, the Trustee shall have all powers and authority necessary or advisable to carry out the provisions of the Plan, and all inherent, implied and statutory powers now or subsequently provided by law, including specifically the power to do any of the following: (i) To deal with all or any part of the Fund, including, without limitation, to invest, reinvest and change investment; (ii) To acquire any property by purchase, subscription, lease or other means; (iii) To sell for cash or on credit, convey, lease for long or short terms, or convert, redeem or exchange all or any part of the Fund; (iv) To borrow money for the purpose of the Fund, and for any sum so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the Fund; (v) To enforce by suit or otherwise, or to waive its rights on behalf of the Fund, and to defend claims asserted against him or the Fund; (vi) To compromise, adjust and settle any and all claims against or in favor of it or the Fund; (vii) To renew, extend or foreclose any mortgage or other security; (viii) To bid in property on foreclosure; (ix) To take deeds in lieu of foreclosure, with or without paying a consideration therefor; (x) To vote, or give proxies to vote, any stock or other security, and to oppose, participate in and consent to the reorganization, merger, consolidation or readjustment of the finances of any enterprise, to pay assessments and expenses in connection therewith, and to deposit securities under deposit agreements; (xi) To hold Plan assets unregistered (including in bearer form), or to register them in its own name, in street name or in the names of nominees who are within the jurisdiction of the district courts of the United States and are either banks or trust companies that are subject to supervision by the United States or a state thereof, brokers or dealers registered under the Securities Exchange Act of 1934, clearing agencies as defined in Section 3(a)(23) of the Securities Exchange Act of 1934, permissible nominees of any of the foregoing, or any other persons or entities permitted to act as nominee for the Trustee under Section 403 of the Act, provided the books and records of the Fund shall at all times reflect that the Fund is the beneficial owner of such securities; (xii) To make, execute, acknowledge and deliver any and all instruments that it shall deem necessary or appropriate to carry out the powers herein granted; and (xiii) Generally to exercise any of the powers of an owner with respect to all or any portion of the Fund. Except as provided in the Act, no person dealing with the Trustee shall be bound to see to the application of any money or property paid or delivered to the Trustee or to inquire into the validity or propriety of any transaction. - 55 - 12.1(c) The Trustee shall not have the power or duty to inquire into the correctness of the amount tendered to it as required by the Plan nor to enforce the payment of contributions thereunder by the Employer. The Trustee shall be responsible only for such sums and assets that it actually receives as Trustee. 12.2 Accounts. The Trustee shall keep true and accurate accounts of all -------- investments, receipts, and disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by any person or persons designated by the Plan Sponsor. Within sixty (60) days after the removal or resignation of the Trustee and at least quarterly (unless the Plan Sponsor requires less frequent reports), the Trustee shall file with the Plan Sponsor a valuation of the assets of the Trust, and an accounting of its transactions since the last previous such accounting. In addition, the Plan Sponsor may require an accounting from the Trustee at any other reasonable time. No employee and no person other than those designated by the Plan Sponsor shall have the right to demand or be entitled to any accounting by the Trustee except as otherwise provided by law. 12.3 Two or More Trustees. Except in the case of the appointment of a -------------------- Separate Trustee pursuant to paragraph 12.8, in the event two or more persons are at any time serving as Trustee hereunder, such Trustees shall jointly manage and control the Fund; provided, however, that pursuant to paragraph 11.4 such Trustees may enter into an agreement in writing with respect to the allocation of specific responsibilities, obligations or duties among themselves. Any written agreement entered into pursuant to this paragraph shall be attached to and made a part of the Plan. 12.4 Management of Fund by Investment Manager. In the event an ---------------------------------------- Investment Manager is appointed for all or part of the assets of the Fund, the Trustee shall follow the directions of the Investment Manager in managing and controlling the assets of the Fund subject to the direction and control of the Investment Manager. The Investment Manager shall be governed by the powers and restrictions imposed on the Trustee in its management and control of the Fund. 12.5 Trustee Compensation and Expenses. Subject to applicable --------------------------------- limitations and prohibitions under the Act, the Trustee shall be paid such reasonable compensation and shall be reimbursed for its reasonable expenses as shall from time to time be agreed upon by the Plan Sponsor and the Trustee. 12.6 Bond. Except as may be provided under Section 412 of the Act, the ---- Trustee shall not otherwise be required to give any bond or other security for the faithful performance of its duties hereunder. 12.7 Trustee Resignation, Removal or Death and Appointment of Successor ------------------------------------------------------------------ or Additional Trustee. - --------------------- 12.7(a) In the event the Trustee or Trustees serving hereunder have been named Trustee by virtue of any office they may hold in connection with their employment by the Plan Sponsor or any other Employer, upon leaving any such office, such Trustee shall at once cease to be a Trustee and shall be discharged from all further duties and responsibilities as Trustee. Upon acceptance in writing of its status as Trustee hereunder by the successor in office of any such Trustee, he shall become a Trustee hereunder. 12.7(b) The Trustee may resign at any time upon delivering to the Plan Sponsor a written notice of such resignation to take effect not less than sixty (60) days after the delivery thereof to the Plan Sponsor unless the Plan Sponsor shall accept as adequate a shorter notice. The Trustee may be removed by the Plan Sponsor by mailing notice by registered mail addressed to the Trustee at his last known address, or by delivery of same to the Trustee to take effect not less than sixty (60) days after mailing or delivery of such notification unless notice of a shorter duration shall be accepted as adequate. The Administrator shall be notified by the Plan Sponsor of any such resignation or removal. 12.7(c) In case of the resignation or removal of a Trustee, such Trustee shall transfer, assign, convey and deliver to the successor or other Trustee the trust estate as it may then be constituted and shall execute all documents necessary for transferring the trust estate. - 56 - 12.7(d) The Plan Sponsor shall forthwith appoint a successor Trustee in case of resignation, removal or death of all Trustees appointed and then serving. Any successor Trustee shall qualify as such by executing, acknowledging, and delivering to the Plan Sponsor an instrument accepting such appointment hereunder in such form as may be satisfactory to the Plan Sponsor, which form shall become a part of this Trust document, and thereupon such successor Trustee shall become vested with the rights, powers, discretion, duties and obligation of its predecessor Trustee. The Administrator shall be notified by the Plan Sponsor of any such successor Trustee. 12.7(e) In the event of the resignation, removal or death of a Trustee, the surviving Trustee shall continue to be a Trustee hereunder. 12.7(f) The Plan Sponsor may at any time and from time to time appoint one or more additional Trustees. The Administrator shall be notified by the Plan Sponsor of any such additional Trustee. 12.7(g) The Trustee may, with the written consent of the Plan Sponsor, or shall, at the written direction of the Plan Sponsor, or the Plan Sponsor may by written direction, appoint a bank with trust powers or a trust company (including any Trustee) as a Co-Trustee for the custody and/or investment of all or a portion of the assets of the Fund and enter into a trust agreement with such bank, and thereafter the Trustee shall deliver assets of the Fund to such bank or trust company for such custody and/or investment in accordance with such written consent or direction of the Plan Sponsor. Any such trust agreement shall be attached to the Plan. For purposes hereof and except as otherwise required by Section 405(b)(2) of the Act with respect to co-fiduciary responsibility and liability: (i) The duties and responsibilities with respect to the assets of the Fund held by any Co-Trustee appointed pursuant to this subparagraph shall be allocated solely to such Co-Trustee, and such Co-Trustee shall have no duties or responsibilities with respect to the other assets of the Fund by reason of its appointment pursuant to this subparagraph; and (ii) Conversely, any Trustee which is not appointed as such Co- Trustee for such assets of the Fund shall have no duties and responsibilities with respect to the assets of the Fund held by such Co- Trustee pursuant to this subparagraph. Any appointment of a Co-Trustee pursuant to this subparagraph shall automatically be considered an allocation of duties and responsibilities under paragraph 11.4 without further action being required and it is intended to be an allocation described in Section 405(b)(1) of the Act. The Administrator shall be notified by the Plan Sponsor of any such appointment of a Co-Trustee pursuant to this subparagraph. 12.8 Establishment of Separate Trusts. -------------------------------- 12.8(a) The Board may establish one or more separate trusts and appoint a bank with trust powers, a trust company or any other person (including any Trustee) as a Separate Trustee and if so provided a separate Custodian for the custody and/or investment of all or a portion of the assets of the Fund and enter into a separate trust agreement with such bank, trust company or other person and the Trustee shall thereafter deliver assets of the Fund to such bank, trust company or other person for such custody and/or investment in accordance with such separate trust agreement and any written directions of the Board. 12.8(b) For purposes hereof: (i) The duties and responsibilities of the Separate Trustee with respect to the assets of the Fund held pursuant to the Plan shall be allocated solely to such Separate Trustee, and such Separate Trustee shall have no duties or responsibilities with respect to the other assets of the Fund by reason of its appointment pursuant to this subparagraph; and -57- (ii) Conversely, any Trustee or Separate Trustee which is not appointed as such Separate Trustee for such assets of the Fund shall have no duties and responsibilities with respect to the assets of the Fund held by such Separate Trustee pursuant to this subparagraph. (iii) The provisions of subparagraphs 12.7(a) through (d) apply to the appointment, resignation or removal of Separate Trustees and Custodians as though references to Trustee were references to Separate Trustee and Custodian, respectively. 12.8(c) Any appointment of a Separate Trustee pursuant to this subparagraph is intended to be an establishment of a separate trust as described in Section 405(b)(3) of the Act. Upon the establishment of such a separate trust, any Trustee currently serving shall automatically become a Separate Trustee in accordance with the provisions of this paragraph. 12.8(d) Prior to March 31, 1997, there are no Separate Trustees, and First Union National Bank of North Carolina is the sole Trustee. Effective as of March 31, 1997, this Agreement shall be considered a separate trust agreement for the purpose of establishing two separate trusts pursuant to this paragraph, one separate trust to consist of all Fund divisions other than the Company Stock Fund (for which no Custodian is appointed as of March 31, 1997) and the other separate trust to consist of the Company Stock Fund (for which a Custodian is appointed as of March 31, 1997 pursuant to a separate custodial agreement). As of March 31, 1997, First Union National Bank of North Carolina is the Separate Trustee for all Fund divisions other than the Company Stock Fund, Thomas M. Mishoe, Jr. is the Separate Trustee for the Company Stock Fund, and First Union National Bank of North Carolina is the Custodian for the Company Stock Fund. 12.8(e) The Administrator shall be notified by the Board of any appointment of a Separate Trustee pursuant to this paragraph (other than the Separate Trustees provided for in subparagraph 12.2(d)). 12.9 Automatic Successor Trustee by Corporate Transaction. If any ---------------------------------------------------- corporate Trustee at any time shall be merged, or consolidated with, or shall sell or transfer substantially all of its assets and business to another employer, domestic or foreign, or shall be in any manner reorganized or reincorporated, then the resulting or acquiring employer shall be substituted ipso facto for such corporate Trustee without the execution of any instrument - ---- ----- and without any action upon the part of the Plan Sponsor, any Participant or Beneficiary, or any other person having or claiming to have an interest in the Fund. ARTICLE XIII Plan Administration ------------------- 13.1 Appointment of Plan Administrator. The Board may appoint one or --------------------------------- more persons to serve as the Plan Administrator (the "Administrator") for the purpose of carrying out the duties specifically imposed on the Administrator by the Plan, the Act and the Code. In the event more than one person is appointed, the persons shall form an administrative committee for the Plan. The person or committeemen serving as Administrator shall serve for indefinite terms at the pleasure of the Board, and may, by thirty (30) days prior written notice to the Board, terminate such appointment. The Board shall inform the Trustee of any such appointment or termination and the Trustee may assume that any person appointed continues in office until notified of any change. 13.2 Plan Sponsor as Plan Administrator. In the event that no ---------------------------------- Administrator is appointed or in office pursuant to paragraph 13.1, the Plan Sponsor shall be the Administrator. 13.3 Compensation and Expenses. Unless otherwise determined and paid by ------------------------- the Employer (as directed by the Plan Sponsor), the person or committeemen serving as the Administrator shall serve without compensation for service as such. All expenses of the Administrator shall be paid as provided in paragraph 10.2, provided no compensation shall be paid the Administrator from the Fund to the extent prohibited by the Act or the Code. -58- 13.4 Procedure if a Committee. If the Administrator is a committee, it ------------------------ shall appoint from its members a Chairman and a Secretary. The Secretary shall keep records as may be necessary of the acts and resolutions of such committee and be prepared to furnish reports thereof to the Trustee. Except as otherwise provided, all instruments executed on behalf of such committee may be executed by its Chairman or Secretary and the Trustee may assume that such committee, its Chairman or Secretary are the persons who were last designated as such to the Trustee in writing by the Plan Sponsor. 13.5 Action by Majority Vote if a Committee. If the Administrator is a -------------------------------------- committee, its action in all matters, questions and decisions shall be determined by a majority vote of its members qualified to act thereon. They may meet informally or take any action without the necessity of meeting as a group. 13.6 Appointment of Successors. Upon the death, resignation or removal ------------------------- of a person serving as, or on a committee which is, the Administrator, the Board may, but need not, appoint a successor. 13.7 Additional Duties and Responsibilities. The Administrator shall -------------------------------------- have the following duties and responsibilities in addition to those expressly provided elsewhere in the Plan: 13.7(a) The Administrator shall be responsible for the fulfillment of all relevant reporting and disclosure requirements set forth in the Act and the Code, including but not limited to the preparation of necessary plan descriptions, summary plan descriptions, annual reports, summary annual reports, employee benefit statements, notice of forfeitability of benefits, notice of special tax treatment (rollover, five-year or ten-year averaging and capital gains) for distributions, and other statements or reports, the distribution thereof to Participants and their Beneficiaries and the filing thereof with the appropriate governmental officials and agencies. 13.7(b) The Administrator shall maintain and retain necessary records respecting administration of the Plan and matters upon which disclosure is required under the Act and the Code. 13.7(c) The Administrator shall make any elections for the Plan under the Act or the Code. 13.7(d) The Administrator shall provide to Participants and Beneficiaries such notices, including but not limited to the notice to interested parties, and information as are required by the Plan, the Act and the Code. 13.7(e) The Administrator shall make all determinations regarding eligibility for participation in and benefits under the Plan. 13.7(f) The Administrator shall have the right to settle claims against the Plan and to make such equitable adjustments in a Participant's or Beneficiary's rights or entitlements under the Plan as it deems appropriate in the event an error or omission is discovered or claimed in the operation or administration of the Plan. 13.8 Power and Authority. ------------------- 13.8(a) The Administrator is hereby vested with all the power and authority necessary in order to carry out its duties and responsibilities in connection with the administration of the Plan, including the power to interpret the provisions of the Plan. For such purpose, the Administrator shall have the power to adopt rules and regulations consistent with the terms of the Plan. 13.8(b) The Administrator shall exercise its power and authority in its discretion. It is intended that a court review of the Administrator's exercise of its power and authority with respect to matters relating to claims for benefits by, and to eligibility for participation in and benefits of, Participants and Beneficiaries shall be made only on an arbitrary and capricious standard. -59- 13.9 Availability of Records. The Employer and the Trustee shall, at ----------------------- the request of the Administrator, make available necessary records or other information they possess which may be required by the Administrator in order to carry out its duties hereunder. 13.10 No Action with Respect to Own Benefit. No Administrator who is a ------------------------------------- Participant shall take any part as the Administrator in any discretionary action in connection with his participation as an individual. Such action shall be taken by the remaining Administrator, if any, or otherwise by the Plan Sponsor. 13.11 Limitation on Powers and Authority. The Administrator shall have ---------------------------------- no power in any way to modify, alter, add to or subtract from any provisions of the Plan. ARTICLE XIV Amendment and Termination of Plan --------------------------------- 14.1 Amendment. The Plan may be amended in whole or in part at any time --------- by action of the Board; provided, however, that: (i) Except to the extent permitted or required by the Act or the Code, neither the Accrued Benefit (nor any subsidy, early retirement benefit, optional form of payment or any other benefit considered to be an accrued benefit for purposes of Section 411(d)(6)(B) of the Code) of a Participant, nor the percentage thereof which is non-forfeitable, at the time of any such amendment shall be adversely affected thereby. (ii) Except to the extent permitted or required by the Act or the Code, no such amendment shall have the effect of revesting in the Employers any part of the Fund prior to the termination of the Plan and the satisfaction of all fixed and contingent liabilities thereunder with respect to Participants and their Beneficiaries. (iii) The duties and obligations of the Trustee hereunder shall not be increased nor its compensation decreased without its written consent. Any such amendment to the Plan shall be in writing and shall be adopted pursuant to action by the Board (including pursuant to any standing authorization for any officer, director or committee to adopt amendments) in accordance with its applicable procedures, including where applicable by majority vote or consent in writing. 14.2 Merger, Consolidation or Transfer of Assets. ------------------------------------------- 14.2(a) The merger or consolidation of or transfer of assets or liabilities between this Plan and any other plan shall be permitted upon action by the Board or as expressly provided elsewhere in the Plan so long as, immediately after such merger, consolidation or transfer of assets or liabilities, each Participant who is or may become eligible to receive an accrued benefit of any type from this Plan (or whose Beneficiaries may be eligible to receive any such benefit) would, if such surviving or transferee plan was then terminated, be entitled to receive an accrued benefit at least equal to the accrued benefit to which such Participant (and each such Beneficiary) would have been entitled had this Plan terminated immediately prior to such merger, consolidation or transfer of assets or liabilities. 14.2(b) With the consent of the Plan Sponsor, the Trustee may accept a direct transfer of cash or other property to the Fund on behalf of a Participant from a plan qualified under Section 401 or 403(a) of the Code. -60- 14.2(c) In the event property is received by the Trustee pursuant to this paragraph, such property shall be valued at its fair market value on the date of receipt by the Trustee in accordance with the method of valuation used for purposes of paragraph 4.6 or as otherwise provided in the merger, consolidation or asset transfer agreement. 14.2(d) Assets becoming part of the Fund by reason of any such merger, consolidation or transfer of assets or liabilities shall be allocated to the accounts in the Plan as provided in the merger, consolidation or asset transfer agreement or as otherwise provided in the Plan. 14.3 Plan Permanence and Termination. The Employers have established ------------------------------- the Plan with the intention and expectation that they will be able to make their contributions indefinitely, but none of the Employers are or shall be under any obligation or liability to any Participant or Employee to continue their contributions or to maintain the Plan for any given length of time, and each may in its sole and absolute discretion discontinue its contributions or otherwise terminate its participation in the Plan at any time without any such liability for such discontinuance or termination. 14.4 Lapse in Contributions. Failure by any Employer to make ---------------------- contributions to the Fund in any year or years, unless the same shall constitute a complete discontinuance of contributions, or shall be coupled with any other event causing a termination of its participation in the Plan, shall not terminate the Plan or operate to vest the rights of any Participants or to accelerate any payments or distributions to or for the benefit of any Participants or their Beneficiaries. 14.5 Termination Events. ------------------ 14.5(a) The Plan shall terminate in whole or in part as the case may be upon the happening of any of the following events: (i) With respect to any Employer, action by its Board terminating the Plan as to it and specifying the date of such termination. Notice of such termination shall be delivered to the Plan Sponsor, Trustee and the Administrator. (ii) With respect to any Employer, its adjudication as a bankrupt or its general assignment to or for the benefit of its creditors or its dissolution, unless within sixty (60) days after such event a successor employer shall assume the terms and conditions hereof in writing. (iii) With respect to any Employer, its complete discontinuance of contributions. (iv) Termination or partial termination of the Plan within the meaning of Section 411(d)(3) of the Code, provided, however, that in the case of a partial termination, paragraphs 14.5 through 14.8 shall only apply to that part of the Plan which is partially terminated. (v) With respect to any Employer other than the Plan Sponsor, upon its ceasing to be an Affiliate with respect to the Plan Sponsor. (vi) Action by the Board of the Plan Sponsor terminating the Plan as a whole and specifying the date of such termination. Notice of such termination shall be delivered to the Trustee, the Administrator and all Employers. 14.5(b) For purposes of paragraphs 14.6 through 14.8 hereof, any action by the Board terminating the Plan shall also specify whether the Plan is thereafter to be operated as a "terminated plan" or a "frozen plan". Such terms are defined as follows: (i) A "terminated plan" is one that has been formally terminated, has ceased crediting service for benefit accrual purposes and vesting, and has been or is distributing Plan assets to Participants and Beneficiaries entitled thereto -61- as soon as administratively possible. For purposes hereof, a Plan will be considered a terminated plan when Plan assets are required to be distributed pursuant to paragraph 14.8 hereof. (ii) A "frozen plan" is one to which contributions to the Plan have ceased but all Plan assets are not being distributed to Participants or Beneficiaries entitled thereto as soon as administratively possible. For purposes hereof, a Plan will be considered a frozen plan when Plan assets are not required to be distributed pursuant to paragraph 14.8 hereof. 14.5(c) Termination of the Plan shall mean that: (i) Contributions shall cease to be made to the Plan for periods after the effective date of the termination, and (ii) Unless otherwise determined by the Board or prohibited by the Act or the Code, any withdrawal, investment direction, or other rights shall cease in the case of a "terminated plan" or shall continue in the case of a "frozen plan", and (iii) In the case of a "frozen plan", benefit payments shall be made as provided in ARTICLE VIII and withdrawals and loans shall be permitted as provided in ARTICLE IX prior to its becoming a "terminated plan". 14.6 Termination Allocations and Separate Accounts. --------------------------------------------- 14.6(a) Upon the effective date of the termination or partial termination of the Plan within the meaning of Section 411(d)(3) of the Code, or upon the effective date of the complete discontinuance of contributions to the Plan, the accounts of each affected Participant shall be fully vested. 14.6(b) Upon the effective date of the termination of the Plan with respect to any Employer, or upon the discontinuance of contributions by it, all or that portion of each Participant's account which is attributable to such Employer's (or its predecessor's) contributions shall be fully vested to the extent, if any, as the Board or the Plan Sponsor shall provide. In addition: (i) If so directed by the Plan Sponsor, and as of the effective date of the termination of the Plan with respect to such Employer or the complete discontinuance of contributions by it, or as of any subsequent Valuation Date, the Trustee shall pay out of the Fund or provide for all accrued expenses not otherwise paid, shall value the assets held by the Fund, and shall adjust such accounts, both in the same manner as at the end of the Plan Year. (ii) If so directed by the Plan Sponsor, the Trustee shall then hold as separate accounts the portions of each account which have been fully vested under the provisions of this subparagraph. 14.6(c) Upon the effective date of the termination of the Plan as a whole or the complete discontinuance of all contributions to the Plan, or if so directed by the Plan Sponsor, the partial termination of the Plan, the Trustee shall, subject to the Dollar/25% Limitation of paragraph 4.3, allocate the then unallocated contributions and forfeitures to the accounts of Participants and adjust such accounts in the same manner as at the end of the Plan Year and shall thereafter hold such accounts of all Participants as separate accounts hereunder. Thereafter, and after all fixed and contingent liabilities of the Fund to Participants and their Beneficiaries have been satisfied, any remaining assets of the Fund held in such account pursuant to paragraph 4.5 hereof shall be distributed to the Employer in such manner and in such proportions as the Plan Sponsor may determine. 14.6(d) To the extent a Participant's Matching and Profit Sharing Active Accounts becomes fully vested pursuant to this paragraph, it shall be transferred to his Matching and Profit Sharing Non-forfeitable Accounts. -62- 14.7 Holding of Separate Accounts. ---------------------------- 14.7(a) Upon termination of the Plan with respect to any Employer caused solely by a complete discontinuance of its contributions, by a partial termination of the Plan and/or by action of its Board or the Board, the Trustee shall continue to administer any separate accounts established in accordance with paragraph 14.6 as a part of the Fund in accordance with the provisions of the Plan for the sole benefit of the then Participants and Beneficiaries then receiving benefits, and any future Beneficiaries entitled to receive benefits hereunder with respect to such separate accounts. 14.7(b) In administering such separate accounts the Trustee shall have the powers and duties imposed upon it under the Plan provided that under no circumstances shall all or any portion of the separate accounts of any Participant held under this paragraph, as from time to time adjusted to reflect the profits, losses and expenses of the Fund, be subject to any forfeiture or inure to the benefit of any person other than such Participant or his Beneficiary. 14.8 Distribution of Separate Accounts after Termination. --------------------------------------------------- Notwithstanding the other provisions of this ARTICLE XIV, but subject to the applicable provisions of clause (i)(B) of subparagraph 8.1(a) in the event that the Employer maintains another defined contribution plan other than an employee stock ownership plan (as defined in Section 4975(e)(7) of the Code), the Trustee shall forthwith distribute or pay the respective separate accounts in the Fund to the Participants who are not Transferor Plan Participants or their Beneficiaries entitled thereto, in cash or in assets valued as hereinbefore provided, in a Lump Sum Payment and to Transferor Plan Participants and their Beneficiaries entitled thereto either in the form of a Lump Sum Payment, in cash or in assets valued as hereinbefore provided, or in the form of an annuity contract or policy upon the happening of any of the following events which occur on or after or result in the termination of the Plan: (i) Delivery to the Trustee of a notice executed on behalf of the Plan Sponsor by authority of the Board directing that such distribution or payment be made. (ii) Adjudication of the Plan Sponsor as a bankrupt or general assignment by the Plan Sponsor to or for the benefit of creditors or dissolution of the Plan Sponsor, unless, within sixty (60) days after such event, either a successor or other employer shall assume the terms and conditions hereof in writing, or the Trustee (or a successor Trustee appointed within such sixty (60) day period) shall agree to continue to hold and administer the Fund as provided herein and additionally, unless otherwise agreed with or directed by the Plan Sponsor, to assume all the powers and duties imposed upon the Named Fiduciaries under the Plan. In assuming such powers and duties, the Trustee (or any successor Trustee) shall be vested with all authority granted by the Plan without any limitation imposed upon such authority by the Plan except the requirement that its actions shall be governed by the other provisions of the Plan and by the Act and the Code. If the Trustee (or any successor Trustee) shall so agree to continue the trust, all expenses of the Plan and the Fund and reasonable compensation to the Trustee (or any successor Trustee) and any successor shall be paid from the Fund. In the event of the death, resignation or removal of the Trustee (or any successor Trustee) who shall have so agreed to continue the trust, a court of competent jurisdiction over the Fund shall appoint a successor or the respective account balances in the Fund shall forthwith be distributed as hereinabove provided at the direction of such court. 14.9 Effect of Employer Merger, Consolidation or Liquidation. ------------------------------------------------------- Notwithstanding the foregoing provisions of the ARTICLE XIV, the merger or liquidation of any Employer into any other Employer or the consolidation of two (2) or more of the Employers shall not cause the Plan to terminate with respect to the merging, liquidating or consolidating Employers, provided that the Plan has been adopted or is continued by and has not terminated with respect to the surviving or continuing Employer. ARTICLE XV Matters Relating to Company Stock --------------------------------- -63- 15.1 Voting Directions. ----------------- 15.1(a) Voting rights with respect to Company Stock (and any other securities of the Employer) held in any Fund division and allocated to Participants' accounts as of the applicable record date shall be passed through to Participants (or if deceased, to their Beneficiaries). When so required to be passed through, such rights which are not so exercised shall not be exercised by the Trustee. 15.1(b) In addition to the required pass-through of voting rights under subparagraph 15.1(a), when and then to the extent and in the manner directed by the Board: (i) Any voting rights with respect to Company Stock (or other securities of the Employer) which are not required to be passed through may be passed through to Participants (or if deceased, to their Beneficiaries), (ii) Any decision by a holder of Company Stock (or such other securities) to accept or reject a tender offer for Company Stock (or such other securities) may be treated as voting rights with respect to Company Stock (or such other securities) and passed through to Participants (or if deceased, to their Beneficiaries), and/or (iii) Voting rights with respect to unallocated Company Stock (and such other securities) may be passed through to Participants (or if deceased, to their Beneficiaries). For purposes hereof, a "tender offer" is intended to include any acquisition proposal which does not require voting rights with respect to Company Stock (or such other securities) to be exercised. 15.1(c) Whenever voting rights of Company Stock (or any other securities of the Employer) are passed through to Participants under subparagraph 15.1(a) or (b), each Participant (or if deceased, his Beneficiary) shall have the right to direct the manner in which such Company Stock (or other securities) is to be voted pursuant to clause (i) hereof or to actually or by attorney vote such Company Stock (or other securities) pursuant to clause (ii) hereof as determined by the Administrator. Within a reasonable time before such voting rights are to be exercised, the Administrator shall notify each Participant (or if deceased, his Beneficiary) of the occasion for the exercise of such rights and shall cause to be sent to each such Participant (or if deceased, his Beneficiary entitled to benefits hereunder) all information that the Employer or tender offeror, as the case may be, distributes to shareholders (or security holders) regarding the exercise of such rights. (i) Unless otherwise determined pursuant to clause (ii) of this subparagraph, any direction made pursuant to this paragraph shall be made in writing on a form provided by the Administrator, executed by the Participant (or if deceased, his Beneficiary), and delivered to the Administrator by 5:00 p.m. of the second day preceding (or such other period as the Administrator may establish) the date such voting rights are to be exercised. The Administrator shall then forthwith deliver such direction to the Trustee. To the extent permitted by law, the Trustee shall exercise such rights as directed and, except in the case of voting rights or a tender offer described in subparagraph 15.1(b) unless also directed by the Administrator, shall not exercise such rights which are not so directed. (ii) Notwithstanding the foregoing, the Administrator may alternatively direct the Trustee to execute and give each Participant (or if deceased, his Beneficiary) a power of attorney with respect to such Company Stock (or other securities), and the Participant (or if deceased, his Beneficiary) may then vote such Company Stock (or other securities) directly or through his attorney. If the Administrator determines to pass through voting rights pursuant to this clause (ii), such Company Stock (or other securities) which is not voted by Participants (or if deceased, their Beneficiaries) shall not be voted. -64- 15.1(d) To the extent that the voting rights of Company Stock (or other securities of the Employer) or the decision to accept or reject a tender offer for Company Stock (or other securities of the Employer) held in the Fund are not passed through to Participants and are not prohibited from being voted under subparagraph 15.1(a), either: (i) The Administrator shall direct the Trustee in writing as to the manner, if any, in which such voting rights shall be exercised and as to the acceptance or rejection of such tender offer in whole or in part, provided such direction is delivered to the Trustee prior to the time such voting rights are to be exercised or such tender offer is to be accepted or rejected, and the Trustee shall exercise such rights as directed, or (ii) The Administrator's duly authorized representative may exercise such rights in person or by proxy, or (iii) The Administrator shall inform the Trustee that neither the Administrator nor its authorized representative will exercise its rights hereunder and that the Trustee should exercise such rights in its discretion. Such direction may include, but shall not be limited to, an instruction to vote such Company Stock (or such other securities) or to accept or reject such tender offer based on the manner in which such rights with respect to a majority (or some other specified percentage or fraction) of shares of Company Stock (or shares or interests in such other securities) with respect to which such voting or tender acceptance or rejection rights are passed through to Participants are exercised. 15.1(e) If the Trustee or Administrator is prevented by law from, or does or may have a conflict of interest in, exercising any voting rights of Company Stock (or other securities of the Employer) in accordance with the applicable provisions of the Plan or making directions or other determinations pursuant to this paragraph, or if the Plan Sponsor deems it appropriate for any reason, the Plan Sponsor shall appoint a Co-Trustee (sometimes referred to as the "Voting Co-Trustee") in lieu of the Trustee or Administrator for the purpose of exercising such voting rights in accordance herewith or making directions or other determinations pursuant to this paragraph and such appointment shall be terminable at will by the Plan Sponsor. 15.2 Acquisitions and Dispositions of Company Stock. ---------------------------------------------- 15.2(a) Purchases of Company Stock for the Company Stock Fund may be made on the open market or from the Plan Sponsor (if the Plan Sponsor consents) as determined by the Trustee from time to time or as directed by the Plan Sponsor. 15.2(b) The Named Fiduciaries under the Plan are hereby specifically authorized, pursuant to and in accordance with Section 408(e) of the Act to acquire from or sell to any "party in interest" as defined in Section 3(14) of the Act any stock or securities of the Employer which constitutes "qualifying employer securities" as defined in Section 407(d)(5) of the Act if such acquisition or sale is for adequate consideration (or in the case of the acquisition by the Plan, at a price not less favorable to the Plan than the fair market value of such securities at the time of acquisition) and if no commission is charged the Plan with respect thereto. The Board and the Plan Sponsor are each authorized to determine on behalf of the Plan and the Fund what is adequate consideration. Unless otherwise determined, the closing sale price per share of Company Stock as reported in The Wall Street Journal or other authoritative ----------------------- sources for the day on which a purchase or sale is to take place shall be adequate consideration with respect to Company Stock if Company Stock is considered readily tradable on an established market. If such price is not supplied by The Wall Street Journal or other authoritative sources, then the ----------------------- price per share will be determined pursuant to the valuation method or procedure determined by the Board or the Plan Sponsor in good faith. 15.3 Sales Prohibited if Registration or Qualification Required. In no ---------------------------------------------------------- event shall any acquisition or sale of Company Stock pursuant to the Plan be consummated if in the opinion of counsel for the Plan Sponsor such acquisition or sale could result in the loss by the Employer or the Plan of its exemption from applicable registration and/or qualification requirements of federal or state securities laws. The foregoing sentence shall, however, be inapplicable if and to the extent such acquisition or sale is required to preserve the qualification of the Plan under Section 401 or, to the extent applicable, 409 -65- of the Code or to the extent such acquisition or sale is directed in writing by the Administrator. In the event an acquisition or disposition of Company Stock is made as provided in this paragraph under circumstances which require the registration and/or qualification of the Company Stock under applicable federal or state securities laws, then the Plan Sponsor, at the expense of the Employer, shall take or cause to be taken any and all actions as may be necessary or appropriate to effect such registration or qualification. 15.4 Limitation on Insiders' Interests in Company Stock. -------------------------------------------------- Notwithstanding anything in the Plan to the contrary, but subject to any applicable qualification requirements under Section 401 and, to the extent applicable, 409 of the Code, the Board shall have authority to adopt and implement administrative rules and regulations relating to the investment of the assets held in the accounts of Participants who are insiders (within the meaning of Section 16 of the Securities Exchange Act of 1934 (the "1934 Act") and the rules thereunder), including, without limitation, such rules and regulations as may the Administrator or Plan Sponsor deems necessary or appropriate in order for insiders' participation in the Plan to satisfy the conditions of Rule 16b-3, as amended (or any successor or similar rule), under the 1934 Act. 15.5 No Guarantee of Values. Neither the Employer nor the Named ---------------------- Fiduciaries guarantee that the fair market value of the Company Stock when it is distributed will be equal to its purchase price or that the total amount distributable under the Plan will be equal to or greater than the amount of contributions and direct transfers allocated to any Participant. Each Participant assumes all risk of any decrease in the market value of the Company Stock and other assets allocated to his accounts in accordance with the provisions of the Plan. 15.6 Legend Regarding Securities Laws Restriction on Sale or Transfer. ---------------------------------------------------------------- Each certificate for shares of Company Stock distributed from the Plan which is subject to a restriction on sale or transfer by reason of any applicable federal or state securities laws shall bear an appropriate legend giving notice of such restrictions. 15.7 Confidentiality of Participant Directions regarding and Holdings of ------------------------------------------------------------------- Company Stock. - ------------- 15.7(a) The Administrator shall maintain confidentially with respect to Participant directions to invest or cease investment in the Company Stock Fund, Participants' interests in the Company Stock Fund and Participant directions regarding the exercise of voting, tender and similar rights for Company Stock as is intended under Section 404(c) of the Act. The Administrator's procedures for confidentiality shall include the collection of investment direction information by the Administrator (or its delegate) and the collection of voting instructions by the Plan Administrator (or its delegate), followed by delivery of voting instructions to the Trustee. Information regarding investment directions and voting instructions shall be retained by the Administrator, as required by the Act and other applicable laws, but will not be disclosed to management of the Plan Sponsor or any other Employer or Affiliate except to the extent required by securities or other applicable laws which are not pre-empted by the Act. 15.7(b) The Plan fiduciary responsible for monitoring compliance with the confidentiality procedures of this paragraph is the Director of Human Resources of the Plan Sponsor. 15.7(c) The Plan fiduciary responsible for monitoring compliance with the confidentiality procedures of this paragraph shall appoint an independent fiduciary for the Plan to carry out certain activities with respect to Company Stock for any matters (such as tender offers, exchange offers and contested Board elections) for which he believes appropriate in order to ensure confidentially. ARTICLE XVI Miscellaneous ------------- 16.1 Headings. The headings in the Plan have been inserted for -------- convenience of reference only and are to be ignored in any construction of the provisions hereof. -66- 16.2 Gender and Number. In the construction of the Plan, the masculine ----------------- shall include the feminine or neuter and the singular shall include the plural and vice-versa in all cases where such meanings would be appropriate. 16.3 Governing Law. The Plan and the Fund created hereunder shall be ------------- construed, enforced and administered in accordance with the laws of the Commonwealth of Virginia, and any federal law pre-empting the same. Unless federal law specifically addresses the issue, federal law shall not pre-empt applicable state law preventing an individual or person claiming through him from acquiring property or receiving benefits as a result of the death of a decedent where such individual caused the death. 16.4 Employment Rights. Participation in the Plan shall not give any ----------------- employee the right to be retained in the Employer's employ nor, upon dismissal or upon his voluntary termination of employment, to have any right or interest in the Fund other than as herein provided. 16.5 Conclusiveness of Employer Records. The records of the Employer ---------------------------------- with respect to age, service, employment history, compensation, absences, illnesses and all other relevant matters shall be conclusive for purposes of the administration of the Plan. 16.6 Right to Require Information and Reliance Thereon. The Employer, ------------------------------------------------- Administrator and Trustee shall have the right to require any Participant, Beneficiary or other person receiving benefit payments to provide it with such information, in writing, and in such form as it may deem necessary to the administration of the Plan and may rely thereon in carrying out its duties hereunder. Any payment to or on behalf of a Participant or Beneficiary in accordance with the provisions of the Plan in good faith reliance upon any such written information provided by a Participant or any other person to whom such payment is made shall be in full satisfaction of all claims by such Participant and his Beneficiary; and any payment to or on behalf of a Beneficiary in accordance with the provisions of the Plan in good faith reliance upon any such written information provided by such Beneficiary or any other person to whom such payment is made shall be in full satisfaction of all claims by such Beneficiary. 16.7 Alienation and Assignment. ------------------------- 16.7(a) Except as otherwise permitted by the Act and the Code and as expressly permitted by the Plan or the Administrator, no benefit hereunder shall be subject in any manner to alienation, sale, anticipation, transfer, assignment, pledge, encumbrance, garnishment, attachment, execution or levy of any kind. 16.7(b) As provided in the Act and the Code, this prohibition shall not apply to any QDRO entered on or after January 1, 1985, and the Administrator shall have all rights granted thereunder in determining the existence of such an order, in establishing and following procedures therefor and in complying with any such order. The Administrator shall treat any domestic relations order entered before January 1, 1985 as a QDRO entered on January 1, 1985 if the Plan is paying benefits pursuant to such order on January 1, 1985 or if the Administrator in its discretion deems such treatment warranted. On a uniform and non-discriminatory basis, the Administrator may determine that any special charge, fee or expense in reviewing the status of a domestic relations order and in otherwise administering the Plan in connection therewith be charged directly to the account of the Participant with respect to whom the order is issued. 16.7(c) As provided in the Act and the Code, this prohibition shall not apply to any Participant loan which meets the requirements of subparagraph 9.8(a). 16.8 Notices and Elections. --------------------- 16.8(a) Except as provided in subparagraph 16.8(b), all notices required to be given in writing and all elections, consents, applications and the like required to be made in writing, under any provision of the Plan, shall be invalid unless made -67- on such forms as may be provided or approved by the Administrator and, in the case of a notice, election, consent or application by a Participant or Beneficiary, unless executed by the Participant or Beneficiary giving such notice or making such election, consent or application. 16.8(b) Subject to limitations under applicable provisions of the Code or the Act (such as the requirement that spousal consent be in writing), the Administrator is authorized in its discretion to accept other means for receipt of effective notices, elections, consent and/or application by Participants and/or Beneficiaries, including but not limited to interactive voice systems, on such basis and for such purposes as it determines from time to time. 16.9 Delegation of Authority. Whenever the Plan Sponsor or any ----------------------- Employer is permitted or required to perform any act, such act may be performed by its Chief Executive Officer, its President, its Vice President and Treasurer, or its Board of Directors or by any person duly authorized by any of the foregoing. 16.10 Service of Process. The Administrator, as well as the Trustee, ------------------ shall be the agent for service of process on the Plan. 16.11 Construction. This Plan is created for the exclusive benefit of ------------ Employees of the Employer and their Beneficiaries and shall be interpreted and administered in a non-discriminatory manner consistent with its being an employees' profit sharing plan and trust and a defined contribution plan as defined in Sections 401(a) and 414(i), of the Code, respectively, with a cash or deferred arrangement described in 401(k) of the Code. ARTICLE XVII Adoption of the Plan -------------------- 17.1 Restated Adoption and Failure to Obtain Qualification. If the ----------------------------------------------------- Internal Revenue Service determines that this Restatement of the Plan does not qualify initially under Section 401 of the Code, the Plan as restated herein shall have no force and effect, unless the same shall be further amended in order to so qualify. 17.2 Adoption by Additional Employers. Any employer which is an -------------------------------- Affiliate and which, with the consent of the Board, desires to adopt the Plan, may do so by executing the Plan or an adoption agreement in a form authorized and approved by such employer's Board of Directors and the Board. In the event that such Affiliate has established and has been maintaining a profit sharing or money purchase pension plan for the benefit of its employees which qualifies under Section 401 or 404(a)(2) of the Code, an adoption or other agreement may provide, subject to the requirements of paragraph 14.2, that such plan is amended and restated by the provisions of this Plan (such prior plan being deemed a predecessor plan to this Plan) or that such plan is to be merged or consolidated with this Plan; and, in such event, the assets of such plan shall be paid over to the Trustee to be administered as a part of the Fund pursuant to the provisions of this Plan. -68- IN WITNESS WHEREOF, the Plan Sponsor, for itself and for each Employer, pursuant to the resolution duly adopted by its Board of Directors, has caused its name to be signed to this Plan and Trust Agreement by its duly authorized officer with its corporate seal hereunto affixed and attested by its Secretary or Assistant Secretary, and each Trustee and the Custodian have caused their names to be signed to this Plan and Trust Agreement, as of the ______ day of April, 1997. ESKIMO PIE CORPORATION, Plan Sponsor and participating Employer By:________________________________(SEAL) Its_______________________________ Attest: ___________________________________ Its_______________________________ FIRST UNION NATIONAL BANK OF NORTH CAROLINA, Separate Trustee for all Fund divisions other than the Company Stock Fund and Custodian for the Company Stock Fund By:________________________________(SEAL) Its_______________________________ Attest: ___________________________________ Its_______________________________ ___________________________________(SEAL) THOMAS M. MISHOE, JR., Separate Trustee for the Company Stock Fund -69- ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST Appendix A Determination of Hours of Service --------------------------------- A-1.1 Introduction. Hours of Service shall be credited to Employees for ------------ purposes of the Plan as provided in this Appendix. A-1.2 Paid Hours for the Performance of Duties. An Employee shall be ---------------------------------------- credited with one Hour of Service for each hour for which he is paid by the Employer, or entitled to payment, for the performance of duties for the Employer, including each hour for which credit has not theretofore been given and for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to by the Employer. Such Hours of Service shall be credited to the individual for the period in which the duties are actually performed. A-1.3 Paid Hours Where No Performance of Duties Required. An Employee -------------------------------------------------- shall also be credited with up to and including five hundred and one (501) Hours of Service for any single continuous period during which no duties are performed due to vacation, holiday, sickness, incapacity, disability, layoff, jury duty, military duty or leave of absence and on account of which he is directly or indirectly paid, or entitled to payment, by the Employer (other than under a plan maintained solely for the purpose of complying with applicable workmen's compensation or unemployment compensation or disability insurance laws or other than solely as reimbursement for medical or medically related expenses incurred by the individual), including hours for any such period for which credit has not theretofore been given and for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to by the Employer, all determined as provided below. Such Hours of Service shall be credited in accordance with the following rules. (i) The number of Hours of Service to be credited for a payment calculated on the basis of units of time (such as hours, days, weeks or months) shall be the number of regularly scheduled working hours included in the unit of time on the basis of which the payment is calculated; provided, however, that if an Employee has no regular working schedule, the number of Hours of Service to be credited to the Employee shall be calculated, as determined by the Administrator, on the basis of a forty (40) hour workweek, an eight (8) hour workday, or on any reasonable basis which reflects the average hours worked by the Employee, or by other Employees in the same job classification, over a representative period of time, provided that the basis so used is consistently applied. Such Hours of Service shall be credited to the year or years in which the period during which no duties are performed occurred. (ii) The number of Hours of Service to be credited for a payment which is not calculated on the basis of units of time shall be the number determined by dividing the amount of the payment by the Employee's most recent "hourly rate of compensation" before the period for which the payment is made. An Employee's "hourly rate of compensation" is: (A) In the case of an Employee whose compensation is determined on the basis of an hourly rate, his hourly rate of compensation; (B) In the case of an Employee whose compensation is determined on the basis of a fixed rate for specified periods of time (other than hours), his rate of compensation for the specified period of time divided by the number of hours regularly scheduled during such specified period of time; provided, however, that the Employee has no regular work schedule, the "hourly rate of compensation" of the Employee shall be calculated, as determined by the Administrator, on the basis of a forty (40) hour workweek, an eight (8) hour workday, or on any reasonable basis which reflects the average hours worked by the Employee, or by other Employees in the same job classification, over a representative period of time, provided that the basis so used is consistently applied; or -A-1- (C) In the case of all other Employees, the lowest hourly rate of compensation paid to Employees in the same job classification or, if none have an hourly rate, the minimum wage as established from time to time under Section 6(a)(1) of the Fair Labor Standards Act of 1938, as amended. Such Hours of Service shall be credited to the year in which the period during which no duties are performed occurs, or, if more than one year is involved, such Hours of Service shall be allocated between the first two such years on any reasonable and consistently applied basis determined by the Administrator. (iii) Notwithstanding the provisions of clauses (i) and (ii) of this paragraph, such Hours of Service shall not be credited in a number greater than the number of hours regularly scheduled for performance of duties during the period for which the payment is made; provided, however, that if the Employee has no regular work schedule, the number of regularly scheduled hours for the Employee for purposes of the provisions of this clause (iii) shall be deemed to be, as determined by the Administrator, forty (40) hours per workweek, eight (8) hours per workday, or such number as reflects the average hours worked by the Employee, or by other Employees in the same job classification, over a representative period of time, provided such number used is consistently applied. A-1.4 Periods Overlapping A Year. Notwithstanding the year to which Hours -------------------------- of Service are required to be credited under the foregoing, in the case of Hours of Service to be credited in connection with a period of no more than thirty-one (31) days which overlaps two years, all such Hours of Service may be credited to the first or second such year, if done consistently and as directed by the Administrator. A-1.5 Absences Due to Pregnancy, Childbirth, Adoption and Related Child ----------------------------------------------------------------- Care. Solely for purposes of determining whether an Employee is credited with a - ---- Year of Broken Service for purposes of determining his eligibility to participate in the Plan or his vested interest in his Accrued Benefit, if the Employee is absent from work with the Employer for any period beginning on or after the first day of the first Plan Year commencing after December 31, 1984: (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 after such birth or placement, then the Employee shall be credited with that number of Hours of Service which would normally have been credited to the Employee during such absence but for such absence or, if the Employee's otherwise credited Hours of Service cannot be readily determined, with eight (8) Hours of Service per day of such absence, except that the total number of Hours of Service so credited shall not exceed that number needed to avoid incurring a Year of Broken Service. Such Hours of Service shall be credited either for the applicable year in which the absence from work begins, if the Employee would be prevented from receiving a Year of Broken Service for such year solely because such periods of absence are treated as Hours of Service as provided in this subparagraph, or in the immediately following year, in any other case. Notwithstanding the foregoing, no credit for Hours of Service shall be given under this subparagraph unless the Employee furnishes to the Administrator such timely information as the Administrator may reasonably require to establish that the absence from work is for one of the foregoing reasons or purpose and the number of days for which there was such an absence. A-1.6 Absences for Leave under the Family and Medical Leave Act. Solely --------------------------------------------------------- for purposes of determining whether an Employee is credited with a Year of Broken Service (but only when Years of Broken Service are determined on the -A-2- basis of Hours of Service) for purposes of determining his eligibility to participate in the Plan or his vested interest in his Accrued Benefit, if the Employee is absent from work with the Employer for any period after August 4, 1993 for family or medical leave required to be granted under the Family and Medical Leave Act, then the Employee shall be credited with that number of Hours of Service which would normally have been credited to the Employee during such absence but for such absence or, if the Employee's otherwise credited Hours of Service cannot be readily determined, with eight (8) Hours of Service per day of such absence, except that the total number of Hours of Service so credited shall not exceed that number needed to avoid incurring a Year of Broken Service. Such Hours of Service shall be credited for the applicable year(s) in which the absence from work occurs. Notwithstanding the foregoing, no credit for Hours of Service shall be given under this subparagraph unless the Employee complies with the leave procedures required under the Employer's leave policies and the Family and Medical Leave Act. A-1.7 Qualified Military Service. Effective December 12, 1994, service -------------------------- shall be granted for periods of Qualified Military Service as provided in paragraph 4.10 of the Plan. Unless otherwise required under Section 414(u) of the Code or USERRA, the affected Employee shall be credited with that number of Hours of Service which would normally have been credited to the Employee during such absence but for such absence or, if the Employee's otherwise credited Hours of Service cannot be readily determined, with eight (8) Hours of Service per day of such absence. Such Hours of Service shall be credited for the applicable year(s) in which the Qualified Military Service occurs. Notwithstanding the foregoing, no credit for Hours of Service shall be given under this subparagraph unless the Employee complies with the any notice and restoration right procedures required, or permitted to be required and adopted by the Employer, under Section 414(u) of the Code or USERRA. A-1.8 No Duplication of Hours Credited or Conflict with Federal Law. ------------------------------------------------------------- Nothing contained in this Appendix shall be construed to require or permit any duplication in the crediting of Hours of Service or to alter, amend, modify, invalidate, impair or supersede any law of the United States or any valid rule or regulation issued under any such law so as to deny an Employee credit for an Hour of Service where such credit is required by federal law other than the Act, including but not limited to credit required to be given for periods of time in which no duties are performed due to military duty or service in the United States Armed Forces, provided that the Employee enters such service directly from the employ of the Employer and returns to active employment with the Employer within the period prescribed by applicable law. Hours of Service before any year commencing after September 2, 1974 may be determined or reasonably estimated with such records as are available to the Employer. -A-3- ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST Appendix B Determination of Top Heavy Plan Status -------------------------------------- B-1.1 Introduction. The Plan will be a Top Heavy Plan for any Plan Year ------------ beginning after December 31, 1983 if the sum of the present values of the cumulative accrued benefits of Key Employees under the Plan, and the present values of the cumulative accrued benefits of Key Employees under all plans aggregated with it, exceeds sixty percent (60%) of the aggregate of the present value of the cumulative Accrued Benefits under the Plan and accrued benefits under such plan(s) at the applicable determination date. For purposes hereof, aggregation, accrued benefits (including Accrued Benefits) taken into account, the determination date and all other standards and criteria for determining top- heaviness under this Plan and such other plan(s) shall be determined under Section 416 of the Code. Subject to the foregoing, the determination of Top Heavy Plan status shall be made each Plan Year in accordance with the rules and definitions contained in this Appendix. B-1.2 Determination Date. The determination date with respect to a plan ------------------ means the last day of its preceding plan year or, in the case of the first plan year of a plan, the last day of such first plan year. B-1.3 Value of Accrued Benefits. ------------------------- B-1.3(a) The value of an accrued benefit at a determination date is the value thereof at the most recent valuation date occurring within the twelve (12) month period ending on the determination date, plus, in the case of a defined contribution plan, an appropriate adjustment for contributions made or due thereafter and on or before the determination date. B-1.3(b) If the plan is a defined benefit plan, the present value of accrued benefits thereunder shall be determined on the basis of the actuarial assumptions stated in such plan for such purpose or, if none are stated, on the basis of the applicable actuarial equivalent benefit payment factors of such plan, in any case taking into account post-retirement mortality, interest, non- proportional subsidies (the benefits of which are assumed to commence at the age when the benefit is most valuable), pre-retirement mortality and future increases in cost of living, but not taking into account proportional subsidies, future withdrawals or salary increases, future increases in the maximum dollar limitation of Section 415 of the Code, and benefits not relating to retirement. B-1.3(c) If the plan is a defined contribution plan, the value of an accrued benefit shall be determined as follows: (i) An individual's account balance in a plan not subject to Section 412 of the Code is the sum of his actual account balance on the applicable valuation date and all contributions actually made after the applicable valuation date but on or before the determination date; provided, however, for such a plan's first plan year, the amount determined in the preceding sentence shall be added to the amount of any contributions made after the determination date that are allocated as of a date in that first plan year. (ii) An individual's account balance in a defined contribution plan that is subject to Section 412 of the Code is the sum of his account balance on the applicable valuation date, all contributions due as of the determination date (that is, contributions that would be allocated as of a date not later than the determination date, even though those amount are not yet required to be contributed), and, for the plan year that contains the determination date, all amounts actually contributed (or due to be contributed) after the extended payment period in Section 412(c)(10) of the Code. B-1.3(d) The accrued benefit of a Non-Key Employee shall be determined (i) under the method which is uniformly used for accrual purposes for all plans of the Employer or (ii) if there is no method described in clause (i), as if such benefit accrued not more rapidly than the slowest applicable accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code. -B-1- B-1.4 Accrued Benefits Excluded from Determination. In determining the -------------------------------------------- value of accrued benefits, there shall be excluded: (i) Any rollover contribution or plan-to-plan transfer initiated by the participant and made after December 31, 1983 so long as the rollover contribution or transfer was not derived from a plan maintained by the Employer, (ii) Any accumulated deductible employee contributions, (iii) The accrued benefit of any individual who was a Key Employee for a prior plan year but who is no longer a Key Employee, and (iv) For plan years beginning after December 31, 1984, the accrued benefit of any individual who has not performed service for any Employer maintaining the plan at any time during the five (5) plan year period ending on the determination date. B-1.5 Distributions and Transfers Taken into Account in Determination. --------------------------------------------------------------- In determining the value of accrued benefits, there shall be included any distributions made under the plan at any time during the five (5) plan year period ending on the determination date: (i) Including distributions from any terminated plan which if it had not been terminated would have been required to be aggregated with this Plan under clause (i) or (ii) of subparagraph 1.6(b) of this Appendix, but (ii) Excluding: (A) Distributions made on account of death, to the extent the benefits do not exceed the present value of accrued benefits existing immediately prior to death (in the case of a defined contribution plan, a distribution made on account of death is the participant's accrued account balance (including the cash value of life insurance policies)), and (B) Distributions and plan-to-plan transfers which are rolled over into a plan maintained by the Employer or initiated by the participant. B-1.6 Aggregation of Plans. -------------------- B-1.6(a) When aggregating plans, the value of accrued benefits shall be calculated with reference to the determination dates of such aggregated plans that fall within the same calendar year. When aggregating defined benefit plans the same actuarial assumptions shall be used with respect to all such plans and, if the stated assumptions of such plans are not the same, the plan sponsor(s) of such plans shall select and agree on one plan's assumptions. B-1.6(b) The plans to be aggregated with this Plan for purposes hereof for a plan year are: (i) Each other plan (whether or not terminated) intended to meet the applicable requirements of Section 401(a)(10)(B) of the Code and maintained by the Employer and each simplified employee pension plan (whether or not terminated) maintained by the Employer in which a Key Employee participates for the plan year containing the determination date with respect to such plan year or for any of the preceding four (4) plan years, (ii) Each other qualified or simplified employee pension plan (whether or not terminated) maintained by the Employer which, during the applicable five (5) plan year period described in clause (i) of this subparagraph, enables -B-2- any such plan described in clause (i) of this subparagraph to meet the requirements of Section 401(a)(4) or 410 of the Code, and (iii) Solely in the discretion of the Plan Sponsor, any additional qualified or simplified employee pension plan(s) (whether or not terminated) maintained by the Employer if the plans described in clauses (i) and (ii) of this subparagraph would continue to meet the requirements of Sections 401(a)(4) and 410 of the Code with such plan(s) being included in the aggregation group. -B-3- ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST Appendix C List of Participating Employers (As of January 1, 1997) -----------------------
Type and Effective Date Effective Date Place of of Commencement of Termination Name of Employer Organization of Participation of Participation - ---------------- ------------ ---------------- ---------------- Eskimo Pie Corporation Virginia corporation April 6, 1992 ---- Eskimo, Inc. Virginia corporation February 1, 1997 ---- Sugar Creek Foods, Inc. Virginia corporation February 1, 1997 ----
-C-1- ESKIMO PIE CORPORATION SAVINGS PLAN AND TRUST Appendix D Rules Pertaining to Limitations on After-Tax, Pre-Tax and Matching Contributions - -------------------------------------------------------------------------------- D-1.1 Limitation on Pre-Tax Contributions. ----------------------------------- D-1.1(a) The aggregate amount of a Participant's Pre-Tax Contributions made to the Plan for a Plan Year shall not exceed the applicable limits thereon specified in this paragraph and elsewhere in the Plan. D-1.1(b) Notwithstanding anything in the Plan to the contrary, the aggregate Pre-Tax Contributions and other Elective Deferrals made by a Participant for any calendar year may not exceed the Elective Deferral Dollar Limitation. (i) In no event shall the aggregate Elective Deferrals made by any Employee for any calendar year to this Plan and any other plan maintained by the Employer exceed the Elective Deferral Dollar Limitation, and the Administrator shall, whenever necessary to comply with this limitation, cause such Employee's Elective Deferrals to this Plan to cease being made for such calendar year and take such other action as it may deem appropriate in connection therewith. (ii) For purposes hereof: (A) The term "Elective Deferral Dollar Limitation" means $7,000, as adjusted by the Adjustment Factor and as otherwise adjusted pursuant to Section 402(g) of the Code. (B) The term "Elective Deferrals" means a Participant's Pre- Tax Contributions to the Plan and his other elective or salary reduction contributions to a cash or deferred arrangement, tax sheltered annuity or simplified employee pension plan or "Section 501(c)(18)" trust to the extent not includable in or to the extent deductible from the Participant's gross income for his taxable year of contribution on account of or as described in Section 401(k), 403(b), 408(k) or 501(c)(18) of the Code and required to be taken into account and aggregated for purposes of applying the limitations of Section 402(g) of the Code to the Plan. (C) The term "Excess Elective Deferrals" means a Participant's Elective Deferrals for a calendar year in excess of the Elective Deferral Dollar Limitation for such calendar year. (iii) The following procedure applies to the notice of the existence of Excess Elective Deferrals and to the distribution of Excess Elective Deferrals during the calendar year for which made: (A) By written notice filed with the Administrator the Participant may notify the Administrator of the existence of Excess Elective Deferrals with respect to the Participant and may allocate the amount of his Excess Elective Deferrals for such calendar year among the plans to which contributed and notify the Administrator of the portion, if any, allocated to the Plan. In addition, the Employer may notify the Administrator of Excess Elective Deferrals made to the Plan and other plans maintained by the Employer. (B) The Administrator, in its discretion, may then distribute the designated Excess Elective Deferrals (without income thereon unless otherwise determined by the Administrator on a uniform and non-discriminatory basis) in a "corrective distribution" during the calendar year for which made so long as the distribution is made after the Plan has received the Excess Elective Deferrals or, if permitted under Section 402(g) of the Code, may direct that the Excess Elective Deferrals be retained in the Plan permanently or for later distribution pursuant to the Plan. -D-1- (iv) The following procedure applies to the notice of the existence of Excess Elective Deferrals and to the distribution of Excess Elective Deferrals after the calendar year for which made: (A) Not later than the January 31 following each calendar year the Administrator shall inform each Participant of his aggregate Pre- Tax Contributions for such calendar year. (B) Not later than the March 1 following each calendar year, by written notice filed with the Administrator the Participant may notify the Administrator of the existence of Excess Elective Deferrals with respect to the Participant and may allocate the amount of his Excess Elective Deferrals for such calendar year among the plans to which contributed and notify the Administrator of the portion, if any, allocated to the Plan. In addition, the Employer may notify the Administrator of Excess Elective Deferrals made to the Plan and other plans maintained by the Employer. (C) The Administrator may then, in its discretion, direct that any Excess Elective Deferrals allocated to the Plan be distributed to the Participant (together with income thereon as determined pursuant to Section 402(g) of the Code) in a "corrective distribution" or, if permitted under Section 402(g) of the Code, be retained in the Plan. (v) For purposes hereof and except to the extent otherwise provided under Section 401(k) or 402(g) of the Code: (A) The amount of any Excess Elective Deferrals that may be distributed with respect to any Participant for a calendar year shall be reduced by any Excess Deferral Contributions (as defined in paragraph 1.2 of this Appendix) previously distributed or recharacterized with respect to the Participant for the Plan Year beginning with or within the calendar year. (B) Excess Elective Deferrals allocated to the Plan shall be considered first to be Pre-Tax Optional Contributions for such Plan Year and then to be the remainder of the Participant's Pre-Tax Basic Contributions. (vi) For purposes hereof and except to the extent otherwise provided under Section 401(k) or 402(g) of the Code, the income allocated to any Excess Elective Deferrals allocated to the Plan shall be determined by the Administrator under the following rules and calculated under any reasonable method selected by the Administrator so long as the method does not violate the requirements of Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for a calendar year, and is used by the Plan for allocating income to Participants' accounts under the Plan: (A) Unless another method is determined by the Administrator, where the corrective distribution is made after the end of the calendar year for which the Excess Elective Deferrals were made, the amount of income to be distributed shall be determined by multiplying (I) the income for the calendar year or other period in question allocable to the account to which such Excess Elective Deferrals are allocated by (II) a fraction, the numerator of which is the amount of the Participant's Excess Elective Deferrals allocated to such account for the calendar year or other period in question and entitled to a share of the valuation adjustment therefor under paragraph 4.6 of the Plan and the denominator of which is the balance in such account on the last day of the calendar year or other period in question, reduced by the earnings allocable thereto and increased by the losses allocable thereto in the calendar year or other period in question. -D-2- (B) Where the corrective distribution is made after the end of the calendar year for which the Excess Elective Deferrals were made, unless otherwise determined by the Administrator on a uniform and non- discriminatory basis, no income shall be distributed for the period between the end of the calendar year and the date of distribution. (C) Where the corrective distribution is made during the calendar year for which the Excess Elective Deferrals were made, unless otherwise determined by the Administrator on a uniform and non- discriminatory basis, no income shall be distributed. (vii) For purposes of the Code, including Sections 401(a)(4), 401(k)(3), 404, 409, 411, 412 and 416 thereof, Excess Elective Deferrals are treated as Employer contributions even if they are distributed. However, Excess Elective Deferrals which are timely distributed to a Participant are not treated as Annual Additions for purposes of Section 415 of the Code and paragraphs 4.3 and 4.4 of the Plan. In addition, Excess Elective Deferrals of Non-Highly Compensated Employees are not taken into account in determining Deferral Percentages under paragraph 1.2 of this Appendix to the extent they exceed the Elective Deferral Dollar Limitation based only on Elective Deferrals made to this Plan and other plans maintained by the Employer. D-1.1(c) If a Participant's Pre-Tax Contributions are returned in a corrective distribution made because of the existence of Elective Deferrals made to plans not maintained by the Employer or any Affiliate, such contributions shall nevertheless still be considered made for any benefit accrual requirements contingent thereon, and any Matching Contributions attributable thereto shall be also be distributed (to the extent vested) or forfeited (to the extent not vested). D-1.2 Limitation on and Distribution of Pre-Tax Contributions Made by --------------------------------------------------------------- Highly Compensated Employees. - ---------------------------- D-1.2(a) Except where the alternative method under Section 401(k)(12) of the Code of meeting the nondiscrimination requirements of Section 401(k) of the Code is satisfied with respect to the Plan for a Plan Year beginning on or after January 1, 1999, the Pre-Tax Contributions otherwise permitted to be made pursuant to the Plan shall be limited as hereafter provided so that the Average Deferral Percentage for Eligible Participants who are Highly Compensated Employees for a Plan Year (that is, the Tested Plan Year) does not exceed the greater of (i) or (ii) as follows : (i) The "regular limitation" percentage which is equal to one hundred twenty-five percent (125%) of the Average Deferral Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year, or (ii) The "alternative limitation" percentage which is equal to the lesser of: (A) Two hundred percent (200%) of the Average Deferral Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year, or (B) Two (2) percentage points over the Average Deferral Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year. Notwithstanding the foregoing, for Plan Years beginning on or after January 1, 1997, if the Tested Plan Year is the first Plan Year of the Plan, then the Average Deferral Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year shall be deemed to be three percent (3%) unless the Plan Sponsor or the Administrator elects in accordance with Section 401(k)(3)(E) of the Code, to use the actual Average Deferral Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the first Plan Year. D-1.2(b) For purposes hereof: -D-3- (i) The term "Applicable Plan Year" means: (A) For Plan Years beginning before January 1, 1997, the Tested Plan Year. (B) For Plan Years beginning on or after January 1, 1997, the Plan Year immediately preceding the Tested Plan Year, unless the Plan Sponsor or the Administrator elects in accordance with Section 401(k)(3)(A) of the Code, to use the Tested Plan Year. (ii) The term "Average Deferral Percentage" means the average (expressed as a percentage) of the Deferral Percentages of the Eligible Participants in a group. (iii) The term "Deferral Contributions" means: (A) Pre-Tax Contributions, and (B) To the extent provided or elected pursuant to the special operating rules of subparagraph 1.2(c) of this Appendix: (I) Qualified non-elective contributions, including without limitation QNEC Contributions, within the meaning of Section 401(m)(4)(C) of the Code (that is, any employer contributions (other than matching contributions within the meaning of Section 401(m)(4)(A) of the Code) which the Employee may not elect to have paid to him instead of being contributed to the plan, which are subject to the restrictions on distributions contained in Section 401(k)(2)(B) of the Code (generally prohibiting distribution before separation from service, death, or disability unless the Employee has a hardship or has reached age fifty-nine and one-half (59-1/2) or after plan termination), and which are immediately fully vested and non-forfeitable), (II) Qualified matching contributions within the meaning of Section 401(k)(3)(C)(I) of the Code (that is, matching contributions as defined in Section 401(m)(4)(A) of the Code, which are subject to the restrictions on distributions contained in Section 401(k)(2)(B) of the Code (generally prohibiting distribution before separation from service, death, or disability unless the Employee has a hardship or has reached the age fifty-nine and one-half (59-1/2) or after plan termination) and which are immediately fully vested and non- forfeitable), and/or (III) Any other elective deferrals under a cash or deferred arrangement described in Section 401(k) of the Code. (C) Notwithstanding the foregoing, a Pre-Tax Contribution and any other elective deferral shall not be considered a Deferral Contribution for a Plan Year unless both: (I) It is allocated as of a date within the Plan Year (which generally means that it is not contingent upon the Employee's participation in the plan or arrangement or performance of services on any date subsequent to that date and that is actually paid to the funding vehicle of the plan or arrangement no later than the end of the 12-month period immediately following such Plan Year), and (II) It either relates to compensation that either would have been received by the Employee in such Plan Year but for his election to contribute to the plan or arrangement or is attributable to services performed by the Employee in the Plan Year, and but for the Employee's election to contribute to the -D-4- plan or arrangement, would have been received by the Employee within two and one-half (2-1/2) months after the end of such Plan Year. (iv) The term "Deferral Percentage" means the ratio (expressed as a percentage and calculated to the nearest one-hundredth of one percent (.01%)) of (A) the Pre-Tax Contributions under the Plan (and, where provided or elected in accordance with the special operating rules of subparagraph 1.2(c) of this Appendix, any other Deferral Contributions) made by or on behalf of an Eligible Participant for the Plan Year to (B) the Eligible Participant's Eligible Compensation for the Plan Year. (v) The term "Eligible Compensation" means an Eligible Participant's Statutory Compensation while he is an Eligible Participant determined without regard to suspensions from participation. (vi) The term "Eligible Participant" means any Employee who is authorized under the terms of the Plan to make Pre-Tax Contributions for the Plan Year, determined without regard to suspensions from participation for any reason other than not being an Eligible Employee (or, where provided or elected in accordance with the special operating rules of subparagraph 1.2(c) of this Appendix, who is authorized under the terms of the applicable plan to make or receive an allocation of Deferral Contributions for the Plan Year). (vii) The term "Excess Deferral Contributions" means the amount of Deferral Contributions for a Plan Year which must be eliminated in order for the restrictions of subparagraph 1.2(a) of this Appendix to be satisfied for the Plan Year. (viii) The term "Tested Plan Year" means the Plan Year for which the limitation is being applied to the contributions of Eligible Participants who are Highly Compensated Employees. D-1.2(c) The following special rules shall apply for purposes of this paragraph: (i) The following plans or portions of plans are mandatorily disaggregated and must be tested separately under subparagraph 1.2(a) of this Appendix and Section 401(k)(3) of the Code: (A) Contributions under an employee stock ownership plan described in Section 409 or 4975(e)(7) of the Code (an "ESOP") (or the portion of a plan which is an ESOP) may not be aggregated with contributions under a non-ESOP (or the portion of a plan which is not an ESOP) except as permitted under Section 401(k), 409 or 4975 of the Code. (B) Except where permitted to be aggregated for purposes of Section 410 of the Code, contributions by or for employees who are included in a unit of employees covered by a collective bargaining agreement may not be aggregated with contributions by or for employees who are included in a unit of employees not covered by the same collective bargaining agreement. (C) Except where permitted to be aggregated for purposes of Section 410 of the Code, contributions by or for employees assigned to qualified separate lines of business within the meaning of Section 414(r) of the Code, unless the plan in question qualifies for the employer-wide exception to mandatory disaggregation for this purpose under Section 414(r) of the Code. (D) Contributions under plans that could but actually are not aggregated for the plan year for purposes of satisfying the minimum coverage requirements of Section 410(b) of the Code (other than the average benefits percentage test). -D-5- (E) Contributions under a plan maintained by more than one employer as described in Section 413(c) of the Code shall be treated as if each such employer maintained a separate plan. (F) Except as provided in clause (ii) of this subparagraph, contributions under plans which do not have the same plan year. (ii) Subject to the limitations of clause (i) of this subparagraph, the following plans or portions of plans are mandatorily aggregated and must be tested as one plan under subparagraph 1.2(a) of this Appendix and Section 401(k)(3) of the Code: (A) The Deferral Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to make Pre-Tax Contributions or have other elective deferrals allocated to his account under two or more cash or deferred arrangements described in Section 401(k) of the Code that are maintained by the Employer shall be determined as if all such Pre-Tax Contributions and elective deferrals were made under a single plan. Such aggregation shall be effected on the basis of plan years beginning in the same calendar year. (B) In the event that this Plan satisfies the requirements of Section 401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii)) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii)) of the Code only if aggregated with this Plan, then this paragraph shall be applied by determining the Deferral Percentages of Eligible Participants as if all such plans were a single plan. (iii) Subject to the limitations of clause (i) of this subparagraph, two or more cash or deferred arrangements may be permissively aggregated by the Administrator for purposes of satisfying the requirements of Section 401(a)(4), 401(k) and 410(b) of the Code if such arrangements each have the same plan year. (iv) At the option of the Administrator, each Eligible Participant's Deferral Contributions for a Plan Year consisting of qualified non-elective contributions and/or qualified matching contributions under any plan or arrangement may be included in determining the Deferral Percentages for the Plan Year provided, however, that: (A) The non-elective contributions (both including and excluding the qualified non-elective contributions which are treated as Deferral Contributions) satisfy the requirements of Section 401(a)(4) of the Code. (B) The matching contributions satisfy the requirements of Section 401(m) of the Code, provided that the qualified non-elective contributions and qualified matching contributions treated as Deferral Contributions are disregarded in making this determination. (C) Except as provided in clauses (v)(A) and (B) of this subparagraph, the qualified non-elective contributions and qualified matching contributions treated as Deferral Contributions are not taken into account in determining whether any other contributions or benefits satisfy the requirements of Section 401(a)(4) of the Code or whether employee contributions and matching contributions meet the requirements of Section 401(m) of the Code. (D) The qualified non-elective contributions may not be treated as Deferral Contributions if the effect is to increase the difference between the Average Deferral Percentages for Highly Compensated Employees and for Non-Highly Compensated Employees. -D-6- (E) The qualified non-elective contributions and qualified matching contributions satisfy the contingent benefit limitations of Section 401(k)(4)(A) (which generally prohibit benefits other than matching contributions from being contingent on making or not making elective deferrals). (F) The plan years of the plans or arrangements under which the qualified non-elective contributions and qualified matching contributions treated as Deferral Contributions are made is the same as the Plan Year. (v) The determination of Excess Deferral Contributions for a Plan Year for purposes of this paragraph shall be made: (A) After first determining the Excess Elective Deferrals under subparagraph 1.1(b) of this Appendix for the Plan Year; provided that the Excess Elective Deferrals of Non-Highly Compensated Employees shall not be taken into account in determining the Deferral Percentage of such Eligible Participants to the extent that such Excess Elective Deferrals are made under this Plan or other cash or deferred arrangement maintained by the Employer and that Excess Elective Deferrals of Highly Compensated Employees shall be taken into account in determining the Deferral Percentage of such Eligible Participants, and (B) Before determining the Excess Aggregate Contributions for purposes of paragraph 1.3 of this Appendix and Section 401(m) of the Code for the Plan Year. (vi) The employee groups tested hereunder may be divided into separate testing groups on such basis, if any, as the Administrator may determine and as is permitted under Sections 410, 401(k) and 401(m) of the Code, including, but not limited to, separate testing for excludible employees (that is, where the plan's age and/or service requirements are lower than the greatest minimum age and service conditions permissible under Section 410(a) of the Code). (vii) If the Plan Sponsor or the Administrator elects to apply Section 410(b)(4)(B) of the Code in determining whether the Plan meets the requirements of Section 410(b) of the Code for a Plan Year, the Plan may exclude altogether the participation of Non-Highly Compensated Employees (but not the participation of Highly Compensated Employees) who have not met the minimum age and service requirements of Section 410(a)(1)(A) of the Code in determining the satisfaction of requirements of subparagraph D- 1.2(a) and subparagraph D-1.4(a) of this Appendix. (viii) The determination and treatment of the Deferral Contributions and Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury or his delegate. D-1.2(d) If the Average Deferral Percentage for the Eligible Participants who are Highly Compensated Employees for a Plan Year is more than the amount permitted under the above restrictions, then: (i) If the Administrator directs that Excess Deferral Contributions shall be recharacterized, the Excess Deferral Contributions for the Highly Compensated Employees for the Plan Year shall be reduced by recharacterization as After-Tax Contributions as required by Section 401(k) of the Code or by distributing such contributions (together with income thereon) as provided below after the end of the Plan Year for which made and, to the extent not inconsistent therewith. Notwithstanding the foregoing, in no case shall the amount of Excess Deferral Contributions recharacterized with respect to any Highly Compensated Employee exceed the amount of his Pre-Tax Contributions and other elective deferrals. When Excess Deferral Contributions cannot be recharacterized, they shall be returned in a "corrective distribution" to the Highly Compensated Employee at such time as the Administrator shall determine but in no event later than twelve (12) months after the end of the Plan Year for which made, together with income thereon (as -D-7- determined pursuant to the provisions of clause (iv) of subparagraph 1.3(d) of this Appendix substituting the phrase "Excess Deferral Contributions to be returned" for "Excess Aggregate Contributions"). (ii) If the Administrator does not direct that Excess Deferral Contributions shall be recharacterized, the Excess Deferral Contributions for the Highly Compensated Employees for the Plan Year shall be reduced by distributing them (together with income thereon) in a "corrective distribution" to Highly Compensated Employees as required by Section 401(k) of the Code (or, where so provided in another plan for Excess Deferral Contributions made to that plan, by recharacterizing them as after-tax employee contributions pursuant to that other plan) at such time as the Administrator may determine after the end of the Plan Year for which made but in no event later than twelve (12) months after the end of the Plan Year for which made. To the extent not inconsistent with the requirements of Section 401(k) of the Code, the reduction shall be effected in the following manner: (A) First, the excess amount shall be considered to consist of the Participant's Pre-Tax Basic Contributions in excess of the percentage of his Compensation with respect to which Matching Contributions are made for such Plan Year to the extent thereof, and (B) Then, any remaining portion of the excess amount shall be considered to consist of the remainder of the Participant's Pre-Tax Contributions for such Plan Year to the extent thereof, and (C) Finally, any remaining portion of the excess amount shall be considered to consist of the Participant's other Deferral Contributions for such Plan Year. Notwithstanding the time period described above for the return of Excess Deferral Contributions, such amounts and any income thereon returned more than two and one-half (2-1/2) months after the end of the Plan Year may be subject to the ten percent (10%) excise tax imposed on the Employer by Section 4979 of the Code. (iii) Among such Participants, the reduction shall be effected by reducing contributions in the order of the highest dollar amounts of Deferral Contributions by or on behalf of each of the Highly Compensated Employees, such that the applicable restrictions of subparagraph 1.2(a) of this Appendix are satisfied; provided, however, that any required reduction for any Eligible Participant will be reduced by his Excess Elective Deferrals returned or recharacterized pursuant to subparagraph 1.1(b) of this Appendix. (iv) When two or more plans are involved, contributions shall be reduced in the following order: First, those under money purchase pension plans, then those under stock bonus plans, then those under profit sharing plans, and lastly, those under all other plans; and reductions under plans of the same type shall be on a pro rata basis. (v) Whenever Excess Deferral Contributions are recharacterized as After-Tax Contributions, the following rules shall apply with respect to such recharacterization. (A) Excess Deferral Contributions recharacterized are includable in the Participant's income on the earliest date any elective deferrals would have been received by the Participant but for his election to contribute to the plan or arrangement. (B) Such recharacterized Excess Deferral Contributions are to be treated as After-Tax Contributions for purposes of Sections 72, 401(a), 401(m) and 6047 of the Code, but shall be considered elective deferrals for all other purposes of the Code including but not limited to Sections 401(k)(2), 404, 409, 411, 412, 415, 416 and 417 of the Code. -D-8- (C) Such recharacterized Excess Deferral Contributions shall remain allocated to the applicable account of the Participant, except to the extent required to be distributed to the Participant. (D) Such Excess Deferral Contributions shall be recharacterized no later than two and one-half (2-1/2) months after the end of the Plan Year in question. For this purpose, recharacterization is deemed to occur on the date on which the last of those Highly Compensated Employees with Excess Deferral Contributions to be recharacterized is notified of the recharacterization in any manner prescribed by the Secretary of the Treasury or his delegate. (E) The payor or Administrator shall report such recharacterized Excess Deferral Contributions as employee contributions to the Internal Revenue Service and the affected Participant by timely providing such forms as the Secretary of the Treasury or his delegate shall designate to the Internal Revenue Service and to the affected Participant, by timely taking such other actions as the Secretary of the Treasury or his delegate shall require, and by the Administrator's accounting for such amounts as employee contributions for purposes of Sections 72 and 6047 of the Code. (vi) For purposes hereof and except to the extent otherwise provided under Section 401(k) of the Code, the income allocated to any Excess Deferral Contributions allocated to the Plan shall be determined by the Administrator under the following rules and calculated under any reasonable method selected by the Administrator so long as the method does not violate the requirements of Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for a Plan Year, and is used by the Plan for allocating income to Participants' accounts under the Plan: (A) Unless another method is determined by the Administrator, the amount of income to be distributed shall be determined by multiplying (I) the income for the Plan Year or other period in question allocable to the account to which such Excess Deferral Contributions are allocated by (II) a fraction, the numerator of which is the amount of the Participant's Excess Deferral Contributions allocated to such account for the Plan Year or other period in question and entitled to a share of the valuation adjustment therefor under paragraph 4.6 and the denominator of which is the balance in such account on the last day of the Plan Year or other period in question, reduced by the earnings allocable thereto and increased by the losses allocable thereto in the Plan Year or other period in question. (B) Unless otherwise determined by the Administrator on a uniform and non-discriminatory basis, no income shall be distributed for the period between the end of the Plan Year and the date of distribution. (vii) Any distribution of Excess Deferral Contributions (and income) shall clearly be designated by the Administrator as such. D-1.2(e) If a Participant's Pre-Tax Contributions are recharacterized as After-Tax Contributions for purposes of paragraph 1.3 of this Appendix, such contributions shall nevertheless still be considered made for any benefit accrual requirements contingent thereon. D-1.2(f) If a Participant's Pre-Tax Contributions are returned pursuant to this paragraph, such contributions shall nevertheless still be considered made for any benefit accrual requirements contingent thereon and any Matching Contributions attributable thereto shall be also be distributed (to the extent vested) or forfeited (to the extent not vested). D-1.3 Limitation on and Distribution of After-Tax and Matching -------------------------------------------------------- Contributions Made by or on behalf of Highly Compensated Employees. - ------------------------------------------------------------------ -D-9- D-1.3(a) Except where the alternative method under Section 401(m)(11) of the Code of meeting the nondiscrimination requirements of Section 401(m) of the Code is satisfied with respect to the Plan for a Plan Year beginning on or after January 1, 1999, the After-Tax Contributions made by Participants and the Matching Contributions otherwise allocated to the account of a Participant under the Plan shall be limited as hereafter provided so that the Average Contribution Percentage for Eligible Participants who are Highly Compensated Employees for a Plan Year (that is, the Tested Plan Year) does not exceed the greater of (i) or (ii) as follows: (i) The "regular limitation" percentage which is equal to one hundred twenty-five percent (125%) of the Average Contribution Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year, or (ii) The "alternative limitation" percentage which is equal to the lesser of: (A) Two hundred percent (200%) of the Average Contribution Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year, or (B) Two (2) percentage points over the Average Contribution Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year. Notwithstanding the foregoing, for Plan Years beginning on or after January 1, 1997, if the Tested Plan Year is the first Plan Year of the Plan, then the Average Contribution Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the Applicable Plan Year shall be deemed to be three percent (3%) unless the Plan Sponsor or the Administrator elects in accordance with Section 401(m)(2)(E) of the Code, to use the actual Average Contribution Percentage for the Eligible Participants who are Non-Highly Compensated Employees for the first Plan Year. D-1.3(b) For purposes hereof: (i) The term "Aggregate Contributions" means: (A) After-Tax Contributions and Matching Contributions, (B) To the extent provided or elected pursuant to the special operating rules of subparagraph 1.3(c) of this Appendix, any after-tax employee contributions which are allocated to a separate account to which attributable earnings or loss are allocated and consisting of either: (I) Employee contributions to the defined contribution portion of a plan described in Section 414(k) of the Code. (II) Employee contributions to a qualified cost-of-living arrangement described in Section 415(2)(B) of the Code. (III) Employee contributions applied to the purchase of whole life insurance protection or survivor benefit protection under a defined contribution plan. (IV) Amounts attributable to Excess Deferral Contributions as defined in paragraph 1.2 of this Appendix which are recharacterized as after-tax employee contributions. (V) Employee contributions to a contract described in Section 403(b) of the Code. -D-10- Notwithstanding the foregoing, after-tax employee contributions do not include loan repayments, cash-out buy-backs, qualifying rollover contributions, employee contributions which are transferred to a plan or any other amounts which are excluded from such term under Section 401(m) of the Code, (C) To the extent provided or elected pursuant to the special operating rules of subparagraph 1.3(c) of this Appendix, any other matching contributions within the meaning of Section 404(m)(4)(A) of the Code (that is, employer contributions made on account of after-tax employee contributions under any plan or elective deferrals under a cash or deferred arrangement described in Section 401(k) of the Code), and/or (D) To the extent provided or elected pursuant to the special operating rules of subparagraph 1.3(c) of this Appendix: (I) Pre-Tax Contributions, (II) Qualified non-elective contributions, including without limitation QNEC Contributions, within the meaning of Section 401(m)(4)(C) of the Code (that is, any employer contributions (other than matching contributions) which the Employee may not elect to have paid to him instead of being contributed to the plan, which are subject to the restrictions on distributions contained in Section 401(k)(2)(B) of the Code (generally prohibiting distribution before separation from service, death, or disability unless the Employee has a hardship or has reached age fifty-nine and one-half (59-1/2) or after plan termination), and which are immediately fully vested and non- forfeitable), and/or (III) Any other elective deferrals under a cash or deferred arrangement described in Section 401(k) of the Code. (E) Notwithstanding the foregoing, a contribution shall not be considered an Aggregate Contribution for a Plan Year unless: (I) In the case of an after-tax employee contribution it is actually paid to the funding vehicle of the plan or an agent of the plan who remits the contribution to the funding vehicle within a reasonable time. (II) In the case of a matching contribution, it is allocated as of a date within the Plan Year, it is actually paid to the funding vehicle of the plan no later than the end of the 12- month period immediately following such plan year, and it is made on behalf of the Employee's elective deferrals or employee contributions for the plan year. (ii) The term "Applicable Plan Year" means: (A) For Plan Years beginning before January 1, 1997, the Tested Plan Year. (B) For Plan Years beginning on or after January 1, 1997, the Plan Year immediately preceding the Tested Plan Year, unless the Plan Sponsor or the Administrator elects in accordance with Section 401(m)(2)(A) of the Code, to use the Tested Plan Year. (iii) The term "Average Contribution Percentage" means the average (expressed as a percentage) of the Contribution Percentages of the Eligible Participants in a group. -D-11- (iv) The term "Contribution Percentage" means the ratio (expressed as a percentage and calculated to the nearest one-hundredth of one percent (.01%)) of (A) the Matching Contributions under the Plan (and, where provided or elected in accordance with the special operating rules of subparagraph 1.3(c) of this Appendix, any other Aggregate Contributions) made by or on behalf of an Eligible Participant for the Plan Year to (B) the Eligible Participant's Eligible Compensation for the Plan Year. (v) The term "Eligible Compensation" means an Eligible Participant's Statutory Compensation while he is an Eligible Participant determined without regard to suspensions from participation. (vi) The term "Eligible Participant" means any Employee who is authorized under the terms of the Plan to make After-Tax Contributions or Pre-Tax Contributions for the Plan Year or receive an allocation of the Matching Contribution for the Plan Year, determined without regard to suspensions from participation for any reason other than not being an Eligible Employee (or, where provided or elected in accordance with the special operating rules of subparagraph 1.3(c) of this Appendix, who is authorized under the terms of the applicable plan to make or receive an allocation of other Aggregate Contributions for the Plan Year). (vii) The term "Excess Aggregate Contributions" means the amount of Aggregate Contributions for a Plan Year which must be eliminated in order for the restrictions of subparagraph 1.3(a) of this Appendix to be satisfied for the Plan Year. (viii) The term "Tested Plan Year" means the Plan Year for which the limitation is being applied to the contributions by or for Eligible Participants who are Highly Compensated Employees. D-1.3(c) The following special rules shall apply for purposes of this paragraph: (i) The following plans or portions of plans are mandatorily disaggregated and must be tested separately under subparagraph 1.3(a) of this Appendix and Section 401(m)(2) of the Code: (A) Contributions under an employee stock ownership plan described in Section 409 or 4975(e)(7) of the Code (an "ESOP") (or the portion of a plan which is an ESOP) may not be aggregated with contributions under a non-ESOP (or the portion of a plan which is not an ESOP) except as permitted under Section 401(m), 409 or 4975 of the Code. (B) Except where permitted to be aggregated for purposes of Section 410 of the Code, contributions by or for employees who are included in a unit of employees covered by a collective bargaining agreement may not be aggregated with contributions by or for employees who are included in a unit of employees not covered by the same collective bargaining agreement. (C) Except where permitted to be aggregated for purposes of Section 410 of the Code, contributions by or for employees assigned to qualified separate lines of business within the meaning of Section 414(r) of the Code, unless the plan in question qualifies for the employer-wide exception to mandatory disaggregation for this purpose under Section 414(r) of the Code. (D) Contributions under plans that could but actually are not aggregated for the plan year for purposes of satisfying the minimum coverage requirements of Section 410(b) of the Code (other than the average benefits percentage test). (E) Contributions under a plan maintained by more than one employer as described in Section 413(c) of the Code shall be treated as if each such employer maintained a separate plan. -D-12- (F) Except as provided in clause (ii) of this subparagraph, contributions under plans which do not have the same plan year. (ii) Subject to the limitations of clause (i) of this subparagraph, the following plans or portions of plans are mandatorily aggregated and must be tested as one plan under subparagraph 1.3(a) of this Appendix and Section 401(m)(2) of the Code: (A) The Contribution Percentage for any Eligible Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to make after-tax employee contributions, or to have matching contributions, qualified non-elective contributions or elective deferrals allocated to his account, under two or more plans described in Section 401(a) or cash or deferred arrangements described in Section 401(k) of the Code that are maintained by the Employer shall be determined as if all such after-tax employee contributions, matching contributions, qualified non-elective contributions and elective deferrals were made under a single plan. Such aggregation shall be effected on the basis of plan years beginning in the same calendar year. (B) In the event that this Plan satisfies the requirements of Section 401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii)) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of Section 401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii)) of the Code only if aggregated with this Plan, then this paragraph shall be applied by determining the Contribution Percentages of Eligible Participants as if all such plans were a single plan. (iii) Subject to the limitations of clause (i) of this subparagraph, two or more plans to which after-tax employee contributions or matching contributions or both may be made may be permissively aggregated by the Administrator for purposes of satisfying the requirements of Section 401(a)(4), 401(m) and 410(b) of the Code if such plans each have the same plan year. (iv) At the option of the Administrator, each Eligible Participant's Aggregate Contributions for a Plan Year consisting of qualified non-elective contributions and elective deferrals under any plan or arrangement may be treated as matching contributions and included in determining the Contribution Percentages for the Plan Year provided, however, that: (A) The non-elective contributions (both including and excluding the qualified non-elective contributions which are treated as Aggregate Contributions and in the latter case also excluding the qualified non- elective contributions treated as elective deferrals under Section 401(k) of the Code) satisfy the requirements of Section 401(a)(4) of the Code. (B) The elective deferrals (both including and excluding elective deferrals treated as Aggregate Contributions) satisfy the requirements of Section 401(k) of the Code. (C) Except as provided in clauses (v)(A) and (B) of this subparagraph, the qualified non-elective contributions and elective deferrals treated as Aggregate Contributions are not taken into account in determining whether any other contributions or benefits satisfy the requirements of Section 401(a)(4) of the Code or whether elective deferrals meet the requirements of Section 401(k) of the Code. (D) The qualified non-elective contributions may not be treated as Aggregate Contributions if the effect is to increase the difference between the Average Contribution Percentages for Highly Compensated Employees and for Non-Highly Compensated Employees. -D-13- (E) The plan years of the plans or arrangements under which the qualified non-elective contributions and elective deferrals treated as Aggregate Contributions are made is the same as the Plan Year. (v) Contributions by or for employees who are included in a unit of employees covered by a collective bargaining agreement shall automatically be considered to pass the non-discrimination test of subparagraph 1.3(a) of this Appendix and Section 401(m) of the Code and need not be tested thereunder. (vi) The determination of Excess Aggregate Contributions for a Plan Year for purposes of this paragraph shall be made after: (A) First determining the Excess Elective Deferrals under subparagraph 1.1(b) of this Appendix for the Plan Year, and (B) Then determining the Excess Deferral Contributions under paragraph 1.2 of this Appendix for the Plan Year. (vii) The employee groups tested hereunder may be divided into separate testing groups on such basis, if any, as the Administrator may determine and as is permitted under Sections 410, 401(k) and 401(m) of the Code, including, but not limited to, separate testing for excludible employees (that is, where the plan's age and/or service requirements are lower than the greatest minimum age and service conditions permissible under Section 410(a) of the Code). (viii) If the Plan Sponsor or the Administrator elects to apply Section 410(b)(4)(B) of the Code in determining whether the Plan meets the requirements of Section 410(b) of the Code for a Plan Year, the Plan may exclude altogether the participation of Non-Highly Compensated Employees (but not the participation of Highly Compensated Employees) who have not met the minimum age and service requirements of Section 410(a)(1)(A) of the Code in determining the satisfaction of requirements of subparagraph D-1.3(a) and subparagraph D-1.4(a) of this Appendix. (ix) The determination and treatment of the Aggregate Contributions and Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury or his delegate. D-1.3(d) If the Average Contribution Percentage for the Eligible Participants who are Highly Compensated Employees for a Plan Year is more than the amount permitted under the above restrictions, then: (i) The Excess Aggregate Contributions for the Highly Compensated Employees for the Plan Year shall be reduced by distributing them (to the extent vested) to Highly Compensated Employees or by forfeiting them (to the extent not vested), together with income thereon in either case, as required by Section 401(m) of the Code at such time as the Administrator may determine after the end of the Plan Year for which made but in no event later than twelve (12) months after the end of the Plan Year for which made. To the extent not inconsistent with the requirements of Section 401(m) of the Code, the reduction shall be effected in the following manner: (A) First, the excess amount shall be considered to consist of the Participant's After-Tax Optional Contributions for such Plan Year and similar contributions under other plans taken into account for such Plan Year on a pro rata basis to the extent thereof, which contributions shall be distributed to the Participant, and (B) Then, any remaining portion of the excess amount shall be considered to consist of the Participant's After-Tax Basic Contributions, Matching Contributions, and other Aggregate Contributions treated as matching contributions and similar contributions under other plans taken into account for such Plan Year on a pro rata basis to the extent thereof, which contributions shall be distributed to the Participant (or forfeited, to the extent not vested). -D-14- Notwithstanding the time period described above for the return of Excess Aggregate Contributions, such amounts and any income thereon returned more than two and one-half (2-1/2) months after the end of the Plan Year may be subject to the ten percent (10%) excise tax imposed on the Employer by Section 4979 of the Code. (ii) Among such Participants, the reduction shall be effected by reducing contributions in the order of the highest dollar amounts of Aggregate Contributions by or on behalf of each of the Highly Compensated Employees, such that the applicable restrictions of subparagraph 1.3(a) of this Appendix are satisfied. (iii) When two or more plans are involved, contributions shall be reduced in the following order: First, those under defined benefit plans shall be reduced, then those under target benefit pension plans, then those under money purchase pension plans, then those under stock bonus plans, then those under profit sharing plans, and lastly, those under all other plans; and reductions under plans of the same type shall be on a pro rata basis. (iv) For purposes hereof and except to the extent otherwise provided under Section 401(m) of the Code, the income allocated to any Excess Aggregate Contributions allocated to the Plan shall be determined by the Administrator under the following rules and calculated under any reasonable method selected by the Administrator so long as the method does not violate the requirements of Section 401(a)(4) of the Code, is used consistently for all Participants and for all corrective distributions under the Plan for a Plan Year, and is used by the Plan for allocating income to Participants' accounts under the Plan: (A) Unless another method is determined by the Administrator, the amount of income to be distributed shall be determined by multiplying (I) the income for the Plan Year or other period in question allocable to the account to which such Excess Aggregate Contributions are allocated by (II) a fraction, the numerator of which is the amount of the Participant's Excess Aggregate Contributions allocated to such account for the Plan Year or other period in question and entitled to a share of the valuation adjustment therefor under paragraph 4.6 of the Plan and the denominator of which is the balance in such account on the last day of the Plan Year or other period in question normally taken into account in determining such valuation adjustment. (B) Unless otherwise determined by the Administrator on a uniform and non-discriminatory basis, no income shall be distributed for the period between the end of the Plan Year and the date of distribution. (v) Any distribution of Excess Aggregate Contributions (and income) shall clearly be designated by the Administrator as such. D-1.4 Limitation on Multiple Use of Alternative Limitations in Paragraphs ------------------------------------------------------------------- 1.2 and 1.3 of this Appendix. - ---------------------------- D-1.4(a) Multiple use of the alternative limitations under clause (ii) of subparagraphs 1.2(a) and 1.3(a) of this Appendix is prohibited as provided in section 401(m)(9)(A) of the Code and, to the extent not inconsistent therewith, is considered to occur if both of the following occur for a Plan Year: (i) One or more Highly Compensated Employees are Eligible Participants for purposes of both paragraphs 1.2 and 1.3 of this Appendix, and (ii) The sum of the Average Deferral Percentages and the Average Contribution Percentages of the Highly Compensated Employees who are Eligible Participants exceeds the Multiple Use Limitation Percentage, and (ii) Both: -D-15- (A) The Average Deferral Percentage of the Highly Compensated Employees who are Eligible Participants for the Tested Plan Year exceeds one hundred twenty-five percent (125%) of the Average Deferral Percentage of the Non-Highly Compensated Employees who are Eligible Participants for the Applicable Plan Year, and (B) The Average Contribution Percentage of the Highly Compensated Employees who are Eligible Participants for the Tested Plan Year exceeds one hundred twenty-five percent (125%) of the Average Contribution Percentage of the Non-Highly Compensated Employees who are Eligible Participants for the Applicable Plan Year. Notwithstanding anything to the contrary herein, the prohibition on multiple use of the alternative limitations under clause (ii) of subparagraphs 1.2 and 1.3 of this Appendix shall apply separately to contributions under an employee stock ownership plan described in Section 409 or 4975(e)(7) of the Code (an "ESOP") (or the portion of a plan which is an ESOP) and contributions under a non-ESOP (or the portion of a plan which is not an ESOP) except as permitted under Section 401(k), 401(m), 409 or 4975 of the Code. D-1.4(b) If the multiple use requirement of subparagraph 1.4(a) of this Appendix is not satisfied for a Plan Year, then the Excess Multiple Use Contributions shall be eliminated as provided in Sections 401(k) and 401(m) of the Code and, to the extent not inconsistent therewith, as follows: (i) The elimination shall be effected in the manner of reduction described in paragraphs 1.2 and 1.3 of this Appendix, depending on whether the contribution eliminated is a Deferral Contribution or an Aggregate Contribution. (ii) Such reduction shall be effected first for Aggregate Contributions and then for Deferral Contributions. (iii) Such reduction shall be effected for all Highly Compensated Employees who are Eligible Participants for purposes of either paragraph 1.2 or 1.3 of this Appendix. D-1.4(c) For purposes hereof: (i) The term "Excess Multiple Use Contributions" means the amount of Deferral Contributions and/or Aggregate Contributions for a Plan Year which must be eliminated so that the Multiple Use Limitation Percentage will not be exceeded for the Plan Year. (ii) The term "Multiple Use Limitation Percentage" means a percentage equal to the greater of: (A) The sum of: (I) One hundred twenty-five percent (125%) of the greater of (a) the Average Deferral Percentage of the Non- Highly Compensated Employees who are Eligible Participants or (b) the Average Contribution Percentage of the Non-Highly Compensated Employees who are Eligible Participants, and (II) Two (2) plus the lesser of (a) the Average Deferral Percentage referred to in clause (ii)(A)(I) of this subparagraph or (b) the Average Contribution Percentage referred to in clause (ii)(A)(I) of this subparagraph, provided that the amount determined under this clause (ii)(A)(II)(b) shall in no event exceed two hundred percent (200%) of such lesser Average Deferral Percentage or Average Contribution Percentage. -D-16- (B) The sum of: (I) One hundred twenty-five percent (125%) of the lesser of (a) the Average Deferral Percentage of the Non-Highly Compensated Employees who are Eligible Participants or (b) the Average Contribution Percentage of the Non-Highly Compensated Employees who are Eligible Participants, and (II) Two (2) plus the greater of (a) the Average Deferral Percentage referred to in clause (ii)(B)(I) of this subparagraph or (b) the Average Contribution Percentage referred to in clause (ii)(B)(I) of this subparagraph, provided that the amount determined under this clause (ii)(B)(II)(b) shall in no event exceed two hundred percent (200%) of such greater Average Deferral Percentage or Average Contribution Percentage. (iii) Notwithstanding the foregoing: (A) The employee groups tested hereunder may be divided into separate testing groups on such basis, if any, as the Administrator may determine and as is permitted under Sections 410, 401(k) and 401(m) of the Code, including, but not limited to, separate testing for excludible employees (that is, where the plan's age and/or service requirements are lower than the greatest minimum age and service conditions permissible under Section 410(a) of the Code). (B) The Multiple Use Limitation Percentage may otherwise be appropriately adjusted by the Administrator as permitted in Sections 401(k) and (m) of the Code in accordance with regulations under Sections 401(m)(9) of the Code. D-1.5 Distribution of Transferred Contributions to Meet Requirements -------------------------------------------------------------- Similar to Those of Paragraphs 1.2, 1.3 and 1.4 of this Appendix. In the event - ---------------------------------------------------------------- that Deferral Contributions or Aggregate Contributions are transferred from another plan to this Plan and corrective distributions are required under Section 401(k), 401(m) or 402(g) of the Code with respect to the transferred contributions (including income thereon), the Administrator is authorized to distribute to the affected Participant or return to the transferor plan the transferred Deferral Contributions and Aggregate Contributions (including income thereon) as may be necessary or appropriate to effect the corrective distribution. -D-17- EX-21 12 EX21 Exhibit 21 SUBSIDIARIES OF THE REGISTRANT Subsidiaries of the Registrant Organized Under the Laws of - ------------------------------ --------------------------- Sugar Creek Foods, Inc.; Consolidated subsidiary Virginia Eskimo Inc.; Consolidated subsidiary Virginia All other subsidiaries individually and in the aggregate do not constitute a "significant subsidiary" within the meaning of Rule 1-02(v) of Regulation S-X. EX-23 13 EX23 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP We consent to the incorporation by reference in (a) the Registration Statement (Form S-8 No. 33-58576) pertaining to the 1992 Incentive Stock Plan of Eskimo Pie Corporation and (b) the Registration Statement (Form S-8 No. 333-24893) pertaining to the Eskimo Pie Corporation 1996 Incentive Stock Plan, the Eskimo Pie Corporation Savings Plan and the Eskimo Pie Corporation Employee Stock Purchase Plan of our report dated March 2, 2000, with respect to the consolidated financial statements of Eskimo Pie Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1999. /s/ ERNST & YOUNG LLP Richmond, Virginia March 21, 2000 EX-24 14 EX24 Exhibit 24 POWER OF ATTORNEY I, Robert C. Sledd, do hereby constitute and appoint David B. Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute any and all instruments as such attorneys or attorney deems necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations, policies or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the preparation and filing with the Commission of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by the virtue hereof. WITNESS the execution hereof this 27th day of January, 2000. /s/ Robert C. Sledd -------------------------------- Robert C. Sledd POWER OF ATTORNEY I, Judith B. McBee, do hereby constitute and appoint David B. Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute any and all instruments as such attorneys or attorney deems necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations, policies or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the preparation and filing with the Commission of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by the virtue hereof. WITNESS the execution hereof this 3rd day of February, 2000. /s/ Judith B. McBee ------------------------------------ Judith B. McBee POWER OF ATTORNEY I, F. Claiborne Johnston, Jr., do hereby constitute and appoint David B. Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute any and all instruments as such attorneys or attorney deems necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations, policies or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the preparation and filing with the Commission of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by the virtue hereof. WITNESS the execution hereof this 25th day of January, 2000. /s/ F. Claiborne Johnston, Jr. ------------------------------- F. Claiborne Johnston, Jr. POWER OF ATTORNEY I, Wilson H. Flohr, Jr., do hereby constitute and appoint David B. Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute any and all instruments as such attorneys or attorney deems necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations, policies or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the preparation and filing with the Commission of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by the virtue hereof. WITNESS the execution hereof this 8th day of February, 2000. /s/ Wilson H. Flohr, Jr. ------------------------- Wilson H. Flohr, Jr. POWER OF ATTORNEY I, Daniel J. Ludeman, do hereby constitute and appoint David B. Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute any and all instruments as such attorneys or attorney deems necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations, policies or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the preparation and filing with the Commission of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by the virtue hereof. WITNESS the execution hereof this 14th day of February, 2000. /s/ Daniel J. Ludeman ------------------------------------- Daniel J. Ludeman POWER OF ATTORNEY I, Arnold H. Dreyfuss, do hereby constitute and appoint David B. Kewer and Thomas M. Mishoe, Jr., my true and lawful attorneys-in-fact, any of whom acting singly is hereby authorized for me and in my name and on my behalf as a director and/or officer of Eskimo Pie Corporation (the "Company"), to act and to execute any and all instruments as such attorneys or attorney deems necessary or advisable to enable the Company to comply with the Securities Exchange Act of 1934, and any rules, regulations, policies or requirements of the Securities and Exchange Commission (the "Commission") in respect thereof, in connection with the preparation and filing with the Commission of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, and any and all amendments to such Report, together with such other supplements, statements, instruments and documents as such attorneys or attorney deem necessary or appropriate. I do hereby ratify and confirm all my said attorneys or attorney shall do or cause to be done by the virtue hereof. WITNESS the execution hereof this 25th day of January, 2000. /s/ Arnold H. Dreyfuss ------------------------------------ Arnold H. Dreyfuss EX-27 15 EX27
5 1,000 12-MOS DEC-31-1999 DEC-31-1999 1,751 0 6,057 0 4,032 12,397 19,546 12,968 36,486 8,468 2,929 0 0 3,464 19,332 36,486 66,452 66,452 38,657 64,769 0 0 356 1,327 491 836 0 0 0 836 .24 .24
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