-----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, FNXiaTNJvX5dJNOcR2MS5FN7MV6wz84d2zZqaPbx26PJ86I8oymVfpUH0qiLsABI U7P+MeOJ06F6zXjtSR3uLQ== 0000950109-96-000941.txt : 19960222 0000950109-96-000941.hdr.sgml : 19960222 ACCESSION NUMBER: 0000950109-96-000941 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19951126 FILED AS OF DATE: 19960221 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRAUSS LEVI ASSOCIATES INC CENTRAL INDEX KEY: 0000778977 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 942973849 STATE OF INCORPORATION: DE FISCAL YEAR END: 1128 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 033-00762 FILM NUMBER: 96523469 BUSINESS ADDRESS: STREET 1: 1155 BATTERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4155446000 10-K405 1 ANNUAL REPORT ON FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended November 26, 1995 Commission file number: 33-762 ----------------- LEVI STRAUSS ASSOCIATES INC. (Exact name of registrant as specified in its charter) Delaware 94-2973849 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1155 Battery Street, San Francisco, California 94111 (Address of principal executive offices) Registrant's telephone number, including area code (415) 544-6000 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: None 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, 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] The aggregate value of the registrant's voting stock held by non-affiliates, at $189 per share (based on the latest independent valuation), was approximately $94.5 million at February 2, 1996. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.
Outstanding at Class of Common Stock February 2, 1996 --------------------- ---------------- Class E common stock, $.10 par value 1,489,159 shares Class L common stock, $.10 par value 51,351,158 shares
Documents incorporated by reference: None FORM 10-K TABLE OF CONTENTS
Page PART I Item 1. Business................................................................................. 3 Item 2. Properties............................................................................... 17 Item 3. Legal Proceedings........................................................................ 18 Item 4. Submission of Matters to a Vote of Security Holders (in the 1995 fourth quarter)......... 18 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................... 19 Item 6. Selected Financial Data.................................................................. 20 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 21 Item 8. Financial Statements and Supplementary Data.............................................. 29 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..... 59 PART III Item 10. Directors and Executive Officers of the Registrant....................................... 60 Item 11. Director and Executive Compensation...................................................... 65 Item 12. Security Ownership of Certain Beneficial Owners and Management........................... 75 Item 13. Certain Relationships and Related Transactions........................................... 78 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 80 SIGNATURES.......................................................................................... 85 Corporate Directory................................................................................. 88
- ------------------------------------------------------------------------------- All percentage changes in this report are based on unrounded amounts. 2 PART I ITEM 1. BUSINESS General Levi Strauss Associates Inc. (the "Company") is the world's largest brand-name apparel manufacturer. The Company designs, manufactures and markets branded jeans and casual sportswear for men, women and youth, including jeans, slacks, shirts, jackets, skirts and fleecewear. Its products are manufactured and sold in numerous countries throughout the world and are primarily marketed under the Levi's(R) and Dockers(R) trademarks. In February 1996, the Company entered into a transaction designed to create a new, refocused Company which would be dedicated to remaining privately-held and managed with an explicit commitment to achieving superior financial returns while operating in a values-oriented manner. In the transaction, participating holders of the Company's Class L Common Stock (Class L Shares) would acquire shares of a new corporation by contributing Class L Shares. The new corporation would then buy, for cash in a merger, all of the remaining shares of the Company's Class L Common Stock and all outstanding shares of the Company's Class E Common Stock. (See Note 20 to the Consolidated Financial Statements contained in this Form 10-K for further information.) The Company is a leader in the apparel industry; its brands are among the strongest in the industry and the most widely recognized by consumers in its markets worldwide. Sales of jeans (made of denim, corduroy, twill and other fabrics) and jeans-related products, primarily marketed under the Levi's(R) brand, are the predominant source of revenue for the Company. Worldwide revenues of jeans and jeans-related products for 1995 were $5.2 billion, or 78% of total revenues. Casual sportswear, primarily natural fiber pants and tops marketed under the Dockers(R) brand, are also an important source of revenue in the U.S. and continue to be introduced in selected non-U.S. markets. Industry Overview The worldwide apparel market is greatly affected by demographic trends, frequent shifts in prevailing fashions and styles, international trade and economic developments, and retailer practices. The Company's market success is dependent on its ability to quickly and effectively initiate and/or respond to changes in market trends and other consumer preferences. Further, as consumers worldwide become more price and value conscious and competitors offer lower priced and innovative products, the Company actively promotes brand awareness and product loyalty and continues to focus on product innovation and development. The ongoing competitive nature of the apparel industry and market trends present a continuous risk that new products or market segments may emerge and compete with the Company's existing products and/or markets. The Company's market success is also dependent on the quality of service that it provides to its customers. Retailers are striving to maintain lower inventory positions and place orders closer in time to requested delivery dates. Additionally, retailers are demanding increasing levels of floor-ready and receipt-ready programs and enhanced store merchandising support. Recent changes in the U.S. retail industry, including an increasing number of retail failures and consolidations, have resulted in more centralized buying practices and potentially greater credit exposures from customers. In response, the Company emphasizes the importance of developing effective business partnerships with retail customers, focused on customer service and well-defined product and marketing programs. 3 Organization Structure The Company's current operating structure consists of two principal organizations: Levi Strauss North America (LSNA) and Levi Strauss International (LSI). LSNA is comprised of the Company's businesses in the U.S., Canada and Mexico. The operating structure of LSNA is organized along brand lines: the Levi's(R) brand, Dockers(R) brand and Brittania(R) brand. The Company recently introduced the SLATES(TM) brand for which sales are expected to commence in the U.S. during fiscal year 1996. LSI manufactures and markets jeans and casual apparel outside of North America and is organized regionally into the Europe, Latin America and Asia Pacific divisions. Each international division is responsible for manufacturing, marketing, sales, distribution, finance and information systems activities. Principal Brands Levi's(R) Brand The Levi's(R) brand is comprised primarily of jeans and jeans-related products that traditionally have been the Company's key products. In addition to the 501(R) family of jeans, the Levi's(R) products include Red Tab(TM), Orange Tab(TM) and silverTab(TM) jeans and related products for men, women and youth. Sales of Levi's(R) products in the U.S. for fiscal years 1995, 1994 and 1993 were $3.1 billion, $2.8 billion, and $2.6 billion, respectively. Record dollar sales were established for fiscal year 1995 by the Levi's(R) brand. The men's jeans business established record levels of unit and dollar sales, with favorable comparisons to prior year levels in all major product categories. Recently, strong performance in Levi's(R) Women's jeans contributed to record 1995 sales. Major areas of growth continue to be in basic jeans products (501(R), Red Tab(TM) and Orange Tab(TM)), silverTab(TM) products and shirts for jeans. In the Europe division, led by Germany and Italy, high demand for basic denim products, most notably the 501(R) family of jeans, drove sales increases for 1995. The Asia Pacific division, primarily Japan, experienced conflicting consumer demand for core heavy weight denim products versus alternative lighter weight fabric products. Further, continuing growth opportunities exist in the Asia Pacific division as evidenced by the strong performance in South Korea which contributed to increased unit sales during fiscal year 1995. The Company anticipates sales growth in 1996 across all markets served by the Levi's(R) brand. Sales of Levi's(R) jeans for women are expected to be higher in 1996 compared to 1995 due to increased market demand and expanded product offerings. Traditional blue denim and colored denim bottoms and shorts, loose silhouettes and coordinating tops are expected to continue as prominent products sold to the youth market in 1996. Dockers(R) Brand The Dockers(R) brand consists of casual sportswear for men, women and youth. The principal products under the Dockers(R) brand are men's casual and dress slacks, including wrinkle-resistant products. Although the Dockers(R) brand is driven by the men's category, the brand also serves the women's and youth casual slacks markets and offers complementing tops. U.S. sales of Dockers(R) products for 1995, 1994 and 1993 were $876.4 million, $808.3 million and $953.7 million, respectively. Sales of Dockers(R) brand increased in fiscal year 1995 as a result of the continued popularity of men's products in North America, specifically the wrinkle-resistant products. Offsetting these sales were the continued decreased sales of women's and youthwear products. During 1995, positive response to the Dockers(R) brand was seen in most European markets, although Germany did not produce anticipated sales levels. The Dockers(R) line of products was launched in Japan and Australia during 1995, adding to the list 4 of non-U.S. markets which currently offer Dockers(R) products, including several western European countries, the Philippines and Hong Kong. During 1996, the Company intends to continue its focus on the Dockers(R) "khakiwear" vision which it began executing in 1995. Within the U.S., this vision emphasizes the broad continuum of casual products, designed and merchandised to fit a specific niche in the consumer's wardrobe. Outside of the U.S., the Company will continue to launch the Dockers(R) line of products into major metropolitan cities. SLATES(TM) Brand The Company announced the SLATES(TM) brand in late 1995 and plans to launch the brand in the Fall of 1996. This brand will add a third component to the Company's presence in the men's pants business by occupying a position between casual pants and tailored clothing and offering a younger attitude than traditional dress pants. Brittania(R) Brand The Brittania(R) brand is the Company's value-priced line of jeans and casual apparel that competes in the value-oriented, growing mass merchant category. Products include men and women's jeans, tops and casual sportswear manufactured and marketed under the Brittania(R) and Brittgear(TM) labels. Fiscal year 1995 Brittania(R) product sales decreased from fiscal year 1994. While demand for men's products has increased slightly, women's products have shown an overall slowdown in sales. Markets U.S. Operations The U.S. retail industry in recent years has experienced substantial transformation through consolidations or closure of a number of major retailers. As a result, major retailers are larger, resulting in more centralized buying practices and greater leverage with suppliers (including the Company), and potentially greater credit exposure for those suppliers. Relationships with these customers are important to the Company; Levi's(R) and Dockers(R) products sold to the Company's top 25 customers in the U.S. accounted for approximately 67% and 65% of total U.S. revenues in fiscal years 1995 and 1994, respectively. Retailers are also seeking more services and support from those suppliers. Changes in the U.S. retail environment may also have favorable implications for the Company. Major U.S. department stores increasingly are carrying only the top performing national brands as they expand shelf space devoted to lower- priced, private label products. As a result, although the Company faces various pressures from the consolidation of the customer base and the growth of private label, it may benefit from the strength and popularity of Levi's(R) and Dockers(R) products relative to its principal national competitors. This possible emergence of the Levi's(R) and Dockers(R) brands as two of but a few national brands widely carried by major U.S. retailers illustrates the importance of having strong brands and developing effective business partnerships with retail customers, focused on customer service, rapid replenishment and well-defined product and marketing programs. The Levi's(R) brand products witnessed continued market expansion during fiscal year 1995. The Company experienced increased demand for men's jeans across all product lines, and notable growth in jeans for women. In recognition of the ongoing changes in the jeans market, the Company continues to add new designs, finishes, fabrications and colors to its traditional product lines. Ongoing efforts are placed on coordination with laundry contractors, textile producers and other companies throughout the world to develop concepts and processes to promote finishing development leadership and finished product shade consistency. 5 The Dockers(R) brand continues to be the most highly recognized and regarded brand among male consumers of casual slacks. The women's and youth Dockers(R) product lines have suffered from a very weak retail environment for moderately priced sportswear products and from a lack of consumer interest in some products. The Company hopes to see long-term benefits from its newly repositioned core pants strategy which was developed in 1994 and began to be executed in 1995. This strategy stems from an emphasis on "khakiwear" and will depend on effective communication to consumers and emphasis on the display of product to enable consumers to quickly recognize the product offerings. The concept is designed to support a young image for the Dockers(R) brand. The SLATES(TM) brand, which will be launched in 1996, is targeted towards the male consumer in the dress pants category. The brand fits a niche between casual pants and tailored clothing and is intended to offer a younger attitude than traditional dress pants. The target market for this brand will be male consumers aged 40 and over. The Brittania(R) brand represents the Company's presence in the growing mass merchant channel. This channel currently comprises over 40% of the jeans market. The Brittania(R) brand offers low-priced, high quality products to major mass merchant accounts and is a component of the overall U.S. marketing strategy. Non-U.S. Operations The Company has the largest and most successful international business among its principal competitors. The Company markets products in over 40 countries outside of the U.S., with recent entries in India and South Africa, and explores and evaluates new markets on an ongoing basis. Non-U.S. operations produced 39% of the Company's net sales in fiscal years 1995 and 1994 and contributed 48% and 50% to earnings before corporate expenses and interest during 1995 and 1994, respectively. Currently, the Company has the largest brand share and strongest brand image in virtually all of its established markets outside of the U.S. The success in these markets is believed to be due to the Company's brand image and reputation, the continuing focus on core jeans products and the quality of its retail distribution, including stores that sell only Levi's(R) products. In many countries, jeans are generally perceived as a fashion item rather than a basic, functional product and, like many apparel items, are higher-priced relative to the U.S. market. Core denim jeans, especially the 501(R) family of products, continue as key products in Europe and Canada. In Western Europe, mainly the U.K., France and Spain, higher volumes and more favorable pricing strategies were realized in 1995. Italy and Poland also experienced favorable performance due to the strong demand for basic jeans products. In the Asia Pacific division, particularly in Japan, sales were flat due to the continued depressed economy and retail conditions. Sales in other Asia Pacific affiliates, namely the Philippines and Korea, have also increased. In Mexico, the Levi's(R) brand continues to be the market share leader with sales remaining stable in spite of the continuing recession. Brazil maintains the highest level of sales activity within the Company's Latin America division. The Company entered into the Argentina market in late 1995. Risks of Non-U.S. Operations The Company's non-U.S. operations, including its use of non-U.S. manufacturing sources, are subject to the usual risks of doing business outside the U.S. These risks include adverse fluctuations in currency exchange rates, varying degrees of socio-economic and political instability and other risks similar to those seen in the U.S. including changes in import duties or quotas, disruptions or delays in shipments and transportation and labor disputes. The Company is also exposed to risks associated with changes in the laws and policies that govern foreign investment in countries where it has operations and, to a lesser extent, changes in U.S. laws and regulations relating to foreign trade and investment. The Company continually evaluates the risk of 6 non-U.S. operations when considering capital and reinvestment alternatives. The Company also uses various currency hedging strategies to mitigate the effects of currency fluctuations. In many non-U.S. countries, the appeal of Levi's(R) products, particularly the 501(R) family of products, has generated higher prices for those products than those in the U.S. This encourages diversion of Levi's(R) products sold in the U.S. to countries where the products command higher prices. The Company is taking steps to discourage diversion, however, the recent weakening of the U.S. dollar compared to certain European currencies has reduced in some measure the effectiveness of these steps. In addition, the approach may result in U.S. retailer and consumer resistance to the higher pricing for the U.S. products, a factor of particular concern given increased retailer and consumer value- consciousness. More recently, certain currencies within Europe have weakened against the German mark and French franc, resulting in cross-border diversion. This occurrence adversely affects pricing strategy in Europe. Across many markets, a growing problem faced by the Company is the counterfeiting of its Levi's(R) brand products. Counterfeit products primarily originate in Asia and the most lucrative market for the sale of these products is Europe. The Company pursues and prosecutes counterfeiters because of the serious negative effects which could result from the presence of these products in the markets, including erosion of brand image and consumer confidence. Competition The Company and its largest competitor in the U.S. jeans market, VF Corporation, account for approximately one-half of the units sold in the U.S. jeans market. The Company believes that the combined brand share of its Levi's(R) and Brittania(R) products in the U.S. jeans market is second only to the combined share of VF Corporation's four principal brands, Wrangler(R), Lee(R), Rustler(R) and Lee Riders(R). As a result of the changing retail environment, competition is also emerging from some of the Company's customers who have developed private-label products. The Company is seeking to strengthen relationships and consumer loyalty through the use of dedicated channels (i.e., Original Levi's Stores in the U.S. and overseas), by utilizing targeted consumer marketing and maintaining a presence on the Internet. The Company believes that the Dockers(R) brand has surpassed its traditional competitors in market share. As these traditional competitors have begun to lose retail space, specialty stores, mail-order marketers and fully integrated lines are presenting new competition for the Dockers(R) products. Further, import competition is more prevalent in the casual apparel market than in the jeans market. Apparel imports have generally lower labor costs and may exert downward pressure on prices of casual wear products. This situation is limited to some extent by U.S. trade policies that restrict apparel imports through quotas and tariffs. In the Company's principal markets outside of the U.S., although there is no single competitor in the jeans market with a comparable global market presence, there are numerous local competitors of varying strengths which are beginning to exert greater pressures. In Japan, the Levi's(R) brand faces strong competitors who have gained market share by reducing prices in response to the growing number of value-oriented consumers. Additionally, as in the U.S., competition from retailers' house brands is increasing in many countries. Distribution The Company distributes its Levi's(R) and Dockers(R) products through retail stores that satisfy its account selection criteria and sell directly to the retail consumer. The Company does not sell its first quality "in season" products to wholesalers, jobbers or distributors, and maintains a compliance program to enforce its distribution policy and to control unauthorized diversionary sales of its products. The Company believes 7 that industry leadership and brand strength of its core products are maintained through the use of traditional distribution channels including department stores, specialty stores and national chains. The Company distributes Brittania(R) products principally through mass merchant channels, including Kmart Corporation and Target Stores. Mass merchandisers comprise approximately 5% of the Company's U.S. unit sales. Outside of the U.S., the retail industry differs from country to country. In some regions the Company's primary customers are large chain retailers with centralized buying power. In other countries, the retail industry is comprised of numerous smaller, less centralized shops. The Company also distributes to approximately 1,100 independently owned stores outside the U.S. that sell only Levi's(R) brand products. These stores are strategically positioned in prime locations around the world and offer a broad selection of premium Levi's(R) products using special retail fixtures and visual merchandising. The Company believes these stores are of strategic importance in enhancing the brand image of Levi's(R) products. Company-Owned Retail and Outlet Stores/Retail Joint Venture In order to enhance the image and values of the Levi's(R) and Dockers(R) brands, the Company has begun implementation of a five-year plan to open up to 100 Original Levi's Stores and 50 Dockers Shops at various locations throughout the U.S. Of the 100 Original Levi's Stores planned, up to 50 are to be established through a joint venture relationship with Designs, Inc., in which the Company has a 30% equity interest, and the remaining stores will be owned and operated by the Company. This joint venture was established in January 1995. The Original Levi's Stores and Dockers Shops sell only Levi's(R) and Dockers(R) branded products. The Company believes that by managing these stores directly, management will learn the needs of both retailers and consumers. Premier stores will be operated only in key markets and locations most able to help the Company achieve its primary focus of maintaining a high brand image, such as downtown urban locations and selected high visibility regional malls. The Company's five- year plan also includes the operation of up to 90 outlet stores, seven of which were open as of November 26, 1995, dedicated to each brand in key outlet malls outside major markets. The Company has authorized projects with capital expenditures totaling approximately $177.0 million during the next few years in connection with this program. As of the end of fiscal year 1995, 21 Original Levi's Stores were open, of which 12 were established with the Company's joint venture partner and eight are Company owned and operated. These stores offer the largest and most comprehensive selection of Levi's(R) products in the U.S. and also currently offer Levi's(R) Personal Pair(TM) jeans, a personal-fit service available to Levi's(R) Jeans for Women customers. During the fourth quarter of 1995, the Company acquired Custom Clothing Technology Corp. (CCTC), the software company responsible for creating the technology behind Personal Pair(TM) products. Personal Pair(TM) jeans are also available at Original Levi's Stores in Canada. The consumer response to the Personal Pair(TM) product has been very favorable, and as such, the Company plans to expand this offering to women's Dockers(R) products, and men's jeans and Dockers(R) products. The Company had 10 Dockers Shops throughout the U.S. as of the end of fiscal year 1995. As with the Original Levi's Stores, a New York Flagship Dockers Shop was opened in September 1995. These Dockers Shops offer the largest selection of Dockers(R) products in the U.S., including the men and women's Dockers(R) line, Dockers(R) Golf and Dockers(R) Authentics. To further enhance the Levi's(R) brand image outside of the U.S., the Company opened one owned and operated "flagship" store in London during 1994 and expects to open several other flagship stores in major metropolitan areas outside of the U.S. in 1996. 8 Advertising and Marketing The Company devotes substantial resources to advertising and marketing programs which differ according to the conditions of the country targeted. In the U.S., the Company advertises extensively on radio and television and in national publications as well as on billboards and other outdoor displays. It also participates in local co-operative advertising and visual merchandising programs under which the Company shares advertising and point of sale costs with retailers. The Company is increasing its use of in-store presentations in which the Company influences the way its products are presented at the retail level. The Company assists retailers in displaying products in a manner intended to enhance the product's image, promote its quality and present a consistent brand message directly to the consumer. Outside the U.S., advertising themes and strategies vary depending on the culture of the country, however, these themes and strategies seek to maintain consistency in the global positioning of the Levi's(R) brand. In addition to media and point of sale advertising, the Company sponsors international concerts and events. In 1995, the Levi's(R) brand launched a major 501(R) product line campaign in the U.S. entitled "501 Reasons" and continued several other advertising initiatives supporting women's and youthwear product lines as well as a new Levi's(R) brand trademark campaign. These campaigns continue the Levi's(R) brand's commitment to a strong consumer marketing focus. Initially launched in Europe, the animated "Clayman" campaign became the Company's first global commercial designed to communicate a consistent image for the Levi's(R) brand. During 1995 the U.S. Dockers(R) brand launched national, regional and outdoor advertising campaigns for men's, women's and youth Dockers(R) products. Specifically, in the Fall of 1995, the Dockers(R) brand launched its "Nice Pants" media campaign designed to create a consistent, younger image for the brand. In 1995, U.S. and non-U.S. advertising expense was $276.1 million and $175.5 million, respectively, compared to 1994 expenses of $233.5 million and $139.2 million, respectively. Strategic Initiatives The importance of customer service, both inside and outside the U.S., prompted the Company to undertake a significant reengineering effort, particularly in the U.S., referred to as its customer service initiative. The U.S. customer service initiative involves development and implementation of new business processes intended to enable the Company to meet a number of defined customer service targets. The Company is also involved in a similar effort in its businesses outside of the U.S. U.S. Customer Service Initiative In November 1995, U.S. management re-examined its customer service initiative effort in its entirety. Management reviewed a number of factors, including positive developments in U.S. sales and delivery performance and the complexity of the initiative, resource requirements, escalating costs and business disruption. Management concluded that a continued effort to meet the original customer service targets within the planned timetable was inappropriate due to a lack of cost-effectiveness and business disruption risks. Accordingly, U.S. management has revised the customer service goals, timetable and approach, which is intended to reduce the costs and business disruption risks of the initiative while permitting the Company to maintain a competitive advantage. Since 1993 and over the next several years, the Company has and plans to incur total capital expenditures of over $400.0 million to support the new U.S. distribution network, expanded system requirements, organization and manufacturing changes. Included in this total capital expenditure projection is over $300.0 million related to the construction, renovation and retrofitting of new and existing customer service centers. The total capital expenditure projection amount includes previously recognized capital expenditures of approximately $280.0 million. 9 Additionally, the Company plans to spend approximately $450.0 million for transitional expenses, including costs related to the implementation of new software applications, reengineering design and planning, implementation of organization and process changes, training, education and other related expenses. The total amount for transitional expenses include previously recognized expenses of approximately $150.0 million. These costs will be expensed as incurred. LSI Customer Service Initiatives The LSI customer service initiatives encompass the Company's affiliates in the Europe, Latin America and Asia Pacific divisions. The objective of the LSI initiatives is to build the capabilities within the LSI organization to make customer service a competitive advantage. Scheduled to begin in 1996, the initiatives will follow a gradual and phased implementation over an extended time-frame and will be integrated into the normal business operations. Based in part upon U.S. experience, LSI management, in reviewing proposed business process designs, is focusing on cost-effectiveness, the anticipated benefits of the initiative, and the impact on business disruption. The Company plans total expenditures (including capital expenditures) related to the customer service initiatives in the Europe, Latin America and Asia Pacific divisions to be approximately $71.0 million during 1996. Risks of Strategic Initiatives Although the Company has revised the original objectives, scope and timing of the customer service initiatives, the Company continues to assume substantial risks in undertaking these initiatives. Business and employee disruption, escalating costs and schedule slippage still pose risks to the Company during the reengineering effort. Successful transition to and training of employees for new positions, development and integration of essential information systems, effective completion of new customer service centers and management of manufacturing facility redesign efforts are critical factors leading to the success of the service initiatives. More broadly, these initiatives involve fundamental changes in the way the Company operates its business. There are numerous commercial, operating, financial, legal and other risks and uncertainties presented by the design and implementation of such programs. The Company is not aware of undertakings of comparable magnitude in the apparel industry, and cannot predict with certainty the outcome of these initiatives. Although there can be no assurance that the Company will successfully design and implement these new business processes, or that the costs of these initiatives will not exceed estimates, the Company believes that the reengineering initiative is essential to maintain its global competitive position. Information Systems The Company continues to face challenges in developing the information systems necessary to support new business processes and customer service requirements. The complexities and cost of planning, developing, implementing and integrating new systems were key factors in the Company's decision to refocus its customer service initiative. Inadequate systems occasionally hinder and may adversely affect the Company's decision making processes and execution including, for example, demand forecasting and the use of automated product replenishment arrangements. The Company is devoting substantial resources to technology acquisition and development, including a major effort to upgrade personal computers throughout both the U.S. and non-U.S. organizations, and development of the systems needed to support the business. In addition, the Company must install new materials handling technologies in the new customer service centers and integrate the software that operates that equipment with the Company's business systems. The Company considers development of flexible, cost-effective technology a critical strategic business issue. 10 Global Sourcing Sourcing is a key strategic issue and is critical to the Company's success. In 1995 and 1994, approximately 54% and 50%, respectively, of the apparel production units of the Company's U.S. operations were manufactured by independent contractors. Approximately 42% and 45% of non-U.S. products were manufactured by independent contractors in 1995 and 1994, respectively. In 1995 and 1994, independent contractors were used for the finishing process for approximately 72% and 70%, respectively, of the finished units of U.S. operations. Approximately 47% and 53% of the finishing process for non-U.S. finished units in 1995 and 1994, respectively, was performed by independent contractors. The Company has a few long-term contracts with certain of its manufacturing sources and competes with other companies for production facilities and import quota capacity. Inability to obtain quality production could adversely affect incremental volume gains in a period of strong sales, a problem experienced from time to time by the Company. Although the Company believes that it has established close relationships with its manufacturing sources, the Company's future success will depend in some measure upon its ability to maintain such relationships. In line with the Company's efforts to conduct its business in a responsible manner, the Company established its Global Sourcing and Operating Guidelines (GSOG) to provide direction for the selection of contractors and suppliers. The GSOG is comprised of two parts: 1) the Business Partner Terms of Engagement which address workplace issues that are substantially controllable by individual business partners and 2) the Country Assessment Guidelines which address larger, external issues beyond the control of individual business partners. The Terms of Engagement assist in selecting business partners that operate work places where ethical, legal, environmental, employment and community involvement standards and practices are consistent with those of the Company. The Country Assessment Guidelines assist in making practical and principled business decisions in balancing the potential risks and opportunities associated with conducting business in a particular country. In making these decisions, issues of brand image, health and safety, the human rights environment, the legal system and the political, economic and social environment are considered in an attempt to determine the degree to which the Company's global corporate reputation and commercial success may be exposed to unreasonable risk. Cost is also a key component of sourcing. Currently, there is a substantial disparity between U.S. and offshore cost of production. The Company is engaged in various efforts to reduce the costs of U.S. manufacturing (for example, by redesigning processes within individual facilities and worker training), and has a long-term sourcing plan for its U.S. operations. In addition, the Company is rationalizing its supplier base, with development of business partnerships based on terms of engagement, service, financial stability, community support and long-term mutual profitability, not simply low cost, as the key objective. The businesses outside of the U.S. are undertaking similar measures to reduce costs, including using cost-benefit analysis to evaluate sourcing alternatives. The General Agreement on Tariffs and Trade (GATT) Uruguay Round agreement was implemented on January 1, 1995. The major provision of the agreement which may impact the Company is the phase-out of the textile and apparel quota system, the Multifiber Arrangement (MFA). Most quotas are scheduled to be eliminated after 10 years. The North American Free Trade Agreement (NAFTA) became effective January 1, 1994. Quota and tariffs are being phased out on apparel products of North American origin over a six to seven year period. Tariffs on the Company's products produced in Mexico from U.S. fabric have had immediate duty-free and quota-free access to the U.S. market. 11 Trade legislation which may significantly impact the Company in 1996 would be the passage of NAFTA-like preferential tariffs for the Caribbean Basin countries (CBI countries). A "CBI Parity" Bill was introduced in Congress in 1995 but has been opposed by Unions and other groups. At this time, the future of this legislation is uncertain. Raw Materials The Company's flagship product is the 501(R) jean. Cone Mills Corp. historically has been and remains the sole worldwide supplier of the denim used in 501(R) jeans. The Company has a long-term supply contract with Cone Mills Corp. but has no other long-term raw materials contracts. The loss of Cone Mill Corp. or other principal suppliers could have an adverse effect on the Company's results and operations. Increases in denim prices would also directly affect the Company's cost and earnings. As part of its U.S. reengineering effort, the Company is rationalizing its supplier base to reduce the number of suppliers it uses for certain fabrics. The Company also purchases large quantities of thread and trim (buttons, zippers, snaps, etc.) but is not dependent on any one supplier for such items. Cone Mills Corp. and Burlington Industries supplied approximately 28% and 16%, respectively, of the total volume of fabrics purchased by the Company for U.S. operations in 1995. Cone Mills Corp. supplied approximately 30% of the Company's fabric purchases for non-U.S. operations in 1995. Unshipped Orders As of November 26, 1995 and November 27, 1994, the Company's unshipped order position for all products was approximately 112 million and 105 million units, respectively. The increase is attributable to the anticipation of a strong first quarter of 1996 for the Levi's(R) brand. Unit cancellations in 1995 increased 7% from 1994. Although improved inventory management was experienced in the U.S., Canada and Mexico, resulting in lower unit cancellations, slightly higher unit cancellations were seen in the Europe and Asia Pacific divisions. Despite the increase in unit cancellations, unit sales continued to increase. Trademarks and Licensing Agreements The Company has a general program concerning the protection and enforcement of its trademark rights. The Levi's(R) trademark, one of the Company's most valuable assets, is registered in over 150 countries. The Company owns and has widely registered other trademarks that it uses in marketing jeans and other products, the most important of which, in terms of product sales, are the 501(R), Dockers(R), Tab Device(R) and Arcuate Stitching Design(R) trademarks. The Company vigorously defends its trademarks against infringement, including initiating litigation to protect such trademarks when necessary. The Company has licensing agreements permitting third parties to manufacture and market Levi's(R) branded products in countries where the Company has elected not to, or is unable to, manufacture or market on a direct basis. Additionally, it has agreements permitting third parties to manufacture and distribute certain other products, such as shoes, socks and belts, under the Levi's(R), Dockers(R) and Brittania(R) trademarks. In the Fall of 1995, the Company introduced a new brand of dress slacks under the SLATES(TM) trademark. The Company is in the process of registering this trademark in several countries. Seasonality The apparel industry in the United States generally has four selling seasons-- Spring, Summer, Fall and Holiday. New styles, fabrics and colors are introduced on a regular basis, based on anticipated consumer 12 preferences, and are timed to coincide with these retail selling seasons. Historically, seasonal selling schedules to retailers have preceded the related retail season by two to eight months. Outside the U.S., the apparel industry typically has two seasons--Spring and Fall. The Company's business is affected by the general seasonal trends that are characteristic of the apparel industry. Customers No customers of the Company accounted for 10% or more of net sales for fiscal year 1995. The Company has no long-term contracts or commitments with any of its customers other than with its retail joint venture partnership. U.S. sales to the Company's top five retail customers accounted for 39% and 38% of total U.S. revenues for fiscal year 1995 and 1994, respectively. The loss of any of these customers could have a material adverse effect on the Company's results of operations. The sale of Brittania(R) products to two customers accounted for approximately 71% and 64% of 1995 and 1994 Brittania(R) revenues, respectively. The loss of either of these customers could have an adverse effect on Brittania Sportswear Ltd.'s operations, but not a material effect on the Company's results of operations. Employees The Company employs approximately 37,700 people, a majority of whom are production workers. A substantial number of production workers are employed in plants where the Company has collective bargaining agreements with recognized labor unions. The Company considers its employees to be an important asset of the Company and believes that its relationships with employees are satisfactory. Environmental Laws Compliance with United States federal, state and local laws enacted for the protection of the environment has to date had no material effect upon the Company's capital expenditures, earnings, or competitive position. Although the Company does not anticipate any material adverse effects in the future based on the nature of its operations and the thrust of such laws, no assurance can be given that such laws, or any future laws enacted for the protection of the environment, will not have a material adverse effect on the Company. Foreign and Domestic Operations and Geographic Data See Note 2 to the Consolidated Financial Statements for information regarding financial data by geographic area. Social Responsibility Social responsibility is a matter of strong conviction on the part of the Company. The Company has a long-standing commitment to equal employment opportunity, affirmative action and minority purchasing programs. The Company seeks to be an active corporate citizen in the communities in which it operates and maintains a Worldwide Code of Business Ethics. The Company has traditionally supported charitable social investment programs and intends to maintain its historical practice of charitable giving. During 1995, the Company made a donation of $19.0 million to the Levi Strauss Foundation. The Company also contributed $.1 million to support matching gifts to the Red Tab Foundation, which was established to provide emergency financial assistance to the Company's employees and retirees in the United States. The Red Tab Foundation is currently in the process of expanding to non-U.S. affiliates. The Levi Strauss Foundation made current grant commitments totaling approximately $10.8 million in 1995 and the Company made additional corporate charitable contributions of $5.0 million, primarily for 13 international programs. These include grants in three community partnership giving (or staff-directed) areas: AIDS and Disease Prevention, economic development (projects which seek to enhance the economic options and opportunities of low-income individuals) and social justice (Project Change, a race relations program in four U.S. communities). Also included are grants through the Community Involvement Team program (in which groups of employees or retirees volunteer their time to review local community needs and then develop and implement projects to meet those needs), the Corporate Childcare Fund and the Social Benefits Program (matching gifts and volunteer service programs). Contributions by the Levi Strauss Foundation have averaged over $9.3 million for each of the last three years. Mission Statement and Aspirations Statement The Company believes that shared goals are as critical to the Company's success as providing quality products and service and being a leader in the apparel industry. In order to identify and focus these shared goals, the Company adopted the following "Mission Statement" and "Aspirations Statement": Mission Statement The mission of the Company is to sustain responsible commercial success as a global marketing company of branded apparel. We must balance goals of superior profitability and return on investment, leadership market positions, and superior products and service. We will conduct our business ethically and demonstrate leadership in satisfying our responsibilities to our communities and to society. Our work environment will be safe and productive and characterized by fair treatment, teamwork, open communications, personal accountability and opportunities for growth and development. Aspirations Statement We want a Company that our people are proud of and committed to, where all employees have an opportunity to contribute, learn, grow and advance based on merit, not politics or background. We want our people to feel respected, treated fairly, listened to and involved. Above all, we want satisfaction from accomplishments and friendships, balanced personal and professional lives, and to have fun in our endeavors. When we describe the kind of Company we want in the future, what we are talking about is building on the foundation we have inherited: affirming the best of our Company's traditions, closing gaps that may exist between principles and practices and updating some of our values to reflect contemporary circumstances. The type of leadership that is necessary to make these Aspirations a reality is as follows: Teamwork and Trust: Leadership that exemplifies directness, openness to influence, commitment to the success of others, willingness to acknowledge our own contributions to problems, personal accountability, teamwork and trust. Not only must we model these behaviors but we must coach others to adopt them. Diversity: Leadership that values a diverse workforce (age, sex, ethnic group, etc.) at all levels of the organization, diversity in experience and a diversity in perspectives. We are committed to taking full advantage of the rich backgrounds and abilities of all our people and to promote a greater diversity in positions of influence. Differing points of view will be sought; diversity will be valued and honesty rewarded, not suppressed. 14 Recognition: Leadership that provides greater recognition--both financial and psychic--for individuals and teams that contribute to our success. Recognition must be given to all who contribute: those who create and innovate and also those who continually support the day-to-day business requirements. Ethical Management Practices: Leadership that epitomizes the stated standards of ethical behavior. We must provide clarity about our expectations and must enforce these standards throughout the corporation. Communications: Internally, leadership that builds an environment where information is actively shared, sought and used in ways that lead to empowerment that works, improved performance, and meaningful feedback. Externally, leadership that strengthens our corporate reputation with key stakeholders. All communications should be clear, timely and honest. Empowerment: Leadership that promotes ways of working in which responsibility, authority and accountability for decision making are held by those closest to our products and customers, and every employee has the necessary perspective, skills and knowledge to be successful in his or her job. We all share responsibility for creating the environment that will nurture empowerment at all levels of the organization. The Company is providing Aspirations training to employees and attempts to hold managers and employees accountable for behaviors that are in accordance with these objectives. Business Vision The Company developed its Business Vision to identify its goals and provide direction for prioritizing its initiatives and strategies. The Business Vision is as follows: We will strive to achieve responsible commercial success in the eyes of our constituencies, which include stockholders, employees, consumers, customers, suppliers and communities. Our success will be measured not only by growth in shareholder value, but also by our reputation, the quality of our constituency relationships, and our commitment to social responsibility. As a global company, our businesses in every country will contribute to our overall success. We will leverage our knowledge of local markets to take advantage of the global positioning of our brands, our product and market strengths, our resources and our cultural diversity. We will balance local market requirements with a global perspective. We will make decisions which will benefit the Company as a whole rather than any one component. We will strive to be cost effective in everything we do and will manage our resources to meet our constituencies' needs. The strong heritage and values of the Company as expressed through our Mission and Aspiration Statements will guide all our efforts. The quality of our products, services and people is critical to the realization of our business vision. Products We will market value-added, branded apparel with Levi's(R) branded jeans continuing to be the cornerstone of our business. Our brands will be positioned to ensure consistency of image and values to our consumers around the world. Our channels of distribution will support this effort and will emphasize the value-added aspect of our products. To preserve and enhance consumers' impressions of our brands, the majority of our products will be 15 sold through dedicated distribution, such as Levi's(R) Only Stores and in-store shops. We will manage our products for profitability, not volume, generating levels of return that meet our financial goals. Service We will meet the service commitments that we make to our customers. We will strive to become both the "Supplier of Choice" and "Customer of Choice" by building relationships that are increasingly interdependent. These relationships will be based upon a commitment to mutual success and collaboration in fulfilling our customers' and suppliers' requirements. All business processes in our supply chain--from product design through sourcing and distribution--will be aligned to meet these commitments. Our sourcing strategies will support and add value to our marketing and service objectives. Our worldwide owned-and-operated manufacturing resources will provide significant competitive advantage in meeting our service and quality commitments. Every decision within our supply chain will balance cost, customer requirements, and protection of our brands, while reflecting our corporate values. People The Company will be the "Employer of Choice" by providing a workplace that is safe, challenging, productive, rewarding and fun. Our global work force will embrace a culture that promotes innovation and continuous improvement in all areas, including job skills, products and services, business processes, and Aspirational behaviors. The Company will support each employee's responsibility to acquire new skills and knowledge in order to meet the changing needs of our business. All employees will share in the Company's success and commitment to its overall business goals, values and operating principles. Our organization will be flexible and adaptive, anticipating and leading change. Teamwork and collaboration will characterize how we address issues to improve business results. 16 ITEM 2. PROPERTIES At November 26, 1995, the Company owned or leased various manufacturing, warehousing, distribution and office facilities throughout the U.S. and abroad. Corporate headquarters are located at Levi's Plaza in San Francisco, California, where the Company currently leases 668,005 square feet of office space, of which 75,992 square feet is subleased to third parties. Additionally, the adjacent Company owned "Icehouse Building" is used as office facilities and encompasses 194,765 square feet, of which 6,264 square feet is subleased. Further, 384,578 square feet of office space is leased by the Company throughout the U.S. for use as sales offices, data centers and other general purposes. The manufacturing, warehousing and distribution facilities utilized in the Company's operations are described below.
Owned * Leased Total --------------------- --------------------- ---------------------- Number Number Number of Square of Square of Square Facilities Feet Facilities Feet Facilities Feet ---------- --------- ---------- --------- ---------- ---------- Manufacturing and Warehousing: U.S. 26 2,709,864 18 1,123,953 44 3,833,817 Non-U.S. 14 1,264,794 8 495,500 22 1,760,294 -- --------- -- --------- -- ---------- 40 3,974,658 26 1,619,453 66 5,594,111 Distribution: U.S. 7 3,998,850 1 170,875 8 4,169,725 Non-U.S. 3 447,203 18 1,233,400 21 1,680,603 -- --------- -- --------- -- ---------- 10 4,446,053 19 1,404,275 29 5,850,328 -- --------- -- --------- -- ---------- Total 50 8,420,711 45 3,023,728 95 11,444,439 == ========= == ========= == ==========
- ------------------------------------------- * Includes properties under capital lease. U.S. Operations The manufacturing and warehousing facilities are principally located in Texas and Tennessee. Approximately 122,364 of the total space was idle and available for sublease. The sole leased distribution facility, 170,875 square feet, is used by the Brittania(R) division. Owned distribution centers for U.S. operations are located in Mississippi, Arkansas, Kentucky, Nevada and Texas. Construction is in process on three distribution centers, with a total square footage of 2,522,904 in conjunction with the Company's customer service initiatives. These centers were not in operation as of November 26, 1995. Non-U.S. Operations Manufacturing and warehousing facilities outside the U.S. are located primarily in Canada, Spain, the United Kingdom, Brazil and Belgium. The largest distribution facilities outside of the U.S. are located in Belgium, Germany and Canada. In management's opinion, these facilities are well maintained and provide adequate capacity for current and future operations of the Company. However, the Company continues to evaluate the facility needs of its operations given changing U.S. and non-U.S. markets. 17 ITEM 3. LEGAL PROCEEDINGS The Company does not consider any pending legal proceeding to be material. In the ordinary course of its business the Company has pending various cases involving contractual matters, employee-related matters, distribution questions, product liability claims, trademark infringement and other matters. The Company believes that these cases are not material in the aggregate in light of the strength of its legal positions in such matters. The Company evaluates environmental liabilities on an ongoing basis and, based on currently available information, does not consider any environmental exposure to be material to the Company's consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None, during the 1995 fourth quarter. 18 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's outstanding Class L common stock is held primarily by members of the families of certain descendants of the Company's founder and certain members of the Company's management. Class E common stock is currently held by the trustee for the Employee Investment Plan of Levi Strauss Associates Inc. (EIP), the Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan (ELTIS) and employees who purchased stock through the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc. (ESAP) (see Note 12 to the Consolidated Financial Statements). There is no established public trading market for either class of common stock and no shares of common stock are convertible into shares of any other classes of stock or other securities. All holders of Class L common stock are parties to, and bound by, an agreement restricting transfer of the Class L common stock. Additionally, management Class L stockholders are parties to contracts with the Company providing for in- service, employment separation-related and post-separation stock purchases (see Note 16 to the Consolidated Financial Statements for information relating to the Management Liquidity Program). The outstanding shares of Class E common stock are subject to restrictions on transfer imposed by the EIP, ELTIS and ESAP. On February 2, 1996, there were approximately 250 Class L stockholders and 1,237 Class E stockholders. During February 1996, the Company entered into an Agreement and Plan of Merger (the "Merger") with LSAI Holding Corp. ("Holdings") and LSAI Acquisition Corp. Pursuant to the Merger, each share of the Company's Class L Common Stock (other than shares contributed to Holdings by Class L holders) and each share of the Company's Class E Common Stock will be converted into the right to receive $265 per share in cash. See Note 20 to the Consolidated Financial Statements for further discussion. See Note 18 to the Consolidated Financial Statements for stock valuation information. 19 ITEM 6. SELECTED FINANCIAL DATA The following table presents historical income statement data and balance sheet data of the Company for the past five fiscal years. This data has been derived from the consolidated financial statements of the Company, which have been audited by Arthur Andersen LLP, independent public accountants. Unless otherwise indicated, references to years in this Form 10-K refer to the fiscal years of the Company.
Fiscal Years * 1995 1994 1993 1992 1991 ===================================================================================================================== (Dollars in Millions, Except Per Share Data) Operating Results: Net sales $ 6,707.6 $ 6,074.3 $ 5,892.5 $ 5,570.3 $ 4,902.9 Gross profit 2,777.5 2,441.9 2,254.3 2,138.8 1,878.6 Percentage of net sales 41.4% 40.2% 38.3% 38.4% 38.3% Stock option charge -- -- -- 158.0 -- Operating income 987.2 969.1 851.7 677.4 750.0 Income from continuing operations 734.7 557.5 492.4 360.8 366.5 Cumulative effects of changes in accounting principles/(1)/ -- (236.5) -- -- -- Net income 734.7 321.0 492.4 358.9 345.1 - --------------------------------------------------------------------------------------------------------------------- Per Common Share Data: Income from continuing operations $ 13.94 $ 10.59 $ 9.38 $ 6.91 $ 6.44 Cumulative effects of changes in accounting principles/(1)/ -- (4.49) -- -- -- Net income 13.94 6.10 9.38 6.91 6.26 Cash dividends declared/(2)/ 1.50 1.30 1.10 3.40 .20 - --------------------------------------------------------------------------------------------------------------------- Financial Position: Total assets $ 4,709.2 $ 3,925.3 $ 3,108.7 $ 2,880.7 $ 2,633.4 Long-term debt and capital lease obligations 16.4 16.7 93.1 262.0 432.7 Employee Stock Purchase and Award Plan common stock 66.5 49.7 33.5 16.4 -- Management Liquidity Program common stock 180.1 138.6 -- -- -- Stockholders' equity 2,115.3 1,471.6 1,251.0 768.2 558.3 Working capital $ 1,673.6 $ 1,567.5 $ 1,017.2 $ 609.5 $ 648.0 Current ratio 2.2 2.4 1.9 1.5 1.6 - ---------------------------------------------------------------------------------------------------------------------
* Fiscal years 1995, 1994, 1993 and 1991 each contained 52 weeks and ended on November 26, 1995, November 27, 1994, November 28, 1993 and November 24, 1991, respectively. Fiscal year 1992 contained 53 weeks and ended on November 29, 1992. /(1)/ Effective November 29, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes." /(2)/ For fiscal years 1995, 1992 and 1991, dividends were declared on Class E Common Stock and Class L Common Stock. For fiscal years 1994 and 1993, dividends were declared on Class E Common Stock only. 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following summary of results of operations, financial condition and liquidity discusses data contained in the Consolidated Financial Statements of the Company. The discussion focuses on 1995, 1994, and 1993 comparisons and includes analyses of major components of net income, specific balance sheet items, liquidity and capital resources. Results of Operations - -------------------------------------------------------------------------------- Summary The Company achieved record net income in 1995, mainly due to record sales, a one-time $100.0 million reversal of previously recorded taxes on unremitted non- U.S. earnings, lower costs of goods sold as a percentage of sales, favorable currency hedging transactions and higher interest income due to higher levels of cash investments in 1995. Negatively affecting record earnings were marketing, general and administrative expenses which increased as a percentage of net sales for 1995. Net income results exceeded 1994 results by 129%, however, 1994 results included the adoption of Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109 "Accounting for Income Taxes" which caused a net of tax negative impact of $236.5 million on 1994 earnings. Excluding the net impact of these one-time charges, 1995 net income would have been 32% higher than 1994. The Company anticipates that sales in 1996 will exceed 1995 record figures based primarily on the continued market expansion and growth of the Levi's(R) brand products. Net income for 1996, however, is expected to decrease from 1995 as a result of planned increases in expenses related to the customer service initiatives, information systems expansion, the start-up of new businesses, an increase in certain non-U.S. advertising campaigns, the 1995 one-time reversal of $100.0 million of previously recorded taxes on unremitted non-U.S. earnings and the 1995 reversal of $103.0 million of previous years' workers' compensation accruals. Also expected to contribute to the lower 1996 earnings, is higher interest expense related to debt which would be required to fund a proposed merger transaction. (See "Subsequent Events - Proposed Merger Transaction" within this item of the Form 10-K.) Net Sales Net sales for fiscal year 1995 reached a record level of $6.7 billion, an increase of 10% over 1994, compared to the 1994 increase of 3% over 1993. The increase in 1995 was attributable to a 6% increase in unit sales and by a 4% increase in average unit selling prices. Sales from U.S. operations were $4.1 billion, an increase from 1994 of 9%, principally due to strong performance in Levi's(R) jeans for men and women. Dockers(R) products also achieved increases in sales due to the strong sales of men's products offset by a continued decrease in the performance of women's and youthwear products. In the U.S., the top five and top 25 customers comprised approximately 39% and 67%, respectively, of total U.S. net sales for 1995. In 1994, the top five and top 25 customers comprised approximately 38% and 65%, respectively, of total U.S. net sales for the year. Non-U.S. sales for 1995 were a record at $2.6 billion, an increase of 12% over 1994 and were driven by consumer demand for basic denim products, particularly the 501(R) family of products. Due to higher overall average unit selling prices and a greater proportion of sales of higher margin denim bottoms, businesses outside of the U.S. continue to enjoy higher gross margins than U.S. businesses. Sales in Europe increased 16% from the prior year, led by strong sales in Germany and Italy, and high growth in France and certain affiliates in Eastern Europe. In the Asia Pacific division, predominantly Japan, 21 consumer demand continued to vacillate between core heavy weight denim products and alternative lighter weight blended fabric products. Continued strong growth was experienced in South Korea. Dockers(R) products for men were offered in numerous markets within Europe and Asia Pacific in 1995. Although unit volume was low, consumer acceptance was high in most markets. The Company anticipates higher unit volume in 1996. Furthermore, dollar sales were favorably impacted by foreign currency translation rates for certain European currencies and the Japanese yen. Dollar sales for 1994 of $6.1 billion increased 3% over 1993 sales of $5.9 billion mostly due to a 6% increase in average unit selling prices that offset a 3% decrease in unit sales. Contributing to the 1994 results was strong performance in the Europe division and the U.S. Levi's(R) brand product line. Cost of Goods Sold Cost of goods sold as a percentage of net sales was 59% in 1995, a slight decrease from 60% in 1994 and 62% in 1993. Due to the performance of the Levi's(R) brand, markdowns of inventories were lower, helping to maintain margins. Furthermore, the Company continued its efforts to focus on overall cost effectiveness in line with its strategic initiatives. These efforts were reflected in the implementation of alternative manufacturing systems and greater utilization of production capacity at certain U.S. owned and operated manufacturing facilities. Although benefits of the alternative manufacturing systems included reduced absenteeism and turnover, decreased injuries and lower workers' health and safety costs, the implementation did not lower production costs at the rate originally anticipated. The 1995 cost of goods sold benefited from the reversal of approximately $103.0 million of previous years' workers' compensation accruals in the U.S. compared to a similar reversal of $85.9 million in 1994. Costs of goods sold per average unit produced outside of the U.S. was slightly higher due to the high cost of labor in certain non-U.S. markets, particularly Western Europe. Although the average cost per unit produced outside the U.S. is higher when compared to U.S. produced goods, the gross margins experienced outside of the U.S. are greater due to higher average unit selling prices. In 1995, while non-U.S. operations produced 39% of the Company's net sales, they contributed 48% to consolidated earnings before corporate expenses and interest. Marketing, General and Administrative Marketing, general and administrative expenses in 1995 increased to $1.8 billion from $1.5 billion the prior year. As a percentage of net sales, these costs were 27% in 1995 and 25% in 1994. The largest increase in costs was reflected in administrative expenses which increased 30% in 1995 compared to 1994. The increase was mainly due to compensation expense increases resulting from the Company's long-term performance plan and a new performance and pay program, Partners in Performance, both of which were based on actual results that exceeded pre-established targets for the year. Furthermore, stock based compensation expense was negatively impacted by the significant appreciation in the value of the Company's common stock. (See Note 16 to the Consolidated Financial Statements for additional information.) Information resources expense increased 29% from the prior year as a result of expansion of the Company's information systems infrastructure. The increase in these costs on a global basis, stemmed from the Company's continued efforts to devote substantial resources to technology acquisition and development, including a major effort to upgrade personal computers and develop the systems needed to effectively support the Company's operations. Advertising expenses increased 21% from the prior year primarily due to increased cinema, television, print and billboard advertising to support the Dockers(R) brand repositioning in the U.S. and new television and cinema campaigns for the Levi's(R) brand in Europe. In 1995 the Company launched the "Clayman" 22 campaign in Europe, and as a result of highly favorable consumer response, the Company introduced the campaign in numerous other markets, making it the Company's first global campaign. Additionally, the "501 Reasons" campaign was launched to support the Levi's(R) brand in the U.S. As a percentage of sales, marketing, general and administrative expense for 1994 was 25% compared to 24% in 1993. Administrative expense for 1994 increased 12% from the comparable 1993 period mostly due to compensation expense related to the adoption of the Management Liquidity Program, expenses related to customer service initiatives in the U.S. and higher earnings-related compensation costs. Selling expense for 1994 increased 22% over 1993 primarily due to higher 1994 sales and increased staffing required to support new and existing product lines in the U.S. The Company is experiencing an upward trend in marketing, general and administrative expenses as a percentage of sales. These expenses represented 27%, 25% and 24% of sales in 1995, 1994 and 1993, respectively. The Company believes it faces a growing inability to pass on cost increases to retailers in the form of higher prices. It considers cost-effectiveness a critical strategic issue and is developing and using various measures to manage costs, including changes in the customer service initiatives, more widespread use of cost-benefit analysis, negotiating lower costs with suppliers, redesign of production facilities and processes and using the Partners in Performance compensation system to involve employees more directly in cost-effectiveness. (See Note 13 to the Consolidated Financial Statements for additional information on Partners in Performance.) Other Operating (Income) Expense, Net Other operating income, net decreased slightly from the prior year despite a 20% increase in net licensee income compared to 1994. Higher 1995 start-up costs associated with Company-owned and operated retail stores in the U.S. and new businesses outside of the U.S., 1995 losses recognized on the disposal of capital assets and the 1994 adjustment for idle facilities all contributed to the slight 1995 decrease. This decrease was partially offset by the 1994 recognition of environmental-related expenses. Other operating income, net for 1994 increased $28.9 million from 1993 mostly due to expenses incurred in 1993 for idle facilities, relocation of certain operations and costs recognized for a decline in value on existing capital assets as a result of the Company's U.S. initiative to improve customer service. The increase was offset by the 1994 recognition of costs associated with environmental-related soil remediation. Interest Expense Interest expense for 1995 decreased 21% from 1994 due a decrease in average debt balances for the same period of 69%. Early in fiscal year 1995, the Company repaid the fourth and final series of dividend notes to Class L stockholders with cash from operations, thereby reducing debt balances. The average interest rate for long-term and short-term borrowings outstanding during 1995 was 23% compared to 18% in 1994. Interest expense levels were largely affected by the high interest rate markets of non-U.S. countries, particularly Eastern Europe and Latin America, where a high proportion of debt resided. The Company expects to incur higher interest expense in 1996 due to the proposed merger transaction. (See "Subsequent Event - Proposed Merger Transaction" within this item of the Form 10-K.) Interest expense for 1994 decreased 47% from 1993 primarily due to lower 1994 average debt balances. Cash flows from operations were used to reduce debt levels throughout 1994. The average interest rate in 1994 was approximately 18% compared to 9% in 1993, due to the high interest rate markets of non-U.S. countries where most of the Company's debt resided. 23 Other (Income) Expense, Net Other income, net increased $81.7 million from 1994 mostly due to losses on foreign currency transactions in 1994 and higher interest income on investments in 1995. However, 1995 other income was reduced by the amortization of foreign currency option premiums. The Company also had foreign currency forward and option contracts with third parties which resulted in unrealized transaction gains of $19.4 million and realized transaction losses of $29.5 million. The recognition of gains on option contracts is deferred until maturity of the contracts. (See "Risk Management" within this item of the Form 10-K.) In 1994, other expense, net increased $35.1 million from the 1993 amount mostly due to greater 1994 net foreign currency transaction losses and costs associated with foreign currency exchange contracts. The net foreign currency transaction losses primarily resulted from the weakening of the U.S. dollar compared to European currencies and the Japanese yen during 1994. Provision for Taxes The decrease in the 1995 provision for taxes compared to 1994 was due mostly to a $100.0 million one-time reversal of previously recorded taxes on unremitted non-U.S. earnings related to foreign royalty payments. (See Note 3 to the Consolidated Financial Statements for additional information.) The 1995 effective tax rate was 29% compared to 40% in 1994 and 41% in 1993. Excluding this one-time reversal, the 1995 effective tax rate would have been 39%. This one percentage point decrease from 1994 was primarily due to a change in the mix of U.S. and non-U.S. earnings and a decrease in taxes on the undistributed earnings of non-U.S. subsidiaries. The increase in the 1994 provision for taxes compared to 1993 was due to higher 1994 earnings. The 1994 effective tax rate fell to 40% from 41% in 1993 due to a change in the mix of U.S. and non-U.S. earnings, lower state taxes and a decrease in taxes on the undistributed earnings of non-U.S. subsidiaries. The Company complied with the provisions of SFAS No. 109 "Accounting for Income Taxes", which requires an asset and liability approach for financial accounting and reporting of income taxes as of November 29, 1993. The adoption resulted in an $11.9 million credit to income, which was recorded as a cumulative effect of changes in accounting principles on the Consolidated Statement of Income. Upon adoption, deferred tax assets and deferred tax liabilities were adjusted accordingly. (See Note 3 to the Consolidated Financial Statements for additional information.) Postretirement Benefits The Company recorded a one-time, non-cash charge against 1994 earnings of $402.3 million before taxes and $248.4 million after taxes due to the adoption of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective November 29, 1993. This charge was recorded as a cumulative effect of a change in accounting principles, net of income tax effects, on the Consolidated Statement of Income with a corresponding amount recorded to employee related benefits on the Consolidated Balance Sheet. The adoption of SFAS No. 106 also resulted in additional ongoing expenses for service and interest costs related to postretirement benefits, which were $38.6 million in 1995 and $43.0 million in 1994. 24 Financial Condition and Liquidity - -------------------------------------------------------------------------------- The following table sets forth certain measures of the Company's financial condition and liquidity. - --------------------------------------------------------------------------------
Fiscal Year --------------------------------- 1995 1994 1993 ==================================================================================================== (Dollars in Millions) Cash and cash equivalents, net of short-term borrowings $1,066.7 $ 789.6 $ 242.6 Cash provided by operating activities 749.3 769.3 495.7 Cash used for investing activities 363.8 152.3 103.8 Cash used for financing activities 105.3 71.1 374.1 Working capital 1,673.6 1,567.5 1,017.2 ====================================================================================================
Cash and Cash Equivalents, Net of Short-Term Borrowings The Company's financial position at November 26, 1995 with respect to cash and cash equivalents, net of short-term borrowings, increased $277.1 million from 1994 primarily due to cash provided by operations that was partially used for the purchase of property, plant and equipment related to the Company's customer service initiatives. Remaining cash balances were invested in money market interest bearing investments maturing within three months. The Company anticipates utilizing most of this cash to fund the proposed 1996 merger transaction. (See "Subsequent Event - Proposed Merger Transaction" within this item of the Form 10-K.) The increase in cash and cash equivalents, net of short- term borrowings at November 27, 1994 of $547.0 million from 1993 was the result of increased cash provided by operations that was partially offset by capital expenditures and the repayment of debt. Cash Provided by Operating Activities Less cash was provided by operations in 1995 compared with 1994 primarily due to an increase in trade receivables and inventories, partially offset by increases in various current liabilities. Trade receivables increased 7% from 1994 due to increased sales levels. Due to continually improving management of receivables, the balances did not increase at the rate of the related sales. Inventories, predominantly finished goods, increased 12% from 1994 mostly due to higher inventory levels in the U.S. in anticipation of strong first quarter 1996 sales. Inventory management outside of the U.S. improved from the prior year, with the greatest improvement in Europe, resulting in quicker inventory turns. Year-end 1994 inventories decreased 1% from year-end 1993 reflecting lower U.S. inventories, due to improved U.S. Levi's(R) brand production planning, partially offset by higher non-U.S. inventories. The increase in accounts payable and accrued liabilities in 1995 contributed to cash provided by operations. Accounts payable were higher in 1995 due to the increased purchase of materials related to increased sales. The increase in other liabilities was greatly attributable to significant accruals of consulting and professional fees for services related to the customer service initiatives. Cash Used for Investing Activities Cash used for investing activities was $211.5 million higher for fiscal year 1995 than 1994 primarily due to purchases of property, plant and equipment. Capital expenditures of $333.9 million were higher in 1995, resulting in a property, plant and equipment balance which was 35% higher at the end of 1995 versus 1994. Approximately $199.0 million of 1995 capital expenditures were related to the Company's U.S. customer service initiative and included construction costs and equipment purchases for customer service centers and purchases of desk-top computer systems. Outside the U.S., capital expenditures of $46.7 million were incurred that related primarily to the Europe division and included upgrades to certain distribution centers 25 and three new flagship stores. The 13% increase in property, plant and equipment from year-end 1993 to 1994 reflected capital expenditures related to the U.S. customer service initiative and the purchase of equipment and leasehold improvements in connection with the data center relocation outside of California, in accordance with the Company's disaster recovery plan. At year-end 1995, the Company had capital expenditure purchase commitments outstanding of approximately $100.0 million. Commitments related to the U.S. customer service initiatives were approximately $60.0 million and included an equipment contract with Computer Aided Systems, Inc. and a design, engineering, procurement and construction services agreement with Fluor Daniel, Inc. These contracts relate to the installation of materials handling systems and the design and construction of the U.S. customer service centers. The remaining commitments relate primarily to general operational needs in the U.S. business. The Company anticipates authorizations for capital expenditures of approximately $265.8 million for new 1996 projects. Spending on capital projects during the 1996 year (which included authorizations from previous years) is expected to be $325.0 million, including capital expenditures of approximately $109.9 million related to the LSNA customer service initiatives. The Company plans for capital expenditures of approximately $10.0 million during 1996 related to the LSI customer service initiatives. Cash Used for Financing Activities The Company used $34.2 million more cash for financing activities in fiscal year 1995 compared to 1994. Dividends were declared and paid twice during fiscal year 1995 on shares of both Class E and Class L common stock at a total for the year of $1.50 per share or $86.4 million. Also affecting the cash used for financing activities was the 1995 repurchase of 70,842 shares of management Class L common stock, pursuant to the Management Liquidity Program, at the appraised stock value at the time of repurchase of $134 per share totaling $9.5 million. (See Note 16 to the Consolidated Financial Statements for additional information.) During 1995, the Company repaid its fourth and final series of dividend notes to Class L stockholders, which originated in 1993, for an aggregate amount of $20.6 million, plus interest accrued of $1.9 million. The decrease for 1994 in cash used for financing activities of $303.0 million compared to year-end 1993 relates mostly to a significant paydown of debt during fiscal year 1993. During 1995, the Company extended its primary credit agreement to a term of five years and negotiated certain other items including lower commitment fees, lower interest rate basis points and less stringent covenants. At November 27, 1995, with no borrowings outstanding on its primary credit agreement, the Company had a total outstanding debt balance of $38.1 million (mostly outside the U.S.), 43% lower than year-end 1994. Working Capital Working capital was higher at the end of fiscal year 1995 compared to 1994 due to the significant increase in cash and cash equivalents. However, this increase was partially offset by a reclassification from long-term deferred tax liability to current taxes payable in connection with an anticipated settlement with the Internal Revenue Service relating to its examination of the Company's consolidated U.S. income tax returns for 1983 through 1985. Risk Management A large portion of the Company's revenue and income is derived from its operations outside of the U.S. As a result, the Company's operations and financial results could be significantly affected by international factors, such as changes in foreign currency exchange rates or weak economic conditions in the foreign 26 markets in which the Company does business. When the U.S. dollar strengthens against other currencies, the U.S. dollar value of non-U.S. dollar-based sales decreases. When the U.S. dollar weakens, the U.S. dollar value of non-U.S. dollar-based sales increases. Correspondingly, the U.S. dollar value of non-U.S. dollar-based costs increases when the U.S. dollar weakens and decreases when the U.S. dollar strengthens. Accordingly, changes in exchange rates may positively or negatively affect the Company's consolidated sales and gross margins. To mitigate the short-term impact of fluctuating currency exchange rates on the Company's non-U.S. dollar-based sales, product procurement, and operating expenses, the Company regularly manages its non-U.S. dollar-based exposures. Specifically, the Company enters into foreign exchange forward and option contracts to hedge foreign currency exposures, as warranted. Currently, these contracts do not extend beyond one year. (See Notes 1, 6, 7 and 8 to the Consolidated Financial Statements for additional information.) Subsequent Events Proposed Merger Transaction In February 1996, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with LSAI Holding Corp. ("Holdings") and LSAI Acquisition Corp., a wholly-owned subsidiary of Holdings ("Merger Sub"). The Merger Agreement provides for the merger (the "Merger") of Merger Sub with and into the Company. The Company's Board of Directors and stockholders approved the Merger in February 1996. Completion of the Merger is subject to satisfaction of certain conditions, including receipt of necessary financing and regulatory approvals; completion is expected during the second quarter of 1996. In the Merger, each share of the Company's Class L Common Stock (other than shares contributed to Holdings by Class L holders) and each share of the Company's Class E Common Stock will be converted into the right to receive $265 per share in cash. As a result of the Merger, the Company will become a wholly- owned subsidiary of Holdings. The cash consideration will be provided through bank borrowings by Holdings, which are expected to be assumed by the Company after the Merger, and through cash generated by the Company. The total cash consideration is expected to be approximately $2.3 billion, however, this amount may change depending on the number of shares of Class L Common Stock ultimately contributed to Holdings. The final amount will not be determined until early March 1996. Holdings is a Delaware corporation organized and owned by a group of holders of the Company's Class L Common Stock. Holders of Holdings common stock will place their shares in a voting trust, giving the trustees voting power over most matters subject to stockholder vote, and will be subject to restrictions on share transfers. Based upon Subscription Agreements received from Class L stockholders on January 25, 1996, 44,738,958 shares of Class L Common Stock will be contributed to Holdings and 7,016,950 shares of Class L Common Stock will be converted into the right to receive cash upon the Merger. A Participating Stockholder who enters into a Subscription Agreement has until February 26, 1996 (the "Adjustment Date") to reduce his or her investment level or withdraw the subscription completely. Assuming that no subscription reductions or withdrawals occur prior to the Adjustment Date, the transaction would result in a decrease in cash and cash equivalents of $1,047.1 million, an increase in debt of $1,269.0 million, a decrease in ESAP and Management Liquidity Program Common Stock of $246.6 million and a decrease in stockholders' equity of $2,023.8 million. Other than Management Holders who participate in the Offering, the Company's management and employees will have no continuing equity interest in Holdings or the Company following the Merger. In 27 lieu of an equity interest, it is expected that all Company employees worldwide will participate in new arrangements designed to align employee and stockholders' interests in the post-Merger entity by providing one or more cash payments to employee participants based upon the future value created after the Merger. There can be no assurances that the new arrangements will be adopted in the form described or that they will result in such alignment of interests. However, it is the intention of Holdings' management to cause such a cash-based plan to be adopted in connection with the Merger. The operation of the EIP and ELTIS plans will remain essentially the same as before the Merger, except that participants will no longer have the option to invest in Company stock. The ESAP plan will cease to exist after the Merger. The Management Liquidity Program will not be assumed by Holdings and will therefore not apply to Holdings' Common Stock. The stock options outstanding at November 26, 1995 are expected to be exercised prior to the Merger and will, at the option of the holder, be contributed to Holdings or converted to cash in the Merger. No options will be assumed by Holdings. The Stock Appreciation Rights effectively will remain in place but appreciation will be based on a measure other than Company stock. The financial statements included in this Form 10-K do not give effect to the Merger. 28 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and related Notes are located on pages 30 through 57, with the Report of Independent Public Accountants on page 58. All Financial Statement Schedules have been omitted, since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and Notes thereto. 29 CONSOLIDATED FINANCIAL STATEMENTS LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES For the Years Ended November 26, 1995, November 27, 1994 and November 28, 1993 30 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars In Thousands, Except Per Share Data)
Year Ended Year Ended Year Ended November 26, 1995 November 27, 1994 November 28, 1993 ----------------- ----------------- ----------------- Net sales $ 6,707,631 $ 6,074,321 $ 5,892,479 Cost of goods sold 3,930,132 3,632,406 3,638,152 ----------- ----------- ----------- Gross profit 2,777,499 2,441,915 2,254,327 Marketing, general and administrative expenses 1,809,633 1,493,234 1,394,170 Other operating (income) expense, net (19,373) (20,448) 8,418 ----------- ----------- ----------- Operating income 987,239 969,129 851,739 Interest expense 15,659 19,824 37,144 Other (income) expense, net (63,257) 18,410 (16,718) ----------- ----------- ----------- Income before taxes and cumulative effects of changes in accounting principles 1,034,837 930,895 831,313 Provision for taxes 300,101 373,402 338,902 ----------- ----------- ----------- Income before cumulative effects of changes in accounting principles 734,736 557,493 492,411 Cumulative effects of changes in accounting principles: Postretirement benefits other than pensions (SFAS 106), net of applicable income tax benefits of $153,885 -- 248,429 -- Income taxes (SFAS 109) -- (11,912) -- ----------- ----------- ----------- Net income $ 734,736 $ 320,976 $ 492,411 =========== =========== =========== Income per common share: Income before cumulative effects of changes in accounting principles $ 13.94 $ 10.59 $ 9.38 Postretirement benefits other than pensions (SFAS 106) -- 4.72 -- Income taxes (SFAS 109) -- (0.23) -- ----------- ----------- ----------- Net income $ 13.94 $ 6.10 $ 9.38 =========== =========== =========== Average common shares outstanding 52,696,492 52,639,433 52,513,160 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 31 Page 1 of 2 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
November 26, November 27, 1995 1994 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $1,088,032 $ 813,320 Trade receivables, net of allowance for doubtful accounts of $34,939 in 1995 and $28,066 in 1994 969,849 908,690 Inventories: Raw materials 127,010 122,947 Work-in-process 143,301 165,180 Finished goods 608,772 494,636 ---------- ---------- Total inventories 879,083 782,763 Deferred tax assets 16,821 66,160 Other current assets 117,387 95,005 ---------- ---------- Total current assets 3,071,172 2,665,938 Property, plant and equipment, net of accumulated depreciation of $525,037 in 1995 and $454,376 in 1994 906,755 669,606 Goodwill and other intangibles, net of accumulated amortization of $191,361 in 1995 and $180,920 in 1994 336,356 341,355 Noncurrent deferred tax assets 337,146 204,574 Other assets 57,728 43,836 ---------- ---------- $4,709,157 $3,925,309 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt and capital lease obligations $ 389 $ 25,974 Short-term borrowings 21,302 23,701 Accounts payable 346,594 286,675 Accrued liabilities 361,563 339,395 Salaries, wages and employee benefits 293,606 279,038 Taxes payable 374,082 142,348 Dividends payable -- 1,266 ---------- ---------- Total current liabilities 1,397,536 1,098,397 Long-term debt and capital lease obligations, less current maturities 16,366 16,720 Long-term employee related benefits 317,242 301,546 Postretirement medical benefits 448,084 418,622 Long-term tax liability 134,470 393,360 Minority interest 33,557 36,837
The accompanying notes are an integral part of these financial statements. 32 Page 2 of 2 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
November 26, November 27, 1995 1994 ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (continued) Common Stock - Employee Stock Purchase and Award Plan and Management Liquidity Program: Class E common stock - $.10 par value; issued: 1995 - 543,140 shares; 1994 - 431,123 shares (Redemption value $102,653) 54 43 Class L common stock - $.10 par value; issued: 1995 - 571,688 shares; 1994 - 547,531 (Redemption value $183,130) 57 55 Additional paid-in capital, common 246,498 188,144 ----------- ----------- Total common stock - Employee Stock Purchase and Award Plan and Management Liquidity Program 246,609 188,242 ----------- ----------- Stockholders' Equity: Class E common stock - $.10 par value; authorized 100,000,000 shares; issued and outstanding: 1995 - 953,058 shares; 1994 - 939,747 shares 95 94 Class L common stock - $.10 par value; authorized 170,000,000 shares; issued: 1995 - 51,184,220 shares; 1994 - 51,279,219 shares 5,118 5,128 Additional paid-in capital, common 188,933 187,369 Retained earnings 1,853,982 1,227,897 Translation adjustment 82,940 71,623 Pension liability -- (701) Treasury stock, at cost - Class E: 1995 - 5,014 shares; 1994 - 10,221 shares; Class L: 1995 - 404,750 shares; 1994 - 499,749 shares (15,775) (19,825) ----------- ----------- Total stockholders' equity 2,115,293 1,471,585 ----------- ----------- $ 4,709,157 $ 3,925,309 =========== ===========
The accompanying notes are an integral part of these financial statements. 33 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in Thousands)
Class E Class L Additional Common Common Paid-In Retained Translation Pension Treasury Total Stock Stock Capital Earnings Adjustment Liability Stock Equity ------- ------- ---------- ----------- ----------- ---------- --------- ----------- Balance at November 29, 1992 $ 79 $ 5,191 $ 230,222 $ 499,043 $ 57,427 $ (5,060) $ (18,669) $ 768,233 Sale and Company contribution of Class E stock to employee plans (104,642 shares) 10 -- 12,350 -- -- -- 536 12,896 Purchase of Class E stock from ESAP (4,638 shares) -- -- -- -- -- -- (563) (563) Cash dividends on Class E stock ($1.10 per share) -- -- -- (1,314) -- -- -- (1,314) Net income -- -- -- 492,411 -- -- -- 492,411 Net loss on sale and purchase of subsidiary's treasury stock -- -- -- (10) -- -- -- (10) Translation adjustment -- -- -- -- (9,105) -- -- (9,105) Pension liability -- -- -- -- -- (11,514) -- (11,514) ------- ------- ---------- ----------- ----------- ---------- --------- ----------- Balance at November 28, 1993 89 5,191 242,572 990,130 48,322 (16,574) (18,696) 1,251,034 Purchase and retirement of management Class L stock (83,949 shares) -- (8) (193) (9,369) -- -- -- (9,570) Adoption of Class L management liquidity program (547,531 shares and 499,749 options) -- (55) (60,477) (72,057) -- -- -- (132,589) Sale and Company contribution of Class E stock to employee plans (52,502 shares) 5 -- 5,467 -- -- -- 826 6,298 Purchase of Class E stock from ESAP (15,769 shares) -- -- -- -- -- -- (1,955) (1,955) Cash dividends on Class E stock ($1.30 per share) -- -- -- (1,775) -- -- -- (1,775) Net income -- -- -- 320,976 -- -- -- 320,976 Net loss on sale and purchase of subsidiary's treasury stock -- -- -- (8) -- -- -- (8) Translation adjustment -- -- -- -- 23,301 -- -- 23,301 Pension liability -- -- -- -- -- 15,873 -- 15,873 ------- ------- ---------- ----------- ----------- ---------- --------- ----------- Balance at November 27, 1994 94 5,128 187,369 1,227,897 71,623 (701) (19,825) 1,471,585 Reclassification of Class L and retirement of Treasury stock related to exercise of 94,999 stock options -- (10) (218) (3,290) -- -- 3,518 -- Sale and Company contribution of Class E stock to employee plans (13,311 shares) 1 -- 1,782 -- -- -- 2,276 4,059 Purchase of Class E stock from ESAP (12,159 shares) -- -- -- -- -- -- (1,744) (1,744) Increase in value of Class L shares under management liquidity program -- -- -- (26,218) -- -- -- (26,218) Cash dividends on Class E and Class L stock ($1.50 per share) -- -- -- (79,143) -- -- -- (79,143) Net income -- -- -- 734,736 -- -- -- 734,736 Translation adjustment -- -- -- -- 11,317 -- -- 11,317 Pension liability -- -- -- -- -- 701 -- 701 ------- ------- ---------- ----------- ----------- ---------- --------- ----------- Balance at November 26, 1995 $ 95 $ 5,118 $ 188,933 $ 1,853,982 $ 82,940 $ -- $ (15,775) $ 2,115,293 ======= ======= ========== =========== =========== ========== ========= ===========
The accompanying notes are an integral part of these financial statements. 34 Page 1 of 2 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Year Ended Year Ended Year Ended November 26, November 27, November 28, 1995 1994 1993 ---------- ---------- ---------- Cash Flows from Operating Activities: Income before cumulative effects of changes in accounting principles $ 734,736 $ 557,493 $ 492,411 Adjustments to reconcile net cash provided by operating activities: Depreciation and amortization 115,382 114,986 111,818 Foreign exchange (gains) losses (6,887) 30,144 (593) Provision for deferred employee benefits 136,324 97,326 35,115 Payment of deferred employee benefits (34,285) (32,099) (25,436) Provision (benefit) for workers' compensation claims (5,661) 39,859 102,428 Payment of workers' compensation claims (43,943) (49,077) (58,665) Increase in trade receivables (136,399) (42,639) (139,329) (Increase) decrease in inventories (58,119) 34,743 (67,428) (Increase) decrease in other current assets (7,471) 6,340 (9,309) Decrease in deferred taxes (82,846) (2,242) (30,380) Increase (decrease) in accounts payable and accrued liabilities 128,184 (38,254) 51,262 Increase in salaries, wages and employee benefits 7,358 46,330 41,376 Increase (decrease) in taxes payable 237,307 (2,774) (33,789) Increase (decrease) in long-term employee related benefits 27,744 (28,190) 568 Increase (decrease) in long-term tax liabilities (263,187) 46,931 44,949 Other, net 1,082 (9,550) (19,323) --------- --------- --------- Net cash provided by operating activities 749,319 769,327 495,675 --------- --------- --------- Cash Flows from Investing Activities: Purchases of property, plant and equipment (333,949) (176,357) (142,841) Proceeds from sale of property, plant and equipment 863 29,586 6,290 Increase (decrease) of net investment hedge (11,027) (5,487) 32,757 Investment in joint venture (6,614) -- -- Other, net (13,114) -- -- --------- --------- --------- Net cash used for investing activities (363,841) (152,258) (103,794) --------- --------- ---------
The accompanying notes are an integral part of these financial statements. 35 Page 2 of 2 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Year Ended Year Ended Year Ended November 26, November 27, November 28, 1995 1994 1993 ----------- ------------ ------------ Cash Flows from Financing Activities: Repayments of long-term debt (25,948) (92,358) (415,716) Proceeds from sale of common stock to employee plans 18,647 21,622 29,512 Net increase (decrease) in short-term borrowings (2,651) 13,952 (128,792) Purchase of management Class L common stock (9,493) (9,570) -- Dividends paid (87,343) (3,181) (82,210) Proceeds from issuance of long-term debt -- 11 227,952 Other, net 1,483 (1,593) (4,893) ----------- --------- --------- Net cash used for financing activities (105,305) (71,117) (374,147) ----------- --------- --------- Effect of exchange rate changes on cash (5,461) 14,695 (2,763) ----------- --------- --------- Net increase in cash and cash equivalents 274,712 560,647 14,971 Beginning cash and cash equivalents 813,320 252,673 237,702 ----------- --------- --------- Ending cash and cash equivalents $ 1,088,032 $ 813,320 $ 252,673 =========== ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest $ 19,411 $ 18,841 $ 36,787 Income taxes 410,490 328,121 364,064 Non-cash investing and financing activities: Capital lease obligations incurred -- -- 409 Dividends declared, not paid - common stock -- 1,266 688 Increase in Management Liquidity Program Class L common stock due to increase in valuation 50,664 138,587 -- Decrease in stockholders' equity due to Management Liquidity Program (26,218) (132,589) -- Notes issued for payment of dividends -- -- 77,116
The accompanying notes are an integral part of these financial statements. 36 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Significant Accounting Policies Principles of Consolidation. The consolidated financial statements include the accounts of Levi Strauss Associates Inc. (LSAI or the Company) and all subsidiaries. All significant intercompany items have been eliminated. The consolidated financial statements do not give effect to the Proposed Merger Transaction. (See Note 20.) Cash Equivalents. All highly liquid investments with an original maturity of three months or less are included as cash equivalents. Inventory Valuation. Inventories are valued at the lower of average cost or market and include materials, labor and manufacturing overhead. Market is calculated on the basis of anticipated selling price less allowances to maintain a normal gross margin for each product. Income Taxes. Deferred income taxes result from timing differences in the recognition of revenue, expense and credits for income tax and financial statement purposes. U.S. Federal income tax and foreign withholding taxes are not provided on the undistributed earnings of non-U.S. subsidiaries to the extent that taxes on the distribution of such earnings are expected to be offset by tax credits. Effective November 29, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". This statement requires a change from the deferral method of accounting for income taxes under Accounting Principles Board Opinion No. 11 to the asset and liability method of accounting for income taxes. Under SFAS No. 109, deferred tax assets and liabilities are established at the balance sheet date in amounts that are expected to be recoverable or payable when the difference in the tax bases and financial statement carrying amounts of assets and liabilities ("temporary differences") reverse. The 1994 adoption was recorded as a cumulative effect of a change in accounting principles on the Consolidated Statements of Income and resulted in an $11.9 million credit to 1994 income. Depreciation and Amortization Methods. Property, plant and equipment is carried at cost, less accumulated depreciation. Goodwill and other intangibles are carried at cost, less accumulated amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets. In the case of certain property under capital lease, depreciation is computed over the lesser of the useful life or the lease term. Postretirement Benefit Plans. The Company adopted SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective November 29, 1993. SFAS No. 106 requires the Company to recognize an expense to establish a "transition obligation", representing the value at the beginning of the year of the postretirement benefit obligation earned by employees and retirees in prior periods. This adoption was recorded as a cumulative effect of a change in accounting principles, net of income taxes, on the Consolidated Statements of Income and resulted in a one-time charge of $402.3 million before taxes and $248.4 million after taxes. Additionally, the Company recorded an expense for 1995 and 1994 net periodic costs of $38.6 million and $43.0 million, respectively. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Common Stock - Employee Stock Purchase and Award Plan and Management Liquidity Program. Stock held by participants of the Employee Stock Purchase and Award Plan (ESAP) and Management Liquidity Program are classified outside stockholders' equity due to the put rights attached to Class E and Class L common stock, respectively. (See Notes 12, 16 and 20.) Translation Adjustment. The functional currency for most of the Company's foreign operations is the applicable local currency. For those operations, assets and liabilities are translated into U.S. dollars at period-end exchange rates, and income and expense accounts are translated at average monthly exchange rates. Net exchange gains or losses resulting from such translation are accumulated as a separate component of stockholders' equity. The U.S. dollar is the functional currency for foreign operations in countries with highly inflationary economies, for which both translation adjustments and gains and losses on foreign currency transactions are included in other (income) expense, net. Foreign Exchange Contracts. The Company enters into foreign exchange contracts to manage its foreign currency exposures, particularly inventory purchases, intercompany royalties, loans and other transactions from its non-U.S. affiliates and licensees. Market value gains and losses on hedge contracts are recognized currently or are deferred until realized depending on the nature of the underlying transaction and the type of hedge instrument used. These gains and losses in market value on hedge instruments offset foreign exchange gains or losses on the underlying exposures. The effects of exchange rate changes on transactions designated as hedges of net investments are included in the separate component of stockholders' equity. At November 26, 1995, the net effect of exchange rate changes due to net investment hedge transactions was a $10.8 million decrease to translation adjustment. Gains or losses resulting from foreign currency exchange transactions (including certain foreign currency hedge transactions) and translation adjustments of foreign operations in countries with highly inflationary economies are included in other (income) expense, net, and amounted to (gains) losses of $(10.3) million, $51.6 million and $10.0 million for 1995, 1994 and 1993, respectively. The recognition of gains on option contracts is deferred until maturity of the contracts. These gains are then included in other (income) expense, net. Advertising Costs. The Company expenses advertising costs as incurred. For fiscal years 1995, 1994 and 1993 total advertising expense was $451.6 million, $372.7 million and $375.6 million, respectively. Restructuring Costs. Restructuring costs for severance are accrued when formal plans to restructure are adopted, the information has been communicated to affected employees, the plan specifically identifies certain employee information and involuntary terminations are expected to occur within one year from the date the plan was approved. In absence of a formal plan of restructuring for severance, costs are expensed as incurred. Employee retraining and relocation costs are not considered restructuring costs and are expensed as incurred. Other costs will be expensed as incurred or earlier depending on their nature. Reclassifications. Certain prior year amounts have been classified to conform to 1995 presentation. 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 2: Industry Segment and Geographic Information The Company operates in one principal industry segment: the design, manufacture and marketing of apparel for men, women and youth. Geographical financial information is as follows:
1995 1994 1993 ----------- ----------- ----------- (000s) Net Sales to Unaffiliated Customers: United States $ 4,063,314 $ 3,721,348 $ 3,715,054 Europe 1,785,458 1,542,802 1,332,433 Other non-U.S. 858,859 810,171 844,992 ----------- ----------- ----------- $ 6,707,631 $ 6,074,321 $ 5,892,479 =========== =========== =========== Sales Between Operations: United States $ 108,383 $ 124,001 $ 163,627 Europe 269 149 32 Other non-U.S. 40,840 39,767 36,730 ----------- ----------- ----------- $ 149,492 $ 163,917 $ 200,389 =========== =========== =========== Total Sales: United States $ 4,171,697 $ 3,845,349 $ 3,878,681 Europe 1,785,727 1,542,951 1,332,465 Other non-U.S. 899,699 849,938 881,722 Eliminations (149,492) (163,917) (200,389) ----------- ----------- ----------- $ 6,707,631 $ 6,074,321 $ 5,892,479 =========== =========== =========== Contribution to Income Before Other Charges: United States $ 602,946 $ 572,097 $ 465,889 Europe 443,348 409,227 365,821 Other non-U.S. 122,300 154,529 171,440 ----------- ----------- ----------- 1,168,594 1,135,853 1,003,150 Other Charges: Corporate expenses, net 118,098 185,134 134,693 Interest expense 15,659 19,824 37,144 ----------- ----------- ----------- Income Before Taxes and Cumulative Effects of Changes in Accounting Principles: $ 1,034,837 $ 930,895 $ 831,313 =========== =========== =========== Assets: United States $ 2,022,613 $ 1,669,954 $ 1,643,230 Europe 663,518 597,617 490,904 Other non-U.S. 318,548 350,437 361,361 Corporate 1,704,478 1,307,301 613,165 ----------- ----------- ----------- $ 4,709,157 $ 3,925,309 $ 3,108,660 =========== =========== ===========
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3: Income Taxes The U.S. and non-U.S. components of income before taxes and cumulative effects of changes in accounting principles are as follows:
1995 1994 1993 ----------- --------- --------- (000s) U.S. $ 611,883 $ 582,321 $ 474,895 Non-U.S. 422,954 348,574 356,418 ----------- --------- --------- $ 1,034,837 $ 930,895 $ 831,313 =========== ========= ========= The provision for taxes consists of the following: Federal State Non-U.S. Total --------- ---------- --------- --------- (000s) 1995 - ---- Current $ 164,069 $ 25,578 $ 186,125 $ 375,772 Deferred (25,803) (4,170) (45,698) (75,671) --------- ---------- --------- --------- $ 138,266 $ 21,408 $ 140,427 $ 300,101 ========= ========== ========= ========= 1994 - ---- Current $ 208,119 $ 20,037 $ 141,215 $ 369,371 Deferred (1,070) 2,296 2,805 4,031 --------- ---------- --------- --------- $ 207,049 $ 22,333 $ 144,020 $ 373,402 ========= ========== ========= ========= 1993 - ---- Current $ 177,651 $ 37,578 $ 157,537 $ 372,766 Deferred (25,548) (3,350) (4,966) (33,864) --------- ---------- --------- --------- $ 152,103 $ 34,228 $ 152,571 $ 338,902 ========= ========== ========= =========
During the fourth quarter of 1995, the Company recognized a $100.0 million one- time reversal of previously recorded taxes on unremitted non-U.S. earnings as a result of a resolution with U.S. and foreign tax authorities regarding foreign royalty payments. At November 26, 1995, cumulative non-U.S. operating losses of $30.2 million generated by the Company were available to reduce future taxable income primarily between the years 1997 and 2003. The Company utilized all of its remaining foreign tax credit carryforwards in 1993. Income tax expense (benefit) included in translation adjustment was $(3.1) million, $3.3 million and $(0.1) million for 1995, 1994 and 1993, respectively. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Under SFAS No. 109, adopted as of November 29, 1993, temporary differences which give rise to deferred tax assets and liabilities at November 26, 1995 and November 27, 1994 were as follows:
1995 1994 --------------------- --------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax Assets Liabilities Assets Liabilities -------- ----------- -------- ----------- (000s) Postretirement benefits $ 183,734 $ -- $ 173,634 $ -- Employee compensation and benefit plans 170,856 -- 163,587 -- Inventory 48,407 -- 40,657 -- Depreciation and amortization 30,983 42,600 28,390 36,669 Foreign exchange gains/losses 16,278 56,119 16,683 53,764 Restructuring charges 4,194 -- 7,347 -- Tax on unremitted non-U.S. earnings -- 11,873 -- 75,373 State income tax -- 11,812 -- 5,364 Other 21,919 -- 11,607 -- --------- --------- --------- --------- $ 476,371 $ 122,404 $ 441,905 $ 171,170 ========= ========= ========= =========
The net deferred tax assets at November 26, 1995 and November 27, 1994 were $354.0 million and $270.7 million, respectively. Under the provisions of APB No. 11, the approximate tax effects of timing differences giving rise to deferred income tax expense (benefit) resulted from:
1993 --------- (000s) Employee compensation and benefits $(24,739) Accrued strategic organization costs (9,888) Undistributed non-U.S. earnings (8,221) Inventory capitalization and adjustments 6,008 Depreciation, amortization and other 2,976 --------- $(33,864) =========
41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's effective income tax rate for fiscal years 1995, 1994 and 1993 differs from the statutory federal income tax rate as follows:
1995 1994 1993 ----- ----- ----- Statutory rate 35.0% 35.0% 35.0% Changes resulting from: State income taxes, net of federal income tax benefit 1.3 1.5 2.7 Non-U.S. earnings taxed at different rates, including withholding taxes 0.9 1.4 2.2 Acquisition-related book and tax bases differences 0.5 1.3 1.3 Reversal of prior years' accruals (9.7) -- -- Other, net 1.1 0.9 (0.4) ---- ---- ---- Effective rate 29.1% 40.1% 40.8% ==== ==== ====
The consolidated U.S. income tax returns of the Company for 1983 through 1989 are under examination by the Internal Revenue Service (IRS). The examination for 1983 through 1985 includes the review of certain transactions relating to the 1985 leveraged buyout by the Company of Levi Strauss & Co. An agreement in principle has been reached with the IRS on the major issues raised during the examination for 1983 through 1985 and is expected to be resolved in 1996. The IRS has not yet concluded its examination for 1986 through 1989. The Company believes it has made adequate provision for income taxes and interest for all prior periods. Note 4: Property, Plant and Equipment The components of property, plant and equipment, including both leased and owned assets stated at cost, are as follows:
1995 1994 ---------------------- ---------------------- Owned Leased Owned Leased ----------- --------- ----------- --------- (000s) Land $ 48,133 $ 5,134 $ 47,228 $ 5,134 Buildings and leasehold improvements 414,149 21,599 356,263 24,718 Machinery and equipment 688,275 3,507 565,686 6,632 Construction in progress 250,995 -- 118,321 -- ---------- -------- ---------- -------- 1,401,552 30,240 1,087,498 36,484 Accumulated depreciation (513,423) (11,614) (437,296) (17,080) ---------- -------- ---------- -------- $ 888,129 $ 18,626 $ 650,202 $ 19,404 ========== ======== ========== ========
Depreciation expense, which includes amortization of assets under capital lease, for 1995, 1994 and 1993 was $97.8 million, $94.2 million and $85.5 million, respectively. The 1995 increase in construction in progress relates to the Company's customer service initiatives. The Company plans to spend over $400.0 million for capital expenditures in conjunction with these initiatives. (See Item 1 of this Form 10- K for additional information.) 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 5: Intangible Assets The components of intangible assets are as follows:
1995 1994 ---------- ---------- (000s) Goodwill $ 351,722 $ 351,722 Acquisition intangibles 67,606 67,606 Tradenames 79,322 79,322 Intangible pension asset -- 2,518 Other intangibles 29,067 21,107 --------- --------- 527,717 522,275 Accumulated amortization related to goodwill (90,164) (81,377) Other accumulated amortization (101,197) (99,543) --------- --------- $ 336,356 $ 341,355 ========= =========
Goodwill, resulting from the 1985 acquisition of Levi Strauss & Co. by Levi Strauss Associates Inc., is being amortized through the year 2025. Acquisition intangibles include trained workforce, leasehold interest, research and development and licenses. Acquisition intangibles and tradenames were valued as a result of the 1985 acquisition. Intangible pension asset is not amortized, but is adjusted each year to correspond to changes in the minimum pension liability. Amortization expense for 1995, 1994 and 1993 was $17.5 million, $20.5 million and $24.0 million, respectively. 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 6: Debt and Lines of Credit Debt and unused lines of credit are summarized below:
1995 1994 --------- --------- (000s) Long-Term Debt: Unsecured: Dividend notes payable $ -- $ 20,564 Other unsecured indebtedness 111 2,138 --------- --------- 111 22,702 Secured: Notes payable, at various rates, due in installments through 1999 6,606 7,465 --------- --------- 6,717 30,167 Current maturities (348) (22,981) --------- --------- $ 6,369 $ 7,186 ========= ========= Unused Lines of Credit: Long-term (all U.S.): $ 200,000 $ 200,000 Short-term: U.S. 305,000 230,067 Non-U.S. 374,379 345,854
Primary Credit Agreement During 1995, the Company renegotiated and amended its $200.0 million revolving line of credit to a term of five years. The amendment allows for lower commitment fees, lower interest rate basis points and less stringent covenants than the original facility. This primary credit agreement requires the Company to maintain minimum levels of net worth, leverage and interest coverage. All borrowings under the primary credit agreement bear interest based on either the lending banks' base rate, the certificate of deposit rate or the LIBOR rate (at the Company's option) plus an incremental percentage. No borrowings were taken on this line during 1995. Commitment fees of $250,000 were paid on the unused portion of the amounts available for borrowing. Other Debt During 1993, the Company issued four series of notes payable collectively totaling $77.1 million to Class L stockholders in partial payment of a dividend declared in November 1992. These notes were payable in four semi-annual installments commencing June 15, 1993 and ending December 15, 1994 and bore an interest rate incrementally above the six-month Treasury Bill rate. The Company repaid all scheduled payments on the dividend notes to Class L stockholders for an aggregate amount of $77.1 million, plus accrued interest of $4.3 million. 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Principal Debt Payments The required aggregate long-term debt principal payments, excluding capitalized leases, for the next five years and thereafter are as follows:
Year Principal Payments ---- ------------------- (000s) 1996 $ 348 1997 6,140 1998 -- 1999 -- 2000 -- Thereafter 229
Short-Term Credit Lines and Stand-By Letters of Credit The Company has unsecured and uncommitted short-term credit lines available totaling $679.0 million at various interest rates from various U.S. and non-U.S. banks. These credit arrangements may be canceled by the lenders upon notice and generally have no compensating balance requirements or commitment fees. The Company has $105.2 million of standby letters of credit with various international banks, $92.6 million of which serves as guarantees by the creditor banks to cover workers' compensation claims. The Company pays fees on the standby letters of credit and any borrowings against the letters of credit are subject to interest at various rates. Interest Rate Swaps The Company occasionally enters into interest rate swap transactions to hedge existing floating-rate or fixed-rate liabilities for fixed rates or floating rates. The net interest to be received or paid on the transactions is recorded as an adjustment to interest expense. In 1994, due to lower debt levels, the Company terminated its remaining $100.0 million of interest rate swap agreements that hedged floating-rate liabilities for fixed rates. The termination resulted in a loss of $2.6 million that was included in other (income) expense, net. Interest Rates on Borrowings The weighted average interest rate on short-term borrowings outstanding at year- end 1995 and 1994 was 14% and 19%, respectively. These rates were relatively high in 1995 and 1994 as approximately 46% and 65% of the short-term borrowings balance outstanding at the end of 1995 and 1994, respectively, were related to borrowings in Eastern Europe and Latin America, where the average interest rates were substantially higher than other Company borrowings. Excluding the short- term borrowings in Eastern Europe and Latin America, the weighted average interest rate on short-term borrowings outstanding at year-end 1995 would have been 8%. Note 7: Commitments and Contingencies The Company enters into foreign currency forward and option contracts primarily to manage foreign currency exposures. At November 26, 1995, the Company has U.S. dollar forward currency contracts to sell the aggregate equivalent of $631.0 million and to buy the aggregate equivalent of $118.6 million of various foreign currencies. These contracts hedge currency exposures resulting from sourcing operations, net investment positions and intercompany royalties. The Company also has Belgian franc and German mark 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) forward currency contracts to sell the aggregate equivalent of $215.2 million of various European currencies in order to hedge currency exposures resulting from intercompany receivables and payables. Additionally at November 26, 1995, the Company has option contracts to sell the aggregate equivalent of $354.0 million of various foreign currencies. These contracts are at various exchange rates and expire at various dates through 1996. Realized and unrealized transaction (gains) losses on the forward and option currency contracts included in other (income) expense, net in 1995 were $29.5 million and $(19.4) million, respectively, and in 1994 were $17.7 million and $26.7 million, respectively. The Company's market risk is directly related to fluctuations in the currency exchange rates. The Company's credit risk is limited to the currency rate differential for each agreement if a counterparty were to fail to meet the terms of the contract. These instruments are executed with credit worthy financial institutions and the Company does not anticipate nonperformance by the counterparties. (See Note 8.) The Company evaluates environmental liabilities on an ongoing basis and, based on currently available information, does not consider any environmental exposure to be material. Additionally, the Company does not consider any pending legal proceedings to be material. Note 8: Fair Value of Financial Instruments The estimated fair value amounts of certain financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying amount and estimated fair value of the Company's financial instruments at November 26, 1995 and November 27, 1994 are as follows:
1995 1994 ------------------- ------------------- Estimated Estimated Carrying Fair Carrying Fair Value Value Value Value -------- --------- -------- --------- (000s) Balance sheet financial instruments: Long-term debt $ 6,369 $ 6,369 $ 7,186 $ 7,186 Common stock: Employee Stock Purchase and Award Plan 63,479 102,653 49,655 57,770 Management Liquidity Program 183,130 183,130 138,587 138,587 Off-balance sheet financial instruments: Foreign exchange forward contracts (gain)/loss position -- 2,532 -- 20,744 Foreign exchange option contracts (gain)/loss position -- (13,480) -- --
46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Quoted market prices or dealer quotes are used to determine the estimated fair value of the majority of forward exchange contracts and option contracts. Other techniques, such as the discounted value of future cash flows, replacement cost, and termination cost have been used to determine the estimated fair value for long-term debt and the remaining financial instruments. The estimated fair value of the Employee Stock Purchase and Award Plan and Management Liquidity Program common stock is based on the latest valuation of common stock. (See Note 18: Common Stock - Valuation.) The carrying values of cash and cash equivalents, trade receivables, current assets, current maturities of long-term debt, short-term borrowings, taxes and dividends payable are assumed to approximate fair value. All investments mature in 90 days or less, therefore the carrying values are considered to approximate market value. The fair value estimates presented herein are based on pertinent information available to the Company as of November 26, 1995 and November 27, 1994. Although the Company is not aware of any factors that would substantially affect the estimated fair value amounts, such amounts have not been updated since that date and, therefore, the current estimates of fair value at dates subsequent to November 26, 1995 and November 27, 1994 may differ substantially from these amounts. Additionally, the aggregation of the fair value calculations presented herein do not represent, and should not be construed to represent, the underlying value of the Company. Note 9: Leases The Company is obligated under both capital and operating leases for facilities, office space, showrooms and equipment. At November 26, 1995, obligations under long-term leases are as follows:
Type of Lease ------------------------- Capital Operating ------------- --------- (000s) Minimum Lease Payments: 1996 $ 44 $ 61,878 1997 2 54,612 1998 2 48,546 1999 1 43,551 2000 -- 38,926 Remaining years 10,000 41,439 ------- -------- Total minimum lease payments 10,049 $288,952 ======== Amount representing interest (11) ------- Present value of net minimum lease payments 10,038 Current maturities (41) ------- $ 9,997 =======
The total minimum lease payments on capital and operating leases have not been reduced by estimated future income of $10.6 million from noncancelable subleases. 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In general, leases relating to real estate include renewal options of up to 20 years. Some leases contain escalation clauses relating to increases in operating costs. Certain operating leases provide the Company with an option to purchase the property after the initial lease term at the then-prevailing market value. Rental expense for 1995, 1994 and 1993 was $93.0 million, $84.3 million and $75.1 million, respectively. Note 10: Retirement Plans The Company has numerous non-contributory defined benefit retirement plans covering substantially all employees. It is the Company's policy to fund its retirement plans based on actuarial recommendations consistent with applicable laws and income tax regulations. Plan assets, which may be denominated in foreign currencies and issued by foreign issuers, are invested in a diversified portfolio of securities including stocks, bonds, real estate investment funds and cash equivalents. The weighted average expected long-term rate of return on assets is 9.0%. Benefits payable under the plans are based on either years of service or final average compensation. The funded status of the plans, as of November 26, 1995 and November 27, 1994, reconciles with amounts recognized on the balance sheet as follows:
Plans in Which Plans in Which Accumulated Benefits Assets Exceed Exceed Assets Accumulated Benefits ----------------------- ----------------------- 1995 1994 1995 1994 ---------- ---------- ---------- ---------- (000s) Actuarial present value of: Vested benefits $ 155,843 $ 119,998 $ 99,398 $ 71,996 Non-vested benefits 6,036 5,011 5,245 4,675 ---------- ---------- ---------- ---------- Accumulated benefit obligation 161,879 125,009 104,643 76,671 Impact of future salary increases 117,590 112,598 5,440 4,489 ---------- ---------- ---------- ---------- Projected benefit obligation 279,469 237,607 110,083 81,160 Less plan assets at fair value 186,178 145,640 124,451 91,917 ---------- ---------- ---------- ---------- Plan assets less than (in excess of) projected benefit obligation 93,291 91,967 (14,368) (10,757) Unrecognized net loss from plan experience (48,340) (47,590) (9,436) (3,547) Unrecognized prior service cost (6,379) (8,110) (2,662) (2,092) Unrecognized net asset (liability) at transition (10,998) (12,381) 4,889 5,263 Adjustment required to recognize minimum liability -- 1,763 -- -- ---------- ---------- ---------- ---------- Accrued (prepaid) pension cost $ 27,574 $ 25,649 $ (21,577) $ (11,133) ========== ========== ========== ==========
Unrecognized net liabilities at transition (established 1988) are being amortized primarily on a straight-line basis over 15 years. Past service costs are amortized on a straight line basis over the average remaining service period of employees expected to receive benefits. 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The weighted average discount rate and the rate of increase in future compensation levels used to determine the actuarial present value of the projected benefit obligations for the plans were 7.6% and 6.5%, respectively, for 1995, 8.0% and 7.0%, respectively, for 1994 and 6.6% and 6.0%, respectively, for 1993. Changes in the discount rate and the rate of increase in future compensation levels used to measure the 1995 pension obligations resulted in increases to those obligations as compared to the prior year. During 1994, the Company recorded a minimum liability of $1.8 million for one of its pension plans. The Company also recorded a corresponding intangible asset of $1.1 million and, since the required intangible asset exceeded the related prior service cost, an adjustment was made to stockholders' equity of $.7 million. No such minimum liability existed at November 26, 1995 and, accordingly, the pension liability within stockholders' equity was adjusted to zero. Net pension expense includes the following components:
1995 1994 1993 --------- -------- --------- (000s) Service cost of benefits earned during the period $ 32,519 $38,181 $ 29,225 Interest cost on the projected benefit obligations 25,419 22,169 18,722 Gain on plan assets (43,875) (8,062) (22,046) Net amortization and deferrals 26,623 (63) 15,162 -------- ------- -------- Net pension expense $ 40,686 $52,225 $ 41,063 ======== ======= ========
Note 11: Postretirement Benefit Plans The Company adopted SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective November 29, 1993. The statement requires the Company to accrue postretirement benefits (other than pensions) over the period that an employee becomes fully eligible for benefits. Previously, the Company used a "pay-as-you-go" method whereby expenses were recorded as claims were incurred. Upon adoption of SFAS No. 106, the Company recorded a one-time, non-cash charge against earnings of $402.3 million before taxes and $248.4 million after taxes. This transition obligation represents the actuarially determined value, at November 29, 1993, of the present value of the postretirement benefit obligation earned by retirees and employees in prior periods. The transition obligation was recorded in 1994 as a cumulative effect of a change in accounting principles, net of income tax effects, on the Consolidated Statements of Income. The Company maintains two plans that provide postretirement defined benefits, principally health care benefits, to substantially all domestic retirees and their qualified dependents. These plans have been established with the intention and expectation that they will continue indefinitely. However, the Company retains the right to amend, curtail or discontinue any aspect of the plans at any time. Under the Company's current policies, employees become eligible for these benefits when they reach age 55 with 15 years of credited service. The plans are contributory and contain certain cost-sharing features, such as deductibles and coinsurance. The plans also provide for reimbursement of Medicare Part B premiums to participants over age 65. The accounting for retiree health care benefits anticipates future cost-sharing changes to the written plan consistent with the Company's expressed intent to limit, over time, the Medicare Part B 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) premium reimbursement to 50% of the annual increase in the premium cost. The Company's policy is to fund postretirement benefits as claims and premiums are paid. Postretirement benefit costs for fiscal years 1995 and 1994, exclusive of the transition obligation, include the following components:
1995 1994 ---------- ---------- (000s) Service cost of benefits earned during the period $ 14,037 $ 17,515 Interest cost on the accumulated benefits obligation 27,354 25,494 Amortization of actuarial gains (2,750) -- ---------- ---------- Net postretirement benefit costs $ 38,641 $ 43,009 ========== ==========
The actuarial present value of the Accumulated Postretirement Benefits Obligation (APBO) and amounts recognized on the Company's Consolidated Balance Sheets at November 26, 1995 and November 27, 1994 are as follows:
1995 1994 ---------- ---------- (000s) APBO attributed to: Retirees $ 180,075 $ 163,542 Fully eligible active participants 49,509 43,792 Other active participants 169,073 145,969 ---------- ---------- APBO 398,657 353,303 Less plan assets at fair value -- -- ---------- ---------- APBO in excess of plan assets 398,657 353,303 Unrecognized net gain 60,347 79,324 ---------- ---------- Accrued postretirement benefit costs $ 459,004 $ 432,627 ========== ==========
The discount rate used to determine the APBO was 7.5% and 8.0% at November 26, 1995 and November 27, 1994, respectively. An 11.3% and 5.7% annual rate of increase in the health care trend rate and Medicare Part B trend rate, respectively, was assumed for 1995, declining gradually to 5.0% and 2.5% by the year 2008 and remaining at those rates thereafter. A one percentage point increase in the assumed health care trend rate for each future year would have increased the service cost and interest cost components of net postretirement benefit costs by approximately $10.6 million and would have increased the APBO as of November 26, 1995 by approximately $57.9 million. Note 12: Employee Investment Plans The Company maintains three employee investment plans. The Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc. (ESAP) is a non- qualified employee equity program for highly compensated (as defined by the Internal Revenue Code) employees. The Employee Investment Plan of Levi Strauss Associates Inc. (EIP) and the Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan (ELTIS) are two qualified plans that cover non- highly compensated Home Office employees and U.S. field employees. 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ESAP Under the ESAP, eligible employees may invest up to 10% of their annual compensation, through payroll deductions, to directly purchase and hold shares of Class E common stock. Employee contributions are made on an after-tax basis. The Company may match 75% of the contributions made by employees in stock. Employees are always 100% vested in the Company match. Employees may elect to have their withholding taxes deducted from the shares contributed by the Company. There are various put, call and first refusal rights associated with Class E common stock obtained through the ESAP. The ESAP generally prohibits all transfers of shares other than to the Company. Put rights associated with ESAP entitle participants to sell shares back to the Company in specified circumstances subject to certain restrictions and penalties. It also entitles the Company to buy back shares upon termination of the participant's employment. In all cases, shares are repurchased at the current appraised value of the shares during the semi-annual employee purchase periods. (See Note 18: Common Stock - Valuation.) Shares held by participants of the ESAP are classified outside stockholders' equity due to the put rights attached to Class E common stock sold through the ESAP. The redemption value at the time of repurchase is based on the latest valuation of Class E common stock. The following summary presents ESAP activity for the years ended November 26, 1995, November 27, 1994 and November 28, 1993:
Common Additional Stock Paid-in Capital Total -------- ---------------- --------- (000s) Balance at November 29, 1992 $ 17 $ 16,336 $ 16,353 Sale of Class E stock to ESAP (27,797 shares at $116 per share; 51,614 shares at $138 per share)/(1)/ 8 10,331 10,339 Company contribution of Class E stock to ESAP (18,578 shares at $116 per share; 33,758 shares at $138 per share) 5 6,808 6,813 ------- ------------ --------- Balance at November 28, 1993 30 33,475 33,505 Sale of Class E stock to ESAP (30,233 shares at $114 per share; 49,375 shares at $129 per share)/(1)/ 8 9,849 9,857 Company contribution of Class E stock to ESAP (16,234 shares at $114 per share; 34,433 shares at $129 per share) 5 6,288 6,293 ------- ------------ --------- Balance at November 27, 1994 43 49,612 49,655 Sale of Class E stock to ESAP (22,984 shares at $134 per share; 41,115 shares at $157 per share)/(1)/ 6 9,741 9,747 Company contribution of Class E stock to ESAP (17,675 shares at $134 per share; 30,243 shares at $157 per share) 5 7,112 7,117 ------- ------------ --------- Balance at November 26, 1995 $ 54 $ 66,465 $ 66,519 ======= ============ =========
- -------------------------- /(1)/ includes adjustment due to the reissuance of treasury stock purchased in 1995, 1994 and 1993, respectively 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EIP/ELTIS Under the Company's two qualified plans, eligible employees may contribute up to 10% of their annual compensation to various investment funds, including a fund that invests in Class E common stock. The Company may match 50% of the contributions made by employees to all funds maintained under the qualified plans. In prior years, the Company matched 50% of the contributions made by employees to the fund that invested in Class E common stock only. Employees are always 100% vested in the Company match. The ELTIS also includes a company profit sharing provision with payments made at the sole discretion of the Board of Directors. The EIP and the ELTIS allow employees a choice of either pre-tax or after-tax contributions. Prior to June 1, 1995, employee contributions under the ELTIS were on a pre-tax basis only. Effective March 1, 1995, certain assets of the ELTIS were transferred to, held by and under the control of a new trustee, Fidelity Management Trust Company. During 1994, certain assets of the EIP were similarly transferred to Fidelity Management Trust Company. ELTIS participants may currently direct investments among a series of mutual funds offered under the ELTIS and managed by the new trustee. These mutual funds provide participants additional investment alternatives which were not previously available under the ELTIS, thereby increasing participant flexibility in managing their investments. During 1995, ELTIS purchased 2,109 shares of Class E common stock from the Company at $134 per share as determined by the valuation of an independent investment banking firm. There were no shares purchased by the EIP due to cash needs of the plan. In addition, the Company contributed 11,202 shares and $3.8 million in cash to these plans. During 1994, the qualified plans collectively purchased 10,208 shares at $114 per share as determined by the valuation of an independent investment banking firm at the time of purchase. In addition, the Company contributed 35,367 shares and $.3 million in cash to these plans. During 1993, the qualified plans collectively purchased 47,351 shares and 14,436 shares at $116 and $138 per share, respectively, as determined by the valuation of an independent investment banking firm at the time of purchase (the $116 price was based on the independent valuation of $119 per share, less a $3 per share dividend paid after the valuation was issued but before the stock purchase). In addition, the Company contributed 38,263 shares to these plans in 1993. The aggregate cost of providing all aspects of these plans in 1995, 1994 and 1993 was $14.4 million, $14.7 million and $12.8 million, respectively. The aggregate cost of providing all other employee savings and compensation plans in 1995, 1994 and 1993 was $20.9 million, $18.1 million and $16.0 million, respectively. (See Note 20 for the possible future impact of the Proposed Merger Transaction on these plans.) Note 13: Partners in Performance Plan In 1995, the Company implemented the Partners in Performance Plan (PIP) to immediately replace the previous Cash Performance Sharing Plan, the Management Incentive Plan and all other plans with regards to short-term incentives, and to replace the Long-Term Performance Plan in 1996 with regards to long-term incentives. This program is for all salaried employees worldwide and is intended to align the objectives of all employees with the strategic objectives of the Company and interests of the Company shareholders. 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Annual Incentive Plan The Annual Incentive Plan (AIP), the short-term portion of PIP, began in 1995 and is intended to reward individual and team contributions to the Company's objectives during the year. The amount of incentive earned depends upon the performance and salary grade level of the individual and also depends on corporate, group, division and affiliate financial results against pre- established targets. The cost of the AIP for fiscal year 1995 was $74.6 million. The Cash Performance Sharing Plan, replaced by AIP for fiscal year 1995, was for all Home Office payroll employees, and paid out based on a percentage of base salary and certain Company earnings criteria. Home Office employees could receive up to 12 percent of their covered compensation (fiscal year salary and non-long-term performance plan bonus) under this plan. Similar plans were available to employees outside of the U.S. The cost of providing the Cash Performance Sharing Plan and related non-U.S. plans in 1994 and 1993 was $19.4 million and $16.6 million, respectively. The Company's Management Incentive Plan (MIP), replaced by AIP in fiscal year 1995, provided selected senior level employees with incentive compensation and provided a tool for recruiting and retaining these employees. Under the MIP, the Personnel Committee of the Board of Directors, as administrator of the MIP, could award discretionary cash payments to eligible employees. Such awards were made on the basis of various factors, including profit levels, return on investment, salary grade and individual performance. The amounts charged to expense for the MIP in 1994 and 1993 were $15.8 million and $13.8 million, respectively. Long-Term Incentive Plan The Long-Term Incentive Plan (LTIP), the portion of PIP related to long-term incentives, will begin in 1996 and is intended to reward individual and team contributions to the future success of the Company and to encourage all employees to take a long-term perspective of the business. These incentives are based on a performance unit plan measured by a three-year cumulative earnings performance calculation, individual salary grade level and relative total shareholder return. The Company's Long-Term Performance Plan (LTPP), to be replaced by LTIP in fiscal year 1996, is intended to provide incentive and reward performance over time for certain directors, officers and key employees. Under this plan, a number of performance units were granted to each participant. The value assigned to each unit was based on the Company achieving a target performance measure over a three-year period, as determined by a committee of the Board of Directors. Awards were paid in one-third increments on the third, fourth and fifth anniversaries of the date of the grant. The amounts charged to expense, for the plan in 1995, 1994 and 1993 were $47.0 million, $29.8 million and $25.7 million, respectively. Note 14: Executive Stock Appreciation Rights Plan The Levi Strauss Associates Inc. Executive Stock Appreciation Rights Plan was established in 1992. There were no SAR grants during 1995. During 1995, 14,000 SARs were exercised resulting in a cash disbursement by the Company of $1.0 million. In 1994, 170,000 SARs were granted to certain executives at an initial grant value of $129 per SAR. These SARs vest over several years and become exercisable commencing in 1997. Additionally in 1994, 17,000 SARs granted in 1992 were forfeited. There were no SAR grants during 1993. 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The amounts charged to expense for the plan (net of forfeitures) in 1995, 1994 and 1993 were $7.7 million, $1.8 million and $.9 million, respectively. (See Note 20 for the possible future impact of the Proposed Merger Transaction on this plan.) Note 15: Stock Option Plan The Company has a 1985 Stock Option Plan (the Plan) for Class L common stock under which options are granted at an exercise price determined on the date of grant by a committee of the Board of Directors. Options under the Plan expire ten years from the date of grant and become exercisable as determined by the committee. During the fourth quarter of 1994, all outstanding options became subject to the terms of the management liquidity program. (See Note 16.) The following summary presents stock option activity for the years ended November 28, 1993, November 27, 1994 and November 26, 1995:
Options Exercise/Surrender Exercise Outstanding Price Bonus ------------ ------------------ ---------- Outstanding and exercisable at November 29, 1992 499,749 $ 3.50 No activity during 1993 -- -- -- ------------ Outstanding and exercisable at November 28, 1993 499,749 $ 3.50 No activity during 1994 -- -- -- ------------ Outstanding and exercisable at November 27, 1994 499,749 $ 3.50 Exercised during 1995 (94,999) $ 3.50 $2,960,216 ------------ Outstanding and exercisable at November 26, 1995 404,750 $ 3.50 ============
(See Note 20 for the possible future impact of the Proposed Merger Transaction on this plan.) Note 16: Management Liquidity Program During 1994, the Board of Directors and stockholders approved a stock liquidity program (the Liquidity Program) for management holders of Class L common stock. The Liquidity Program allowed the Company to enter into contracts with then- existing management holders of Class L common stock relating to in-service, employment separation-related and post-separation stock purchases. Holders of 1,047,280 shares of Class L common stock (including outstanding options) initially participated in this program. They may annually sell a specified amount of their stock to the Company, subject to certain limitations and conditions. The program also entitles the Company to purchase all of the shares held by a management holder at the time of separation from employment. Participating shares were classified on the balance sheet outside of stockholders' equity due to the liquidity feature. The redemption value at the time of repurchase is based on the latest valuation of common stock. In December 1995, an independent investment banking firm appraised the Company's stock value at $189 per share, an increase of $55 per share from the prior year end. (See Note 18: Common Stock - Valuation.) As a result of the increased value, the Company recorded compensation expense in 1995 for participating stock options and related exercise bonus totaling $29.4 million, decreased retained earnings by $26.2 million for participating shares and increased Management Liquidity Program Class L common stock by $50.7 million. Future changes in stock valuation will result in periodic adjustments to compensation 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) expense for participating stock options, participating share balances and retained earnings. (See Note 20 for the possible future impact of the Proposed Merger Transaction on this program.) During 1994, the Company incurred a pre-tax compensation expense for participating stock options of $6.0 million and for the related exercise bonus of $13.2 million, based on the then-current appraised stock value of $134 per share. The following summary presents Management Liquidity Program activity of the participating shares for the years ended November 26, 1995, November 27, 1994 and November 28, 1993:
Common Additional Stock Paid-in Capital Total -------- ---------------- ----------- (000s) Balance at November 28, 1993 $ -- $ -- $ -- Reclassification of participating shares from stockholders' equity 55 138,532 138,587 -------- -------------- ----------- Balance at November 27, 1994 55 138,532 138,587 Repurchase and retirement of 70,842 shares (7) (9,486) (9,493) Increase in value to $189 per participating share -- 53,704 53,704 Reclassification from stockholders' equity due to exercise of 94,999 options 9 323 332 -------- -------------- ----------- Balance at November 26, 1995 $ 57 $ 183,073 $ 183,130 ======== ============== ===========
Note 17: Long-Term Employee Related Benefits The components of long-term employee related benefits are as follows:
1995 1994 ---- ---- (000s) Workers' compensation $ 121,796 $ 148,445 Other deferred employee benefits 195,446 153,101 ---------- ---------- $ 317,242 $ 301,546 ========== ==========
Included in the liability for workers' compensation are accrued expenses related to the Company's program that provides for early identification and treatment of employee injuries. During 1995 and 1994, alternative manufacturing systems were implemented by the Company resulting in significant improvements in the Company's safety programs and, accordingly, workers' compensation costs have decreased substantially from prior years. Accruals for workers' compensation of $97.3 million and $125.9 million were recorded during fiscal years 1995 and 1994, respectively. Furthermore, the Company reduced its workers' compensation expense in 1995 and 1994 by $103.0 million and $85.9 million, respectively, related to reversals of previously estimated costs. Other deferred employee benefits include accrued liabilities for the Company's long-term performance plan, deferred compensation, benefit restoration, pension and other plans. 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 18: Common Stock Certificate of Incorporation The Company has an authorized capital structure consisting of: 270,000,000 shares of common stock, par value $.10 per share, of which 100,000,000 shares are designated Class E common stock and 170,000,000 shares are designated Class L common stock; plus 10,000,000 shares of preferred stock, par value $1.00 per share. Class L common stock is subject to a stockholders' agreement (expiring in April 2001), which limits transfers of the shares. Additionally, management Class L stockholders are parties to contracts with the Company providing for in- service, employment separation-related and post-separation stock purchases. (See Note 16.) The outstanding shares of Class E common stock are subject to restrictions on transfer imposed by the EIP, ELTIS and ESAP. (See Note 20: Subsequent Event - Proposed Merger Transaction.) Common Stock - Valuation Class E common stock is appraised, usually twice a year, by an independent investment banking firm. The latest appraised value of Class E common stock is used as the price for selling or repurchasing Class E common stock from the EIP and ELTIS trustee and ESAP participants. The latest appraised value of Class E common stock is also used as the value for Class L common stock, including participating shares of the Management Liquidity Program. The investment firm is instructed to value stock as though there had been a public trading market for the stock on the valuation date, and to not give consideration to an acquisition or control premium, or to a private market discount. There is, however, no assurance that the Company's stock would trade at the price determined through the independent investment banking firm valuation had there been a public trading market for the shares on the valuation date. (See Note 20: Subsequent Event - Proposed Merger Transaction.) Common Stock - Employee Investment Plans (see Note 12) Common Stock - Management Liquidity Program (see Note 16) Note 19: Related Parties See Item 13, Other Transactions, of this Form 10-K for related party information. Note 20: Subsequent Events Proposed Merger Transaction In February 1996, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with LSAI Holding Corp. ("Holdings") and LSAI Acquisition Corp., a wholly-owned subsidiary of Holdings ("Merger Sub"). The Merger Agreement provides for the merger (the "Merger") of Merger Sub with and into the Company. The Company's Board of Directors and stockholders approved the Merger in February 1996. Completion of the Merger is subject to satisfaction of certain conditions, including receipt of necessary financing and regulatory approvals; completion is expected during the second quarter of 1996. In the Merger, each share of the Company's Class L Common Stock (other than shares contributed to Holdings by Class L holders) and each share of the Company's Class E Common Stock will be converted into the right to receive $265 per share in cash. As a result of the Merger, the Company will become a wholly- owned subsidiary of Holdings. The cash consideration will be provided through bank borrowings by Holdings, which are expected to be assumed by the Company after the Merger, and through cash 56 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) generated by the Company. The total cash consideration is expected to be approximately $2.3 billion, however, this amount may change depending on the number of shares of Class L Common Stock ultimately contributed to Holdings. The final amount will not be determined until early March 1996. Holdings is a Delaware corporation organized and owned by a group of holders of the Company's Class L Common Stock. Holders of Holdings common stock will place their shares in a voting trust, giving the trustees voting power over most matters subject to stockholder vote, and will be subject to restrictions on share transfers. Based upon Subscription Agreements received from Class L stockholders on January 25, 1996, 44,738,958 shares of Class L Common Stock will be contributed to Holdings and 7,016,950 shares of Class L Common Stock will be converted into the right to receive cash upon the Merger. A Participating Stockholder who enters into a Subscription Agreement has until February 26, 1996 (the "Adjustment Date") to reduce his or her investment level or withdraw the subscription completely. Assuming that no subscription reductions or withdrawals occur prior to the Adjustment Date, the transaction would result in a decrease in cash and cash equivalents of $1,047.1 million, an increase in debt of $1,269.0 million, a decrease in ESAP and Management Liquidity Program Common Stock of $246.6 million and a decrease in stockholders' equity of $2,023.8 million. Other than Management Holders who participate in the Offering, the Company's management and employees will have no continuing equity interest in Holdings or the Company following the Merger. In lieu of an equity interest, it is expected that all Company employees worldwide will participate in new arrangements designed to align employee and stockholders' interests in the post-Merger entity by providing one or more cash payments to employee participants based upon the future value created after the Merger. There can be no assurances that the new arrangements will be adopted in the form described or that they will result in such alignment of interests. However, it is the intention of Holdings' management to cause such a cash-based plan to be adopted in connection with the Merger. The operation of the EIP and ELTIS plans will remain essentially the same as before the Merger, except that participants will no longer have the option to invest in Company stock. The ESAP plan will cease to exist after the Merger. The Management Liquidity Program will not be assumed by Holdings and will therefore not apply to Holdings' Common Stock. The stock options outstanding at November 26, 1995 are expected to be exercised prior to the Merger and will, at the option of the holder, be contributed to Holdings or converted to cash in the Merger. No options will be assumed by Holdings. The Stock Appreciation Rights effectively will remain in place but appreciation will be based on a measure other than Company stock. The financial statements included in this Form 10-K do not give effect to the Merger. 57 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Levi Strauss Associates Inc.: We have audited the accompanying consolidated balance sheets of Levi Strauss Associates Inc. (a Delaware corporation) and Subsidiaries as of November 26, 1995 and November 27, 1994, and the related consolidated statements of income, stockholders' equity and cash flows for the years ended November 26, 1995, November 27, 1994 and November 28, 1993. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Levi Strauss Associates Inc. and Subsidiaries as of November 26, 1995 and November 27, 1994, and the results of their operations and their cash flows for each of the three years in the period ended November 26, 1995, in conformity with generally accepted accounting principles. As explained in Notes 3 and 11 to the Consolidated Financial Statements, at the beginning of the fiscal year 1994 the Company changed its method of accounting for income taxes and postretirement benefit plans. ARTHUR ANDERSEN LLP San Francisco, California, January 5, 1996 58 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 59 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The table below identifies the current directors and executive officers of the Company, along with their offices, positions and ages.
Name * Age Office And Position - ---- --- ------------------- Peter E. Haas, Sr./(1)//(2)/............ 77 Director, Chairman of the Executive Committee of the Board of Directors Robert D. Haas/(1)//(2)/................ 53 Director, Chairman of the Board of Directors and Chief Executive Officer Thomas W. Tusher/(2)/................... 54 Director, President and Chief Operating Officer Angela Glover Blackwell/(2)//(3)/....... 50 Director Tully M. Friedman/(2)//(3)/............. 54 Director James C. Gaither/(2)//(4)/.............. 58 Director Rhoda H. Goldman/(1)//(2)//(4)/......... 71 Director Peter E. Haas, Jr./(1)//(2)//(3)/....... 48 Director Walter J. Haas/(1)//(2)//(3)/........... 45 Director (Effective November 16, 1995) F. Warren Hellman/(3)//(4)/............. 61 Director James M. Koshland/(2)//(4)/............. 44 Director Patricia Salas Pineda/(3)//(4)/......... 44 Director Thomas J. Bauch......................... 52 Senior Vice President, General Counsel and Secretary R. William Eaton, Jr.................... 52 Senior Vice President, Chief Information Officer Donna J. Goya........................... 48 Senior Vice President, Human Resources Peter A. Jacobi......................... 52 Senior Vice President, President of Levi Strauss International George B. James......................... 58 Senior Vice President, Chief Financial Officer Robert D. Rockey, Jr.................... 54 Senior Vice President, President of Levi Strauss North America
- -------------------------- * Walter A. Haas, Jr./(1)/ served as Honorary Chairman of the Board of Directors until his death on September 20, 1995. /(1)/ Robert D. Haas and Walter J. Haas are the sons of Walter A. Haas, Jr.; Walter A. Haas, Jr. was the brother of Peter E. Haas, Sr. and Rhoda H. Goldman; Peter E. Haas, Sr. is the father of Peter E. Haas Jr. /(2)/ Member, Corporate Ethics and Social Responsibility Committee /(3)/ Member, Audit Committee /(4)/ Member, Personnel Committee Directors are divided into three classes of equal number. All directors are and will be elected by holders of a majority of the outstanding shares of the Company entitled to vote in the election of directors. Stockholders vote separately for the election of directors in each class. The first class of directors consists of Mr. R. D. Haas, Mrs. Goldman, Ms. Blackwell and Mr. Friedman and the term of office expires at the 1996 annual meeting. The second class consists of Mr. P.E. Haas, Jr., Mr. W. J. Haas, Mr. Hellman and Ms. Pineda and the term of office expires at the 1997 annual meeting. The third class consists of Mr. Tusher, Mr. P. E. Haas, Sr., Mr. Gaither and Mr. Koshland and the term of office expires at the 1998 annual meeting of stockholders. (See Note 20 to the Consolidated Financial Statements.) 60 Directors who are elected at an annual meeting of stockholders to succeed those whose terms then expire will be identified as being directors of the same class as those they succeed. Staggered board provisions result in the election of only one-third of the Board at each annual meeting. This arrangement limits the ability of a person holding enough stock to control the election process from effecting a rapid change in board composition and therefore may have the effect of delaying, deferring or preventing a change in control of the Company. Executive officers serve at the discretion of the Board of Directors. All members of the Haas family and Mrs. Goldman are descendants of the founder of LS&CO., Levi Strauss. Peter E. Haas, Sr. assumed his present position as Chairman of the Executive Committee of the Board of Directors in March 1989 after serving as Chairman of the Board of LS&CO. since 1981, and of the Company since 1985. He joined LS&CO. in 1945 and became President in 1970 and Chief Executive Officer in 1976. He has served on the Board of LS&CO. since 1948 and has been a director of the Company since its inception in 1985. Mr. P.E. Haas, Sr. is a former Associate of the Smithsonian National Board and a former trustee and former Chairman of the Board of Trustees of the San Francisco Foundation. He is a former director of the Northern California Grantmakers, Crocker National Corporation and Crocker National Bank, and American Telephone and Telegraph Co. He is a former President of the United Way of the Bay Area, the Jewish Community Federation, Aid to Retarded Citizens and the Rosenberg Foundation and a former member of the Board of Governors of the United Way of America. Robert D. Haas assumed his present position as Chairman of the Board of Directors of the Company and LS&CO. in March 1989. Since 1984, he has served as Chief Executive Officer of the Company and LS&CO., and was President of the Company from its inception in 1985 to March 1989. Since he joined LS&CO. in 1973, Mr. Haas served in a number of positions, including Marketing Director and Group Vice President of LSI, Director of Corporate Marketing Development, Senior Vice President of Corporate Planning and Policy and President of the New Business Group. He became President of the Operating Groups in 1980 and was named Executive Vice President and Chief Operating Officer in 1981. He was elected to the LS&CO. Board of Directors in 1980 and has been a director of the Company since its inception in 1985. Mr. R.D. Haas is an active participant in business and community organizations and is currently Chairman of the Board of Directors of the Levi Strauss Foundation, a trustee of the Evelyn and Walter A. Haas, Jr. Foundation, a trustee of the Ford Foundation, an honorary trustee of the Brookings Institution and an honorary director of the San Francisco AIDS Foundation. He is also a member of the Conference Board, the Council on Foreign Relations, the Trilateral Commission, the Bay Area Council, the California Business Roundtable and a former Director of the American Apparel Association. Thomas W. Tusher, President and Chief Operating Officer, joined LS&CO. in 1969, was elected Executive Vice President and Chief Operating Officer in 1984 and became President and a director of the Company in March 1989. He previously served as President of the Europe division, Executive Vice President of the International Group and was appointed President of LSI in 1980. He was elected a Vice President of LS&CO. in 1976 and a Senior Vice President in 1977 and was a director of LS&CO. from 1979 until 1985. 61 Mr. Tusher is a director of Cakebread Cellars and a former director of Great Western Financial Corporation and the San Francisco Chamber of Commerce. He is a member and former Chairman of the Walter A. Haas School of Business Advisory Board, University of California Berkeley and a member of the Bay Area Sports Hall of Fame Committee. Angela Glover Blackwell, a director since February 1994, is the founder and former President of Urban Strategies Council, established in 1987. As of January 23, 1995, she assumed the vice-presidency of the Rockefeller Foundation in New York. Ms. Blackwell currently serves on the Board of the Foundation for Child Development. Previously, she served as staff attorney and managing attorney for Public Advocates, Inc. and served on the Boards of Common Cause, the James Irvine Foundation, Children Now, the Center on Budget and Policy Priorities, the Urban Institute and Public Advocates, Inc. She formerly co-chaired the Commission for Positive Change in the Oakland Public Schools Tully M. Friedman, a director since 1985, has been a general partner of the private investment firm of Hellman & Friedman since its inception in 1984. From 1979 until 1984, he was a general partner and, later, managing director of Salomon Brothers Inc. Currently, he is on the Advisory Board of Tevecap, S.A., on the Board of Directors of American President Companies, Ltd., Mattel, Inc., McKesson Corporation and MobileMedia Corporation and is a member of the Board of Representatives of Falcon Holding Group, L.P. Mr. Friedman is a member of the Executive Committee and a Trustee of the American Enterprise Institute, a director of Stanford Management Company and a Director of Nueva School. He is also a former President of the San Francisco Opera Association and a former Chairman of Mount Zion Hospital and Medical Center. James C. Gaither, a director since April 1988, is a partner of the law firm of Cooley, Godward, Castro, Huddleson & Tatum, San Francisco, California. Prior to beginning his law practice with the firm in 1969, he served as law clerk to the Honorable Earl Warren, Chief Justice of the United States, Special Assistant to the Assistant Attorney General in the U.S. Department of Justice and Staff Assistant to the President of the United States, Lyndon B. Johnson. Mr. Gaither is the former President of the Board of Trustees at Stanford University and is a member of the Board of Trustees of the Carnegie Endowment for International Peace and for The RAND Corporation. He was formerly Chairman of the Board of Trustees for the Center for Biotechnology Research and has served as Chairman of the Board of many educational and philanthropic organizations in the San Francisco Bay Area. Mr. Gaither is currently a director of Basic American Inc. and Amylin Pharmaceuticals, Inc., and has served as a director of several other public, private and non-profit companies. Rhoda H. Goldman, a director since 1985, devotes substantial time to public service. She is a director of Mount Zion Health Systems and a former trustee of Mount Zion Medical Center of the University of California, San Francisco, Vice President of the Board of Governors of the San Francisco Symphony, a member of Foster McGaw Prize Committee, the Goldman Environmental Foundation, the Walter A. Haas School of Business Advisory Board, University of California Berkeley, the ARCS Foundation and the Levi Strauss Foundation. She is past President of Congregation Emanu-El, San Francisco. Additionally, she is Chairperson of the Stern Grove Festival Association and has served as Chairperson of the Distribution Committee of the San Francisco Foundation and the Mayor's Holocaust Memorial Committee. Peter E. Haas, Jr., a director since 1985, joined LS&CO. in 1972 as Director of the Minority Purchasing Program. He later transferred to LSI, where he held the positions of Manager of Financial Analysis, 62 Inventory Planning Manager and General Merchandising Manager. He became a Vice President and General Manager in the Menswear division in 1980, Director of Materials Management for Levi Strauss USA in 1982 and was Director of Product Integrity of The Jeans Company from 1984 to February 1989. Mr. P.E. Haas, Jr. is President of the Board of Directors of the Red Tab Foundation and former President and current member of the Board of Trustees of Marin Academy. Additionally, he is director of the following Boards: Levi Strauss Foundation and The Stern Grove Festival Foundation, honorary director of the Novato Youth Center (former President) and trustee of the Walter and Elise Haas Fund. He was formerly on the Boards of Vassar College and North Bay Bancorp. Walter J. Haas, a director since November 1995, served as Chairman and Chief Executive Officer of the Oakland A's Baseball Company from January 1, 1993 after holding the title of President and Chief Executive Officer for two years. W.J. Haas had also served as the club's Executive Vice President from 1980 through 1987 and then as the Chief Operating Officer from 1988 through 1989. Prior to joining the Athletics, he served as Grants Manager for Levi Strauss & Co. He also served as business manager for Sons of Champlin, Inc. and as President of Goldmine Records. W.J. Haas currently serves as the Vice Chairman of the Board of Trustees of the Marin County Day School and is a trustee for the Evelyn and Walter A. Haas, Jr. Fund and Elise and Walter Haas Fund. He is a former Director of the Major League Promotions Corporation and the United States International Sports Committee, and was honorary Chairman of the San Francisco Chapter of the Legal Assistance to the Elderly, Inc. F. Warren Hellman, a director since 1985, has been a managing partner of the private investment firm of Hellman & Friedman since its inception in 1984. Previously, he was a Managing Director of Lehman Brothers Kuhn Loeb, Inc. Mr. Hellman is currently a director of American President Companies, Ltd., Williams- Sonoma, Inc., Franklin Resources, Inc., Il Fornaio America Corporation, DN&E Walter Co., Children Now, Eller Media Company and University of California San Francisco (UCSF) Foundation. He is a trustee of the Brookings Institution and the San Francisco Foundation. James M. Koshland, a director since 1985, is a partner of the law firm of Gray Cary Ware & Freidenrich, a Professional Corporation, Palo Alto, California, with which he has been associated since 1978. Mr. Koshland is a member of the Executive Board of the firm. He is a director of the Giarretto Institute, the Foundation for the Future of Menlo-Atherton High School, the Senior Coordinating Council of the Palo Alto area, and the Executive Committee of the Board of Visitors of Stanford Law School. Patricia Salas Pineda, a director since 1991, is currently General Counsel and Assistant Corporate Secretary of New United Motor Manufacturing, Inc., with which she has been associated since 1984. She is currently a trustee at the James Irvine Foundation, the Oakland Museum and The RAND Corporation. She was formerly a member and served as President of the Port of Oakland Commission and was a former member of the KQED, Inc. Board of Directors, the San Francisco Ballet Association and the Mills College Board of Trustees. Thomas J. Bauch, Senior Vice President, General Counsel and Secretary, joined LS&CO. in 1977. He was named General Counsel in 1981, elected a Vice President of LS&CO. in 1982 and assumed his current position as Senior Vice President in 1985. Mr. Bauch has served on the Board of Governors of the Commonwealth Club and the Board of Visitors of the University of Wisconsin Law School. He has served on the Board of Directors of the Urban School of San Francisco, the American Corporate Counsel Association, and the Medical Research Institute, and as a legal advisor to the City of Belvedere and the Multicultural Alliance. He was Chairman of the Bay Area General Counsel Association in 1984. 63 R. William Eaton, Jr., Senior Vice President and Chief Information Officer, joined LS&CO. in 1978 as Manager of Information Systems. He became Vice President for Information Resources of LSI in 1983, was elected a Vice President of LS&CO. in 1986, was named Chief Information Officer in 1988 and assumed his current position of Senior Vice President in February 1989. Mr. Eaton is a former member of the Commonwealth Club and the King's Mountain Community Association. Donna J. Goya, Senior Vice President, Human Resources, joined LS&CO. in 1970 and became the Director of Equal Employment Opportunity and Personnel Policy in 1980. She became Director of Employee Relations and Policy in 1983 and Vice President of Corporate Personnel in 1984. She was elected a Senior Vice President in 1986. Ms. Goya is a director of INROADS and is a member of the Human Resources Roundtable and the National Academy of Human Resources. Peter A. Jacobi, President of Levi Strauss International, joined the Company in 1970 and was named President of the Youthwear division in 1981. In 1984, he became Executive Vice President of the Jeans Company and was subsequently named President of the Men's Jeans division. Mr. Jacobi became President of the European division of LSI in 1988. In 1991, he assumed the position of President of Global Sourcing and was elected Senior Vice President. In 1993, he assumed his current position. Mr. Jacobi is past President of the South-West Apparel and Textile Manufacturers Association and also served on the Board of Directors for the Men's Fashion Association. He is a member of the Board of Directors of the Textile/Clothing Technology Corporation, Advisory Board to the University of Michigan School of Engineering and the U.C. Berkeley/St. Petersburg (Russia) School of Management Project. George B. James, Senior Vice President and Chief Financial Officer, joined the Company and LS&CO. in 1985. From 1984 to 1985, he was Executive Vice President and Group President of Crown Zellerbach Corporation and from 1982 to 1984, he held the position of Executive Vice President and Chief Financial Officer of Crown Zellerbach Corporation. From 1972 to 1982, he was Senior Vice President and Chief Financial Officer of Arcata Corporation. Mr. James is a director of Basic Vegetable Products, Inc., Fiberboard Corp., Crown Vantage, Inc., the World Affairs Council, California Pacific Medical Center Foundation and the Committee for Economic Development. In addition, he is a trustee of the San Francisco Ballet Association and serves as trustee for the Stern Grove Festival Association and the Zellerbach Family Fund. Robert D. Rockey, Jr., President of Levi Strauss North America, joined LS&CO. in 1979 and became President of the Womenswear division in 1983. In 1984, he was named President of the Europe division of LSI and, in 1988, he was appointed President of the Men's Jeans division. During 1991, Mr. Rockey became President of U.S. Marketing divisions and later was elected Senior Vice President. In 1992, he assumed the position of President of Levi Strauss North America. Mr. Rockey is a director and former President of the South-West Apparel and Textile Manufacturers Association. Insider Report Filings The Company's executive officers and directors are not obligated, under Section 16(a) of the Securities Exchange Act of 1934, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. 64 ITEM 11. DIRECTOR AND EXECUTIVE COMPENSATION Compensation of Directors Directors of the Company who are also stockholders or employees of the Company do not receive any additional compensation for their services as director. Directors who are not stockholders or employees (Mr. Gaither and Mss. Blackwell and Pineda) receive approximately $36,000 in annual compensation during each of their first five years of service and, beginning in their sixth year of service, are expected to receive annual compensation of approximately $42,000. Such payments include an annual cash retainer of $30,000 for each of the first three years, $20,000 for the fourth year, $10,000 for the fifth year, and $6,000 thereafter. The payments also include fees of $500 per Board and Board committee meeting attended and award payments under the Company's Long-Term Performance Plan (LTPP). The amount of each type of payment varies depending on the year of service and the actual value of the LTPP units. Mr. Gaither and Mss. Blackwell and Pineda each received grants of 350 performance units under the LTPP in 1995. In 1995, Mr. Gaither and Ms. Pineda received payments under the LTPP of $93,297 and $58,183, respectively. These directors will be eligible to receive performance units under the Long-Term Incentive Plan (LTIP) which will replace the LTPP in 1996. Directors who are not employees or stockholders also receive travel accident insurance while on Company business and are eligible to participate in a deferred compensation plan. (See Long-Term Performance Plan and Deferred Compensation Plan captions.) Pursuant to the Proposed Merger Transaction (See Note 20 to the Consolidated Financial Statements), the Company's Board of Directors appointed a Special Committee, which consists solely of independent Company directors who will not be participating in the Merger. The members of the Special Committee, Mr. Gaither and Mss. Blackwell and Pineda, must review and approve the terms of the Merger Agreement prior to approval by the Company's Board. The Company will pay each member of the Special Committee $30,000 for service on the Committee, and will enter into indemnification agreements with each member under which the Company will indemnify the member for certain losses, claims, damages and liabilities arising from service on the Committee. In addition, the Company will provide indemnification under its by-laws to the Committee members. Compensation Committee Interlocks and Insider Participation F. Warren Hellman and Tully M. Friedman, directors of the Company, are general partners of Hellman & Friedman, an investment banking firm. Hellman & Friedman provides financial advisory services to the Company and received $300,917 for such services in 1995. At November 26, 1995 Messrs. Hellman and Friedman and their families and other partners of Hellman & Friedman beneficially owned an aggregate of 1,418,842 shares of Class L common stock. See Item 12, Security Ownership of Certain Beneficial Owners and Management, for additional information concerning Mr. Hellman's and Mr. Friedman's beneficial ownership of Class L common stock. (See Note 20 to the Consolidated Financial Statements for discussion of Proposed Merger Transaction.) 65 Summary Compensation Table for Executive Officers The following table sets forth summary compensation information for 1995, 1994 and 1993 for each of the five most highly compensated executive officers of the Company:
Long-Term Compensation ------------------------- Annual Compensation Awards Payouts -------------------------------------- ----------- ----------- Securities Other Annual Underlying LTIP All Other Name and Salary Bonus Compensation SAR's Payouts Compensation Principal Position Year ($) ($) ($) (#) ($) ($) - ---------------------------- ------ ---------- ----------- ------------- ----------- ----------- ------------- /(1)/ /(2)/ /(3)/ /(4)/ /(5)/ Robert D. Haas 1995 $1,094,818 $1,600,000 $ -- $ -- $2,133,065 $1,001,435 Chairman of the Board and 1994 1,044,184 1,374,058 -- -- 1,356,521 990,861 Chief Executive Officer 1993 998,460 1,162,795 -- -- 506,667 871,060 Thomas W. Tusher 1995 744,218 900,000 2,960,216 -- 1,312,207 522,182 President, Chief Operating 1994 709,852 785,953 -- -- 1,196,220 465,924 Officer 1993 680,056 677,063 -- -- 944,985 624,510 George B. James 1995 426,122 380,000 -- -- 570,566 203,891 Senior Vice President, 1994 387,260 356,039 -- -- 556,482 188,199 Chief Financial Officer 1993 369,292 313,231 -- -- 481,539 160,633 Robert D. Rockey, Jr. 1995 417,554 457,978 -- -- 574,440 277,199 Senior Vice President, 1994 406,419 447,043 -- 40,000 521,830 240,240 President of Levi Strauss 1993 354,959 317,724 -- -- 432,805 179,570 North America Peter A. Jacobi 1995 360,158 420,200 -- -- 583,185 255,855 Senior Vice President, 1994 336,156 376,656 -- 40,000 543,386 234,186 President of Levi Strauss 1993 311,692 281,413 -- -- 453,071 163,712 International
- -------------------- /(1)/ In 1995, bonuses were determined pursuant to the Company's Annual Incentive Plan and will be paid in 1996 or deferred to later years (see Partners in Performance caption). In 1994 and 1993, bonuses were determined pursuant to the Company's Management Incentive Plan (MIP) and Cash Performance Sharing Plan. The bonuses include amounts based upon 1994 and 1993 performance that were paid in 1995 and 1994, respectively, or deferred to later years (see Partners in Performance caption). Amounts paid to Mr. Haas relating to MIP bonuses were $1,197,500 and $1,010,000 for 1994 and 1993, respectively. Amounts paid to Mr. Haas relating to Cash Performance Sharing bonuses were $176,558 and $152,795 for 1994 and 1993, respectively. Amounts paid to Mr. Tusher relating to MIP bonuses were $675,000 and $580,000 for 1994 and 1993, respectively. Amounts paid to Mr. Tusher relating to Cash Performance Sharing bonuses were $110,953 and $97,063 for 1994 and 1993, respectively. Amounts paid to Mr. James relating to MIP bonuses were $300,000 and $265,000 for 1994 and 1993, respectively. Amounts paid to Mr. James relating to Cash Performance Sharing bonuses were $56,039 and $48,231 for 1994 and 1993, respectively. Amounts paid to Mr. Rockey, Jr. relating to MIP bonuses were $389,112 and $271,188 for 1994 and 1993, respectively. Amounts paid to Mr. Rockey, Jr. relating to Cash Performance Sharing bonuses were $57,931 and $46,536 for 1994 and 1993, respectively. Amounts paid to Mr. Jacobi relating to MIP bonuses were $327,250 and $240,043 for 1994 and 1993, respectively. Amounts paid to Mr. Jacobi relating to Cash Performance Sharing bonuses were $49,406 and $41,370 for 1994 and 1993, respectively. /(2)/ Other annual compensation represents cash bonuses related to certain stock option exercises under the 1985 Stock Option Plan (see 1985 Stock Option Plan caption). /(3)/ See table under 1992 Stock Appreciation Rights Plan section. 66 /(4)/ Amounts are paid pursuant to the Company's Long-Term Performance Plan (LTPP). The LTPP amounts shown in the table include amounts based on LTPP units granted in 1990, 1991 and 1992 that were paid in 1993, 1994 and 1995 or deferred to later years (see Long-Term Performance Plan caption). /(5)/ All other compensation consists of amounts contributed under the Company's Employee Stock Purchase and Award Plan (ESAP) and amounts contributed under the Company's benefit restoration plans (BRP). The Internal Revenue Code (the Code) limits the amount of benefits that may be paid under plans qualified by the Code. The BRP will pay any benefits that exceed such limitations. (See Benefits Plans section for more information about both plans.) Amounts contributed to Mr. Haas relating to ESAP were $143,655, $165,295 and $155,958 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Haas relating to BRP were $857,780, $825,566 and $715,102 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Tusher relating to ESAP were $86,507, $103,808 and $99,054 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Tusher relating to BRP were $435,675, $362,116 and $525,456 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. James relating to ESAP were $42,390, $52,403 and $49,140 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. James relating to BRP were $161,501, $135,796 and $111,493 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Rockey, Jr. relating to ESAP were $48,984, $54,214 and $47,424 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Rockey, Jr. relating to BRP were $228,215, $186,026 and $132,146 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Jacobi relating to ESAP were $41,605, $46,270 and $42,072 for 1995, 1994 and 1993, respectively. Amounts contributed to Mr. Jacobi relating to BRP were $214,250, $187,916 and $121,640 for 1995, 1994 and 1993, respectively. The Company typically matches contributions to the ESAP and BRP twice per fiscal year. However, in 1995, the second match was postponed due to the proposed merger transaction. (See Note 20 to the Consolidated Financial Statements for further discussion.) Stock Option and Stock Appreciation Rights Plans 1985 Stock Option Plan In 1985, the Board of Directors of the Company adopted the 1985 Stock Option Plan (the 1985 Plan). The 1985 Plan is administered by the Personnel Committee of the Board of Directors (the Administrator). A total of 5,000,000 shares of Class L common stock may be issued upon exercise of options under the 1985 Plan to eligible employees or non-employee directors of the Company selected by the Board. Options granted under the 1985 Plan are non-qualified stock options and expire ten years from the date of grant. The Board or the Administrator determines the exercise price, exercise schedule, the manner in which payment occurs and any provision for a cash bonus to be paid at or about the time of exercise of the option. In addition the administrator retains discretion, subject to plan limits, to modify the terms (e.g., acceleration or elimination of vesting requirements of outstanding options). There were no option grants during 1995, 1994 or 1993. Pursuant to the plan, no grants can be made after fiscal year 1995. During 1995, 94,999 stock options were exercised at a price of $3.50 per share. Class L Treasury Stock was reissued and reclassified as Management Liquidity Program Class L common stock. The Company disbursed $2.9 million for the related exercise bonus. (See Management Liquidity Program caption under Item 13., Certain Relationships and Related Transactions.) 1992 Stock Appreciation Rights Plan In 1992, the Board of Directors of the Company adopted the 1992 Executive Stock Appreciation Rights Plan of Levi Strauss Associates Inc. The purpose of the 1992 Executive Stock Appreciation Rights Plan is to attract, retain, motivate and reward certain executives by giving them an opportunity to participate in the future success of the Company. The stock appreciation rights (SARs), are tied to and based on changes in the value of the Company's Class E common stock (Class E common stock is appraised, usually twice a year, by an independent investment banking firm). Upon exercise, the holder is entitled to receive a cash payment from the Company equal to the difference in the fair market value of stock on grant date and 67 exercise date, less related tax withholding. A total of 500,000 rights may be granted under this plan. SARs awarded under the Company's plan may not be transferred. The plan is administered by a committee of at least two members of the Board of Directors of the Company who are disinterested persons. The administrative committee for SARs determines the initial values of the SARs, the exercise schedule and any other terms or conditions applicable to the SARs that may be appropriate. In addition, the administrative committee retains discretion, subject to plan limits, to modify the terms of SARs (e.g., acceleration or elimination of vesting requirements). During 1995, 14,000 SARs were exercised resulting in a cash disbursement by the Company of $1.0 million. No SARs were granted in 1995. A total of 170,000 SARs were granted in 1994 to certain executives at an initial grant value of $129 per SAR. The 1994 grant of SARs vest and become exercisable over several years commencing in 1997. Twenty percent of these SARs will be exercisable in 1997, an additional 30 percent in 1998 and the remaining 50 percent in 1999. Also during 1994, 17,000 SARs granted in 1992 were forfeited. There were no SAR grants during 1993. 68 The following table presents information for the year ended November 26, 1995 regarding aggregated options/SARs of executive officers of the Company listed in the Summary Compensation Table. Aggregated Option Exercises in Last Fiscal Year and Year-End Option/SAR Values - ------------------------------------------------------------------------------
Number of Dollar Value Securities of Underlying Unexercised Unexercised In-The-Money Options/SARs Options/SARs at Year-End (#) at Year-End ($) Number of --------------- -------------------- Shares Name and Acquired Dollar Value Exercisable/ Exercisable/ Principal Position on Exercise Realized Unexercisable Unexercisable - ------------------------------ ----------- ------------ --------------- -------------------- Robert D. Haas -- -- -- -- Chairman of the Board and Chief Executive Officer Thomas W. Tusher 94,999 $14,582,347 404,750/-- $75,081,125/-- President, Chief Operating Officer George B. James -- -- -- -- Senior Vice President, Chief Financial Officer Robert D. Rockey, Jr. -- -- 8,333/56,667 $874,965/$4,150,035 Senior Vice President, President of Levi Strauss North America Peter A. Jacobi 8,333 $608,309 --/56,667 --/$4,150,035 Senior Vice President, President of Levi Strauss International
Long-Term Performance Plan The Company has a Long-Term Performance Plan (LTPP) for outside directors, officers and other key employees, under which performance units are granted to each participant. The value assigned to each unit is determined at the discretion of the Personnel Committee of the Board of Directors. The performance unit value guidelines selected by the Personnel Committee with respect to existing grants are based on the Company's three-year cumulative net earnings before tax. Under such guidelines (which are subject to change by the Personnel Committee), the current forecast value of the units granted in 1995 and 1994 is $100 and $220 per unit, respectively, and the final value of the units granted in 1993 is $264 per unit. The units vest and are paid in cash in one-third increments on the third, fourth and fifth anniversaries of the date of grant or the amounts can be deferred at the election of the participant. The Company will implement a new performance management and pay program replacing this program in 1996. (See Partners in Performance caption for additional information.) 69 The following table sets forth information relating to Long-Term Performance Plan units granted in 1995 for the executive officers of the Company listed in the Summary Compensation Table: Long-Term Performance Plan - Awards in Last Fiscal Year -------------------------------------------------------
Estimated Future Payments Under Non-Stock Price-Based Plans ------------------------- Performance /(2)//(3)/ or Other Period Number Until Name and of Units Maturation Dollar Dollar Principal Position Granted or Payout Threshold Target - --------------------------- -------- ------------- --------- ---------- /(1)/ Robert D. Haas 15,000 3-5 years $0 $1,500,000 Chairman of the Board and Chief Executive Officer Thomas W. Tusher 8,400 3-5 years 0 840,000 President, Chief Operating Officer George B. James 2,500 3-5 years 0 250,000 Senior Vice President, Chief Financial Officer Robert D. Rockey, Jr. 3,250 3-5 years 0 325,000 Senior Vice President, President of Levi Strauss North America Peter A. Jacobi 3,000 3-5 years 0 300,000 Senior Vice President, President of Levi Strauss International
- -------------------- /(1)/ The units vest in three years and are paid out in cash in one-third increments payable in June 1998, June 1999 and June 2000. /(2)/ Each LTPP unit is valued at $100 if the Company achieves a target level of corporate earnings performance over a three-year period. The basis for measuring long-term performance is a corporate three-year cumulative earnings performance calculation (e.g., an internal calculation of earnings from operations). Performance above target levels will produce increases in award values. There is no cap on the award value; however, the award formula is directly related to the Company's earnings performance. /(3)/ Under the terms of the LTPP, the Personnel Committee retains discretion, subject to plan limits, to modify the terms of outstanding awards to take into account the effect of unforeseen or extraordinary events and accounting changes. Partners in Performance In 1995, the Company implemented a new performance and pay program, Partners in Performance, for all salaried employees worldwide. This program was designed to align the objectives of all employees with the strategic objectives of the Company and interests of the Company's shareholders. To accomplish this goal, all eligible employees have the opportunity to earn incentives, both short and long term. The short-term incentive plan, the Annual Incentive Plan (AIP), began in 1995 and rewards 70 performance measured by business unit and corporate financial results against pre-established targets. The AIP replaces the MIP and Cash Performance Sharing Plan in 1995. The long-term incentives, the Long-Term Incentive Plan (LTIP), will begin in 1996 and are based on a performance unit plan measured by a three- year cumulative earnings performance calculation and relative total shareholder return. The LTIP will replace the LTPP in 1996. Deferred Compensation Plan The Company has an unfunded Deferred Compensation Plan under which a selected group of employees may elect to defer receipt until termination of employment of up to 33% of their base salary and 100% of their bonus. The amounts deferred under this plan, plus interest, may be paid prior to termination in certain hardship circumstances specified in the plan. When electing to defer a bonus, eligible employees may also elect to receive in-service payments of the deferred bonus in five annual installments. Additionally, amounts deferred under this plan are considered compensation covered for defined benefit pension purposes. The Company also maintains a similar deferred compensation plan for outside directors. Benefit Plans Home Office Pension Plan Generally, all Home Office payroll employees, including executive officers, participate in the Company's Home Office Pension Plan (the Pension Plan) after completing one year of service. The Pension Plan, subject to Internal Revenue Service limitations, provides pension benefits based on an individual's years of service and final average covered compensation (generally, base salary plus bonuses awarded for the five consecutive fiscal years out of the individual's last ten years of service that produces the highest average). Contributions by the Company to the Pension Plan cannot be separately calculated for individual executive officers. 71 The following table shows the estimated annual benefits payable upon retirement under the Pension Plan, the benefit restoration plans and Deferred Compensation Plan to persons in various compensation and years-of-service classifications prior to mandatory offset of Social Security benefits:
Pension Plan Table ------------------------------------------------------ Years of Service ------------------------------------- Remuneration 15 20 25 30 35 ------------ -- -- -- -- -- $675,000 $202,500 $270,000 $337,500 $345,938 $354,375 750,000 225,000 300,000 375,000 384,375 393,750 825,000 247,500 330,000 412,500 422,813 433,125 900,000 270,000 360,000 450,000 461,250 472,500 975,000 292,500 390,000 487,500 499,688 511,875 1,050,000 315,000 420,000 525,000 538,125 551,250 1,125,000 337,500 450,000 562,500 576,563 590,625 1,200,000 360,000 480,000 600,000 615,000 630,000 1,275,000 382,500 510,000 637,500 653,438 669,375 1,350,000 405,000 540,000 675,000 691,875 708,750 1,425,000 427,500 570,000 712,500 730,313 748,125 1,500,000 450,000 600,000 750,000 768,750 787,500 1,575,000 472,500 630,000 787,500 807,188 826,875 1,650,000 495,000 660,000 825,000 845,625 866,250 1,725,000 517,500 690,000 862,500 884,063 905,625 1,800,000 540,000 720,000 900,000 922,500 945,000 1,875,000 562,500 750,000 937,500 960,938 984,375 1,950,000 585,000 780,000 975,000 999,375 1,023,750 2,025,000 607,500 810,000 1,012,500 1,037,813 1,063,125 2,100,000 630,000 840,000 1,050,000 1,076,250 1,102,500 2,175,000 652,500 870,000 1,087,500 1,114,688 1,141,875 2,250,000 675,000 900,000 1,125,000 1,153,125 1,181,250 2,325,000 697,500 930,000 1,162,500 1,191,563 1,220,625 2,400,000 720,000 960,000 1,200,000 1,230,000 1,260,000 2,475,000 742,500 990,000 1,237,500 1,268,438 1,299,375
- -------------------- The preceding table assumes retirement at the age of 65, with payment to the employee in the form of a single-life annuity. As of year-end 1995, the credited years of service for Messrs. R.D. Haas, Tusher, James, Rockey, Jr. and Jacobi were 22, 26, 10, 16 and 25, respectively. The 1995 compensation covered by the Pension Plan, benefit restoration plans and Deferred Compensation Plan for Messrs. R.D. Haas, Tusher, James, Rockey, Jr. and Jacobi was $2,468,876, $1,530,171, $782,161, $864,597, and $736,814, respectively. The 1995 compensation covered by the Pension Plan consists of fiscal year 1995 cash salary and 1994 bonus paid in 1995 (not including LTPP). These amounts correspond to the amounts on the Summary Compensation table (see Summary Compensation Table for Executive Officers caption). The Internal Revenue Code (the Code) limits the amount of pension benefits that may be paid under plans qualified under the Code such as the Pension Plan. The Company maintains separate unfunded benefit restoration plans (see the Benefit Restoration Plans caption) that will pay any retirement benefits under the Pension Plan that exceed such limitations. The five individuals named in the Summary Compensation Table are participants in the benefit restoration plans. 72 The Company has unfunded supplemental pension agreements with Messrs. Tusher and James which provide specific benefits upon retirement. The cost to the Company in 1995 of the agreements for Messrs. Tusher and James was $237,200 and $124,300, respectively. Benefit Restoration Plans The Company has two unfunded benefit restoration plans, the Supplemental Benefit Restoration Plan and the Excess Benefit Restoration Plan, collectively called the BRP, that provide eligible employees with benefits that would have been payable from tax-qualified plans (both defined benefit and defined contribution) of the Company except for limitations imposed on such benefits under the Code. The BRP also provides for the deferral of an eligible employee's current compensation to the extent that such compensation cannot be contributed to the Company's investment plans, due to these limitations, and the restoration of Company matching contributions that could not be credited under those plans as a result. All employees who are subject to such limitations are eligible to participate in the BRP. The BRP is administered by the Administrative Committee of the Retirement Plans. Employee Investment Plans The Company maintains three employee investment plans. Two of these plans, the Employee Investment Plan of Levi Strauss Associates Inc. (EIP) and the Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan (ELTIS), are qualified plans that cover Home Office employees and U.S. field employees, respectively. The third plan, the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc. (ESAP) is a non-qualified employee equity program for highly compensated (as defined by the Code) Home Office employees. Effective December 1990, highly compensated employees were no longer eligible to contribute to the EIP due to amendments to the EIP, which were made to comply with certain changes to the Code. The ESAP commenced in 1992 to allow highly compensated employees to participate in equity ownership. The ESAP is administered by the Personnel Committee of the Board of Directors. The Pension Plan and the EIP are administered by the Administrative Committee of the Retirement Plans of the Company. The Personnel Committee has delegated most of its routine administrative functions to the Administrative Committee and to the Employee Benefits Department. The Administrative Committee is appointed by the Board of Directors and has the general responsibility for the administration and operation of the plans, including compliance with reporting and disclosure requirements, establishing and maintaining plan records and determining and authorizing payments of benefits under the plans. The qualified plans also established an Investment Committee appointed by the Board of Directors. The Investment Committee's duties and responsibilities include (i) reviewing the performance of the trustee under the plans; (ii) appointing, removing and reviewing the performance of investment managers who may be delegated the authority to manage plan assets; (iii) establishing investment standards and policies based upon the objectives of the plans as communicated by the Administrative Committee; and (iv) performing such other functions as are specifically assigned to the Investment Committee under the plans. The foregoing descriptions of the Company's benefit plans and agreements are only summaries and are qualified in their entirety by reference to such agreements and plans. Additional information about certain Company employee plans is contained in Notes 12 through 15 to the Consolidated Financial Statements. See Note 20 for discussion of the possible future impact of the Proposed Merger Transaction on these plans. 73 Contracts with Management Holders of Class L Common Stock The management liquidity program (the Liquidity Program) was approved by the Board of Directors and stockholders in 1994. The Liquidity Program allows the Company to enter into contracts with management holders of Class L common stock relating to in-service, employment separation-related and post-separation stock purchases. This program allows participating management stockholders to annually sell a specified amount of their stock to the Company, subject to certain limitations and conditions. The program also entitles the Company to purchase all of the shares held by a management holder at the time of separation from employment. (See Management Liquidity Program caption under Item 13., Certain Relationships and Related Transactions.) 74 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 31, 1995, certain information with regard to the beneficial ownership of Class L common stock and Class E common stock by each person who beneficially owns more than 5% of the outstanding shares of either of those classes, each of the directors, each of the five most highly compensated executive officers and all directors and executive officers of the Company as a group. Shares listed as beneficially owned by the executive officers include shares of Class E common stock acquired through the Employee Stock Purchase and Award Plan. The business address of all persons listed is 1155 Battery Street, San Francisco, California 94111.
Additional Number of Shares in Which Voting Rights or Name of Individual Investment Powers Total Shares Percentage or Number of Number of Exist or May Be Beneficially of Shares Persons in Group Shares Owned Deemed to Exist Owned Outstanding - ------------------------------- ------------------- ---------------------- ------------- ------------ Robert D. Haas 3,788,453 /(2)/ 392,070 /(3)/ 4,180,523 7.91% Thomas W. Tusher 193,644 /(4)/ 404,750 /(5)/ 598,394 1.13% Peter E. Haas, Sr. 8,726,426 /(6)/ 2,733,167 /(7)/ 11,459,593 21.69% Estate of Walter A. Haas, Jr. 3,741,116 600,000 /(8)/ 4,341,116 8.22% Angela Glover Blackwell -- -- -- -- Tully M. Friedman 352,100 /(9)/ 90,000 /(10)/ 442,100 /(1)/ James C. Gaither -- -- -- -- Rhoda H. Goldman 2,672,697 /(11)/ -- 2,672,697 5.06% Peter E. Haas, Jr. 4,466,391 /(12)/ 361,981 /(13)/ 4,828,372 9.14% Walter J. Haas -- -- -- -- F. Warren Hellman 574,742 /(14)/ 402,000 /(15)/ 976,742 1.85% James M. Koshland/(16)/ 45,000 96,000 /(17)/ 141,000 /(1)/ Patricia Salas Pineda -- -- -- -- Frances K. Geballe 2,739,760 /(18)/ -- 2,739,760 5.18% Josephine B. Haas 3,194,449 /(19)/ 1,175,294 /(20)/ 4,369,743 8.27% Miriam L. Haas 3,000,200 /(21)/ -- 3,000,200 5.68% Margaret E. Jones/(22)/ 2,895,710 -- 2,895,710 5.48% Daniel E. Koshland, Jr. 2,865,744 152 /(23)/ 2,865,896 5.42% Peter A. Jacobi 24,796 /(24)/ -- 24,796 /(1)/ George B. James 78,688 /(25)/ -- 78,688 /(1)/ Robert D. Rockey, Jr. 18,899 -- 18,899 /(1)/ Directors and executive officers of the Company as a group (18 persons)/(26)//(27)/ 21,058,362 4,479,968 25,538,330 48.33%
- ----------- Note: Class E common stock represents approximately 3% of all outstanding common stock. Employees of the Company may invest in Class E common stock under the Company's employee investment plans. The Boston Safe Deposit and Trust Company, trustee for the Company's qualified stock investment plans, holds approximately 64% of all outstanding Class E 75 common stock. The business address for the Boston Safe Deposit and Trust Company is 1 Cabot Road, Mail Zone WTO4G, Medford, Massachusetts, 02155- 5158. See Employee Investment Plan caption under Item 11. /(1)/ The percentage of shares outstanding is not shown for those amounting to less than one percent. /(2)/ Includes 526,674 shares owned by the spouse and daughter of Mr. Haas and by trusts for the benefit of his daughter. Mr. Haas disclaims beneficial ownership of such shares. /(3)/ Mr. Haas, as trustee, has sole voting and investing power with respect to these shares. These shares are held by a trust for the benefit of Mr. Haas' nieces and nephews. Mr. Haas disclaims beneficial ownership of such shares. /(4)/ Does not include 159,250 shares held by a trust for the benefit of the sons of Mr. Tusher. Mr. Tusher has neither voting nor investing powers with respect to such shares. /(5)/ Represents shares subject to presently exercisable options. /(6)/ Does not include 3,000,200 shares owned by Miriam L. Haas, the spouse of Mr. Haas. Mr. Haas disclaims beneficial ownership of such shares. /(7)/ Includes 2,733,167 shares in which Mrs. Josephine B. Haas has sole investing power and Mr. Haas has sole voting rights; and 58,800 shares held in trusts for the benefit of his grandnieces and grandnephew in which Mr. Haas has sole voting and investing power. Mr. Haas disclaims beneficial ownership of such shares. /(8)/ Represents shares owned by the Evelyn and Walter Haas, Jr. Fund. /(9)/ Does not include 4,600 shares held by a trust for the benefit of Mr. Friedman's stepson. Mr. Friedman does not have voting or investing powers with respect to such shares and disclaims beneficial ownership of such shares. /(10)/ Represents shares in which Mr. Friedman has sole voting and investing powers. These shares are held by the Friedman Family Partnership for the benefit of Mr. Friedman's daughter and stepson and Cherry Street Partners for the benefit of Mr. Friedman's former spouse. Mr. Friedman disclaims beneficial ownership of such shares. /(11)/ Does not include 1,000,000 shares owned by Richard Goldman's 1995 trust for the benefit of Mr. & Mrs. Goldman's issue. Mrs. Goldman disclaims beneficial ownership of such shares. Does not include 2,891,267 shares held by trusts for the benefit of Mrs. Goldman's children, grandchildren and great-grandchildren. Mrs. Goldman has neither voting nor investing rights with respect to such shares. /(12)/ Includes 2,372,751 shares held by trusts for the benefit of Mr. Haas' children and 150,000 shares held by Peter E. Haas and Joanne C. Haas Charitable Annuity Lead Trust and 102 shares by the spouse of Mr. Haas. Mr. Haas disclaims beneficial ownership of such shares. /(13)/ Includes 61,709 shares held by a trust for the benefit of Michael S. Haas in which Mr. Haas has sole voting and investing powers. Mr. Haas disclaims beneficial ownership of such shares. Also includes 300,272 shares held by The Josephine B. Haas Family Limited Partnership with Mr. Haas as General Partner with voting and investing powers. /(14)/ Mr. Hellman's shares are held in trusts. /(15)/ Mr. Hellman has voting and investing powers with respect to these shares which are held by a trust for the benefit of the daughter of Robert D. Haas. Mr. Hellman disclaims beneficial ownership of such shares. /(16)/ James M. Koshland is the son of Daniel E. Koshland, Jr. /(17)/ Represents shares held by trusts for the benefit of James M. Koshland's children, nieces and nephew. Mr. Koshland disclaims beneficial ownership of such shares. /(18)/ Includes 333,000 shares owned by the spouse of Mrs. Geballe. Mrs. Geballe disclaims beneficial ownership of such shares. /(19)/ Includes 2,733,167 shares in which Mrs. Haas has sole investing powers and Mr. Peter E. Haas, Sr. has sole voting rights. /(20)/ Includes 1,447,855 shares in which Mrs. Haas has shared voting and investing powers and 777,439 shares in which Mrs. Haas has sole voting and investing powers. These shares are held by trusts for the benefit of the son and daughter of Mrs. Haas. Mrs. Haas disclaims beneficial ownership of such shares. /(21)/ Does not include 8,726,426 shares owned by Peter E. Haas, Sr., the spouse of Mrs. Haas. Mrs. Haas disclaims beneficial ownership of such shares. /(22)/ Margaret E. Jones is the daughter of Peter E. Haas, Sr. and Josephine B. Haas. /(23)/ Represents shares owned by The Koshland Foundation in which Mr. Koshland has sole voting rights. /(24)/ Includes 9,300 shares held by trusts for the benefit of Mr. Jacobi's children. /(25)/ Includes 63,096 shares held by The James Family Trust and 11,600 shares held by The James Family Limited Partnership in which Mr. James shares voting and investing powers. /(26)/ Includes 404,750 shares subject to presently exercisable options. /(27)/ As of December 31, 1995, the Company has 211 and 1,252 record owners of Class L and Class E common stock, respectively. 76 Holders of and Transfer Restrictions on Common Stock There is no trading market for outstanding shares of Class E and Class L common stock. The outstanding shares of Class E common stock are currently held by the trustee of the ELTIS and EIP and by certain employees under the ESAP. Class E common stock is subject to certain restrictions on transfer as provided in the various employee plans. See the Employee Investment Plans caption under Item 11 for additional information. Class L common stock is primarily held by members of the families of certain descendants of the Company's founder and certain members of the Company's Board of Directors and management. Under a stockholders agreement that expires in April 2001, transfer of Class L common stock is prohibited except to certain transferees, specified members of the stockholder's family, trusts, charities or other Class L stockholders. Additionally, management Class L stockholders are parties to contracts with the Company providing for in-service, employment separation-related and post-separation stock purchases. See Management Liquidity Program caption under Item 13., Certain Relationships and Related Transactions. See Note 20 to the Consolidated Financial Statements for discussion of the Proposed Merger Transaction. 77 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Management Liquidity Program During 1994, the Board of Directors and stockholders approved a stock liquidity program (the Liquidity Program) for management holders of Class L common stock. The Liquidity Program allowed the Company to enter into contracts with then- existing management holders of Class L common stock relating to in-service, employment separation-related and post-separation stock purchases. They may annually sell a specified amount of their stock to the Company, subject to certain limitations and conditions. The program also entitles the Company to purchase all of the shares held by a management holder at the time of separation from employment. Participating shares were classified on the balance sheet outside of stockholders' equity due to the liquidity feature. Future changes in the stock valuation will result in periodic adjustments to compensation expense for participating stock options currently outstanding, participating share balances and retained earnings. See Note 20 to the Consolidated Financial Statements for a discussion of the impact of the Proposed Merger Transaction on the Liquidity Program. The following table presents information as of November 26, 1995 regarding the interests of the five most highly compensated executive officers of the Company in the Management Liquidity Program. The value of the shares listed were calculated using the most recent valuation by Morgan Stanley & Co. Incorporated ($189 per share).
Name and Principal Position Number of Shares Value - ------------------------------ ---------------- ------------- Robert D. Haas -- -- Chairman of the Board and Chief Executive Officer Thomas W. Tusher 749,749/(1)/ $141,702,561 President, Chief Operating Officer George B. James 63,096 11,925,144 Senior Vice President, Chief Financial Officer Robert D. Rockey, Jr. 15,540 2,937,060 Senior Vice President, President of Levi Strauss North America Peter A. Jacobi 12,315 2,327,535 Senior Vice President, President of Levi Strauss International
- ----------- /(1)/ This amount includes outstanding options held by Mr. Tusher to purchase 404,750 shares. Those shares, if acquired, are subject to the Program. 78 Estate Tax Repurchase Policy The Board of Directors has a policy under which the Company will, subject to certain conditions, offer to repurchase a portion of the shares of Class L common stock held by the estate of a deceased stockholder in order to assist the estate in meeting estate tax liabilities. The purchase price will be based on periodic valuations of Class L common stock conducted by an investment banking or appraisal firm (see Note 18 to the Consolidated Financial Statements). Purchases will be made at a discount price reflecting the non-liquidity of large blocks of stock; the discount will be established by the investment banking or appraisal firm. Estate repurchase transactions will be subject to, among other things, compliance with applicable laws governing stock repurchases, satisfaction of certain financial ratios specified in the resolutions adopting the policy, and compliance with any limitations on stock repurchases contained in the Company's credit agreements. Other Transactions John Goldman, the son of Rhoda H. Goldman, a director of the Company, is the controlling person of Richard N. Goldman and Company (RNG), which acts as an insurance broker for the Company. In 1995, the Company paid RNG approximately $375,550 in fees and commissions for the placement of insurance programs. RNG's insurance programs represent approximately 56% of worldwide annual premiums paid by the Company for 1995 property casualty coverage, not including workers' compensation coverage. The Company believes the premiums paid to RNG are competitive. At November 26, 1995, Rhoda H. Goldman had no equity interest in RNG and beneficially owned 2,672,697 shares of the Company's Class L common stock. James C. Gaither is a partner of the law firm of Cooley, Godward, Castro, Huddleson & Tatum which provided legal services to the Company in 1995. James M. Koshland is a partner of the law firm of Gray Cary Ware & Freidenrich which provided legal services to the Company in 1995. See Compensation Committee Interlocks and Insider Participation under Item 11 for additional information. 79 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The financial statements of the Company included in Part II, Item 8 of this Form 10-K are as follows: Consolidated Statements of Income - Years Ended November 26, 1995, November 27, 1994 and November 28, 1993 Consolidated Balance Sheets - November 26, 1995 and November 27, 1994 Consolidated Statements of Stockholders' Equity - Years Ended November 26, 1995, November 27, 1994 and November 28, 1993 Consolidated Statements of Cash Flows - Years Ended November 26, 1995, November 27, 1994 and November 28, 1993 Notes to Consolidated Financial Statements Report of Independent Public Accountants 2. Financial Statement Schedules All schedules have been omitted because they are inapplicable, not required or the information is included in the financial statements or notes thereto. 3. Exhibits 2 Agreement and Plan of Merger incorporated by reference from Exhibit (c)(1) of the Company's Rule 13E-3 Transaction Statement on Schedule 13E-3, filed with the Securities and Exchange Commission on February 14, 1996. 3a Restated Certificate of Incorporation, incorporated by reference from Exhibit 4 of Form 10-Q filed with the Securities and Exchange Commission on April 13, 1993. 3b Amended By-Laws of the Company, incorporated by reference from Exhibit 3b of Form 10-K filed with the Securities and Exchange Commission on February 20, 1992. 4 Form of Class L Stockholders' Agreement, incorporated by reference from Exhibit (c)(5) of the Company's Issuer Tender Offer Statement on Schedule 13E-4, including all amendments thereto, initially filed with the Securities and Exchange Commission on March 4, 1991. 10a * 1985 Stock Option Plan and forms of related agreements, incorporated by reference from Exhibit 10.4 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 10b * Long-Term Performance Plan, incorporated by reference from Exhibit 10.7 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 10c * Management Incentive Plan, incorporated by reference from Exhibit 10.12 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 80 10d * Levi Strauss Associates Inc. Excess Benefit Restoration Plan, incorporated by reference from Exhibit 10e of Form 10-K filed with the Securities and Exchange Commission on February 20, 1992. 10e * Levi Strauss Associates Inc. Supplemental Benefit Restoration Plan, incorporated by reference from Exhibit 10f of Form 10-K filed with the Securities and Exchange Commission on February 20, 1992. 10f * Amendment dated February 9, 1993 to the Levi Strauss Associates Inc. Excess Benefit Restoration Plan and Levi Strauss Associates Inc. Supplemental Benefits Restoration Plan, incorporated by reference from Exhibit 10d of Form 10-Q filed with the Securities and Exchange Commission on July 13, 1993. 10g * Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (as amended and restated through August 22, 1994), incorporated by reference from Exhibit 10b of Form 10-Q filed with the Securities and Exchange Commission on October 11, 1994. 10h * Amendment and Restatement dated August 22, 1994 to the Levi Strauss Associates Inc. Deferred Compensation Plan for Executives, incorporated by reference from Exhibit 10h of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10i * Deferred Compensation Plan for Outside Directors, incorporated by reference from Exhibit 10.9 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 10j * Revised Home Office Pension Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10j of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 10k * Amendment dated November 22, 1994 to the Revised Home Office Pension Plan, incorporated by reference from Exhibit 10k of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10l * Revised Employee Retirement Plan, incorporated by reference from Exhibit 10k of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 10m * Amendment dated January 10, 1995 to the Revised Employee Retirement Plan, incorporated by reference from Exhibit 10m of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10n Levi Strauss Associates Inc. Retirement Plan for Over-the-Road Truck Drivers and Dispatchers, incorporated by reference from Exhibit 10l of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 10o Levi Strauss & Co. Supplemental Unemployment Benefit Plan and related amendments, incorporated by reference from Exhibit 10m of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 10p * Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 4.2 to the Company's Registration Statement on Form S-8, filed with the Securities and Exchange Commission on June 24, 1991 (Reg. No. 33- 41332). 81 10q * Amendments dated August 5, 1992, March 31, 1992 and January 1, 1992 to the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10q of Form 10-K filed with the Securities and Exchange Commission on February 25, 1993. 10r * Amendment dated February 9, 1993 to the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10a of Form 10-Q filed with the Securities and Exchange Commission on July 13, 1993. 10s * Amendment effective as of March 1, 1993 to the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10e of Form 10-Q filed with the Securities and Exchange Commission on July 13, 1993. 10t * Supplemental Pension Agreement dated April 16, 1985 between Levi Strauss & Co. and Thomas W. Tusher, incorporated by reference from Exhibit 10.13 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 10u * Supplemental Pension Agreement dated November 12, 1985 between Levi Strauss & Co. and George B. James, incorporated by reference from Exhibit 10.14 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 10v * Letter Agreement dated August 29, 1985 between the Company and Thomas W. Tusher, incorporated by reference from Exhibit 10.15 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33- 27465). 10w Agreement dated as of May 1, 1989 between the Company and Boston Safe Deposit and Trust Company, incorporated by reference from Exhibit 10.17 to the Company's Registration Statement on Form S-1, filed with the Securities and Exchange Commission on March 9, 1989 (Reg. No. 33-27465). 10x * Home Office Cash Performance Sharing Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10z of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 10y Field Profit Sharing Award Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10aa of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 10z * Levi Strauss Associates Inc. 1992 Executive Stock Appreciation Rights Plan, incorporated by reference from Exhibit 10aa of Form 10-K filed with the Securities and Exchange Commission on February 25, 1993. 10aa Supply Agreement dated as of March 30, 1992, between Levi Strauss & Co. and Cone Mills Corporation, incorporated by reference from Exhibit 10bb of Form 10-K filed with the Securities and Exchange Commission on February 25, 1993. 10bb First Amendment to Supply Agreement dated as of March 30, 1992, between Levi Strauss & Co. and Cone Mills Corporation, incorporated by reference from Exhibit 10dd of Form 10-K filed with the Securities and Exchange Commission on February 23, 1994. 82 10cc Master Trust Agreement between Levi Strauss Associates Inc. and Fidelity Management Trust Company, incorporated by reference from Exhibit 10a of Form 10-Q filed with the Securities and Exchange Commission on October 11, 1994. 10dd Materials Handling System Agreement dated October 31, 1994, between Levi Strauss & Co. and Computer Aided Systems, Inc., incorporated by reference from Exhibit 10ii of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10ee * Form of Stock Purchase Agreement between Levi Strauss Associates Inc. and Individual Management Holder of Class L common stock, incorporated by reference from Exhibit 10jj of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10ff * Form of Manager Family Member Stock Purchase Agreement between Levi Strauss Associates Inc. and Thomas W. Tusher, incorporated by reference from Exhibit 10kk of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10gg * Form of Manager Family Member Stock Purchase Agreement between Levi Strauss Associates Inc. and George B. James, incorporated by reference from Exhibit 10ll of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10hh * Partners in Performance Annual Incentive Plan of Levi Strauss Associates Inc. and Subsidiaries, incorporated by reference from Exhibit 10mm of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10ii * Partners in Performance Long-Term Incentive Plan of Levi Strauss Associates Inc. and Subsidiaries, incorporated by reference from Exhibit 10nn of Form 10-K filed with the Securities and Exchange Commission on February 22, 1995. 10jj * Amendment dated December 31, 1994 to the Deferred Compensation Plan for Outside Directors, incorporated by reference from Exhibit 10a of Form 10-Q filed with the Securities and Exchange Commission on April 10, 1995. 10kk * Amendment dated January 24, 1995 to the Revised Employee Retirement Plan, incorporated by reference from Exhibit 10b of Form 10-Q filed with the Securities and Exchange Commission on April 10, 1995. 10ll Amendment dated May 15, 1995 to the Employee Investment Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10a of Form 10-Q filed with the Securities and Exchange Commission on July 11, 1995. 10mm Amendment dated July 6, 1995 to the Employee Investment Plan of Levi Strauss Associates Inc., incorporated by reference from Exhibit 10a of Form 10-Q filed with the Securities and Exchange Commission on October 10, 1995. 10nn 1995 Amended and Restated Credit Agreement dated September 22, 1995 among the Company, Bank of America N.T. & S.A. and other financial institutions named therein, incorporated by reference from Exhibit 10b of Form 10-Q filed with the Securities and Exchange Commission on October 10, 1995. 10oo * Form of Indemnification Agreement dated November 30, 1995 for members of the Special Committee of the Board of Directors created by the Board of Directors on November 30, 1995. 83 10pp Employee Investment Plan of Levi Strauss Associates Inc. as Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of September 1, 1994. 10qq Amendments dated December 7, 1995 and December 21, 1995 to the Employee Investment Plan of Levi Strauss Associates Inc. 10rr Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan as Amended and Restated Effective November 27, 1989, with main text reflecting changes as of April 1, 1995. 10ss Amendments dated December 7, 1995 and December 21, 1995 to the Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan. 10tt Amendment dated November 22, 1995 to the Levi Strauss Associates Inc. Retirement Plan for Over-the-Road Truck Drivers and Dispatchers. 10uu Amendment dated November 22, 1995 to the Revised Home Office Pension Plan of Levi Strauss Associates Inc. 10vv Amendments dated January 10 and November 22, 1995 to the Levi Strauss Associates Inc. Revised Employee Retirement Plan. 10ww * Amendment dated December 7, 1995 to the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc. 10xx * Amendment dated November 6, 1995 to the Levi Strauss Associates Inc. Excess Benefit Restoration Plan and the Levi Strauss Associates Inc. Supplemental Benefit Restoration Plan. 10yy * Amendment dated November 6, 1995 to the Levi Strauss Associates Inc. Deferred Compensation Plan for Executives. 10zz * Amendment dated November 6, 1995 to the Levi Strauss Associates Inc. Long-Term Performance Plan for Executives. 10aaa * Amendment dated November 6, 1995 to the Levi Strauss Associates Inc. 1992 Executive Stock Appreciation Rights Plan. 21 Subsidiaries of Levi Strauss Associates Inc. 23 Consent of Independent Public Accountants. 27 Financial Data Schedules. - -------------------- * Management contracts or compensatory plans or arrangements covering executive officers or directors of the Company. (b) Reports on Form 8-K There were no Reports on Form 8-K filed with the Commission during the fourth quarter of 1995. 84 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, in the City of San Francisco, State of California, on February 8, 1996. LEVI STRAUSS ASSOCIATES INC. By Robert D. Haas -------------------------------------- Robert D. Haas Chairman of the Board of Directors and Chief Executive Officer Pursuant to the requirements of Section 13 or 15(d) 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 following capacities on February 8, 1996. Signature Title --------- ----- Director, Peter E. Haas, Sr. Chairman of the Executive Committee - ------------------------------------- (Peter E. Haas, Sr.) Director, Chairman of the Board of Directors and Robert D. Haas Chief Executive Officer - ------------------------------------- (Robert D. Haas) Angela G. Blackwell Director - ------------------------------------- (Angela G. Blackwell) Tully M. Friedman Director - ------------------------------------- (Tully M. Friedman) 85 Signature Title --------- ----- James C. Gaither Director - ------------------------------------- (James C. Gaither) Rhoda H. Goldman Director - ------------------------------------- (Rhoda H. Goldman) Peter E. Haas, Jr. Director - ------------------------------------- (Peter E. Haas, Jr.) Walter J. Haas Director - ------------------------------------- (Walter J. Haas) F. Warren Hellman Director - ------------------------------------- (F. Warren Hellman) Patricia S. Pineda Director - ------------------------------------- (Patricia S. Pineda) 86 Signature Title --------- ----- James M. Koshland Director - ------------------------------------- (James M. Koshland) Director, Thomas W. Tusher President and Chief Operating Officer - ------------------------------------- (Thomas W. Tusher) Senior Vice President and George B. James Chief Financial Officer - ------------------------------------- (George B. James) Vice President, Controller and Richard D. Murphy Chief Accounting Officer - ------------------------------------- (Richard D. Murphy) 87 Corporate Directory Executive Office Robert D. Haas, Chairman of the Board of Directors and Chief Executive Officer Thomas W. Tusher, President and Chief Operating Officer Chairman of the Executive Committee of the Board of Directors Peter E. Haas, Sr. Corporate Executive Officers Thomas J. Bauch -- Senior Vice President, General Counsel & Secretary R. William Eaton, Jr. -- Senior Vice President, Chief Information Officer Donna J. Goya -- Senior Vice President, Human Resources George B. James -- Senior Vice President, Chief Financial Officer Robert D. Rockey, Jr. -- Senior Vice President, President of Levi Strauss North America Peter A. Jacobi -- Senior Vice President, President of Levi Strauss International Directors Angela Glover Blackwell -- Vice President, Rockefeller Foundation/(1)//(3)/ Tully M. Friedman -- General Partner, Hellman & Friedman/(1)//(3)/ James C. Gaither -- Partner, Cooley, Godward, Castro, Huddleson & Tatum/(2)//(3)/ Rhoda H. Goldman/(2)//(3)/ Peter E. Haas, Sr./(3)/ Peter E. Haas, Jr./(1)//(3)/ Robert D. Haas/(3)/ Walter J. Haas /(1)//(3)// F. Warren Hellman -- General Partner, Hellman & Friedman/(1)//(2)/ James M. Koshland -- Partner, Gray Cary Ware & Freidenrich/(2)//(3)/ Patricia Salas Pineda -- General Counsel, New United Motor Manufacturing, Inc./(1)//(2)/ Thomas W. Tusher/(3)/ /(1)/ Member, Audit Committee /(2)/ Member, Personnel Committee /(3)/ Member, Corporate Ethics and Social Responsibility Committee Executive Offices Levi's Plaza 1155 Battery Street San Francisco, California 94111 (415) 544-6000 Questions and communications regarding employee investments should be sent to the Director of Employee Benefits at the above address. Independent Public Accountants Arthur Andersen LLP 88 EX-10.OO 2 FORM OF INDEMNIFICATION AGREEMENT Exhibit 10oo ------------ INDEMNIFICATION AGREEMENT ------------------------- INDEMNIFICATION AGREEMENT (the "Agreement") between Levi Strauss Associates Inc., a Delaware corporation (the "Company"), and _______________________________________________, a director of the Company (the "Indemnitee"), dated as of November 30, 1995. WHEREAS, the Indemnitee has been requested to serve on a special committee of the Company's Board of Directors (the "Special Committee") to be formed on November 30, 1995 for the purpose of evaluating an acquisition proposal from certain shareholders of the Company; WHEREAS, the Restated Certificate of Incorporation of the Company (the "Charter") contains various exculpatory provisions with respect to the personal liability of the Company's directors (the "Relevant Charter Provisions") and certain provisions of the By-Laws of the Company (the "By-Laws") provide for certain indemnification of the officers and directors of the Company (the "Relevant By-Law Provisions"); WHEREAS, in order to induce the Indemnitee to serve on the Special Committee, the Company wishes to grant and secure to the Indemnitee indemnification rights to the fullest extent permitted by Delaware law as the same exists or may hereafter be revised (but, in the case of any such revision, only to the extent that such revision permits the Company to provide broader indemnification rights than Delaware law permitted the Company to provide prior to such revision), whether or not expressly provided for in the Bylaws or, pursuant to Section 145(f) of the General Corporation Law of the State of Delaware (the "DGCL"), whether or not expressly provided for by the other provisions of Section 145 of the DGCL (such Delaware law, the "Delaware Law"); NOW, THEREFORE, in consideration of the Indemnitee's agreement to serve on the special committee and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company has agreed to the following: Section 1. (a) In the event that the Indemnitee was or is made a party or is threatened to be made a party to or is otherwise involved, whether or not a party thereto, in any action, suit, demand, arbitration or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") or otherwise incurs or suffers any expense, liability, damage, costs, obligations, penalties or loss (including, without limitation, attorneys' fees, judgments, fines, Employee Retirement and Income Security Act excise taxes or penalties and amounts paid or to be paid in settlement) (collectively, "Losses"), by reason of the fact that the Indemnitee is or was serving at the request of the Company on the Special Committee, or otherwise relating to the establishment or functions of the Special Committee, whether the basis of such 2 proceeding is alleged action in an official capacity as a member of the Special Committee or in any other capacity while serving as a member of the Special Committee, the Indemnitee shall be indemnified and held harmless by the Company to the fullest extent permitted by Delaware Law against all Losses incurred or suffered by the Indemnitee in connection therewith and such indemnification shall continue as to the Indemnitee after the Indemnitee has ceased to be a member of the Special Committee and shall inure to the benefit of the Indemnitee's heirs, executors, administrators, conservators and guardians; provided, however, that except as provided in Section 2 hereof with respect to - -------- ------- proceedings to enforce rights to indemnification or advancement of expenses, the Company shall indemnify the Indemnitee in connection with the proceeding (or part thereof) initiated by the Indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company (such authorization not to be unreasonably withheld). (b) The right to indemnification conferred hereunder shall be a contract right and shall include the right to be paid or reimbursed by the Company for any Losses from time to time incurred or suffered by the Indemnitee, including, without limitation, the expenses incurred in defending or otherwise being involved in any such proceeding or other action in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that -------- ------- if Delaware Law requires an undertaking in connection with an advancement of expenses (hereafter an "undertaking"), such advancement of expenses shall be made only upon delivery to the Company of an undertaking, by or on behalf of the Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by a final judicial decision of a court having jurisdiction pursuant to Section 12 hereof from which there is no further right to appeal (hereinafter a "final adjudication"), that the Indemnitee is not entitled to be indemnified for such Losses under Delaware Law. Section 2. If a claim under Section 1 of this Agreement is not paid in full by the Company within 15 days after a written claim has been received by the Company in the case of advancement of expenses or 30 days after a written claim has been received by the Company in the case of any other right to indemnification hereunder, the Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim. In any such suit or in a suit brought by the Company seeking to recover an advancement of expenses, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit, unless a final adjudication of a court having jurisdiction pursuant to Section 12 hereof finds that each of the claims and/or defenses of the Indemnitee in any such proceeding was frivolous or made in bad faith. In (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit by the Company to 3 recover an advancement of expenses pursuant to the terms of an undertaking, the Company shall be entitled to recover such expenses only if, in the case of each of (i) and (ii), there has been a final adjudication of a court having jurisdiction pursuant to Section 12 hereof that such indemnification or advancement of expenses is not permitted by Delaware Law. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met any applicable standard of conduct set forth under Delaware Law, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee has not met any such applicable standard of conduct, shall be a defense to the suit or create a presumption that the Indemnitee has not met any applicable standard of conduct. Section 3. The right to indemnification and the advancement of expenses conferred in this Agreement shall not be exclusive of any other right which the Indemnitee may have or hereafter acquire under any statute, provision of the Charter or By-Laws, agreement, vote of stockholders or disinterested directors or otherwise; and the Company hereby agrees not to amend the Relevant Charter Provisions or the Relevant By-Law Provisions after the date hereof in a manner applicable and adverse to the Indemnitee and to honor and observe the Relevant Charter Provisions and the Relevant By-Law Provisions, including, without limitation, by affirmatively providing the advancement of expenses thereunder. Section 4. (a) Promptly after receipt by the Indemnitee of notice of the commencement or the threat of commencement of any proceeding with respect to which the Indemnitee believes that the Indemnitee may be entitled to indemnification or the advancement of expenses under this Agreement, the Indemnitee shall notify in writing the Company of the commencement or the threat of commencement thereof, provided, that, failure of the Indemnitee to give the -------- ---- Company notice shall not relieve the Company of its obligations hereunder. (b) Within thirty (30) calendar days after the receipt by the Company of a notice pursuant to Section 4(a) hereof of the commencement of a proceeding, the Company may elect by written notice to the Indemnitee to assume the defense of such proceeding, with counsel approved by the Indemnitee. After the approval of any such counsel by the Indemnitee, the Company will not be liable to the Indemnitee for any fees or disbursements of counsel incurred by the Indemnitee in connection with such proceeding, provided, however, that (i) the Indemnitee shall have the continued right to employ counsel at the expense of the Indemnitee and (ii) the Company shall pay the fees and disbursements of counsel selected by the Indemnitee in the event that the Indemnitee at any time during the course of such 4 proceeding reasonably concludes that there may be a conflict of interest in the defense of such proceeding between the Indemnitee and any other party represented by the counsel selected by the Company. The Company shall not settle any such proceeding unless such settlement provides for no adverse consequence or obligation against the Indemnitee other than monetary damages to be indemnified hereunder and includes as an unconditional term thereof the giving by the claimant or plaintiff of a release of the Indemnitee from all liability with respect to such proceeding. Section 5. In the event that the Company maintains insurance to protect itself and any director or officer of the Company against any expense, liability or loss, such insurance shall cover the Indemnitee to at least the same extent as any other director or officer of the Company. Section 6. The right to indemnification and the advancement of expenses conferred in this Agreement is a contractual right and shall not be altered or abrogated in any manner adverse to the Indemnitee by virtue of amendments to the Charter or By-Laws, or applicable law. Section 7. The parties hereto intend for this Agreement to be interpreted and enforced so as to provide indemnification and advancement of expenses to the Indemnitee to the fullest extent now or hereafter permitted by Delaware Law and, in the event that the validity, legality or enforceability of any provision of this Agreement is in question, such provision shall be interpreted in a manner such that the provision will be valid, legal and enforceable. Section 8. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto and no waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof nor shall such waiver constitute a continuing waiver. Section 9. If any provision of this Agreement is held by a court having jurisdiction pursuant to Section 12 hereof to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, all portions of any Sections of this Agreement containing any such provision held to be invalid, illegal, or unenforceable that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the 5 intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 7 hereof. Section 10. If the Indemnitee is entitled under this Agreement to indemnification by the Company for some or a portion of any Losses but is not entitled, however, to indemnification for the full amount thereof, the Company shall nevertheless indemnify the Indemnitee for such full amount thereof less the portion thereof which a court having jurisdiction pursuant to Section 12 hereof and in a final adjudication determines the Indemnitee is not entitled. Section 11. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. Section 12. (a) The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the Court of Chancery of the State of Delaware for all purposes in connection with any dispute, action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in that Court (subject to the right of appeal to the appropriate appellate court); provided, however, that if the Court of Chancery determines that it lacks subject matter jurisdiction despite this Section 12 and 8 Del. C. (S) 145(k), then any dispute, action or proceeding instituted under this Agreement shall be transferred to the Superior Court of the State of Delaware. (b) In the event of any dispute of any type whatsoever under this Agreement involving the obligations of the Company to indemnify or advance expenses to the Indemnitee, the Company shall have the burden of proving by clear and convincing evidence that the Company is not so obligated to indemnify or advance expenses to the Indemnitee. Section 13. The Company agrees that the Company will pay (and indemnify the members of the Special Committee against) all the costs and expenses of the Special Committee in performing its function, including, without limitation, the costs and expenses of the legal and financial advisors retained by the Special Committee. 6 IN WITNESS WHEREOF, the Company and the Indemnitee have executed this Indemnification Agreement in duplicate on the day and year first above written. LEVI STRAUSS ASSOCIATES INC. By:_____________________________ Name: Title: ______________________________ [Name of Indemnitee] EX-10.PP 3 EMPLOYEE INVESTMENT PLAN Exhibit 10pp EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- (As Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of September 1, 1994) EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- (As Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of September 1, 1994) TABLE OF CONTENTS ----------------- Page ---- SECTION 1 INTRODUCTION AND PERSONS TO WHOM PLAN APPLIES................. 1 1.1 Introduction....................................................... 1 1.2 Persons to Whom Plan Applies....................................... 1 SECTION 2 DEFINITIONS................................................... 3 2.1 "Accounts"......................................................... 3 2.2 "Act".............................................................. 3 2.3 "Administrative Committee"......................................... 3 2.4 "Affiliated Company"............................................... 3 2.5 "Alternate Payee".................................................. 4 2.6 "Annual Additions"................................................. 4 2.7 "Annuity Starting Date"............................................ 4 2.8 "Beneficiary"...................................................... 4 2.9 "Board of Directors"............................................... 4 2.10 "Break in Service"................................................ 5 2.11 "Code"............................................................ 5 2.12 "Committee"....................................................... 5 2.13 "Company"......................................................... 5 2.14 "Compensation".................................................... 5 2.15 "Domestic Relations Order"........................................ 7 2.16 "Effective Date".................................................. 7 2.17 "Employee"........................................................ 7 2.18 "ESP"............................................................. 9 2.19 "Fair Market Value"............................................... 9 2.20 "Forfeiture"...................................................... 9 2.21 "FPSP"............................................................ 9 2.22 "Fund"............................................................ 9 2.23 "Highly Compensated Employee"..................................... 9 2.24 "Highly Compensated Former Employee".............................. 11 2.25 "Home Office Salary Grade"........................................ 11 2.26 "Hour of Service"................................................. 11 EMPLOYEE INVESTMENT PLAN 1 Page ---- 2.27 "Inactive Member"................................................. 11 2.28 "Insider"......................................................... 11 2.29 "Investment Committee"............................................ 11 2.30 "Investment Manager".............................................. 11 2.31 "IRS"............................................................. 11 2.32 "Labor Department"................................................ 11 2.33 "LSAI Stock"...................................................... 11 2.34 "LS&CO.".......................................................... 12 2.35 "Matching Account"................................................ 12 2.36 "Matching Contribution"........................................... 12 2.37 "Member".......................................................... 12 2.38 "Member Contributions"............................................ 12 2.39 "Membership Date"................................................. 12 2.40 "Misconduct"...................................................... 12 2.41 "Mutual Fund"..................................................... 12 2.42 "Nonelective Account"............................................. 12 2.43 "Nonelective Contribution"........................................ 13 2.44 "Normal Retirement Age"........................................... 13 2.45 "Participating Company"........................................... 13 2.46 "Plan"............................................................ 13 2.47 "Plan Benefit".................................................... 13 2.48 "Plan Year"....................................................... 13 2.49 "Post-Tax Account"................................................ 13 2.50 "Post-Tax Contributions".......................................... 13 2.51 "Pre-Tax Account"................................................. 13 2.52 "Pre-Tax Contributions"........................................... 13 2.53 "Profit Sharing 401(k) Account"................................... 13 2.54 "Profit Sharing Regular Account".................................. 13 2.55 "Profit Sharing Contribution"..................................... 14 2.56 "PSP"............................................................. 14 2.57 "Qualified Domestic Relations Order".............................. 14 2.58 "Qualified Member"................................................ 14 2.59 "Quarter"......................................................... 14 2.60 "Registration Rights Agreement"................................... 14 2.61 "Regulations"..................................................... 14 2.62 "Required Beginning Date"......................................... 14 2.63 "Retiree Coordinator"............................................. 14 2.64 "Rollover Account"................................................ 14 2.65 "Rollover Contributions".......................................... 15 EMPLOYEE INVESTMENT PLAN 2 Page ---- 2.66 "Service"......................................................... 15 2.67 "Surviving Spouse"................................................ 16 2.68 "Total Compensation............................................... 16 2.69 "Totally and Permanently Disabled"................................ 17 2.70 "Trust Agreement"................................................. 17 2.71 "Trust Fund"...................................................... 18 2.72 "Trustee"......................................................... 18 2.73 "Valuation Date".................................................. 18 2.74 "Vested Interest"................................................. 18 2.75 "Year of Service"................................................. 18 SECTION 3 MEMBERSHIP AND TRANSFER....................................... 19 3.1 Commencement of Membership......................................... 19 3.2 Rehired and Transferred Employees.................................. 19 3.3 Suspension of Membership........................................... 19 3.4 Termination of Membership.......................................... 19 3.5 Highly Compensated Employees....................................... 19 SECTION 4 MEMBER CONTRIBUTIONS.......................................... 21 4.1 Election to Make Contributions..................................... 21 4.2 Maximum Pre-Tax Contributions...................................... 21 4.3 Change or Suspension of Contributions.............................. 21 4.4 Resumption of Contributions........................................ 21 4.5 Withholding and Deposit With Trustee; Crediting Accounts........... 21 4.6 Distribution of Excess Contributions and Deferrals................. 22 4.7 Rollover Contributions............................................. 22 SECTION 5 MATCHING AND NONELECTIVE CONTRIBUTIONS........................ 24 5.1 Matching Contribution.............................................. 24 5.2 Nonelective Contribution........................................... 24 5.3 Deposit with Trustee; Crediting Accounts........................... 25 5.4 Curtailment or Distribution from Plan of Excess Aggregate Contributions...................................................... 26 SECTION 6 PROFIT SHARING CONTRIBUTION................................... 27 6.1 Amount and Form.................................................... 27 6.2 Cash Election by Members........................................... 27 6.3 Deposit With Trustee; Crediting Accounts........................... 27 6.4 Distribution of Excess Contributions and Deferrals................. 28 SECTION 7 TRUST FUND, INVESTMENTS AND INVESTMENT DIRECTIONS............. 29 EMPLOYEE INVESTMENT PLAN 3 Page ---- 7.1 Trust Fund......................................................... 29 7.2 Investment of Contributions........................................ 29 7.3 Reinvestment of Accounts........................................... 30 7.4 Investment by Alternate Payees..................................... 31 7.5 Allocation of Voting Rights........................................ 31 7.6 Exercise of Voting Rights.......................................... 32 7.7 Other Instructions by Members...................................... 33 7.8 Participant Directed Accounts...................................... 34 SECTION 8 VALUATIONS AND STATEMENTS..................................... 35 8.1 Valuation of Accounts.............................................. 35 8.2 Statements......................................................... 35 SECTION 9 WITHDRAWALS................................................... 36 9.1 Withdrawals from Post-Tax Accounts................................. 36 9.2 Withdrawals from Rollover Accounts................................. 36 9.3 Hardship Withdrawals............................................... 36 9.4 Withdrawals From Stock Fund........................................ 38 9.5 Payment of Withdrawals............................................. 39 9.6 Valuation Date..................................................... 39 9.7 Source of Withdrawals.............................................. 39 9.8 Limitation on Withdrawals by Insiders.............................. 39 9.9 Additional Limitations on Withdrawals.............................. 40 9.10 Withdrawals by Alternate Payees................................... 40 SECTION 10 LOANS......................................................... 41 10.1 Amount of Loans................................................... 41 10.2 Terms of Loans.................................................... 42 10.3 Source of Loans; Application of Loan Payments..................... 43 10.4 Default........................................................... 44 SECTION 11 PLAN BENEFITS................................................. 45 11.1 Vesting in Accounts............................................... 45 11.2 Amount of Plan Benefit............................................ 45 11.3 Valuation of Plan Benefit......................................... 45 11.4 Rehire Before Five One-Year Breaks in Service..................... 45 11.5 Form of Payment................................................... 45 11.6 Time of Payment................................................... 48 11.7 Death Benefit..................................................... 49 EMPLOYEE INVESTMENT PLAN 4 Page ---- 11.8 Limitation on Time of Payment..................................... 49 11.9 Undeliverable Checks.............................................. 49 SECTION 12 ALLOCATION LIMITATIONS........................................ 50 12.1 Limitation on Annual Additions.................................... 50 12.2 Combined Limitation on Benefits and Contributions................. 50 12.3 Disposition of Excess Annual Additions............................ 50 SECTION 13 FUNDING POLICY AND METHOD..................................... 52 13.1 Contributions..................................................... 52 13.2 Trust Fund........................................................ 52 13.3 Expenses of the Plan.............................................. 52 13.4 Cash Requirements................................................. 52 13.5 Independent Accountant............................................ 52 13.6 Loans from Parties-In-Interest.................................... 53 SECTION 14 BENEFICIARIES................................................. 54 SECTION 15 ADMINISTRATION AND OPERATION OF THE PLAN...................... 55 15.1 Plan Administrator................................................ 55 15.2 Control and Management of Plan Assets............................. 55 15.3 Trustees and Investment Managers.................................. 55 15.4 Committee Membership.............................................. 56 15.5 Reports to Board of Directors..................................... 56 15.6 Employment of Advisers............................................ 56 15.7 Limitations on Committee Actions.................................. 56 15.8 Committee Meetings................................................ 57 SECTION 16 CLAIMS AND REVIEW PROCEDURES.................................. 58 16.1 Applications for Benefits......................................... 58 16.2 Denial of Applications............................................ 58 16.3 Requests for Review............................................... 58 16.4 Decisions on Review............................................... 59 16.5 Exhaustion of Administrative Remedies............................. 59 SECTION 17 TERMINATION OF EMPLOYER PARTICIPATION......................... 60 17.1 Termination by Participating Company.............................. 60 17.2 Effect of Termination............................................. 60 17.3 IRS Termination Procedure......................................... 60 EMPLOYEE INVESTMENT PLAN 5 Page ---- 17.4 Termination of the Plan........................................... 60 SECTION 18 AMENDMENT, MERGER OR TERMINATION OF THE PLAN AND TRUST......................................................... 61 18.1 Right to Amend.................................................... 61 18.2 Plan Merger or Consolidation...................................... 61 18.3 Termination of the Plan........................................... 61 18.4 Partial Termination of the Plan................................... 61 18.5 Manner of Distribution............................................ 61 18.6 Restrictions on Liquidation of Trust Upon Termination............. 62 SECTION 19 INALIENABILITY OF BENEFITS.................................... 63 19.1 No Assignment Permitted........................................... 63 19.2 Return of Contributions........................................... 63 19.3 Qualified Domestic Relations Orders............................... 64 SECTION 20 TOP-HEAVY PROVISIONS.......................................... 66 20.1 Determination of Top-Heavy Status................................. 66 20.2 Minimum Allocations............................................... 66 20.3 Minimum Vesting................................................... 67 20.4 Effect of Change in Top-Heavy Status on Vesting................... 67 20.5 Impact on Maximum Benefits........................................ 67 SECTION 21 GENERAL LIMITATIONS AND PROVISIONS............................ 68 21.1 No Employment Rights.............................................. 68 21.2 Payments from the Trust Fund...................................... 68 21.3 Payments to Minors or Incompetents................................ 68 21.4 Lost Members or Other Persons..................................... 68 21.5 Personal Data to the Administrative Committee..................... 68 21.6 Insurance Contracts............................................... 69 21.7 Notice to the Administrative Committee............................ 69 21.8 Notices to Members and Beneficiaries.............................. 69 21.9 Word Usage........................................................ 69 21.10 Headings......................................................... 69 21.11 Governing Law.................................................... 69 21.12 Heirs and Successors............................................. 69 21.13 Withholding...................................................... 69 EMPLOYEE INVESTMENT PLAN 6 Page ---- APPENDIX A PRIOR PLAN PROVISIONS..................................... A-1 APPENDIX B BLACKOUT PROVISIONS....................................... B-1 APPENDIX C FUNDS..................................................... C-1 APPENDIX D ADDITIONAL ELIGIBLE WITHDRAWALS AND LOANS................. D-1 7 EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- (As Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of September 1, 1994) INTRODUCTION AND PERSONS TO WHOM PLAN APPLIES. --------------------------------------------- Introduction. Effective November 27, 1953, the Profit Sharing Plan ------------ of Levi Strauss & Co. (the "PSP") was established to provide eligible employees ("Employees") with a beneficial interest in the profits of Levi Strauss & Co. Effective August 6, 1985, the Frozen Profit Sharing Plan of Levi Strauss & Co. (the "FPSP") was established to hold certain accounts previously held under the Stock Purchase and Investment Plan of Levi Strauss & Co. (the "SPIP"). Effective August 6, 1985, the Employee Savings Plan of Levi Strauss & Co. (the "ESP") was established to provide Employees with a program of regular savings supplemented by Matching Contributions that was similar to aspects of the SPIP. Effective October 1, 1988, the PSP and the FPSP were merged into the ESP. Effective August 1, 1989, the ESP was amended, restated and renamed the Employee Investment Plan of Levi Strauss Associates Inc. (the "EIP"). The EIP was amended from time to time after August 1, 1989, to comply with certain provisions of relevant law or implement other changes desired by Levi Strauss Associates Inc. By this amendment and restatement (the "Plan"), Levi Strauss Associates Inc. intends to amend the EIP (1) to comply with the Tax Reform Act of 1986 and other applicable legislation and (2) effective September 1, 1994, to effect certain plan design changes, including changes relating to a change in recordkeeper. Levi Strauss Associates Inc. intends that the Plan continue to qualify as a profit sharing plan under section 401(a) and related sections of the Code and as a cash or deferred arrangement under section 401(k) of the Code and that the trust established under the Plan continue to qualify as a tax- exempt trust under section 501(a) of the Code. This amended and restated Plan is generally effective on November 27, 1989. Certain provisions of the Plan which were in effect on or after November 27, 1989, but which were amended before September 1, 1994 are included in Appendix A. Persons to Whom Plan Applies. This Plan document is not a new Plan ---------------------------- which succeeds the Plan as previously in effect, but is an amendment and restatement of the Plan as in effect before the Effective Date. The amount, right to and form of any benefits under the Plan, EMPLOYEE INVESTMENT PLAN 1 of each Member who is an Employee on and after the Effective Date, or of persons claiming benefits through such a Member will be determined under this Plan. The amount, right to and form of any benefits under this Plan, of each Member who has separated from Service with Levi Strauss Associates Inc. or an Affiliated Company, or of persons who are claiming benefits through such a Member, will be determined in accordance with the provisions of the Plan in effect on the date of the Member's separation from Service, except as may otherwise be expressly provided under this Plan, or unless the Member again becomes an Employee on or after the Effective Date. This amended and restated Plan will not reduce any Member's Plan Benefit under the Plan, as determined on the date immediately preceding the Effective Date, and this Plan will be construed accordingly. EMPLOYEE INVESTMENT PLAN 2 DEFINITIONS. - ----------- When used in this Plan document the following terms will have the following meanings: "Accounts" means, to the extent applicable to a Member, one or more of -------- the following accounts: Matching Account; Nonelective Account; Post-Tax Account; Pre-Tax Account; Profit Sharing 401(k) Account; Profit Sharing Regular Account; and Rollover Account. "Act" means the Employee Retirement Income Security Act of 1974, as --- amended, and any Regulations or rulings issued under the Act. "Administrative Committee" means the committee appointed to administer ------------------------ the Plan as described in Section 15.4. "Affiliated Company" means: ------------------ A corporation that is a member of a controlled group of corporations (as defined in section 414(b) of the Code) which includes Levi Strauss Associates Inc.; Any trade or business (whether or not incorporated) that is in common control (as defined in section 414(c) of the Code) with Levi Strauss Associates Inc.; An organization (whether or not incorporated) that is a member of an affiliated service group (as defined in section 414(m) of the Code) which includes Levi Strauss Associates Inc.; EMPLOYEE INVESTMENT PLAN 3 Any other entity required to be aggregated with Levi Strauss Associates Inc. under section 414(o) of the Code; or Any other entity designated as an Affiliated Company by the Board of Directors. "Alternate Payee" means the spouse, former spouse, child or other --------------- dependent of a Member who is recognized by a Domestic Relations Order as having a right to receive all, or a portion, of a Member's Plan Benefit. "Annual Additions" means the sum of the following additions to the ---------------- Member's Accounts for the Plan Year: The amount of employer contributions and forfeitures allocated to the Member under any qualified defined contribution plan maintained by the Company and any Affiliated Company, including Profit Sharing Contributions, Matching Contributions, Nonelective Contributions and Forfeitures under this Plan; The aggregate employee contributions which the Member contributes to all qualified retirement plans maintained by the Company and all Affiliated Companies, including Post-Tax Contributions to this Plan; The amount of contributions made on behalf of the Member to any qualified defined contribution plan maintained by the Company and all Affiliated Companies under an election by the Member under a qualified cash or deferred arrangement, including Pre-Tax Contributions to this Plan; and Contributions allocated to any individual medical benefit account (within the meanings of sections 415(l) and 419A(d)(2) of the Code) that is established for the Member. Employee contributions will be determined without regard to any rollover contributions (as defined in sections 402(a)(5), 403(a)(4), 403(b)(8) and 403(d)(3) of the Code) and without regard to any employee contributions to a simplified employee pension plan which are excludable from income under section 408(k)(6) of the Code. In addition, the 25% of compensation limitation described in section 415(c)(1)(B) of the Code will not apply to any contribution for medical benefits (within the meaning of section 419A(f)(2) of the Code) after the Member's separation from Service which is treated as an Annual Addition. EMPLOYEE INVESTMENT PLAN 4 "Annuity Starting Date" means the first day of the first month for --------------------- which an amount is payable as an annuity. The Annuity Starting Date for a Member who elects (with the consent of his or her spouse if the Member is legally married) to receive his or her Plan Benefit in a form other than an annuity in accordance with Section 11.5, is the first day on which all events (including the passing of the day on which benefit payments are scheduled to begin) have occurred which entitle the Member to receive his or her first benefit payment from the Plan. "Beneficiary" means the beneficiary or beneficiaries designated by a ----------- Member under Section 3.1 and Section 14 (or any other person or persons designated as such under applicable law) to receive the amount, if any, payable under the Plan upon the Member's death. "Board of Directors" means the Board of Directors of Levi Strauss ------------------ Associates Inc. The Board of Directors may delegate to any committee, subcommittee or any of its members, or to any agent, its authority to perform any act under the Plan, including without limitation those matters involving the exercise of discretion. Any such delegation of discretion will be subject to revocation at any time at the discretion of the Board of Directors. Any reference to the Board of Directors in connection with such delegated authority will be deemed a reference to the delegate or delegates. "Break in Service" means a period of at least 12 consecutive months, ---------------- beginning on the date Service ends, during which a person has not performed 1 Hour of Service (or been treated as performing Service) under Section 2.66, as determined by the Administrative Committee. "Code" means the Internal Revenue Code of 1986, as amended, and any ---- Regulations or rulings issued under the Code. "Committee" means the Administrative Committee or Investment --------- Committee, as applicable. "Company" means Levi Strauss Associates Inc., LS&CO. and each other ------- Participating Company or any of them. "Compensation" means a Member's compensation for a Plan Year paid by ------------ the Company for services while an Employee and a Member during that Plan Year, including salary, wages, fees, commissions, bonuses, incentive compensation and overtime pay. "Compensation" also includes the Member's Member Contributions to the Plan for the Plan Year and any amounts contributed by the Member to a cafeteria plan maintained by the Company under section 125 of the Code. Back pay awards will be included in Compensation only for the Plan EMPLOYEE INVESTMENT PLAN 5 Year in which the back pay award is made and the amount to be included will be limited to the amount attributable to that Plan Year, regardless of mitigation of damages. If a Member is a territory manager, an account manager or an account executive, or any of the 3, for the entire Plan Year (or portion of the Plan Year during which he or she is a Member), his or her Compensation for purposes of determining the Member's share of any allocation of Matching Contributions, Profit Sharing Contributions and Forfeitures will not exceed the following limits, as determined by the Administration Committee: (a) The Compensation of a territory manager at the time as of which the allocation is made will not exceed the maximum for the Home Office Salary Grade 5 salary range in effect at the end of such Plan Year; (b) The Compensation of an account manager at the time as of which the allocation is made will not exceed the maximum for the Home Office Salary Grade 6 salary range in effect at the end of such Plan Year; and (c) The Compensation of an account executive at the time as of which the allocation is made will not exceed the maximum for the Home Office Salary Grade 7 salary range in effect at the end of such Plan Year. In the case of a Member who is working abroad or who is working for a foreign subsidiary of the Company, but continues to be paid from the home office of the Company, "Compensation" will be the amount determined by the Administrative Committee to be the amount that would have been paid to the Member had he or she been on a domestic payroll of the Company. "Compensation" will not include: ----------- Matching Contributions, Nonelective Contributions or Profit Sharing Contributions to the Plan under Sections 5 and 6 or amounts paid to the Member according to an election under Section 6.2; Amounts paid or contributed to any group insurance plan or other employee benefit plan established or maintained by the Company or an Affiliated Company, except as provided above; Relocation expenses; EMPLOYEE INVESTMENT PLAN 6 Ordinary income recognized by the employee related to the exercise of any right granted under a stock option plan maintained by the Company or an Affiliated Company; Compensation paid by the Company or an Affiliated Company as a nonrecurring or special bonus, tax reimbursement or award; Payments under the Company's long-term performance plan; Severance payments; Payments from the Company's Long Term Disability Plan; "Imputed income;" or "Perks." "Imputed Income" means the amount of income recognized by a Member who receives Company paid life insurance in excess of $50,000 and such other amounts the Administrative Committee determines to be imputed income to the Member under the Code. "Perks" include, but are not limited to, Company paid parking, Company provided car allowances, and the flexible perk allowances provided to certain Members which may be used by the Member for financial counseling or planning; tax preparation or advice; excess medical expenses; physical examinations; additional life insurance, disability insurance, accidental death and dismemberment insurance or liability insurance; business lunch club dues or legal expenses. For Plan Years beginning on and after November 27, 1989, Compensation for any Plan Year in excess of $200,000 or any successor limitation as provided for the Plan Year in section 401(a)(17) of the Code (as adjusted as provided under section 401(a)(17) of the Code) will be disregarded. In determining the Compensation of a Member, the family aggregation rules of section 414(q)(6) of the Code will apply, except that in applying these rules, the term "family" will include only the spouse of the Member and any lineal descendants of the Member who have not reached age 19 before the close of the Plan Year. A Member's Compensation will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. "Domestic Relations Order" means any judgment, decree or order ------------------------ (including approval of a property settlement agreement) that: EMPLOYEE INVESTMENT PLAN 7 Relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Member; and Is entered or made under the domestic relations or community property laws of any state. "Effective Date" means November 27, 1989, except as expressly stated -------------- otherwise in this document or as required to comply with the Tax Reform Act of 1986, as amended, and other applicable legislation. "Employee" means any person who is employed by the Company excluding: -------- --------- Any employee of LS&CO, who is not paid from the home office of Levi Strauss Associates Inc. Any employee of a Participating Company other than LS&CO. who is not paid on a salary or commission basis; or Any stocktaker, service representative, Retiree Coordinator or "Temporary Employee;" Any employee who is not employed in a state or territory of the United States or who receives no remuneration from the Company that constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code); Any alien who: Receives remuneration from the Company which constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code); and Has been transferred by the Company from a job outside the United States to a job within the United States, during any period with respect to which the alien is benefiting (by reason of accruing a benefit or making or having contributions made on the alien's behalf) under: A retirement plan established or maintained outside of the United States by a foreign subsidiary (including a domestic subsidiary operating abroad) or foreign division of the Company; or EMPLOYEE INVESTMENT PLAN 8 The Levi Strauss International Retirement Plan for Third Country National Employees or any successor or similar plan maintained by the Company or any Affiliated Company; A United States citizen locally hired by a foreign subsidiary (including a domestic subsidiary operating abroad) or foreign division of the Company; Any employee who is included in a unit of employees covered by a negotiated collective-bargaining agreement which does not provide for his or her membership in the Plan; A "leased employee" (as defined in section 414(n) or section 414(o) of the Code) who is providing services to the Company or an Affiliated Company; Any employee who is covered by an individual employment contract that expressly provides he or she will not be eligible for membership in the Plan; An employee who is included in a group or classification of employees on the payroll of a company designated by the Board of Directors as not being eligible to participate in the Plan; or A Highly Compensated Employee, with respect to the eligibility to make Member Contributions or receive an allocation of Matching Contributions, Nonelective Contributions, Profit Sharing Contributions and Forfeitures only. A member of the board of directors of the Company is not eligible for membership in the Plan unless he or she is also an Employee of the Company. The Board of Directors may on a nondiscriminatory basis, designate as an Employee a person described in (c), (d), (f) or (j) above. Such designation must be made in writing after receiving the advice of counsel. A "Temporary Employee" means a person who: Is hired to fill, for a period not to exceed 6 calendar months, a position which arises from either an emergency situation or the temporary absence of an Employee; or Is subject, as a condition of such employment, to termination without prior notice at any time. EMPLOYEE INVESTMENT PLAN 9 A person's status as an Employee will be determined by the Administrative Committee, and such determination will be conclusive and binding on all persons. "ESP" means the Employee Savings Plan of Levi Strauss & Co. as in --- effect before August 1, 1989. "Fair Market Value" means the value of a share of LSAI Stock, ----------------- determined by the latest independent appraisal of the value of LSAI Stock obtained by the Investment Committee. If LSAI Stock is offered to the public under the Registration Rights Agreement, "Fair Market Value" will mean the net proceeds realized by the Trustee in selling shares of LSAI Stock under such offering until LSAI Stock is reappraised or until a public market for LSAI Stock arises. "Forfeiture" means the portion of a Member's Matching Account and ---------- Profit Sharing Regular Account which is forfeited under Section 11.1. The term "Forfeiture" also includes that portion of a Member's Profit Sharing Account that was forfeited on account of the Member's separation from service before November 26, 1990, and amounts forfeited under the ESP and PSP before August 1, 1989. "FPSP" means the Frozen Profit Sharing Plan of Levi Strauss & Co. as ---- in effect before October 1, 1988. "Fund" means any of the investment funds described in Section 7.1. ---- "Highly Compensated Employee" means an Employee who: --------------------------- During the preceding Plan Year: Was at any time a 5% owner of the Company or an Affiliated Company (as defined in section 416(i)(1) of the Code); Received "compensation" from the Company or an Affiliated Company in excess of $75,000 (as adjusted under Regulations or rulings issued by the IRS); Received "compensation" from the Company or an Affiliated Company in excess of $50,000 (as adjusted under Regulations or rulings issued by the IRS) and was in the top 20% of employees of the Company and all Affiliated Companies EMPLOYEE INVESTMENT PLAN 10 when ranked on the basis of "compensation" paid during such Plan Year (referred to as the "Top Paid Group" under IRS Regulations); or Was at any time an officer of the Company or an Affiliated Company and received "compensation" greater than 50% of the amount in effect under section 415(b)(1)(A) of the Code; or During the Plan Year: Was at any time a 5% owner of the Company or an Affiliated Company (as defined in section 416(i)(1) of the Code); or Satisfies the requirements of paragraphs (ii), (iii), or (iv) of Section 2.23(a) and is a member of the group consisting of the 100 employees of the Company and all Affiliated Companies paid the greatest "compensation" during the Plan Year. For purposes of determining the number of employees in the Top Paid Group for a Plan Year, the following employees, as described in section 414(q)(8) and section 414(q)(11) of the Code, will be excluded: (i) Those who have not completed 6 months of service; (ii) Those who normally work less than 17-1/2 hours per week; (iii) Those who normally work less than 6 months during any year; (iv) Those who have not attained age 21; (v) Those subject to a collective bargaining agreement; and (vi) Nonresident aliens who receive no earned income from sources within the United States. The Administrative Committee will determine whether an employee is an officer based on the responsibilities of the employee with the Company or an Affiliated Company. Of those employees determined to be officers, no more than 50 employees (or, if less, the greater of 3 employees or 10% of the employees, excluding all employees described in section 414(q)(8) and section 414(q)(11) of the Code) will be treated as officers. Further, if no officer receives the level of "compensation" described in Section 2.23(a)(iv), the highest paid officer of the Company EMPLOYEE INVESTMENT PLAN 11 and all Affiliated Companies will be treated as a Highly Compensated Employee described in Section 2.23(a)(iv). For purposes of determining whether an employee is a Highly Compensated Employee only, any person who is a member of the family of a 5% owner or of a Highly Compensated Employee in the group consisting of the 10 Highly Compensated Employees paid the greatest "compensation" during the Plan Year: (i) Will not be considered a separate employee; and (ii) Any "compensation" paid to the person and any Company or Employee contributions made on behalf of the person will be treated as if it were paid to or on behalf of the 5% owner or Highly Compensated Employee. For purposes of the immediately preceding sentence, the term "family" means, with respect to any employee, the employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. "Compensation" for purposes of this Section 2.23 means Total Compensation as defined in Section 2.68 of the Plan, determined without regard to section 125 of the Code (regarding contributions to a cafeteria plan); section 402(a)(8) of the Code (regarding contributions to a 401(k) plan) and section 402(h)(1)(B) of the Code (regarding contributions to a simplified employee pension plan); and in the case of employer contributions made under a salary reduction agreement, without regard to section 403(b) (regarding annuity contracts). "Highly Compensated Former Employee" means a former employee who ---------------------------------- separates from Service before the beginning of the Plan Year and who was a Highly Compensated Employee for either: The employee's year of separation from Service; or Any Plan Year ending on or after the employee's 55th birthday. An employee who performs no services for the Company or an Affiliated Company during the Plan Year will be treated as a former employee. "Home Office Salary Grade" means the LS&CO. job classification system ------------------------ for home office employees as in effect from time to time. EMPLOYEE INVESTMENT PLAN 12 "Hour of Service" means an hour of employment for which an Employee is --------------- paid or is entitled to payment for the performance of duties as determined under the Labor Department Regulations governing the computation of hours of service. "Inactive Member" means an individual participating in the Plan under --------------- Sections 3.3, 3.5 and 4.7. "Insider" means a Member who is subject to Section 16(a) of the ------- Securities Exchange Act of 1934, as amended. "Investment Committee" means the committee appointed to manage and -------------------- control the Plan's assets as described in Section 15.4. "Investment Manager" means a person who is appointed to direct the ------------------ investment of all or any part of the Trust Fund under Section 15.2 and is either a bank, an insurance company or a registered investment adviser under the Investment Advisers Act of 1940 and who has acknowledged in writing that it is a fiduciary with respect to the Plan. "IRS" means the United States Internal Revenue Service. --- "Labor Department" means the United States Department of Labor. ---------------- "LSAI Stock" means shares of common or preferred stock of Levi Strauss ---------- Associates Inc. that have been authorized for issuance to or ownership by the Trustee. "LS&CO." means Levi Strauss & Co., a Delaware corporation. ------ "Matching Account" means the account maintained for a Member to hold ---------------- the Member's Matching Contributions. "Matching Contribution" means the contribution made by the Company --------------------- under Section 5.1. "Member" means a person who is either an "Active Member" who ------ participates in all features of the Plan or an "Inactive Member" who only participates in certain features of the Plan under Sections 3.3, 3.5 or 4.7. "Member Contributions" means Post-Tax Contributions and/or Pre-Tax -------------------- Contributions. EMPLOYEE INVESTMENT PLAN 13 "Membership Date" means the first day of each payroll period. --------------- "Misconduct" means that a person: ---------- Has committed an act of embezzlement, fraud or theft with respect to the property of the Company or an Affiliated Company or any person with whom the Company or an Affiliated Company does business; Has deliberately disregarded the rules of the Company or an Affiliated Company in such a manner as to cause material loss, damage or injury to, or otherwise endanger the property or employees of the Company or an Affiliated Company; Has made any unauthorized disclosure of any of the secrets or confidential information of the Company or an Affiliated Company; Has engaged in any conduct that constitutes unfair competition with the Company or an Affiliated Company; Has induced any person to breach any contract with the Company or an Affiliated Company; or Has sold Company or an Affiliated Company products to an unauthorized account or has assisted an authorized account in wholesaling Company or an Affiliated Company products. "Mutual Fund" means a regulated investment company, as defined in ----------- section 851 of the Code. "Nonelective Account" means the account maintained for a Member to ------------------- hold the Member's Nonelective Contributions. "Nonelective Contribution" means the contribution made by the Company ------------------------ under Section 5.2. "Normal Retirement Age" means age 65. --------------------- "Participating Company" means LS&CO. or any Affiliated Company, the --------------------- board of directors or equivalent governing body of which adopts the Plan and the Trust Agreement by EMPLOYEE INVESTMENT PLAN 14 appropriate action with the written consent of the Board of Directors. Any Affiliated Company which so adopts the Plan will be deemed to appoint Levi Strauss Associates Inc., the Administrative Committee, the Investment Committee and the Trustee as its exclusive agents to exercise on its behalf all of the power and authority conferred under this Plan, or by the Trust Agreement, upon the Company. The authority of Levi Strauss Associates Inc., the Committees and the Trustee to act as such agents will continue until the Plan is terminated as to the Affiliated Company and the relevant portion of the Trust Fund has been distributed by the Trustee as provided in Section 17.2. "Plan" means this Employee Investment Plan of Levi Strauss Associates ---- Inc., as amended from time to time. "Plan Benefit" means the benefit distributable to a Member or ------------ Beneficiary under Section 11. "Plan Year" means the annual period corresponding to LS&CO.'s fiscal --------- year for federal income tax purposes. "Post-Tax Account" means the account maintained for a Member to hold ---------------- the Member's Post-Tax Contributions. "Post-Tax Contributions" means the post-tax contributions made by a ---------------------- Member under Section 4.1. "Pre-Tax Account" means the account maintained for a Member to hold --------------- the Member's Pre-Tax Contributions. "Pre-Tax Contributions" means the contributions made to the Plan on --------------------- behalf of a Member under Section 4. "Profit Sharing 401(k) Account" means the account maintained for the ----------------------------- Member consisting of Profit Sharing Contributions which the Member could have elected to receive in cash under Section 6.2. "Profit Sharing Regular Account" means the account maintained for a ------------------------------ Member consisting of Profit Sharing Contributions which the Member could not have elected to receive in cash under Section 6.2. EMPLOYEE INVESTMENT PLAN 15 "Profit Sharing Contribution" means the contribution made by the --------------------------- Company under Section 6. "PSP" means the Profit Sharing Plan of Levi Strauss & Co. as in effect --- before October 1, 1988. "Qualified Domestic Relations Order" means a Domestic Relations Order ---------------------------------- that satisfies the requirements described in Section 19.3. "Qualified Member" means a Member who has reached age 63, or who has ---------------- reached age 53 and completed at least 13 Years of Service. "Quarter" means each quarter of the calendar year. ------- "Registration Rights Agreement" means the registration rights ----------------------------- agreement entered into by Levi Strauss Associates Inc. and the Trustee, as amended from time to time, under which the Trustee may require Levi Strauss Associates Inc. under certain circumstances to register LSAI Stock under the Securities Act of 1933. "Regulations" means the applicable regulations issued under the Code ----------- or the Act by the IRS or the Labor Department or any other governmental authority and any temporary rules promulgated by such authorities pending the issuance of such regulations. "Required Beginning Date" generally means April 1 of the calendar year ----------------------- following the calendar year in which the Member attains age 70-1/2. However, the Required Beginning Date for a Member who is not a 5% owner, within the meaning of section 416(i)(1)(B)(i) of the Code, who attained age 70-1/2 during 1988 and had not retired by the Effective Date, will be April 1, 1990. In addition, the Required Beginning Date for a Member who attained age 70-1/2 before January 1, 1988, and who was not a 5% owner, within the meaning of section 416(i)(1)(B)(i) of the Code, during any Plan Year ending with or within the Plan Year in which he or she reached age 66-1/2, or any subsequent year, is the April 1 following the later of the calendar year in which the Member reaches ----- age 70-1/2 or retires. Lastly, the Required Beginning Date for a Member who filed a written election under section 242(b) of the Tax Equity and Fiscal Responsibility Act of 1982 before January 1, 1984, will be the date specified in such election if the election satisfies all of the applicable requirements specified by the IRS, as determined by the Administrative Committee. "Retiree Coordinator" means a retired Employee of the Company who ------------------- resumes employment with the Company or an Affiliated Company on a temporary basis for the purpose EMPLOYEE INVESTMENT PLAN 16 of providing personal relations type services to other retired employees of the Company or an Affiliated Company. "Rollover Account" means the account maintained for a Member to hold ---------------- the Member's Rollover Contributions. "Rollover Contributions" means the rollover contributions made by a ---------------------- Member under Section 4.7. "Service" means employment (whether or not as an Employee) with the ------- Company or an Affiliated Company. Service will begin on the date an Employee first performs 1 Hour of Service for the Company or an Affiliated Company. Service will end on the earlier of: ------- The date the Employee retires; The date the Employee dies; The date the Employee terminates employment; or The first anniversary of the date the Employee is absent from Service for any other reason (e.g. an authorized leave of absence as described in paragraphs (i) and (ii), etc. below). Subject to any applicable rules of the Administrative Committee (which rules will be uniformly applicable to all Employees similarly situated), Service includes: Periods of vacation; Periods of absence whether or not the Employee is paid, not to exceed 12 calendar months, authorized by the Company for sickness, temporary disability or personal reasons; Periods of service in the Armed Forces of the United States, if and to the extent required by the Military Selective Services Act, as amended, or any other federal law of similar import; provided that the Employee returns to Service with the Company or an Affiliated Company within the time his or her employment rights are protected by such law; and EMPLOYEE INVESTMENT PLAN 17 Any period of 12 consecutive months or less, beginning on the first day of a month after a Member terminates employment and ending on the last day of the month preceding the Member's reemployment date, if the Member performs at least 1 Hour of Service within the first month of reemployment. If an Employee is on a leave of absence for more than 12 months, the Employee will be deemed to have quit and terminated Service as of the end of such 12 month period if the Employee fails to abide by the terms and conditions of such leave (which may include a requirement of reemployment), as established from time to time by the Administrative Committee. If an Employee retires, dies or terminates employment while on leave of absence, vacation, holiday or jury duty or while disabled or sick, his or her Service will terminate on the earlier ------- of: (i) The date of such retirement, death or termination; or (ii) 12 months after the start of a leave, vacation or holiday or onset of disability or sickness. All Service will be aggregated, whether or not such Service is performed consecutively, and every partial month will be deemed to be one full month of Service. An Employee's Period of Service will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. "Surviving Spouse" means, with respect to any deceased member, the ---------------- individual (if any) who is considered to be the spouse of such Member under local law at the time of such Member's death. "Total Compensation" means all wages, salaries, and fees for ------------------ professional services and other amounts received during the Plan Year for personal services actually rendered in the course of employment with the Company or an Affiliated Company (including, but not limited to, commissions paid sales representatives, account executives and account managers, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements and other expenses under a nonaccountable plan as described in section 1.62 of the Code) determined without regard to any exclusions from income under section 931 and section 933 of the Code. "Total Compensation" will also include: ------- EMPLOYEE INVESTMENT PLAN 18 In the case of a Member who is an employee within the meaning of section 401(c) of the Code, the Member's earned income (as described under section 401(c)(2) of the Code) determined without regard to any exclusions from gross income similar to those under section 931 and section 933 of the Code; Any foreign earned income as defined under section 911(b) of the Code, regardless of whether such income is excludable from the gross income of the Member under section 911 of the Code; Amounts described in sections 104(a)(3), 105(a) and 105(b) of the Code, but only to the extent that such amounts are includable in the gross income of the Member; Amounts paid or reimbursed by the Company or an Affiliated Company for moving expenses incurred by the Member, but only to the extent that such amounts are not deductible by the Member under section 217 of the Code; The value of a nonqualified stock option granted to the Member by the Company or an Affiliated Company, but only to the extent that the value of the option is includable in the gross income of the Member for the taxable year when granted; and The amount includable in the gross income of the Member upon making an election described in section 83(b) of the Code. "Total Compensation" will not include: ----------- (a) Company contributions to a plan of deferred compensation that, to the extent that before the application of the limitations under section 415 of the Code to that plan, the contributions are not includable in the Member's gross income for federal income tax purposes in the taxable year of the Member in which the contributions are made; (b) Company contributions under a simplified employee pension plan described in section 408(k) of the Code to the extent that such contributions are not considered as compensation for the taxable year in which contributed; (c) Any distributions from a plan of deferred compensation regardless of whether such amounts are includable in gross income of the Member for federal income tax purposes in the taxable year of distribution; (d) Amounts realized from the exercise of a nonqualified stock option; EMPLOYEE INVESTMENT PLAN 19 (e) Amounts realized when restricted stock (or property) held by the Member either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (f) Amounts realized from the sale, exchange or other distribution of stock acquired under an incentive stock option; and (g) Other amounts that receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Member) or contributions made by an employer (whether or not under a salary reduction arrangement) towards the purchase of an annuity contract described in section 403(b) of the Code (whether or not the contributions are excluded from the gross income of the Member. For Plan Years beginning on and after the Effective Date, Total Compensation in excess of $200,000 or any successor limitation as provided for the Plan Year in Section 401(a)(17) of the Code, (as adjusted as provided under section 401(a)(17) of the Code) will be disregarded. In determining the Total Compensation of a Member, the family aggregation rules under section 414(q) of the Code will apply, except that in applying those rules, the term "family" will only include the spouse of the Member and any lineal descendants of the Member who have not reached age 19 before the close of the Plan Year. "Totally and Permanently Disabled" means the Member is eligible to -------------------------------- receive disability benefits under the Federal Social Security Act or, alternatively, has been determined to be totally and permanently disabled by the Administrative Committee based on competent medical evidence. "Trust Agreement" means the trust agreement or agreements between Levi --------------- Strauss Associates Inc. and a Trustee under which the assets of the Plan are managed. "Trust Fund" means the trust fund or funds consisting of the assets of ---------- the Plan and maintained by the Trustee under the Plan and Trust Agreement. "Trustee" means the trustee or trustees of the Trust Fund. ------- "Valuation Date" means any business day. -------------- "Vested Interest" means the nonforfeitable interest of a Member in a --------------- particular Account, determined in accordance with Section 11.1. EMPLOYEE INVESTMENT PLAN 20 "Year of Service" means a 12 month period of Service in which the --------------- Member has Service under Section 2.66. A Member's Years of Service will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. EMPLOYEE INVESTMENT PLAN 21 MEMBERSHIP AND TRANSFER. - ----------------------- Commencement of Membership. Each Employee who was a Member in the -------------------------- Plan on the Effective Date will continue to be a Member. Each Employee who was not a Member in the Plan on the Effective Date, will become a Member in the Plan on the first day of the pay period coinciding with or next following the day on which he or she completes a Year of Service. Upon becoming a Member, an Employee will designate a Beneficiary under Section 2.8 and Section 14. Rehired and Transferred Employees. A former Employee who is rehired, --------------------------------- will be eligible to begin or resume membership in the Plan on the first day of the first pay period coinciding with or next following the date he or she attains or returns to the status of an Employee and has completed a Year of Service. Similarly, an employee of the Company or an Affiliated Company who becomes an Employee after the Membership Date following his or her completion of a Year of Service, will be eligible to begin or resume membership in the Plan on the first day of the first pay period coinciding with or next following the date he or she attains or returns to the status of an Employee. Suspension of Membership. A Member's membership in the Plan will be ------------------------ suspended under the applicable paragraph (a) or (b) below. Change in Employment Status. A Member's membership in the Plan --------------------------- will be suspended for any period during which the Member is an employee of the Company or an Affiliated Company but not an Employee. A Member whose participation is suspended under this Section 3.3(a) may not make Member Contributions or receive any allocation of Nonelective Contributions, Profit Sharing Contributions or Forfeitures with respect to the period of suspension. Withdrawals from Post-Tax Account. A Member's membership in the --------------------------------- Plan will be suspended for at least 3 fiscal months following certain withdrawals from his or her Post-Tax Account as provided in Section 9.1. A Member whose Membership is suspended under this Section 3.3(b) may not make Member Contributions, but may receive an allocation of Nonelective Contributions, Profit Sharing Contributions or Forfeitures with respect to the period of suspension. A suspended Member's Accounts will continue to share in the income, gains, losses and expenses of the Trust Fund. EMPLOYEE INVESTMENT PLAN 22 Termination of Membership. A Member's membership in the Plan will ------------------------- end when his or her Plan Benefit has been distributed or on the date of his or her death, whichever occurs first. Highly Compensated Employees. Any Employee who is a Highly ---------------------------- Compensated Employee will only be eligible for membership in the Plan as an Inactive Member, provided that he or she otherwise satisfies the eligibility requirements of Section 3.1. An Inactive Member will not be eligible to make Member Contributions under Section 4 of the Plan or to receive any allocation of Matching Contributions, Nonelective Contributions, Profit Sharing Contributions or Forfeitures under Section 5 and Section 6 of the Plan. An Inactive Member will, however, be eligible to: Make Rollover Contributions to the Plan under Section 4.7; Direct the investment of his or her Accounts under Section 7; Make withdrawals from his or her Accounts under Section 9; and Obtain Plan loans under Section 10. An Inactive Member will continue to be subject to the remaining provisions of the Plan. The Administrative Committee will periodically determine whether Members in the Plan are Highly Compensated Employees and any such Member's status will change from an Active Member to an Inactive Member as soon as practicable after the Administration Committee makes such determination. EMPLOYEE INVESTMENT PLAN 23 MEMBER CONTRIBUTIONS. - -------------------- Election to Make Contributions. A Member whose membership is not ------------------------------ suspended under Section 3.3 or Section 3.5 may elect, as of the first day of any pay period in any month, to begin making Member Contributions to the Plan in 1% increments, up to a maximum of 10% of his or her Compensation. The Member may elect to make such Member Contributions either as Pre-Tax Contributions or as Post-Tax Contributions. A Member's election to make Pre-Tax Contributions will constitute an election (for federal tax purposes and, wherever permitted, for state and local tax purposes) to have his or her taxable Compensation reduced by the amount of all Pre-Tax Contributions. Maximum Pre-Tax Contributions. The sum of a Member's Pre-Tax ----------------------------- Contributions to the Plan for any calendar year and the portion of the Member's Profit Sharing Contribution which the Member could have received in cash during such calendar year (if the Member does not elect to receive such portion under Section 6.2) will not exceed $7,000 (as adjusted under section 402(g)(5) of the Code for cost of living increases). If any Member's Pre-Tax Contributions are affected by this limitation, the Member will continue to make such contributions as Post-Tax Contributions to the Plan unless the Member elects to suspend such Contributions as provided in Section 4.3. Change or Suspension of Contributions. A Member, at any time, may ------------------------------------- change the rate of his or her Member Contributions within the percentage limitation described in Section 4.1 or may change the nature of such Member Contributions as Pre-Tax Contributions or Post-Tax Contributions by filing the prescribed form with the Administrative Committee, or by utilizing such other notification procedure as is prescribed by the Administrative Committee. A Member may suspend all Member Contributions by filing the prescribed form with the Administrative Committee, or by utilizing such other notification procedure as is prescribed by the Administrative Committee. Such changes in rate or nature of contributions or suspension will be effective as soon as reasonably practicable after the date the form is filed with or notice is received by the Administrative Committee. Resumption of Contributions. A Member who has suspended all Member --------------------------- Contributions under Section 4.3 may resume Member Contributions at any time by filing the prescribed advance notice with the Administrative Committee. The resumption in contributions will be effective as soon as reasonably practicable after the applicable notice is received by the Administrative Committee. Withholding and Deposit With Trustee; Crediting Accounts. All Member -------------------------------------------------------- Contributions to the Plan will be withheld through payroll deductions from the Member's EMPLOYEE INVESTMENT PLAN 24 Compensation and will be paid to the Trustee as soon as reasonably practicable following the end of the pay period in which they are withheld. A Member's Pre- Tax Contributions will be credited to his or her Pre-Tax Account and the Member's Post-Tax Contributions will be credited to his or her Post-Tax Account. Distribution of Excess Contributions and Deferrals. -------------------------------------------------- Excess Contributions. If a Member who is a Highly Compensated -------------------- Employee makes Pre-Tax Contributions which constitute "Excess Contributions" (as defined in section 401(k)(8)(B) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) with respect to a Plan Year, such Excess Contributions (and the earnings on such contributions) will be distributed to the Member after the end of such Plan Year. Such distribution will be made as soon as administratively practicable, but in no event later than the end of the next Plan Year. Pre-Tax Contributions and any earnings on such contributions directed by the Highly Compensated Employees having the highest rate of Pre-Tax Contributions (as a percentage of Compensation) will be refunded first under the provisions of the applicable Regulations. Any refund of Pre-Tax Contributions and earnings on such contributions will be limited to the amount that, in the judgment of the Administrative Committee, will result in the Plan satisfying the requirements of section 401(k)(3)(A) of the Code. Nonelective Contributions which are considered elective contributions under section 1.401(k)-1(g)(7)(i) of the Code shall be handled as Pre-Tax Contributions under this Section 4.6(a). Excess Deferrals. If a Member makes Pre-Tax Contributions which ---------------- constitute "Excess Deferrals" (as defined in section 402(g)(2)(A) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) to one or more plans with respect to a calendar year, the Member may allocate the Excess Deferrals among the plans to which such deferrals were made and notify the Administrative Committee in writing by March 1 of the next calendar year of the Excess Deferrals allocated to the Plan. Upon the Administrative Committee's receipt of such notice, the amount of the Excess Deferrals designated by the Member (and any earnings on such amount) will be distributed to the Member by April 15 of such year. Excess Aggregate Contributions. If a Member who is a Highly ------------------------------ Compensated Employee makes Post-Tax Contributions which constitute "Excess Aggregate Contributions" (as defined in section 401(m)(6)(B) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) with respect to a Plan EMPLOYEE INVESTMENT PLAN 25 Year, such Excess Aggregate Contributions (and any earnings on such contributions) will be distributed to the Member by the end of the next Plan Year. Post-Tax Contributions and any earnings on such contributions directed by the Highly Compensated Employees having the highest rate of Post-Tax Contributions (as a percentage of Compensation) will be refunded first under the provisions of applicable Regulations. Any refund of Post-Tax Contributions and earnings will be limited to the amount that, in the judgment of the Administrative Committee, will result in the Plan satisfying the requirements of section 401(m)(3) of the Code. Rollover Contributions. An Employee may make a Rollover ---------------------- Contribution to the Plan in an amount equal to all or part of a previous distribution from a plan that, at the time of the distribution, met the requirements of section 401(a) of the Code. The Rollover Contribution must be made in cash within 60 days after its receipt by the Employee either from the qualified plan or from an individual retirement account which meets the requirements of section 408 of the Code and has only been used to hold qualified plan distributions. A Rollover Contribution will be permitted only if the Employee establishes that: The Rollover Contribution includes no assets other than those attributable to employer contributions, earnings on employer contributions and earnings on employee contributions under plans qualified under section 401(a) of the Code; and If the amount was received by the Employee from a qualified plan, the Rollover Contribution qualifies as an "eligible rollover distribution" under section 402(c)(4) of the Code; or If the amount was received by the Employee from an individual retirement account, which contains funds described in Section 4.7(a) only, the distribution from such account represented a total distribution of such account. The Rollover Contribution will be paid to the Trustee as soon as practicable, credited to the Employee's Rollover Account and invested as described in Section 7. If it is determined that a Member's Rollover Contribution mistakenly failed to qualify under the Code as a tax-free rollover, then the balance in the Member's Rollover Account attributable to the mistaken contribution immediately will be segregated from all other Plan assets, treated as a nonqualified trust established by and for the benefit of the Member, and distributed to the Member. Such a mistaken contribution will be deemed never to have been a part of the Plan. EMPLOYEE INVESTMENT PLAN 26 MATCHING AND NONELECTIVE CONTRIBUTIONS. - --------------------------------------- Matching Contribution. Except as provided below, for each period (an --------------------- "Accumulation Period") during a Plan Year with respect to which a transfer of Member Contributions to the Stock Fund is permitted in accordance with Section 7.2(b), the Company will make a Matching Contribution to the Plan in an amount equal to 50% of each Member's Member Contributions for the Accumulation Period. The Matching Contribution will be reduced by any amount which cannot be allocated to the Member because of the contribution limitation described in Section 12.1, or with respect to territory managers, account executives and account managers only, the limit on Compensation under Section 2.14. The Board of Directors may determine in its sole discretion that: No Matching Contribution will be made for a particular Plan Year or portion of a Plan Year; A lesser Matching Contribution will be made, in view of Company performance, and economic and financial conditions prevailing and anticipated at the time; or A greater Matching Contribution will be made for a particular Plan Year or portion of a Plan Year. No Matching Contribution will be made for a Member unless he or she: (a) Is an Employee on the last day of the final preceding payroll period with respect to which a Member may make a Contribution which would be matched by a portion of such Matching Contribution; or (b) Ceased to be an Employee during the Plan Year: After attaining age 55 and completing 15 years of Service; After attaining Normal Retirement Age; By reason of death; or By reason of Total and Permanent Disability, and his or her Accounts have not been distributed under Section 11. EMPLOYEE INVESTMENT PLAN 27 The Matching Contribution may be made in the form of cash or in the form of shares of LSAI Stock, or a combination of both. Nonelective Contribution. In order to enable the Plan to satisfy ------------------------ the provisions of section 401(k) or section 401(m) of the Code, the Company may elect to make a Nonelective Contribution to the Plan for each Plan Year in an amount, if any, as the Board of Directors in its sole discretion may determine. Except to the extent necessary to satisfy the requirements of section 401(k) or section 401(m) of the Code, no Nonelective Contribution will be made for a Member unless he or she: Is an Employee on the date as of which a Nonelective Contribution is allocated; or Ceased to be an Employee during the Plan Year: After attaining age 55 and completing 15 years of Service; After attaining age 65; By reason of death; or By reason of Total and Permanent Disability, and his or her Accounts have not been distributed under Section 11. The Nonelective Contribution may be made in the form of cash or in the form of shares of LSAI Stock, or a combination of both. Deposit with Trustee; Crediting Accounts. The Matching ---------------------------------------- Contribution for any Accumulation Period will be paid to the Trustee at the time when Member Contributions designated for investment in the Stock Fund may be transferred to the Stock Fund under Section 7.2 and will be allocated among Members in proportion to their Member Contributions during the Accumulation Period to any Fund. A Member's share of the Matching Contribution will be allocated and credited to the Member's Matching Account as of the earlier of: ------- The date the Matching Contribution is made to the Plan; or The end of the Plan Year during which the Member Contributions with respect to which such Matching Contribution is made. EMPLOYEE INVESTMENT PLAN 28 Forfeitures arising under Section 11.1 with respect to any Member's Matching Account during a Plan Year will be allocated among other Members as an additional Matching Contribution for such Plan Year and credited to such Members' Matching Accounts. The Nonelective Contribution will be paid to the Trustee after such contribution is authorized by the Board of Directors, but no later than 12 months after the end of the Plan Year in which such contribution is made. The amount allocated to each Member's Nonelective Account will be determined by the Board of Directors, or if the Board declines to make such determination, the Administrative Committee. A Member's Nonelective Contribution will be allocated and credited to the Member's Nonelective Account as of the end of the Plan Year with respect to which the Nonelective Contribution is made. Nothing in this Section 5.3 will be construed as requiring an allocation of a Nonelective Contribution to be made on behalf of any Highly Compensated Employee within the meaning of section 401(k) or section 401(m) of the Code. Curtailment or Distribution from Plan of Excess Aggregate --------------------------------------------------------- Contributions. If any Matching Contribution and/or Nonelective Contribution - ------------- otherwise allocable to a Member who is a Highly Compensated Employee would constitute an "Excess Aggregate Contribution" (as defined in section 401(m)(6)(B) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) with respect to the Plan Year, then: The Matching Contribution and/or Nonelective Contribution will not be made to the Plan, if the Matching Contribution and/or Nonelective Contribution has not been made to the Plan as of the date on which the Matching and/or Nonelective Contributions are determined to constitute an Excess Aggregate Contribution; or The Matching Contribution and/or Nonelective Contribution (and any earnings on such contributions) will be distributed to the Member by the end of the next Plan Year, if the Matching Contribution and/or Nonelective Contribution has been made to the Plan before the date on which the Matching and/or Nonelective Contributions are determined to constitute an Excess Aggregate Contribution. The Matching Contribution and/or Nonelective Contribution made on behalf of Highly Compensated Employees having the highest rate of Matching Contribution and/or Nonelective Contribution will be reduced and/or distributed first, under the terms of the applicable Regulations. Any reduction and/or distribution of a Matching Contribution and/or Nonelective Contribution made will be limited to the amount which, in the judgment of the Administrative Committee, is expected to meet the requirements of section 401(m)(6)(B) of the Code. EMPLOYEE INVESTMENT PLAN 29 PROFIT SHARING CONTRIBUTION. - --------------------------- Amount and Form. The Company may make a Profit Sharing Contribution --------------- to the Plan for each Plan Year in such amount as may be determined by the Board of Directors. The Profit Sharing Contribution will be reduced by: ------- An amount equal to the Forfeitures attributable to Members' Profit Sharing Accounts that were allocated to Members for the preceding Plan Year; and The amount which Members elect to receive directly in cash under Section 6.2. No Profit Sharing Contribution will be made for any Plan Year if such contribution would result in the Plan failing to satisfy the requirements of section 410(b) of the Code. The Profit Sharing Contribution may be made in the form of cash, in the form of other property acceptable to the Trustee, or a combination of both. Cash Election by Members. Each Member who is an Employee may elect to ------------------------ receive as a direct cash payment from the Company an amount the Administrative Committee estimates would equal 1/3 of the Profit Sharing Contribution and Forfeitures, if any, otherwise allocable to the Member's Profit Sharing Account for such Plan Year under Section 6.3. A Member must make an election to receive a cash payment by filing the prescribed form with the Administrative Committee by a date determined by the Administrative Committee which is no later than the last day of a Plan Year. No cash payment will be made to a Member who does not make a timely election to receive such payment. A Member will be deemed to have elected to have received a cash payment if the Member ceases to be an employee after the last working day of the Plan Year but before the date such cash payment is made or, alternatively, is receiving no Compensation from the Company or an Affiliated Company for services as an employee on such date. Deposit With Trustee; Crediting Accounts. The Profit Sharing ---------------------------------------- Contribution for any Plan Year will be paid to the Trustee on or before the due date (including extensions) for filing the Company's consolidated federal income tax return for such Plan Year. The Profit Sharing Contribution for a Plan Year will be allocated among Members who are Employees on the last working day of such Plan Year in proportion to each such Member's Compensation for such Plan Year including, in the case of a Member who was a Member for only part of the Plan Year, amounts that would have been Compensation if the Member had been a Member for the full Plan Year. Subject to Section 6.2, a Member's share of the Profit Sharing Contribution will EMPLOYEE INVESTMENT PLAN 30 be credited to the Member's Profit Sharing 401(k) Account and/or Profit Sharing Regular Account, as appropriate. Except as provided in the next following sentence, forfeitures arising under Section 11.1 with respect to any Member's Profit Sharing Account during a Plan Year will be allocated among other Active Members who are Employees on the last working day of such Plan Year as a Profit Sharing Contribution for such Plan Year and, will be credited to such Active Members' Profit Sharing 401(k) Account or Profit Sharing Regular Account, as appropriate. However, in the Plan Year ending in 1994, forfeitures under Section 11.1 as of June 30, 1994, will be allocated among Active Members who are employees on June 30, 1994 (and credited as provided in the immediately preceding sentence), and forfeitures under Section 11.1 with respect to a Member's Profit Sharing Account as of the end of the Plan Year ending in 1994 will be allocated among Active Members who are employees on the last working day of the Plan Year (and credited as provided in the immediately preceding sentence). Distribution of Excess Contributions and Deferrals. -------------------------------------------------- Excess Contributions. To the extent that a Member who is a Highly -------------------- Compensated Employee does not elect to receive a portion of the Profit Sharing Contribution for a Plan Year in cash under Section 6.2 and such portion would constitute an "Excess Contribution" (as defined in section 401(k)(8)(B) of the Code and the Regulations under such Code section which are expressly incorporated by this reference) with respect to such Plan Year, the amount of the Member's Profit Sharing Contribution as may constitute an Excess Contribution will be paid directly to the Member after the end of such Plan Year as if the Member had elected to receive such portion in cash under Section 6.2. Such distribution will be made as soon as administratively practicable, but in no event later than the end of the next Plan Year. The Profit Sharing Contribution and any earnings on such contribution allocated to Highly Compensated Employees having the highest rate of Profit Sharing Contribution (as a percentage of Compensation) will be distributed first under the provisions of the applicable Regulations. Any distribution of the Profit Sharing Contribution and earnings will be limited to the amount that, in the judgement of the Administrative Committee, will result in the Plan satisfying the requirements of section 401(k)(8)(B) of the Code. Excess Deferral. To the extent that a Member does not elect to --------------- receive a portion of the Profit Sharing Contribution otherwise payable directly to the Member during a calendar year under Section 6.2 and such portion would constitute an "Excess Deferral" (as defined in section 402(g)(2)(A) of the Code) with respect to such calendar year, such portion as EMPLOYEE INVESTMENT PLAN 31 may constitute an Excess Deferral will be paid directly to the Member as if the Member had elected to receive such portion in cash under Section 6.2. Such distribution will be made by April 15 of the next calendar year. EMPLOYEE INVESTMENT PLAN 32 TRUST FUND, INVESTMENTS AND INVESTMENT DIRECTIONS. - ------------------------------------------------- Trust Fund. ---------- In General. All contributions to the Plan will be held by the ---------- Trustee for investment and reinvestment as part of the Trust Fund under the Trust Agreement. The Trust Fund will consist of the Funds designated on Appendix C to the Plan. One of such Funds will be designated as the Fund which will hold Member Contributions designated for potential investment in the Stock Fund (the "Holding Account"). Stock Fund. One of the Funds available for investment of the ---------- Trust Funds will be the Stock Fund. The Stock Fund will be invested and reinvested in LSAI Stock to the extent LSAI Stock is available for purchase by the Trustee in accordance with Section 7.2, and in cash or interest-bearing short-term debt obligations of any kind (i) pending investment in LSAI Stock or (ii) to the extent required to pay expenses of the Plan or meet anticipated cash distributions to Members and Beneficiaries, as determined and directed by the Administrative Committee. The Stock Fund will consist of all Stock Fund investments held by the Trustee and all cash held by the Trustee which is derived from dividends, interest or other income from Stock Fund investments, contributions to be invested in the Stock Fund and proceeds from the sale or redemption of Stock Fund investments. Investment of Contributions. A Member's share of any Profit Sharing --------------------------- Contribution and Forfeitures under Section 5.3 allocated to his or her Profit Sharing 401(k) Account and Profit Sharing Regular Account and all Member Contributions will be deposited in the Fund designated by the Member for such investment in 1% increments (provided, however that these allocations will be in 20% increments until the end of the Blackout Period commencing on August 1, 1994) of such contribution as directed by the Member in accordance with procedures established by the Administrative Committee. A Member's investment directions will remain in effect until changed by the Member. If the Member fails to file any investment directions, his or her share of any Profit Sharing Contribution allocated to his or her Profit Sharing 401(k) Account and Profit Sharing Regular Account and his or her Member Contributions will be deposited in the Fund designated in Appendix C for investment of contributions for which no investment direction has been received. All Matching Contributions and Forfeitures under Section 6.3, if any, and Nonelective Contributions will be deposited in the Stock Fund. Generally, twice each Plan Year, the Investment Committee will obtain an independent appraisal of the Fair Market Value of LSAI Stock. The Investment Committee will notify the Trustee of such Fair Market Value promptly after completion of the appraisal. EMPLOYEE INVESTMENT PLAN 33 If Fair Market Value of LSAI Stock Exceeds Adequate --------------------------------------------------- Consideration. If the Trustee determines that the Fair Market Value of LSAI - ------------- Stock exceeds "Adequate Consideration" for such LSAI Stock within the meaning of section 3(18) of the Act, all Member Contributions that are held in the Holding Account and any earnings on such contributions will be transferred to an alternative Fund as designated by the Member, and no Matching Contribution will be made with respect to such Member Contributions unless the Investment Committee effects a "Suspension" as described below. The Investment Committee will effect a Suspension, in its sole discretion, by determining that the Member Contributions held in the Holding Account and earnings on such contributions will remain in the Holding Account rather than be transferred to another Fund. If the Investment Committee effects a Suspension, the Administrative Committee, in such manner and under such procedures as it deems appropriate, will promptly provide Members whose Member Contributions and earnings are subject to the Suspension the opportunity to elect whether such amounts will remain held in the Holding Account. If the Member fails to file an election on the prescribed form by the date determined by the Administrative Committee, such amounts will remain in the Holding Account subject to the remaining provisions of the Plan. If a Member elects to have such amounts transferred to another Fund, such amounts will be transferred to such other Fund. If Fair Market Value of LSAI Stock Does Not Exceed Adequate ----------------------------------------------------------- Consideration. Conversely, if the Trustee determines that the Fair Market Value - ------------- of LSAI Stock does not exceed Adequate Consideration for such stock, the Administrative Committee will notify Members of such Fair Market Value. Each Member who has Member Contributions held in the Holding Account will have the opportunity to elect to have such Member Contributions and any earnings on such contributions transferred to any Fund in 1% increments of such Member Contributions and earnings. If a Member files such an election in the prescribed manner by the date determined by the Administrative Committee, the Member's Member Contributions that are invested in the Holding Account and any earnings on such contributions will be transferred to the Fund or Funds elected by the Member. If a Member fails to file such an election by the date determined by the Administrative Committee, the Member's Member Contributions that are held in the Holding Account and any earnings on such contributions automatically will be transferred to the Stock Fund. At the time when Member Contributions and earnings are transferred to the Stock Fund, the Company will make a Matching Contribution under Section 5.1 unless the Board of Directors determines that no Matching Contribution will be made. EMPLOYEE INVESTMENT PLAN 34 The Trustee will seek to acquire LSAI Stock for the Stock Fund at a price no greater than Fair Market Value, to the extent that any cash Matching Contributions and Forfeitures and Nonelective Contributions deposited in the Stock Fund and Member Contributions transferred to Stock Fund exceed the cash requirements of the Stock Fund as determined by the Administrative Committee. The Trustee may acquire LSAI Stock from a "Party-in-Interest" (as defined in section 3(14) of the Act) or a "Disqualified Person" (as defined in section 4975(e)(2) of the Code) for no more than Adequate Consideration in accordance with the requirements of section 408(e) of the Act. Reinvestment of Accounts. A Member may elect to change the investment ------------------------ of his or her Accounts under the applicable paragraph (a) or (b), subject to the limitations of paragraphs (c) and (d). General Rules Regarding Reinvestment of Accounts. On any ------------------------------------------------ business day, a Member may elect to transfer amounts invested in any Fund other than the Stock Fund among such Funds in 1% increments of the balance credited to the Member's Accounts invested in such Funds as of such day. A Member's election must be made in a manner prescribed by the Administrative Committee. Rules Regarding Reinvestment of Accounts by Qualified Members. ------------------------------------------------------------- As of any business day, a Qualified Member (i.e., any Member who has reached age ---- 63, or attained age 53 and completed at least 13 Years of Service) may elect to have amounts credited to his or her Accounts invested in the Stock Fund transferred to any other Fund in 1% increments by filing the notice prescribed by the Administrative Committee. A Qualified Member may make only 1 such election in any Plan Year. Certain Limitations on Reinvestments by Insiders. A Qualified ------------------------------------------------ Member who is an Insider may reinvest amounts credited to his or her Accounts invested in the Stock Fund only by making an irrevocable election to reinvest within the period beginning on the 3rd business day following the date for the release of the financial data specified in paragraph (e)(1)(ii) of Rule 16b-3 under the Securities Exchange Act of 1934 and ending on the 12th business day following such date. Certain Limitations on Reinvestments Due to Liquidity of the ------------------------------------------------------------ Trust Fund. The Investment Committee may determine that it is not feasible - ---------- for the Trustee to prudently liquidate and transfer the necessary amount from one Fund to another in accordance with Members' reinvestment elections. If the Investment Committee so determines, it will advise the Administrative Committee which will direct that such steps be taken as it considers necessary or desirable for the protection of Members' Accounts, including a pro rata reduction in the EMPLOYEE INVESTMENT PLAN 35 amount transferred with respect to each Member, or the scheduling of transfers over a period consistent with prudent liquidation. Investment by Alternate Payees. The Administrative Committee will ------------------------------ determine, in its sole and absolute discretion, if an Alternate Payee is entitled to a portion of a Member's Accounts under the terms of a Qualified Domestic Relations Order. If the Administrative Committee so determines, it will segregate the Alternate Payee's portion of the Member's Accounts into a separate Matching Account, Nonelective Account, Post-Tax Account, Pre-Tax Account, Profit Sharing Account and Rollover Account as appropriate. The Alternate Payee will only be entitled to direct the investment of his or her Accounts under the provisions of this Section 7 in the same manner, at the same times, and subject to the same conditions as Members in the Plan. Allocation of Voting Rights. Except as specifically authorized in --------------------------- this Section 7.5, the Trustee will vote all shares of LSAI Stock held in the Trust Fund at the direction of the Investment Committee. If the stockholders of Levi Strauss Associates Inc. are entitled to vote with respect to any of the following matters, then only in connection with such matters, the Trustee will vote the shares of LSAI Stock held in the Trust Fund in accordance with the Members' directions to the Trustee as provided in Section 7.6: Any merger or consolidation of Levi Strauss Associates Inc. with any other corporation, unless the stockholders of Levi Strauss Associates Inc. immediately before the merger or consolidation would own (immediately after the merger or consolidation) equity securities of the surviving corporation or acquiring corporation or a parent entity possessing more than 5/6 of the voting power of the surviving corporation or acquiring corporation or parent entity; Any plan of complete liquidation of Levi Strauss Associates Inc.; Any dissolution of Levi Strauss Associates Inc.; or Any plan or agreement for the sale or disposition by Levi Strauss Associates Inc. of all or substantially all of its assets, unless the stockholders of Levi Strauss Associates Inc. immediately before the sale or disposition would own (immediately after the sale or disposition) equity securities of the acquiring entity or a parent entity possessing more than 5/6 of the voting power of the acquiring entity or parent entity. EMPLOYEE INVESTMENT PLAN 36 Exercise of Voting Rights. When Members are entitled to direct the ------------------------- voting of LSAI Stock under Section 7.5, each Member will be entitled to direct the Trustee with respect to the voting of all whole and fractional shares of LSAI Stock which are allocated to his or her Accounts (or represented by units allocated to such Accounts) as of the last Valuation Date coinciding with or preceding the applicable record date. The Administrative Committee will conclusively determine the number of the shares of LSAI Stock that are subject to each Member's voting instructions and will advise the Trustee accordingly. Before any annual or special meeting at which LSAI Stock will be voted on the matters described in Section 7.5, the Board of Directors will cause to be delivered to each Member the proxy statement and any related materials prepared for holders of LSAI Stock, a request for written voting instructions, and the voting instructions form prescribed by the Board of Directors for this purpose. Each Member who wishes to exercise his or her voting rights must complete and return such form to the Trustee before the date prescribed by the Board of Directors. Once received by the Trustee, a Member's voting instructions may be revoked, subject to such conditions as the Trustee may impose. Any shares of LSAI Stock with respect to which the Trustee receives timely, written voting instructions from Members will be voted by the Trustee in accordance with such instructions on the matters described in Section 7.5. The Trustee also will determine the ratio of affirmative votes, negative votes and abstentions with respect to each matter described in Section 7.5 for which it has received timely voting instructions from Members. The Trustee will then vote on such matters all shares of LSAI Stock allocated to Members' Accounts with respect to which it has not received timely voting instructions in accordance with the ratios so determined. If the Trustee determines that voting such shares in accordance with such ratios would violate its fiduciary responsibilities under the Act, it will vote such shares of stock in accordance with such fiduciary requirements. The Trustee will aggregate any fractional shares and, after rounding down to the next lower integer if the total is not a whole number, will vote an equivalent number of whole shares of LSAI Stock. For purposes of this Section 7.6, each Member will be a "Named Fiduciary" as defined under section 402(a) of the Act with respect to the shares of LSAI Stock allocated to his or her Accounts. Other Instructions by Members. ----------------------------- Sale to Levi Strauss Associates Inc. of LSAI Stock. Except as -------------------------------------------------- provided in this Section 7.7 and in the Registration Rights Agreement, the Trustee may sell LSAI Stock held in the Trust Fund only to Levi Strauss Associates Inc. EMPLOYEE INVESTMENT PLAN 37 Acquisition Offers. If any person or group makes an offer to acquire ------------------ all or part of the outstanding LSAI Stock ("Acquisition Offer"), the Trustee will tender the LSAI Stock held in the Trust Fund to such person or group only to the extent that it has been directed to do so by Members. "Acquisition Offers" will not include: ----------- Any offer to purchase LSAI Stock by Levi Strauss Associates Inc.; Any offer to purchase less than 5% of all of the outstanding shares of common stock of Levi Strauss Associates Inc., including LSAI Stock held in the Trust Fund; or Any public offering of LSAI Stock under the Registration Rights Agreement. In the event of an Acquisition Offer, each Member will be entitled to instruct the Trustee confidentially (on a form to be prescribed by the Administrative Committee) with respect to the disposition of those shares of LSAI Stock which then would be subject to the Member's voting instructions under Section 7.6. If the Trustee receives such an instruction by a date determined by the Trustee and communicated to Members, the Trustee will tender such LSAI Stock in accordance with such instruction. Any LSAI Stock as to which the Trustee does not receive instructions within such period will not be tendered by the Trustee. The Trustee will obtain and distribute to each Member all appropriate materials pertaining to the Acquisition Offer, including any statement of the position of Levi Strauss Associates Inc. with respect to such offer issued under Regulation 14e-2 promulgated under the Securities Exchange Act of 1934, as soon as practicable after such materials are issued. If Levi Strauss Associates Inc. is not required to or fails to issue such statement within 5 business days after the commencement of such offer, the Trustee will distribute such materials to each Member without such statement by Levi Strauss Associates Inc. and will separately distribute such statement, if any, as soon as practicable after it is issued. Levi Strauss Associates Inc. may require verification of the Trustee's compliance with the Members' confidential voting instructions by an independent auditor selected by Levi Strauss Associates Inc. For purposes of this Section 7.7(b), each Member will be a "Named Fiduciary" as defined under section 402(a) of the Act with respect to the shares of LSAI Stock allocated to his or her Accounts. EMPLOYEE INVESTMENT PLAN 38 Acquisitions by Levi Strauss Associates Inc. If Levi Strauss -------------------------------------------- Associates Inc. makes an offer to purchase LSAI Stock the Investment Committee will determine whether, and to what extent, the Plan will sell LSAI Stock to Levi Strauss Associates Inc. in connection with such offer. Participant Directed Accounts. It is intended that transactions by ----------------------------- Members pursuant to this Section 7 satisfy the conditions set forth in Department of Labor Regulation Section 2550.404c-1, except to the extent that such transactions are not covered by such regulation. EMPLOYEE INVESTMENT PLAN 39 VALUATIONS AND STATEMENTS. - ------------------------- Valuation of Accounts. As of each Valuation Date, the Administrative --------------------- Committee will value each Member's Accounts at fair market value and will adjust such Accounts to reflect the Member's share of any realized or unrealized investment income, gains, losses and expenses of the Fund or Funds in which the Accounts were invested which have accrued since the preceding Valuation Date. For this and all other purposes under the Plan, LSAI Stock will be taken into account at its Fair Market Value. Statements. The Administrative Committee will prepare and distribute ---------- a statement to each Member at least annually. Such statement will reflect the status of the Member's Accounts (including the fair market value thereof) and will contain such other information as the Administrative Committee may prescribe. EMPLOYEE INVESTMENT PLAN 40 WITHDRAWALS. - ----------- Withdrawals from Post-Tax Accounts. A Member may withdraw all or part ---------------------------------- of the balance credited to his or her Post-Tax Account invested in any Fund or combination of such Funds. In addition, unless the withdrawal is for: The purchase of the Member's primary residence; or The payment of expenses relating to the post-secondary education of the Member or the Member's spouse or children, including expenses for tuition fees, room, board or books, the Member will be suspended from making Member Contributions for at least 3 fiscal months following any such withdrawal. The Member may resume making Member Contributions following the suspension period as of the first pay period following the suspension period by filing the prescribed form with the Administrative Committee in advance. Withdrawals from Rollover Accounts. A Member may withdraw all or part ---------------------------------- of the balance credited to his or her Rollover Account invested in any Fund or combination of such Funds. The Member will not be suspended from making Member Contributions for making any withdrawal under this Section 9.2. Hardship Withdrawals. A Member may make withdrawals from his or her -------------------- Accounts for reasons of hardship as specified in paragraphs (a), (b), and (c) below. Post-Tax Account, Rollover Account, Pre-Tax Account and Profit -------------------------------------------------------------- Sharing 401(k) Account. A Member may withdraw all or part of the Member's - ----------------------- Post-Tax Account, Rollover Account, Pre-Tax Account (excluding earnings credited to such Account after November 27, 1988) and Profit Sharing 401(k) Account (excluding earnings credited to such Account after November 27, 1988) invested in any Fund or any combination of such Funds (excluding contributions made with respect to any period during which the Member was a resident of the United Kingdom), if the Member becomes Totally and Permanently Disabled or if the amount of the withdrawal is needed to meet an "Immediate and Heavy Financial Need" of the Member arising solely from one or more of the following: Expenses for extraordinary and unreimbursed medical or hospital expenses incurred by the Member, the Member's spouse, any dependent of the Member or a nondependent parent or child of the Member; EMPLOYEE INVESTMENT PLAN 41 Amounts necessary for the Member, the Member's spouse, any dependent of the Member, or a nondependent parent or child of the Member to obtain medical or hospital care; The payment of tuition and related educational expenses for the next 12 months of post-secondary education for the Member, the Member's spouse or child, or any dependent of the Member; The payment of expenses incurred by the Member in purchasing his or her primary residence; The need to prevent the eviction of the Member from his or her primary residence or foreclosure on the Member's primary residence; The payment of funeral expenses for a family member or relative of the Member; The loss of income resulting from an abbreviated work schedule required by the Member's health, the loss of employment by the Member's working spouse, garnishment of the Member's wages or material reduction in the compensation of the Member or the Member's working spouse from such Member's or spouse's primary employer; The loss of income, real property or personal property as a result of any natural disaster as specified on Appendix D to the Plan by any individual or entity empowered to amend the Plan; or Effective July 1, 1995, the need to pay attorney's fees, fines, penalties, judgments, assessments or other costs related to legal proceedings on behalf of the Member or the Member's spouse or dependents. Matching Account and Profit Sharing Regular Account. In addition, --------------------------------------------------- a Member may withdraw: All or part of the Member's Matching Account and the Vested Interest in his or her Profit Sharing Regular Account (excluding contributions made with respect to any period during which the Member was a resident of the United Kingdom) EMPLOYEE INVESTMENT PLAN 42 invested in any Fund or any combination of such Funds, if the amount of the withdrawal is needed to meet an Immediate and Heavy Financial Need of the Member due to: Funeral Expenses for a family member or relative of the Member; An abbreviated work schedule required by the Member's health, a loss of income due to health, the loss of employment by the Member's working spouse or garnishment of the Member's wages; The payment of extraordinary and unreimbursed medical or hospital expenses incurred by a nondependent parent or child of the Member; or (D) Effective July 1, 1995, the need to pay attorney's fees, fines, penalties, judgments, assessments or other costs related to legal proceedings on behalf of the Member or the Member's spouse or dependents. All or part of the Member's Vested Interest in his or her Profit Sharing Regular Account (excluding any Profit Sharing Contributions made with respect to any period during which the Member was a resident of the United Kingdom) invested in any Fund or any combination of such Funds, if the amount of the withdrawal is needed to meet Immediate and Heavy Financial Needs of the Member arising from: Foreclosure on the primary residence of the Member; or The loss of income, real property or personal property as a result of any other natural disaster as specified on Appendix D to the Plan by any individual or entity empowered to amend the Plan. General Limits on Hardship Withdrawals. A Member will not be -------------------------------------- suspended from making Member Contributions for making any such withdrawal. An amount will be considered necessary to satisfy the Member's Immediate and Heavy Financial Need only if the Administrative Committee determines that the need cannot be relieved by any of the following: --- Reimbursement or compensation by insurance or otherwise; Reasonable liquidation of the Member's assets, including assets of the Member's spouse and minor children that are reasonably available to EMPLOYEE INVESTMENT PLAN 43 the Member, to the extent such liquidation would not itself cause an immediate and heavy financial need; Cessation of Member Contributions; or A loan from the Member's Accounts under Section 10.1 or a loan from a commercial source on reasonable commercial terms. Unless the Member requests otherwise, the amount of the Member's hardship withdrawal will include the amount of any federal, state or local taxes or any penalties reasonably anticipated to result from the withdrawal. Such sums will be withheld at the time such hardship withdrawal is distributed to the Member. Withdrawals From Stock Fund. The portion of a Member's Accounts --------------------------- invested in the Stock Fund (except for amounts credited to the Member's Nonelective Account) may be withdrawn under Section 9.1 or 9.3 upon receipt of the prescribed notice by the Administrative Committee (except that no such withdrawal will be permitted on and from the date the Company is advised of the new value for LSAI Stock under Section 7 and until either the Trustee confirms that such new value does not exceed Adequate Consideration pursuant to Section 7.2(a) or the Investment Committee instructs that the new value shall be utilized), but only to the extent the Administrative Committee determines that there is sufficient cash available in the Stock Fund to permit such withdrawal. Payment of Withdrawals. A Member may request a withdrawal by ---------------------- providing the prescribed notice with the Administrative Committee. A withdrawal will be paid to the Member in cash as soon as reasonably practicable after the Administrative Committee receives the prescribed notice and determines that the withdrawal request meets the requirements of Section 9.1 (regarding withdrawals from Post-Tax Accounts), Section 9.2 (regarding withdrawals from Rollover Accounts), Section 9.3 (regarding hardship withdrawals) or Section 9.4 (regarding withdrawals from the Stock Fund), as applicable. Valuation Date. The value of a Member's Accounts will be determined -------------- as of the Valuation Date which occurs on or most recently prior to the effective date of the withdrawal. Source of Withdrawals. A Member's Accounts, to the extent available --------------------- with respect to such Hardship withdrawal, will be liquidated to the extent necessary to fund a hardship withdrawal under Section 9.3 in the following order of priority: -------- Post Tax-Account; EMPLOYEE INVESTMENT PLAN 44 Rollover Account; Pre-Tax Account; Profit Sharing 401(k) Account; Profit Sharing Regular Account; and Matching Account. Except as provided above, within any Account, amounts invested in each Fund will be liquidated in order from the lowest risk Fund to the highest risk Fund. The determination of the relative risk of each Fund shall be made by the Investment Committee, in its sole discretion, from time to time. If the Investment Committee determines that it is not feasible for the Trustee to prudently liquidate the necessary amount invested in any Fund in accordance with Members' withdrawal requests, the Investment Committee will so advise the Administrative Committee which will direct that such steps be taken as it considers necessary or desirable for the protection of Members' Accounts, including the reordering of liquidation priorities or a pro rata reduction in the amount of each Member's withdrawal. Limitation on Withdrawals by Insiders. A Member who is an Insider may ------------------------------------- withdraw as of any date amounts credited to his Accounts invested in the Stock Fund only by making an irrevocable election to make such a withdrawal at least 6 months before the last day on which a Member other than an Insider must submit an election to make a withdrawal as of such date. Additional Limitations on Withdrawals. In no event may a Member ------------------------------------- withdraw any amount under this Section 9 which at the time of the intended withdrawal funds a loan under Section 10. Withdrawals by Alternate Payees. An Alternate Payee who is entitled ------------------------------- to a portion of a Member's Accounts under the terms of a Qualified Domestic Relations Order may withdraw amounts from his or her Accounts under this Section 9 in the same manner, at the same times and subject to the same conditions as Members in the Plan. EMPLOYEE INVESTMENT PLAN 45 LOANS. ----- Amount of Loans. --------------- Profit Sharing Regular Account. A Member may borrow up to 100% ------------------------------ of the Member's Vested Interest in his or her Profit Sharing Regular Account to the extent that such amount may be used to secure the promissory note with respect to such loan under Section 10.2(a). Such a loan will be permitted only if the Administrative Committee determines that: The proceeds of the loan will be used to acquire, construct or rehabilitate the Member's primary residence, or to refinance any loan or loans previously made to the Member by a third party for any of these purposes; The loan is required by the Member for the payment of expenses relating to the post-secondary education of the Member or the Member's spouse or children, including expenses for tuition, fees, room, board or books; or The loan is required by the Member due to the loss of income, real property or personal property as a result of any natural disaster as specified on Appendix D to the Plan by any individual or entity empowered to amend the Plan. Profit Sharing 401(k) Account. A Member may borrow up to 100% ----------------------------- of the balance credited to his or her Profit Sharing 401(k) Account for expenses relating to the post-secondary education of the Member or the Member's spouse or children, including expenses for tuition, fees, room, board or books. Post-Tax, Pre-Tax, Matching and Rollover Accounts. ------------------------------------------------- Effective on and after a date determined by the Administrative Committee and announced to Members, a Member may borrow up to 100% of the balance credited to his or her Matching Account and/or Pre- Tax Account. A loan from the Member's Pre-Tax Account will be permitted only if the Administrative Committee determines that the Member is Totally and Permanently Disabled or that the proceeds will be used to satisfy a hardship described in Section 9.3(a)(i) through Section 9.3(a)(viii). A Member may borrow up to 100% of the balance credited to his or her Post-Tax Account and/or Rollover Account. Such loans will be permitted for any reason, but will be subject to Section 10.1(d) (regarding the maximum loan amount), EMPLOYEE INVESTMENT PLAN 46 Section 10.2 (regarding loan terms), Section 10.3 (regarding source of loans) and Section 10.4 (regarding events of default), in addition to other applicable provisions of the Plan. In no case will a Member be permitted to borrow any portion of such Accounts invested in the Stock Fund or the Holding Account. Additional Limitations. No loan will be permitted from the ---------------------- portion of any Account invested in the Stock Fund. No loan will be granted to the extent it would cause the aggregate balance of all loans a Member has outstanding under the Plan to exceed the lesser of: ------ $50,000, less the amount by which such aggregate balance has been reduced by repayments of principal during the one-year period ending on the day before the new loan is made; or 50% of the Member's Vested Interest in all of the Member's Accounts. The amount of any loan must be a multiple of $100 and may not be less than $1,000. Only 4 loans to a Member may be outstanding at any time (no more than 2 of which may be for the acquisition, construction or rehabilitation of the Member's primary residence, or to refinance any loan or loans previously made by a third party for these purposes). Vested Interest and Value of Accounts. The Member's Vested ------------------------------------- Interest in an Account and the value of the balance credited to such Account will be determined as of the latest Valuation Date preceding the date the loan application is submitted for which information is then available. Terms of Loans. All loans will be on such terms and conditions as the -------------- Administrative Committee may determine, and must satisfy the following requirements: Adequate Security. All loans will be made under a promissory ----------------- note secured by: The residence of the Member, in the case of a loan under Section 10.1(a)(i) (regarding the acquisition, construction or rehabilitation of the Member's primary residence); The residence of the Member to the extent agreed upon by the Member and the Administrative Committee, in the case of a loan for expenses for the post-secondary education of the Member or the Member's spouse or children which is EMPLOYEE INVESTMENT PLAN 47 made from the Member's Profit Sharing Regular Account under 10.1(a)(ii), or the Member's Post-Tax Account or the Member's Rollover Account under Section 10.1(c)(ii); and The Account or Accounts that funded the loan to the extent that such Account or Accounts fund the loan. No loans will be secured by the Member's Account or Accounts in an amount greater than 50% of the Vested Interest and value of the balance of the Account of such Member at the time such loan was made. Substantially Level Payment. All loans will be subject to a --------------------------- substantially level payment schedule, as determined by the Administrative Committee, with payments to be made at least quarterly and whenever possible to be made through semi-monthly payroll deductions. If loan payments are not made for a period of up to 365 days due to the Member's temporary absence from active work, such missed payments may be made: In a single sum after the Member returns to active work; Ratably over the remaining period of the loan; In a single sum together with the final payment provided for under the note; or In another manner mutually agreed upon by the Member and the Administrative Committee. However, loan repayments by a Member who has been absent temporarily must recommence by the end of the one-year period following the date the Member's temporary absence began or, if earlier, upon the first paycheck after the Member's return to active work. Reasonable Rate of Interest. All loans will bear interest at a fixed --------------------------- rate determined by the Administrative Committee based upon the prime interest rate in effect at a commercial bank as of the first day of the month immediately preceding the date on which the loan application is received plus 1%, unless such rate would not be "reasonable" as defined by section 408(b)(3) of the Act, in which case a "reasonable" rate of interest will be used. Repayment in Full. All loans will provide for repayment in full, ----------------- whether from the Member's Accounts or otherwise, on or before the earlier of: ------- EMPLOYEE INVESTMENT PLAN 48 5 years after the date the loan is made (15 years after the date the loan is made if the loan is used to acquire the Member's principal residence); or The date the Member's Plan Benefit is distributed under Section 11. Source of Loans; Application of Loan Payments. As soon as --------------------------------------------- administratively practical following the approval of a loan by the Administrative Committee, the amount of the loan will be distributed to the Member from the vested portion of the Member's Accounts that are being used to fund the loan, in the following order of priority: Post-Tax Account; Rollover Account; Pre-Tax Account; Profit Sharing 401(k) Account; Profit Sharing Regular Account; and Matching Account. If less than the entire amount of any Account is required to fund the loan, amounts invested in the Funds will be liquidated to fund the loan in order from the lowest risk Fund to the highest risk Fund. The determination of the relative risk of each Fund shall be made by the Investment Committee, in its sole discretion, from time to time. If the Investment Committee determines that it is not feasible for the Trustee to prudently liquidate the necessary amount invested in any Fund in accordance with Members' loan requests, the Investment Committee will so advise the Administrative Committee. The Administrative Committee will direct that such steps be taken as it considers necessary or desirable for the protection of Members' Accounts, including the reordering of liquidation priorities or a pro rata reduction in the amount of each Member's loan. The promissory note executed by the Member will be reflected in reporting the balance of the Member's Account or Accounts that funded the loan. Principal and interest payments will be credited to the Member's Account or Accounts in proportion to the extent that such Account or Accounts funded the loan. Such principal and EMPLOYEE INVESTMENT PLAN 49 interest payments shall be invested in Funds in proportion to the extent that the funds loaned to the Member were invested in such Funds at the time such loan was made to the Member. Default. If the Administrative Committee determines that a Member's ------- loan obligation is in default, it will take such actions as it deems necessary or appropriate to cause the Plan to realize on its security for the loan. Those actions may include, without limitation, a demand for payment in full, and a distribution of the Member's promissory note to the Member, which will be deemed an involuntary withdrawal from the Member's Accounts in an amount equal to the principal balance of the loan, whether or not the withdrawal would otherwise be permitted on a voluntary basis. No distribution of a Member's promissory note and involuntary withdrawal will occur with respect to a loan from the Member's Pre-Tax Contributions Account or Nonelective Account before the earliest of the events specified in Section 18.6. Any loss caused by the nonpayment or other default on a Member's loan obligation will be borne solely by the Member's Accounts. A Member who is temporarily absent from work will not be considered to be in default for the period which is the lesser of (i) 365 days from the date the Member begins the temporary leave of absence on (ii) the date the Member is no longer considered to be temporarily absent from work. EMPLOYEE INVESTMENT PLAN 50 PLAN BENEFITS. ------------- Vesting in Accounts. A Member's Vested Interest in his or her ------------------- Accounts shall be 100% at all times. Amount of Plan Benefit. If a Member ceases to be an Employee for any ---------------------- reason or becomes Totally and Permanently Disabled while an Employee, the Member (or, in the event of a Member's death, the Member's Beneficiary) will be entitled to receive a Plan Benefit equal to the Member's Vested Interest in his or her Accounts. Valuation of Plan Benefit. The value of the Vested Interest in a ------------------------- Member's Accounts to be distributed as a Plan Benefit will be determined as of the Valuation Date which occurs on or most recently prior to the later of the date of termination of the Member's employment or the date on which the distribution is requested. Rehire Before Five One-Year Breaks in Service. If a Member who --------------------------------------------- suffered a Forfeiture of his or her Profit Sharing Regular Account before the Effective Date for reasons other than Misconduct, or suffered Forfeiture of amounts accumulated under the ESP or PSP, is rehired as an Employee before the date on which the Member incurs a 60 consecutive month Break in Service, an amount equal to the amount which became a Forfeiture will be restored to the Member's Profit Sharing Account or Matching Account, as appropriate. In the case of a Member who ceased to be an Employee and suffered a Forfeiture due to the Employee's pregnancy, the birth of the Employee's child, the placement of a child with the Employee in connection with the adoption of the child by the Employee or the care of the Employee's child immediately following the child's birth or adoption, "84" will be substituted for "60" in the preceding sentence. The first source for amounts restored under this Section 11.4 will be recent Forfeitures of other Members which have not yet been reallocated under Section 5.3 or Section 6.1. To the extent such Forfeitures are insufficient, the Participating Company that employed the Member will make a special contribution in the amount required. Form of Payment. Unless a Member (or Beneficiary) elects otherwise, --------------- the Member's Plan Benefit will be paid in the form of a lump sum in cash. If the value of the Member's Plan Benefit exceeds $3,500, the Member (or Beneficiary) may elect to have all or a portion of such Plan Benefit paid in one of the following forms by filing the prescribed form with the Administrative Committee: EMPLOYEE INVESTMENT PLAN 51 Installments. The Member (or Beneficiary) may elect to have the ------------ Member's Plan Benefit paid in the form of monthly or annual installments, as determined under Section 11.5(a)(i) or Section 11.5(a)(ii) below: Monthly Installments. The Member's Plan Benefit will be paid in -------------------- monthly installments over a period not exceeding the reasonable life expectancy of the Member (or Beneficiary), as determined under the mortality table specified in Section 25 of the Revised Home Office Pension Plan of Levi Strauss Associates Inc. The amount of each monthly installment will be determined by dividing the value of the portion of the Member's Plan Benefit remaining in the Trust Fund by the number of installments elected less the number of installments already paid. Annual or Monthly Installments. The Member's Plan Benefit will ------------------------------ be paid in annual installments over the life expectancy of the Member (or Beneficiary) or the joint life expectancy of the Member and the Member's Beneficiary, where the amount of each annual installment is determined by dividing the value of the Member's Plan Benefit remaining in the Trust Fund by the applicable life expectancy. Alternatively, such payment may be made in monthly installments not exceeding the life expectancy of the Member (or Beneficiary) or the joint life expectancy of the Member and the Member's Beneficiary at the request of the Member (or Beneficiary). The applicable life expectancy for purposes of this Section 11.5(a)(ii) will be determined annually in a manner consistent with section 401(a)(9)(D) of the Code. Annuity Contract. The Member (or Beneficiary) may elect to have the ---------------- Member's Plan Benefit paid in the form of a single premium annuity contract purchased from an insurer. The normal form of annuity contract for a single Member will be a life annuity contract which will provide the Member with a monthly income for his or her life. The normal form of annuity contract for a married Member will be a joint and survivor annuity contract which will provide the Member with a monthly income for his or her life, and upon his or her death, a monthly income to his or her spouse, in an amount not less than 50% nor more than 100% of the amount that was payable to the Member. If the Member dies before the Annuity Starting Date, his or her spouse will be entitled to a survivor's annuity contract which will provide the spouse with a monthly income for his or her life equal to 50% of the amount that would have been paid to the Member if his or her annuity payments had begun on the date of the Member's death. If the Member elects that only a portion of his Plan Benefit be paid in the form of installments or an annuity, then the remainder of such benefit will be paid in a lump sum. EMPLOYEE INVESTMENT PLAN 52 A married Member may elect another form of annuity or may designate another joint annuitant with his or her spouse's consent. The spouse's consent must: Be in writing; Acknowledge the effect of the alternate form of annuity or specifically identify the alternate joint annuitant; Be witnessed by a notary public; and Be given within 90 days before the Annuity Starting Date. The spouse's consent to receive an alternate form of annuity or the designation of a Beneficiary will not be binding on a subsequent spouse if the Member remarries. The Member may revoke such an election at any time before the Annuity Starting Date in which case the Member's benefit will be paid in the form of a joint and survivor annuity to the Member and his or her spouse, unless the Member elects an alternate form of benefit or Beneficiary designation with his or her spouse's consent. If benefits are payable to a joint annuitant other than the Member's spouse, the present value of the benefits payable to the joint annuitant will not exceed 50% of the present value of the benefits payable to the Member (determined as of the Annuity Starting Date). The Administrative Committee will provide to each Member who elects to receive an annuity a written explanation in nontechnical language containing the following information: (i) A description of the terms and conditions of the joint and survivor annuity and the single life annuity; (ii) A statement that the Member may elect during the Election Period described below to waive the joint and survivor annuity or life annuity by electing any optional form of benefit provided under the Plan; (iii) A statement that the Member may revoke the waiver of the joint and survivor annuity or life annuity during the Election Period and the effect of such revocation; (iv) Notice of the requirement that the Member's spouse must consent to the waiver of the joint and survivor annuity and election of any optional form of benefit; EMPLOYEE INVESTMENT PLAN 53 (v) A general explanation of the financial effect of election of each of the optional forms of benefit provided under the Plan; and (vi) A statement that the Member may request an explanation of the specific financial effect, in terms of monthly payments, on the Member's Plan Benefit of making an election. The Election Period will begin 90 days before the Annuity Starting Date and end on the Annuity Starting Date, unless the Member requests additional information from the Administrative Committee, in which case it will end no later than 90 days after the Member receives such additional information. During the Election Period any election not to take the joint and survivor annuity or life annuity will be revocable. Upon the expiration of the Election Period, any election made will be irrevocable and the Member will not be required nor eligible to make an election if no election had been made. Direct Transfer. Effective January 1, 1993, a Member (or --------------- eligible Beneficiary) may elect to have the Member's Plan Benefit paid by a direct transfer to a plan qualified under section 401(a) of the Code which accepts direct transfer contributions, 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), or an annuity plan described in section 403(a) of the Code. The Member (or Beneficiary) may elect to have his or her Plan Benefit paid in the form of a direct transfer at any time after the Administrative Committee provides the Member with notice of the direct transfer option as required by section 402(f) of the Code (the "Section 402(f) Notice"). Time of Payment. A Member's Plan Benefit will be paid in full or will --------------- begin to be paid on the Member's Required Beginning Date. However, subject to the rules stated in paragraphs (a), (b), and (c) below, a Member may elect to receive his or her Plan Benefit earlier, on or as soon as reasonably practicable after the Member ceases to be an Employee. The following rules will govern benefit payments from the Plan. Mandatory Cashout of Benefits Less than $3,500. Except as ---------------------------------------------- provided in Section 11.6(b), a Member's Plan Benefit will be paid in a lump sum cash payment as soon as reasonably practicable after the Member ceases to be an Employee if the value of his or her Plan Benefit does not exceed $3,500. Alternatively, effective January 1, 1993, a Member may elect to have his or her Plan Benefit paid by a direct transfer to a plan qualified under section 401(a) EMPLOYEE INVESTMENT PLAN 54 of the Code which accepts direct transfer contributions, 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), or an annuity plan described in section 403(a) of the Code. The Member may elect to have his or her Plan Benefit paid in the form of a direct transfer at any time after the Administrative Committee provides the Member with notice of the direct transfer option as required by section 402(f) of the Code (the "Section 402(f) Notice"). Insufficient Cash in the Stock Fund. If the Administrative Committee ----------------------------------- determines that the cash available in the Stock Fund is insufficient for the payment of a Member's Plan Benefit, the payment will be delayed until the Administrative Committee determines that sufficient cash is available. Except as provided in Section 11.6(c) (regarding Code section 401(a)(9) compliance) and in Section 11.8 (regarding limitations on the time of distribution), no benefit payment delayed under the Plan will be made later than: ----- 1 year after the last day of the Plan Year in which the Member ceases to be an Employee by reason of reaching Normal Retirement Age, Total and Permanent Disability or death; 5 years after the last day of the Plan Year in which the Member ceases to be an Employee for any other reason; or The Member's Required Beginning Date. If a payment with respect to an Account invested in the Stock Fund has been delayed to the Member's Required Beginning Date and the Administrative Committee determines that the cash in the Stock Fund is insufficient to make such payment, LSAI Stock will be paid to the Member or Beneficiary unless the Company redeems sufficient shares of LSAI Stock at Fair Market Value to make such payment in cash. Section 401(a)(9) Compliance. All benefit payments under the Plan ---------------------------- will be made in accordance with the minimum distribution and incidental benefit requirements of section 401(a)(9) of the Code, which require generally that certain minimum amounts be paid to the Member each calendar year, beginning with the calendar year in which the Member's Required Beginning Date occurs, in order to assure that certain minimum amounts be paid to the Member and that only "incidental" benefits be provided to the Member's Beneficiaries. EMPLOYEE INVESTMENT PLAN 55 Furthermore, any payment option required by section 401(a)(9) of the Code will override and supersede any inconsistent payment provision provided for in the Plan. Death Benefit. If a Member dies before the payment of his or her Plan ------------- Benefit has begun, then the Member's Beneficiary will be entitled to receive the Member's Plan Benefit as soon as reasonably practicable after the Beneficiary files a claim with the Administrative Committee on the prescribed form. If the Beneficiary fails to file the prescribed claim form, the Member's Plan Benefit will be paid in full to the Beneficiary no later than the last day of the calendar year which is 5 years after the Member's death. If the Member dies after installment payments have begun under Section 11.5(a), the remainder of the Member's Plan Benefit will be paid to the Member's Beneficiary in a single lump sum as soon as reasonably practicable after the Member's death. Limitation on Time of Payment. Unless a Member elects otherwise, ----------------------------- payment of his or her Plan Benefit will occur or begin not later than 60 days after the latest of the following: ------ The last day of the Plan Year in which the Member reaches Normal Retirement Age; The last day of the Plan Year in which the Member ceases to be an Employee; The earliest date on which the Administrative Committee can reasonably ascertain the amount of the Member's Plan Benefit; or The earliest date on which the Administrative Committee can reasonably locate the Member (or his or her Beneficiary). In no event, however, will the payment of a Member's Plan Benefit begin later than the Member's Required Beginning Date. Undeliverable Checks. In the event that a Benefit cannot be -------------------- delivered, the Account of the Member (or Beneficiary, as applicable) shall be recredited with the amount of the Benefit which cannot be delivered, but such Account shall be allocated to the money market fund referenced in Appendix C, or in such fund referenced in Appendix C as the Administrative Committee, in its sole discretion, determines is most similar to a money market fund with respect to its risk characteristics. EMPLOYEE INVESTMENT PLAN 56 ALLOCATION LIMITATIONS. ---------------------- Limitation on Annual Additions. The Annual Additions allocated to a ------------------------------ Member for any Plan Year will not exceed the lesser of the following: ------ $30,000 (or, if greater, 1/4 of the dollar limitation for defined benefit plans in effect under section 415(b)(1)(A) of the Code) as adjusted to take into account changes in the cost of living; 25% of the Member's Total Compensation for such Plan Year. If a Member's Annual Additions would exceed the above limitation, then such Annual Additions will be reduced by reducing the components of such additions, as necessary, in the order in which they are listed in Section 2.6. The Plan Year will be the "limitation year" (as defined under section 415 of the Code) unless the Board of Directors designates another 12 consecutive month period as the limitation year under a written resolution adopted by the Board of Directors. Combined Limitation on Benefits and Contributions. If a Member also ------------------------------------------------- participates in one or more qualified defined benefit plans (as defined in section 414(j) of the Code) maintained by the Company or any Affiliated Company, the Member's benefits under any of the qualified defined benefit plans will be reduced to the extent necessary to ensure that the sum of the "Defined Benefit Fraction" (as defined in section 415(e)(2) of the Code) for the Plan Year plus the "Defined Contribution Fraction" (as defined in section 415(e)(3) of the Code) for the Plan Year does not exceed 1.0. Disposition of Excess Annual Additions. Any Annual Additions under -------------------------------------- this Plan that cannot be allocated to a Member because of the limitation in Section 12.1 will be processed as follows: Any Profit Sharing Contribution and Forfeitures attributable to Profit Sharing Accounts that cannot be allocated to the Member will be deducted from the amount of the Profit Sharing Contribution which otherwise would be made under Section 6, but such reduction will not affect the amounts allocable under Section 6.3 to Members whose Profit Sharing Contribution component of Annual Additions is not reduced. EMPLOYEE INVESTMENT PLAN 57 Any Matching Contribution and Forfeitures attributable to Matching Accounts that cannot be allocated to the Member will be deducted from the amount of the Matching Contribution which otherwise would be made under Section 5.1, but such reduction will not affect the amounts allocable under Section 5.3 to Members whose Matching Contribution component of Annual Additions is not reduced. Any Nonelective Contribution that cannot be allocated to the Member will be deducted from the amount of any Nonelective Contribution which otherwise would be made under Section 5.2, but such reduction will not affect the amounts allocable under Section 5.3 to Members whose Nonelective Contribution portion of Annual Additions is not reduced. Any Post-Tax Contributions made by the Member (increased by any income or reduced by any losses allocable to such Contributions) will be returned to the Member in cash. Any Pre-Tax Contributions will be credited to a suspense account on behalf of the Member. All amounts credited to such account will be treated as Pre-Tax Contributions for successive Plan Years and will be allocated annually to the Member under Section 4 (to the extent such allocation is not prohibited by Section 12.1) until exhausted. No gains or losses will be credited to the suspense account and no additional Pre-Tax Contributions, or any Matching Contribution, Nonelective Contribution or Profit Sharing Contribution will be made by or on behalf of the Member so long as any amount remains in the suspense account. EMPLOYEE INVESTMENT PLAN 58 FUNDING POLICY AND METHOD. ------------------------- Contributions. The Administrative Committee will make arrangements ------------- for the collection of Member Contributions as provided in Section 4. The Company will make Matching Contributions, Nonelective Contributions and Profit Sharing Contributions to the Plan as provided in Sections 5 and 6. Trust Fund. All monies, securities or other property received as ---------- contributions under the Plan will be delivered to the Trustee under the Trust Fund, to be managed, invested, reinvested and distributed in accordance with the Plan, the Trust Agreement, and any agreement with an insurance company or other financial institution constituting a part of the Plan and Trust Agreement. Expenses of the Plan. The expenses of administering the Plan will -------------------- include but not be limited to: The fees and expenses of any employee and of the Trustee for the performance of their duties under the Trust Agreement; The expenses incurred by the members of the Administrative Committee and of the Investment Committee in the performance of their duties under the Plan (including reasonable compensation for any legal counsel, certified public accountants and actuaries and any outside agents and cost of services provided for the Plan); and All other proper charges and disbursements of the Trustee or the members of the Administrative Committee and of the Investment Committee (including settlements of claims or legal actions approved by counsel to the Plan). The expenses of administering the Plan may be paid out of the Trust Fund if the Participating Companies do not pay such expenses directly in such proportions as determined by the Administrative Committee. An election by the Participating Companies to pay all or a part of the above expenses directly will not bind such companies as to their rights to elect, with respect to the same or other expenses, at any other time to have such expenses paid from the Trust Fund or to have the Trustee reimburse the Participating Companies for expenditures already made. In estimating costs under the Plan, administrative costs may be anticipated. Cash Requirements. From time to time the Administrative Committee ----------------- will estimate the Plan Benefits, withdrawals and administrative expenses to be paid out of the Trust Fund during the period for which the estimate is made and will also estimate the contributions to EMPLOYEE INVESTMENT PLAN 59 be made to the Plan during that period. The Administrative Committee will inform the Trustee and each Investment Manager of the estimated cash needs of, and contributions to, the Plan during the periods for which the estimates are made. The estimates will be made on an annual, quarterly, monthly or other basis, as the Administrative Committee may determine. Independent Accountant. The Administrative Committee will engage an ---------------------- independent qualified public accountant to conduct such examinations and to express such opinions as may be required by section 103(a)(3) of the Act. The Administrative Committee may remove and discharge the person so engaged, in which event it will engage a successor independent qualified public accountant to perform such examinations and to express such opinions. Loans from Parties-In-Interest. The Investment Committee, in its sole ------------------------------ discretion, may borrow money or receive credit from a party-in-interest (within the meaning of Section 3(14) of ERISA), providing such loan or extension of credit satisfies the applicable conditions of Department of Labor Prohibited Transactions Class Exemption No. 80-26, or such successor exemption which may from time to time be applicable, and otherwise satisfies the prohibited transactions provisions of ERISA and the Code. The proceeds of such a loan shall be allocated to such investment fund or funds as the Investment Committee deems appropriate. In connection with such a loan or extension of credit, the Investment Committee or its designee may execute such promissory notes or loan or other documents as it deems appropriate. EMPLOYEE INVESTMENT PLAN 60 BENEFICIARIES. ------------- If no Beneficiary designation is in effect under Section 2.8 at the time of a Member's death, or if no designated Beneficiary survives the Member, the payment of the Member's Plan Benefit, if any, will be made to the following persons in the order listed: To the Member's Surviving Spouse, if any; If the Member has no Surviving Spouse, then to his or her living children; If the Member has no living children, then to his or her living parents; If the Member has no living parents, then to his or her living brothers and sisters; or If the Member has no living brothers and sisters, then to his or her estate. The Administrative Committee will, in its sole and absolute discretion, determine the right of such persons to receive the Member's Plan Benefit, if any. If the Administrative Committee is in doubt as to the right of any person to receive such benefit, the Administrative Committee may direct the Trustee to retain such benefit, without liability for any interest, until the rights to such benefit are determined, or, alternatively, may direct the Trustee to pay such benefit into any court of appropriate jurisdiction and such payment will be a complete discharge of the liability of the Plan and the Trust Fund. EMPLOYEE INVESTMENT PLAN 61 ADMINISTRATION AND OPERATION OF THE PLAN. ---------------------------------------- Plan Administrator. The Administrative Committee is the "Plan ------------------ Administrator" of the Plan (as such term is defined in the Act) and the "Named Fiduciary" as defined in section 402(a) of the Act with respect to the operation and administration of the Plan. The Administrative Committee will make such rules and regulations and take any other actions to administer the Plan as it may deem appropriate. The Administrative Committee may adopt periods in which advance notice required under the Plan must be given and will communicate such periods to Employees. The Administrative Committee will have sole discretion to interpret the terms of the Plan and to determine eligibility for benefits under the objective criteria described in the Plan. The Administrative Committee's rules, interpretations, computations and actions will be conclusive and binding on all persons. In administering the Plan, the Administrative Committee (a) will act in a nondiscriminatory manner to the extent required by section 401(a) and related sections of the Code, and (b) will at all times discharge its duties in accordance with the standards described in section 404(a)(1) of the Act. Control and Management of Plan Assets. The Investment Committee is ------------------------------------- the "Named Fiduciary" as defined in section 402(a) of the Act with respect to the management and control of the assets of the Plan, but only to the extent that it will have the authority to: Appoint 1 or more trustees to hold the assets of the Plan in trust and to enter into a trust agreement with each trustee it appoints; Appoint 1 or more Investment Managers for any assets of the Plan and to enter into an investment management agreement with each Investment Manager it appoints; Direct the investment of any Plan assets not assigned to an Investment Manager or to the Trustee; and Perform such other functions as are specifically assigned to the Investment Committee under the Plan. Trustees and Investment Managers. Each trustee appointed under -------------------------------- Section 15.2 will have the exclusive authority and discretion to manage and control the Plan assets held in trust by it, except to the extent that: The Investment Committee directs how those assets will be invested; EMPLOYEE INVESTMENT PLAN 62 The Investment Committee allocates the authority to manage those assets to one or more Investment Managers; or The Plan prescribes how those assets will be invested. Each Investment Manager appointed under Section 13.2 will have the exclusive authority to manage, including the power to acquire and dispose of, the Plan assets assigned to it by the Investment Committee, except to the extent that the Plan prescribes how those assets will be invested. The Trustee and each Investment Manager will be solely responsible for diversifying the investment, in accordance with section 404(a)(1)(C) of the Act, of the Plan assets assigned to them by the Investment Committee, except to the extent that the Investment Committee directs or the Plan prescribes how those assets will be invested. Committee Membership. Both the Administrative Committee and the -------------------- Investment Committee will consist of at least 3 members. Each member will be appointed by, will remain in office at the will of, and may be removed, with or without cause, by, the Board of Directors. Any member of either Committee may resign at any time. The Board of Directors will designate the chairman of each Committee. To the maximum extent permitted by law, no member of either Committee will be personally liable by reason of any contract or other instrument executed by him or her or on his or her behalf in his or her capacity as a member of such Committee nor for any mistake of judgment made in good faith. The Company will indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums of which are paid from the Company's own assets), each member of the Administrative Committee and Investment Committee and each other officer, employee or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan or to the management and control of the assets of the Plan may be delegated or allocated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan, unless arising out of such person's own fraud or willful misconduct. Reports to Board of Directors. Each Committee will report to the ----------------------------- Board of Directors, or to its designee for this purpose, annually and at such other times specified by the Board of Directors or such designee, concerning the matters for which it is responsible under the Plan. EMPLOYEE INVESTMENT PLAN 63 Employment of Advisers. The Administrative Committee and the ---------------------- Investment Committee may make use of employees of the Company or outside agents as they require or may deem advisable for purposes of performing their respective duties under the Plan. Either Committee may rely upon the written opinion or advice of counsel provided by the Company, fairness opinions provided by investment bankers and written opinions or advice by actuaries or accountants engaged by the Administrative Committee. Either Committee may delegate to any such agent or to any subcommittee or member of the Committee its authority to perform any act under the Plan, including, without limitation, those matters involving the exercise of discretion. Any such delegation of discretion will be subject to revocation at any time at the discretion of the appropriate Committee. Limitations on Committee Actions. No member of either Committee will -------------------------------- be entitled to act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan. The members of the Administrative Committee and of the Investment Committee will not receive any special compensation for serving in their capacities as members of such Committees but will be reimbursed for any reasonable expenses incurred in performing their Committee duties. Except as otherwise required by the Act, no bond or other security will be required of either Committee or any Committee member in any jurisdiction. Any person may serve on both Committees, and any member of either Committee, any subcommittee or agent to whom either Committee delegates any authority, and any other person or group of persons, may serve in more than one fiduciary capacity (including service both as a trustee and an administrator) with respect to the Plan. Committee Meetings. Each Committee will establish its own procedures ------------------ and the time and place for its meetings, and provide for the keeping of minutes of all meetings. A majority of the members of a Committee will constitute a quorum for the transaction of business at a meeting of the Committee. Any action of a Committee may be taken upon the affirmative vote of a majority of the members of the Committee at a meeting or, at the direction of its Chairman, without a meeting by "mail," telegraph or telephone, provided that all of the members of the Committee are informed by mail, telegraph or telephone of their right to vote on the proposal and of the outcome of the vote. "Mail" will include any written or electronic interoffice communication. EMPLOYEE INVESTMENT PLAN 64 CLAIMS AND REVIEW PROCEDURES. ---------------------------- Applications for Benefits. Any application for a Plan Benefit must be ------------------------- submitted to the Administrative Committee at the Company's principal office. Such application must be in writing on the prescribed form and must be signed by the applicant. Denial of Applications. In the event that any application for a Plan ---------------------- Benefit is denied in whole or in part, the Administrative Committee will notify the applicant in writing of the right to a review of the denial. The written notice will state, in a manner reasonably calculated to be understood by the applicant: The specific reasons for the denial; The specific references to the Plan provisions on which the denial was based; A description of any information or material necessary to perfect the application; An explanation of why such material is necessary; and An explanation of the Plan's review procedure. The written notice will be given to the applicant within 90 days after the Administrative Committee receives the application, unless special circumstances require an extension of time for processing the application. In no event will the extension exceed a period of 90 days from the end of the initial 90-day period. If an extension is required, written notice of the need for the extension will be given to the applicant before the end of the initial 90-day period. The notice will indicate the special circumstances requiring an extension of time and the date by which the Administrative Committee expects to give a decision. If written notice is not given to the applicant within the initial 90-day period, then the application will be deemed to have been denied (for purposes of Section 16.3) upon the expiration of such period. Requests for Review. Any person whose application for a Plan Benefit ------------------- is denied in whole or in part (or such person's duly authorized representative) may appeal the denial by submitting to the Administrative Committee a request for a review of such application within 60 days after receiving written notice of the denial. The Administrative Committee will give the applicant or such representative an opportunity to review pertinent documents (except legally privileged materials) in preparing such request for review and to submit issues and comments in EMPLOYEE INVESTMENT PLAN 65 writing. The request for review must be in writing and must be addressed to the Company's principal office. The request for review must state all of the grounds on which it is based, all facts in support of the request and any other matters which the applicant deems pertinent. The Administrative Committee may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. Decisions on Review. The Administrative Committee will act upon each ------------------- request for review within 60 days after it receives the request, unless special circumstances require an extension of time for processing, but in no event will the decision on review be given more than 120 days after the Administrative Committee receives the request for review. If an extension is required, written notice of the need for the extension will be given to the applicant before the end of the initial 60-day period. The Administrative Committee will give prompt, written notice of its decision to the applicant. If the Administrative Committee confirms the denial of the application for benefits in whole or in part, the notice will state, in a manner calculated to be understood by the applicant, the specific reasons for the denial and specific references to the Plan provisions on which the decision is based. To the extent that the Administrative Committee overrules the denial of the application for a Plan Benefit, such benefit will be paid to the applicant. Exhaustion of Administrative Remedies. No legal or equitable action ------------------------------------- for a Plan Benefit will be brought unless and until the claimant has: Submitted a written application for a Plan Benefit in accordance with Section 16.1; Been notified that the application is denied; Filed a written request for a review of the application in accordance with Section 16.3; and Been notified in writing that the Administrative Committee has affirmed the denial of the application. A Member may bring an action without completing the above steps after the Administrative Committee has failed to act on the claim within the time prescribed in Section 16.2 and Section 16.4. EMPLOYEE INVESTMENT PLAN 66 TERMINATION OF EMPLOYER PARTICIPATION. ------------------------------------- Termination by Participating Company. Any Participating Company may ------------------------------------ terminate its participation in the Plan by giving the Board of Directors prior written notice specifying a termination date which will be the last day of a month at least 60 days after the date such notice is received by the Board of Directors. If the specified termination date is not at least 60 days after the date the notice of termination is received by the Board of Directors, the specified termination date will automatically be changed to the last day of the first month which is at least 60 days after the date the notice is received. The Board of Directors may waive such 60 day notice requirement and terminate the Participating Company's participation in the Plan as of any earlier date. The Board of Directors may also terminate any Participating Company's participation in the Plan, as of any termination date specified by the Board of Directors, for the failure of the Participating Company to make proper contributions, to comply with any other provision of the Plan, or for any other reason the Board of Directors deems appropriate. In any event, the Administrative Committee will promptly notify the IRS and other appropriate governmental authorities under Sections 17.3 and 18.3 of the Plan. Effect of Termination. Upon termination of the Plan as to any --------------------- Participating Company, the interest in the Accounts of any Members who were or are currently employed by such Participating Company will become fully vested and nonforfeitable and no amount will subsequently be payable under the Plan to or with respect to such Members except as provided in this Section 17.2. Subject to any conditions which the IRS or any other governmental authority may impose, the Administrative Committee will direct the Trustee to segregate that portion of the Trust Fund attributable to the Members' Accounts of that Participating Company. To the maximum extent permitted by the Code and the Act, any rights of Members or former Members of that Participating Company and their Beneficiaries and other eligible survivors will be unaffected by a termination of the Plan as to such Participating Company. IRS Termination Procedure. If the Plan is terminated with respect to ------------------------- a Participating Company, the Administrative Committee or the appropriate Company office must submit the Plan to the IRS for a determination that the termination of the Plan with respect to the Participating Company will not adversely affect the qualified status of the Plan and the Trust Fund under sections 401(a) and 501(a) of the Code. No distributions of assets will be made in connection with the termination of the Plan until the IRS has issued a determination as to the effect of such termination. The Participating Company may, by written notice delivered to the Administrative Committee and the Trustee, waive its right to apply for such a determination. Any such waiver request must be approved by the Board of Directors. EMPLOYEE INVESTMENT PLAN 67 Termination of the Plan. If the Plan is terminated with respect to ----------------------- all Participating Companies, the provisions of this Section 17 will be applied to each of the Participating Companies individually or collectively as determined by the Administrative Committee in its sole and absolute discretion. EMPLOYEE INVESTMENT PLAN 68 AMENDMENT, MERGER OR TERMINATION OF THE PLAN AND TRUST. ------------------------------------------------------ Right to Amend. The Board of Directors have the right at any time, to -------------- modify, alter or amend this Plan, in whole or in part, prospectively or retroactively. No amendment will reduce any Member's Plan Benefit, calculated as of the date on which the amendment is adopted, except to the extent as may be appropriate or necessary to enable the Plan and Trust Fund to continue to satisfy the requirements of section 401(a) and section 501(a) of the Code or other applicable law. Any such amendment will be evidenced by an instrument in writing duly executed, acknowledged and delivered to the Administrative Committee and the Trustee. If the Plan is amended by the Board of Directors after it is adopted by an Affiliated Company, unless otherwise expressly provided, it will be treated as so amended by the Affiliated Company without the necessity of any action on the part of the Affiliated Company. Plan Merger or Consolidation. The Board of Directors reserves the ---------------------------- right to merge or consolidate this Plan with any other plan or to direct the Trustee to transfer the assets held in the Trust Fund and/or the liabilities of this Plan to any other plan or to accept a transfer of assets and liabilities from any other plan. In the event of the merger or consolidation of this Plan and the Trust Fund with any other plan, or a transfer of assets or liabilities to or from the Trust Fund to or from any other such plan, then each Member will be entitled to a benefit immediately after the merger, consolidation or transfer (determined as if the Plan was then terminated) that is equal to or greater than the benefit he or she would have been entitled to receive immediately before such merger, consolidation or transfer (if this Plan had then terminated). Termination of the Plan. The Board of Directors hopes and expects to ----------------------- continue the Plan indefinitely. Nevertheless, to the full extent permitted by law, the Board of Directors reserves the right to terminate the Plan or to completely discontinue contributions under the Plan. As required by law, before the termination or discontinuance of contributions, the Board of Directors, or its designee, will notify the Administrative Committee, the Trustee, or any other fiduciary of its intent to terminate the Plan or to discontinue contributions under the Plan. Upon such termination or discontinuance of contributions, the interest of each Member in his or her Accounts will become fully vested and nonforfeitable. Partial Termination of the Plan. Upon a curtailment of the Plan or a ------------------------------- discontinuance of the Plan with respect to a group or class of Members that constitutes a "Partial Termination" under section 411(d)(3) of the Code, the interest of each Member in his or her Accounts will become fully vested and nonforfeitable. If a Partial Termination occurs, the Accounts of the Members affected by the Partial Termination will be segregated by the Trustee and used to pay benefits under the Plan to such Members in accordance with Section 18.5 as EMPLOYEE INVESTMENT PLAN 69 though the Plan had been completely terminated. Alternatively, the Administrative Committee may postpone benefit payments to those Members until their subsequent termination of Service with the Company in accordance with other provisions of the Plan. Manner of Distribution. Upon termination of the Plan, the ---------------------- Administrative Committee may, in its sole and absolute discretion, direct the Trustee to convert the Trust Fund into cash and liquidate it by making benefit payments to Members in accordance with the modes of payment provided for in Section 11.5. Alternatively, with the consent of the Board of Directors, or its designee, the Administrative Committee may direct the Trustee to hold the Members' Plan Benefit in the Trust Fund until such Members or their Beneficiaries become eligible to receive benefit payments under the terms and provisions of this Plan. Restrictions on Liquidation of Trust Upon Termination. In no event, ----------------------------------------------------- however, will a Member's Nonelective Account and Pre-Tax Account be distributed before the first to occur of the following events: ----- The Member's retirement; The Member's death; The Member's disability (as determined by the Administrative Committee); The Member's termination of employment; The Member's attainment of age 59-1/2; The termination of the Plan, provided that neither the Company nor an Affiliated Company maintains a successor plan; The disposition, to a corporation that is not an Affiliated Company, of substantially all of the assets (within the meaning of section 409(d)(2) of the Code) used by the Company in the trade or business in which the Member is employed, provided that the Member continues employment with the transferee corporation and the Company continues to maintain the Plan; or The disposition, to a corporation that is not an Affiliated Company, of the Company's interest in a subsidiary in which the Member is employed, provided that the Member continues employment with the subsidiary and the Company continues to maintain the Plan. EMPLOYEE INVESTMENT PLAN 70 A distribution may be made under (f), (g), or (h) above only if it constitutes a total distribution of the entire balance of the Member's Accounts. EMPLOYEE INVESTMENT PLAN 71 INALIENABILITY OF BENEFITS. -------------------------- No Assignment Permitted. Except as may otherwise be required by law, ----------------------- no amount payable at any time under the Plan and the Trust Agreement will be used or diverted for purposes other than for the exclusive benefit of Members and their Beneficiaries. No amount payable at any time under the Plan and the Trust Agreement will be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any Member, Beneficiary or Alternate Payee. Any attempt to so alienate or subject any such amount will be void. If any Member, Beneficiary or Alternate Payee attempts to, or alienates, sells, transfers, assigns, pledges, attaches or otherwise encumbers any amount payable under the Plan and Trust Agreement, or any portion of such amount, or if by reason of his or her bankruptcy or any other event, such amount would be made subject to his or her debts or liabilities, or would otherwise not be enjoyed by him or her, then the Administrative Committee, if it so elects, may direct that such amount be withheld and that such amount or any portion of such amount be paid or applied to or for the benefit of such person, his or her spouse, children or other dependents or any of them, in such manner and proportion as the Administrative Committee may deem proper. The following arrangements are not prohibited under the Plan: Arrangements for the withholding of tax from benefit distributions; Arrangements for the recovery of benefit overpayments; or Arrangements for direct deposit of benefit payments to an account in a bank, savings and loan association or credit union (provided that such arrangement is not part of an arrangement constituting an assignment or alienation). In addition, the return of Company Contributions under Section 19.2 and the creation, assignment or recognition of a right to all or a portion of a Member's Plan Benefit under a Qualified Domestic Relations Order under Section 19.3 will not violate this Section 19.1. Return of Contributions. All Pre-Tax Contributions, Nonelective ----------------------- Contributions, Matching Contributions and Profit Sharing Contributions are expressly conditioned upon the deductibility of such contributions under section 404 of the Code. If the deduction of any Pre-Tax Contributions, Nonelective Contribution, Matching Contribution or Profit Sharing Contribution is disallowed, then the amount for which a deduction is disallowed will be returned to the appropriate Participating Company within 12 months after the date of the disallowance. In addition, if any Pre-Tax Contributions, Nonelective Contribution, Matching Contribution or EMPLOYEE INVESTMENT PLAN 72 Profit Sharing Contribution is made as a result of a mistake of fact, such contribution may be repaid to the appropriate Participating Company within 12 months after it is made. Any Pre-Tax Contributions, Nonelective Contribution, Matching Contribution or Profit Sharing Contribution so returned will be reduced to reflect losses but will not be increased to reflect gains or income. Any Pre- Tax Contributions so returned will be paid to the Member from whom it was withheld. Qualified Domestic Relations Orders. The Administrative Committee ----------------------------------- will honor the terms of a Qualified Domestic Relations Order that satisfies the following requirements. Requirements. In accordance with section 414(p) of the Code, a ------------ Domestic Relations Order will not be treated as a Qualified Domestic Relations Order unless it satisfies all of the following conditions: --- The Domestic Relations Order clearly specifies the name and last known mailing address (if any) of the Member and the name and last known mailing address of each Alternate Payee covered by the order, the amount or percentage of the Member's Plan Benefit to be paid to each Alternate Payee or the manner in which such amount or percentage is to be determined, and the number of payments or period to which such order applies. The Domestic Relations Order specifically indicates that it applies to this Plan. The Domestic Relations Order does not require this Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, and it does not require the Plan to provide increased benefits. The Domestic Relations Order does not require the payment of all or a portion of a Member's Plan Benefit to an Alternate Payee which is required to be paid to another Alternate Payee under another order previously determined to qualify as a Qualified Domestic Relations Order. Early Commencement of Payments to Alternate Payees. A Domestic -------------------------------------------------- Relations Order requiring payment to an Alternate Payee before a Member has separated from employment may qualify as a Qualified Domestic Relations Order as long as the order does not require payment before the Member's "Earliest Retirement Age," which is the earliest date on which the Member could elect to receive a Plan Benefit. If the order requires payments to begin after a Member's Earliest Retirement Age before the Member's actual retirement, the amount of the payments must be determined as if the Member had begun receiving benefit payments on the EMPLOYEE INVESTMENT PLAN 73 date on which the payments are to begin under the order, but taking into account only the value of the Member's Accounts at that time. The Plan Benefit payable to an Alternate Payee will not be recalculated upon the Member's actual retirement. Alternate Payment Forms. The Domestic Relations Order may call ----------------------- for the payment of the Member's Plan Benefit to an Alternate Payee in any form in which benefits may be paid under the Plan to the Member, other than in the form of a qualified joint and survivor annuity, as defined in section 417(b) of the Code, with respect to the Alternate Payee and his or her subsequent spouse. Processing of Qualified Domestic Relations Orders. The ------------------------------------------------- Administrative Committee will promptly notify the Member, and any Alternate Payee (including any Alternate Payee who may be entitled to benefits under a previously received Qualified Domestic Relations Order) of the receipt of any Domestic Relations Order which could qualify as a Qualified Domestic Relations Order. At the same time, the Administrative Committee will advise the Member and each Alternate Payee of the Plan provisions relating to the determination of the qualified status of such orders. Within a reasonable period of time after receipt of a copy of the Domestic Relations Order, the Administrative Committee will determine whether the order is a Qualified Domestic Relations Order and notify the Member and each Alternate Payee of its determination. The determination of the status of a Domestic Relations Order as a Qualified Domestic Relations Order will be made in accordance with such uniform and nondiscriminatory rules and procedures as may be adopted by the Administrative Committee from time to time. If monthly benefits are presently being paid with respect to a Member named in a Domestic Relations Order which may qualify as a Qualified Domestic Relations Order, or if the Member's Plan Benefit becomes payable after receipt of the order, the Administrative Committee will notify the Trustee to segregate and hold the amounts which would be payable to the Alternate Payee or payees designated in the order if the order is ultimately determined to be a Qualified Domestic Relations Order. If the Administrative Committee determines that the Domestic Relations Order is a Qualified Domestic Relations Order within 18 months of receipt of the order, the Administrative Committee will instruct the Trustee to pay the segregated amounts (plus any earnings on such amounts) to the Alternate Payee specified in the Qualified Domestic Relations Order. Conversely, if within the same 18 month period the Administrative Committee determines that the Domestic Relations Order is not a Qualified Domestic Relations Order, or if the status of the order as a Qualified Domestic Relations Order is not resolved, the Administrative Committee will instruct the Trustee to pay the segregated amounts (plus any earnings on such amounts) to EMPLOYEE INVESTMENT PLAN 74 the person or persons who would have been entitled to such amounts if the order had not been entered. If the Administrative Committee determines that a Domestic Relations Order is a Qualified Domestic Relations Order after the close of the 18 month period mentioned above, the determination will be applied prospectively only. The determination of the Administrative Committee as to the status of a Domestic Relations Order as a Qualified Domestic Relations Order will be binding and conclusive on all interested parties, present and future, subject to the claims review provisions of Section 16. Responsibility of Alternate Payees. Any person claiming to be an ---------------------------------- Alternate Payee under a Qualified Domestic Relations Order will be responsible for supplying the Administrative Committee with a certified or otherwise authenticated copy of the order and any other information or evidence that the Administrative Committee deems necessary in order to substantiate the person's claim or the status of the order as a Qualified Domestic Relations Order. EMPLOYEE INVESTMENT PLAN 75 TOP-HEAVY PROVISIONS. -------------------- Determination of Top-Heavy Status. If the Plan becomes "Top Heavy," --------------------------------- the provisions of this Section 20 will become operative. The Plan will be Top Heavy for a Plan Year if, on the last day of the prior Plan Year (the "Determination Date"), the cumulative balances credited to the Accounts of all Members who are "Key Employees" under the Plan exceed 60% of the cumulative balances credited to the Accounts of all Members under the Plan. The Plan will be "Super Top Heavy" if, on the Determination Date, the cumulative balances credited to the Accounts of all Members who are "Key Employees" under the Plan exceed 90% of the cumulative balances credited to the Accounts of all Members. A "Key Employee" means a key employee as defined in section 416 of the Code. If the Administrative Committee, in its sole and absolute discretion, but under the provisions of section 416 of the Code, determines that the Plan is a constituent in an "Aggregation Group", this Plan will be considered Top Heavy or Super Top Heavy only if the Aggregation Group is a "Top Heavy Group" or a "Super Top Heavy Group." An "Aggregation Group" includes: Each plan intended to qualify under section 401(a) of the Code sponsored by the Company or an Affiliated Company in which 1 or more Key Employees participate; Each other plan of the Company or an Affiliated Company that is considered in conjunction with such plans in determining whether or not the discrimination and coverage requirements of section 401(a)(4) and section 410 of the Code are satisfied; and In the discretion of the Administrative Committee, any other such plan of the Company or an Affiliated Company, which, when considered in conjunction with the plans referred to above, satisfies the nondiscrimination and coverage requirements of section 401(a)(4) and section 410 of the Code. A "Top Heavy Group" is an Aggregation Group in which the sum (determined as of the Determination Date) of the aggregate of the amounts credited to the accounts of Key Employees under all "defined contribution plans" (as defined in section 414(i) of the Code) included in such group plus the present value of the cumulative accrued benefits for Key Employees under all "defined benefit plans" (as defined in section 414(j) of the Code) included in such group, exceed 60% of the total of such amounts for all employees and beneficiaries covered by such plans. A "Super Top Heavy Group" is an Aggregation Group for which the sum so determined for Key EMPLOYEE INVESTMENT PLAN 76 Employees exceeds 90% of the sum so determined for all employees and beneficiaries. Such determination will be made by the Administrative Committee in accordance with section 416 of the Code. Minimum Allocations. For any Plan Year during which the Plan is a ------------------- Top-Heavy Plan, the Matching Contributions, Nonelective Contributions, Profit Sharing Contributions (other than the portion of the Profit Sharing Contributions and Forfeitures which could have been received in cash in accordance with Section 6.2) and Forfeitures allocated under this Plan and employer contributions and forfeitures allocated under any other defined contribution plan of the Aggregation Group, on behalf of any Member who is (a) employed on the last regularly scheduled working day of the Plan Year, and (b) who is not a Key Employee will not be less than a percentage of the Member's Total Compensation, equal to the lesser of: ------ 3%; or The percentage equal to the largest percentage that any Key Employee for that Plan Year receives of Pre-Tax Contributions, Matching Contributions, Nonelective Contributions, Profit Sharing Contributions and Forfeitures allocated on behalf of that Key Employee's Total Compensation for that Plan Year, as limited by Section 20.5 below. The minimum allocation will be determined without regard to any contributions made or benefits available under the federal Social Security Act. Minimum Vesting. If a Member (other than a Member who did not --------------- complete any Period of Service after the Plan became a Top-Heavy Plan) ceases to be an Employee while the Plan is a Top-Heavy Plan and after such Member has completed 3 or more Years of Service, such Member's Vested Interest in his or her Matching Account and Profit Sharing Regular Account will be 100% and will no longer be subject to forfeiture for an act of Misconduct under 11.1. If a Member ceases to be an Employee while the Plan is a Top-Heavy Plan and before the Member has completed 3 Years of Service, the Member's Vested Interest in his or her Matching Account and Profit Sharing Regular Account will be determined in accordance with Section 11.1. Effect of Change in Top-Heavy Status on Vesting. If the Plan at any ----------------------------------------------- time is a Top-Heavy Plan and later ceases to be a Top-Heavy Plan, each Member who is credited with 3 or more Years of Service as of the last day of the last Plan Year in which the Plan is a Top-Heavy Plan will continue to have a 100% Vested Interest in his or her Matching Account and Profit Sharing Regular Account. Each Member who is credited with fewer than 3 Years of Service as of the last day of the last Plan Year in which the Plan is a Top-Heavy Plan will have EMPLOYEE INVESTMENT PLAN 77 his or her Vested Interest in his or her Matching Account and Profit Sharing Regular Account determined under Section 11.1 (unless and until the Plan again becomes a Top-Heavy Plan). Impact on Maximum Benefits. For any Plan Year in which the Plan is a -------------------------- Top-Heavy Plan, the number "1.00" will be substituted for the number "1.25" wherever it appears in section 415(e)(2) and section 415(e)(3) of the Code. Such substitution will not have the effect of reducing any benefit accrued under a defined benefit plan maintained by a Participating Company before the first day of the Plan Year in which this provision becomes applicable. EMPLOYEE INVESTMENT PLAN 78 GENERAL LIMITATIONS AND PROVISIONS. ---------------------------------- No Employment Rights. Nothing in the Plan will be deemed to give any -------------------- employee the right to be retained in the employment of the Company or an Affiliated Company or affect the right of the Company or an Affiliated Company to terminate a person's employment with or without cause. Payments from the Trust Fund. The Trust Fund will be the sole source ---------------------------- of benefits under the Plan and, except as otherwise required by the Act, the Company, the Administrative Committee and the Investment Committee assume no liability or responsibility for payment of such benefits. Each Member, Beneficiary or other person who will claim the right to any payment under the Plan will be entitled to look only to the Trust Fund for such payment and will not have the right, claim or demand for such amount against the Company, the Administrative Committee or the Investment Committee or any member of the Committees, or any employee or member of the board of directors of the Company. Payments to Minors or Incompetents. If the Administrative Committee ---------------------------------- finds that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due him or her or his or her estate (unless a prior claim therefore has been made by a duly appointed legal representative) may, if the Administrative Committee so elects, be paid to his or her spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Administrative Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment will be a complete discharge of the liability of the Plan and the Trust Fund. Lost Members or Other Persons. If the Administrative Committee is ----------------------------- unable to locate a Member, Beneficiary or other person who is entitled to receive a benefit under the Plan, the Administrative Committee may (but need not) direct that such benefit be applied to reduce the Company Matching Contribution and/or Profit Sharing Contribution to the Plan. If the person later makes a claim for his or her benefit before the date final distributions are made from the Trust Fund following the termination of the Plan, the Company that employed the Member with respect to whom the benefit is payable, will reinstate such benefit (without income, gains or other adjustment) by making a special contribution to the Plan as soon as reasonably practicable after such claim is made. However, if the benefit would have been lost by reason of escheat under applicable state law, then the benefit will not be subject to reinstatement. If the Plan is terminated and final distributions are made from the Trust Fund before the applicable escheat period has expired, the Administrative Committee may transfer the affected person's benefits to an individual retirement account established for such person. EMPLOYEE INVESTMENT PLAN 79 Personal Data to the Administrative Committee. Each Member must file --------------------------------------------- with the Administrative Committee such pertinent information concerning himself or herself, his or her Beneficiary or any other person as the Administrative Committee may specify, and no member, Beneficiary or other person will have any rights to any benefit under the Plan unless such information is filed by or with respect to him or her. The Administrative Committee is entitled to rely on personal data given to it by a Member. Insurance Contracts. If the payment of any benefit under the Plan is ------------------- provided for by a contract with an insurance company the payment of such benefit will be subject to all the provisions of such contract. Notice to the Administrative Committee. All elections, designations, -------------------------------------- requests, notices, instructions and other communications from a Participating Company, a Member, Beneficiary, or other person to the Administrative Committee, required or permitted under the Plan, will be: In such form as is prescribed from time to time by the Administrative Committee; Mailed by first-class mail or delivered to such location as will be specified by the Administrative Committee, or provide by electronic means, including telephone, as permitted by the Administrative Committee; and Deemed to have been given and delivered only upon actual receipt by the Administrative Committee or its designee at the location. Notices to Members and Beneficiaries. All notices, statements, ------------------------------------ reports and other communications from a Participating Company or the Administrative Committee or Investment Committee to any employee, Member, Beneficiary or other person (other than the Administrative Committee) required or permitted under the Plan will be deemed to have been duly given when delivered to, or when mailed by first-class mail, postage prepaid and addressed to, the employee, Member, Beneficiary or other person at his or her address last appearing on the records of the Administrative Committee. Word Usage. Whenever used in the Plan, the masculine gender includes ---------- the feminine, and wherever the context of the Plan dictates, the plural will be read as the singular and the singular as the plural. Uses of the term "Sections" as a cross-reference will be to other EMPLOYEE INVESTMENT PLAN 80 Sections contained in the Plan and not to another instrument, document or publication unless specifically stated otherwise. Headings. The titles and headings of Sections are included for -------- convenience of reference only and are not to be considered in construing the provisions of the Plan. Governing Law. The Plan and all rights under the Plan will be ------------- interpreted and construed in accordance with California law except to the extent such law is preempted by the Act and the Code. Heirs and Successors. All of the provisions of the Plan will be -------------------- binding upon all persons who will be entitled to any benefits under the Plan, their heirs and legal representatives. Withholding. Payment of benefits under this Plan will be subject to ----------- applicable law governing the withholding of taxes from benefit payments, and the Trustee and Administrative Committee will be authorized to withhold taxes from the payment of any benefits under the Plan, in accordance with applicable law. IN WITNESS WHEREOF, LEVI STRAUSS ASSOCIATES INC. has caused this Plan to be executed and its corporate seal to be hereunto affixed by its duly authorized officers, as of this _____ day of __________________, 1995. LEVI STRAUSS ASSOCIATES INC. By: _______________________________________ Its: _________________________________ EMPLOYEE INVESTMENT PLAN 81 EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- (As Amended and Restated Effective November 27, 1989) APPENDIX A ---------- PRIOR PLAN PROVISIONS --------------------- This Appendix A states the provisions of the Plan in effect on or after the Effective Date (November 27, 1989) which were amended before September 1, 1994. The provisions of the Plan in effect as of September 1, 1994 are presented in the main text of this amended and restated Plan. Effective before November 21, 1990, Section 2.1 of the Plan, then designated as Section 18.1, read as follows: 18.1 "Accounts" means, to the extent applicable to a Member, one -------- or more of the following accounts: Matching Account, Post-Tax Account, Pre-Tax Account, Profit Sharing Account and Rollover Account. Effective before November 21, 1990, Section 2.6 of the Plan, then designated as Section 15.4, read as follows: 15.4 Annual Additions. For purposes of this Section 15, a ---------------- Member's "Annual Additions" for a Plan Year will equal the sum of the following: (a) The amount of employer contributions and forfeitures allocated to the Member as of any date within such Plan Year under any qualified defined contribution plan maintained by the Affiliated Group, including Profit Sharing Contributions, Matching Contributions and Forfeitures under this Plan; (b) The aggregate employee contributions which the Member contributes during such Plan Year to all qualified retirement plans maintained by the Affiliated Group, including Post-Tax Contributions to this Plan; and EMPLOYEE INVESTMENT PLAN A-1 (c) The amount of contributions made on behalf of the Member for such Plan Year to any qualified defined contribution plan maintained by the Affiliated Group under a salary deferral election by the Member under a qualified cash or deferred arrangement, including Pre-Tax Contributions to this Plan. Effective August 13, 1990, the following clause was added to the end of the fourth sentence of Section 2.8 of the Plan, then designated as Section 10.9: "or the Administrative Committee is satisfied the spouse cannot be located." Before November 26, 1990, an account executive's Compensation under Section 2.14 of the Plan could not exceed the maximum for the Home Office Salary Grade 6 salary range in effect at the end of such a Plan Year. Effective before August 13, 1990, the last paragraph of 2.17 of the Plan, then designated as Section 18.46, read as follows: 18.46 "Temporary Employee" means a person who: ------------------- (a) Is hired to fill, for a period not to exceed six calendar months, a position which arises from either an emergency situation or from the temporary absence of an Eligible Employee; (b) Is subject, as a condition of such employment, to termination without prior notice at any time; and (c) Does not complete a 365-day Period of Service. Effective before November 21, 1990, Section 2.17 of the Plan, then designated as Section 18.10, read as follows: 18.10 "Eligible Employee" means an Employee of a Participating ----------------- Company who is paid from the home office of the Company. The Board of Directors, in designating a Participating Company, may specify that only certain named Employees or only certain classifications of Employees of such Participating Company will be "Eligible Employees," in which EMPLOYEE INVESTMENT PLAN A-2 event all other Employees of such Participating Company will not be "Eligible Employees." In addition, the term "Eligible Employee" will not include an Employee who is: (a) Included in a unit of employees covered by a collective- bargaining agreement that does not provide that such Employee will be eligible to participate in the Plan; (b) A stocktaker, service representative, retiree coordinator or Temporary Employee; (c) A nonresident alien who receives no remuneration from a Participating Company that constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the code); (d) Any alien who (i) receives remuneration from the Company which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code) and (ii) has been transferred by the Company from a job outside the United States to a job within the United States, during any period in respect of which the alien is benefiting (by reason of accruing a benefit or making or having contributions made on such alien's behalf) under (A) a retirement plan established or maintained outside of the United States by a foreign subsidiary (including a domestic subsidiary operating abroad) or foreign division of the Company or (B) the Levi Strauss International Retirement Plan for Third Country National Employees or any successor or similar plan maintained by the Company or any member of the Affiliated Group; (e) A United States citizen locally hired by a foreign subsidiary (including a domestic subsidiary operating broad) or foreign division of a Participating Company; (f) Not paid on a salary or commission basis; (g) Covered by an individual employment contract that expressly provides that he or she will not be eligible for membership in the Plan; or EMPLOYEE INVESTMENT PLAN A-3 (h) A "leased employee" (as defined in section 414(n) of the Code) who is providing services to a member of the Affiliated Group. The Board of Directors on a nondiscriminatory basis may designate as an Eligible Employee any person described in (c), (d), (e) or (f) above. Such designation must be made in writing after receiving the advice of counsel. A person's status as an Eligible Employee will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. Effective on and after November 26, 1990, Section 2.17 of the Plan, then designated as Section 18.10, was amended to exclude Highly Compensated Employees as Eligible Employees for purposes of making Member Contributions and for receiving an allocation of Matching Contributions, Nonelective Contributions, Profit Sharing Contributions and Forfeitures under the Plan. Effective before November 21, 1990, Section 2.34 of the Plan, then designated as Section 18.23, read as follows: 18.23 "Matching Contributions" means the contribution made by ---------------------- the Participating Companies under Section 4. Effective before November 26, 1990, Section 2.35 of the Plan, then designated as Section 18.24, read as follows: 18.24 "Member" means a person who participates in the Plan under ------ Section 2. Effective before July 1, 1991, Section 2.37 of the Plan, then designated as Section 18.12, read as follows: 18.12 "Entry Date" means December 1 and June 1 of each Plan ---------- Year. Section 2.40 and Section 2.41 of the Plan, then designated as Section 18.28 and Section 18.29, were added to the Plan, effective on and after November 21, 1990. EMPLOYEE INVESTMENT PLAN A-4 Section 3.5 of the Plan, then designated as Section 2.5, was added to the Plan effective on and after November 26, 1990. Effective before November 21, 1990, Section 5 of the Plan, then designated as Section 4, read as follows: SECTION 4. MATCHING CONTRIBUTIONS. --------- ---------------------- 4.1 Amount and Form. The Participating Companies will make a --------------- Matching Contribution to the Plan for each Plan Year in an amount equal to 50% of each Member's Member Contributions for such Plan Year which are transferred to Fund C under Section 6.2. The Board of Directors may determine that no Matching Contribution will be made for a particular Plan Year or portion of a Plan Year, or may determine that a lesser Matching Contribution will be made, in view of Company performance and economic and financial conditions prevailing and anticipated at the time. The Board of Directors also may determine in its sole discretion that a greater Matching Contribution will be made for a particular Plan Year or portion of a Plan Year. No Matching Contribution will be made for a Member unless he or she (a) is an Employee on the date as of which a Matching Contribution is allocated or (b) ceased to be an Employee during the Plan Year after attaining age 55 and completing 15 years of Service, after attaining age 65 or by reason of death and his or her Account has not been distributed under Section 10. Matching Contributions may be made in the form of cash or in the form of shares of Stock, or a combination of both. 4.2 Deposit With Trustee; Crediting Accounts. Matching ---------------------------------------- Contributions for any Plan Year will be paid to the Trustee at the time when Member Contributions are transferred to Fund C under Section 6.2 and will be allocated among Members in proportion to their Member Contributions which are transferred to Fund C. A Member's share of the Matching Contributions will be allocated and credited to the Member's Matching Account as of the earlier of the date the Matching Contributions are made to the Plan or the end of the Plan Year during which the Member made the Member Contributions with respect to which such Matching Contributions are made. Forfeitures arising under Section 10.4 with respect to any Member's Matching Account during a Plan Year will EMPLOYEE INVESTMENT PLAN A-5 be allocated among other Members as additional Matching Contributions for such Plan Year and credited to such Members' Matching Accounts. 4.3 Curtailment or Distribution of Excess Aggregate ----------------------------------------------- Contributions. If any Matching Contributions otherwise allocable to a ------------- Member would constitute "excess aggregate contributions" (as defined in section 401(m)(6)(B) of the Code) with respect to a Plan Year, then such matching contributions will be treated in accordance with paragraph (a) or (b): (a) Such Matching Contributions will not be made to the Plan, if the Matching Contributions have not been made to the Plan as of the date on which such Matching Contributions are determined to constitute excess aggregate contributions, or (b) Such Matching Contributions (and any earnings on such Matching Contributions) will be distributed to the Member no later than 2-1/2 months after the end of the Plan Year, if such Matching Contributions have been made to the Plan before the date as of which the Matching Contributions are determined to constitute excess aggregate contributions. Effective before January 1, 1993, Section 4.7 of the Plan read as follows: 4.7 Rollover Contributions. An Employee may make a Rollover ---------------------- Contribution to the Plan in an amount equal to all or part of a previous distribution from a plan that, at the time of the distribution, met the requirements of section 401(a) of the Code. The Rollover Contribution must be made in cash within 60 days after its receipt by the Employee either from the qualified plan or an individual retirement account which meets the requirements of section 408 of the Code. A Rollover Contribution shall be permitted only if the Employee establishes that: (a) The Rollover Contribution includes no assets other than those attributable to employer contributions, earnings on employer contributions and earnings on employee contributions under plans qualified under section 401(a) of the Code; EMPLOYEE INVESTMENT PLAN A-6 (b) Such Contribution includes no assets other than those attributable to a qualified total distribution, as defined in section 402(a)(S)(E)(i) of the Code; and (c) If the amount was received by the Employee from an individual retirement account, the distribution from such account represented a total distribution thereof. The Rollover Contribution shall be paid to the Trustee as soon as practicable, credited to the Employee's Rollover Account and invested as described in Section 7. If it is determined that a Member's Rollover Contribution mistakenly failed to qualify under the Code as a tax-free rollover, then the balance in the Member's Rollover Account attributable to the mistaken contribution immediately shall be segregated from all other Plan assets, treated as a nonqualified trust established by and for the benefit of the Member, and distributed to the Member. Such a mistaken contribution shall be deemed never to have been a part of the Plan. Effective before November 26, 1990, the following sentence appeared at the end of Section 6.2 of the Plan, then designated as Section 5.2: Forfeitures arising under Section 10.5 with respect to any Member's Profit Sharing Account during a Plan Year will be allocated among other Members who are Employees on the last working day of such Plan Year as additional Profit Sharing Contributions for such Plan Year and, subject to Section 5.2, will be credited to such Members' Profit Sharing Accounts. Fund E was added to the Plan, as an investment option under Section 7.1, effective March 1, 1991. Effective before November 21, 1990, Section 7.2 of the Plan, then designated as Section 6.2, read as follows: 6.2 Investment of Contributions. A Member's share of any Profit --------------------------- Sharing Contribution and Forfeitures attributable to Profit Sharing Accounts will be deposited in Fund A, Fund B, Fund D and/or Fund H in 25% increments of such Contribution and Forfeitures as directed by the Member in accordance with procedures established by the Administrative EMPLOYEE INVESTMENT PLAN A-7 Committee. A Member's investment directions for Profit Sharing Contributions and Forfeitures will remain in effect until changed by the Member. If the Member fails to file any investment directions, his or her share of any Profit Sharing Contribution and Forfeitures attributable to Profit Sharing Accounts will be deposited in Fund D. All Matching Contributions will be deposited in Fund C. All Member Contributions initially will be deposited in the Segregated Account. Twice each Plan Year, the Investment Committee will obtain an independent appraisal of the Fair Market Value of Stock. The Investment Committee will notify the Trustee of such Fair Market Value promptly after completion of the appraisal. If the Trustee determines that the Fair Market Value exceeds adequate consideration for Stock within the meaning of section 3(18) of ERISA, all Member Contributions that are invested in the Segregated Account and any earnings on such contributions will be transferred from the Segregated Account to Fund D, and no Matching Contribution will be made with respect to such Member Contributions. If the Trustee determines that the Fair Market Value does not exceed adequate consideration for stock, the Administrative Committee will notify Members of such Fair Market Value and the Company's stockholders of the Trustee's intention to purchase Stock. Each Member who has Member Contributions invested in the Segregated Account will have the opportunity to elect to have such Member Contributions and any earnings on such contributions transferred from the Segregated Account to Fund A, Fund B, Fund C, Fund D and/or Fund H in 25% increments of such Member Contributions and earnings. If a Member files such an election on the prescribed form by the date determined by the Administrative Committee, the Member's Member Contributions that are invested in the Segregated Account and any earnings on such contributions will be transferred to the Fund(s) elected by the Member. If a Member fails to file such an election on the prescribed form by the date determined by the Administrative Committee, the Member's Member Contributions that are invested in the Segregated Account and any earnings on such contributions automatically will be transferred to Fund C. At the time when Member Contributions and earnings are transferred to Fund C, the Participating Companies will make a Matching Contribution under Section 4.1 unless the Board of Directors determines that no Matching contribution will be made. The Trustee will seek to acquire Stock for Fund C at a price no greater than Fair Market Value to the extent any cash Matching Contributions deposited in Fund C and Member Contributions transferred EMPLOYEE INVESTMENT PLAN A-8 to Fund C exceed the cash requirements of Fund C as determined by the Administrative Committee. The Trustee may acquire Stock from a party- in-interest or a disqualified person for no more than adequate consideration (as defined in section 3(18) of ERISA) in accordance with the requirements of section 408(e) of ERISA. If any Member's Member Contributions in excess of the cash requirements of Fund C have not been invested in Stock when the Fair Market Value of Stock is next determined because insufficient Stock was available to the Trustee, the Member may elect to have such Member Contributions and any earnings on such contributions transferred to Fund A, Fund B, Fund D and/or Fund H in 25% increments in accordance with procedures established by the Administrative Committee. In the absence of such an election, the Member Contributions and earnings will remain in Fund C for investment in Stock at the new Fair Market Value to the extent Stock is available. Any Matching Contributions and earnings on such contributions that have not been invested in Stock will remain in Fund C, whether or not the Member elects to transfer the excess Member Contributions to another Fund. Any Member who requests a distribution of his or her Plan Benefit under Section 10 before a date on which Matching Contributions are made to the Plan will be deemed to have elected not to invest in Fund C such Member's Member Contributions and earnings on such contributions which were held in the Segregated Account immediately before such request. Before May 31, 1991, Member investment directions had to be in increments of 25% of the Member's Accounts. Effective on and after October 29, 1990, Section 7.2 of the Plan, then designated as Section 6.2, was amended to give the Investment Committee the discretion to effect a "Suspension." Before July 1, 1991, the phrase "as of the last day of each quarter during a Plan Year" in Section 7.3 of the Plan, then designated as Section 6.2, was replaced by the phrase "as of the last day of each Quarter." Section 7.4 of the Plan, then designated as Section 6.4, was added to the Plan effective on and after January 1, 1991. EMPLOYEE INVESTMENT PLAN A-9 Effective before February 28, 1991 clause (i) of Section 7.7 of the Plan, then designated as section 17.5, read as follows: (i) any offer to purchase stock by the Company if it is for purposes of making cash distributions under the Plan. Section 7.7(c) of the Plan, then designated as Section 17.5(b), was added to the Plan, effective on and after February 28, 1991. Effective with respect to Hardship Withdrawals made before August 13, 1990, the final paragraph of Section 9.3 of the Plan, then designated as Section 8.3, was not applicable. The last clause of Section 9.3(a)(vii) became effective for hardship withdrawals made after May 3, 1993. Effective before the issuance of final regulations under section 401(k) of the Code, the Plan provided for hardship withdrawals from Members' Nonelective Accounts. Effective with respect to withdrawals made before November 21, 1990, Section 9.4 of the Plan, then designated as Section 8.4, read as follows: 8.4 Withdrawals From Fund C. The portion of a Member's Accounts ----------------------- invested in Fund C may be withdrawn under Section 8.1 or 8.3 at the time when Member Contributions and Matching Contributions are invested in Fund C, but only to the extent the Administrative Committee determines that there is sufficient cash available in Fund C to permit the withdrawal. Effective with respect to withdrawals made before November 21, 1990, Section 9.5 of the Plan, then designated as Section 8.5, read as follows: 8.5 Payment of Withdrawals. A Member may request a withdrawal ---------------------- by filing the prescribed form with the Administrative Committee. A withdrawal will be paid in cash soon as reasonably practicable after the Administrative Committee receives the prescribed form and determines that the withdrawal request meets the requirements of Section 8.1, 8.2 or 8.3, as applicable. EMPLOYEE INVESTMENT PLAN A-10 Effective with respect to withdrawals made before June 25, 1990, Section 9.7 of the Plan, then designated as Section 8.7, read as follows: A Member's Accounts will be liquidated to the extent necessary to fund a withdrawal under Section 8.3 in the following order of priority: Post-Tax Account, Rollover Account, Pre-Tax Account, Profit Sharing Account and Matching Account. Within a Member's Profit Sharing Account, the portion attributable to amounts which the Member could have elected to receive in cash under Section 5.2 will be liquidated only after the balance of the Member's Vested Interest in his or her Profit Sharing Account has been liquidated. Within any Account, amounts invested in each Fund will be liquidated in the following order of priority: Fund D, Fund B, Fund H and Fund A. If the Investment Committee determines that it is not feasible for the Trustee to prudently liquidate the necessary amount invested in any Fund in accordance with Members' withdrawal requests, the Investment Committee will so advise the Administrative Committee which will direct that such steps be taken as it considers necessary or desirable for the protection of Members' Accounts, including the reordering of liquidation priorities or a pro rata reduction in the amount of each Member's withdrawal. Effective with respect to withdrawals made after June 25, 1990, but before November 21, 1990, Section 9.7 of the Plan, then designated as Section 8.7, read as follows: 8.7 Source of Withdrawals. A Member's Accounts will be --------------------- liquidated to the extent necessary to fund a withdrawal under Section 8.3 in the following order of priority: Post Tax-Account (excluding any portion of such Account held in Fund C or the Segregated Account within Fund D), Rollover Account, Pre-Tax Account (excluding any portion of such Account held in Fund C or the Segregated Account within Fund D), the portion of the Member's Profit Sharing Account attributable to amounts which the Member could have elected to receive in cash under Section 5.2, the portion of the Member's Post-Tax Account held in the Segregated Account within Fund D, the portion of the Member's Pre-Tax Account held in the Segregated Account within Fund D, the portion of the Member's Post-Tax Account held in Fund C, the portion of the Member's Pre-Tax Account held in Fund C, the balance of the Member's Profit Sharing Account, the Matching Account and the Nonelective Account. Except as provided above, within any Account, amounts invested EMPLOYEE INVESTMENT PLAN A-11 in each Fund will be liquidated in the following order of priority; Fund D, Fund B, Fund H and Fund A. Effective before April 1, 1990, Section 10.1(a) of the Plan, then designated as Section 9.1(a), read as follows: (a) Profit Sharing Account. A Member may borrow an amount from ---------------------- his or her Profit Sharing Account not exceeding 100% of the Member's Vested Interest in such Account. Such a loan will be permitted only if the Administrative Committee determines that (i) the proceeds of the loan will be used to acquire, construct or rehabilitate the Member's primary residence, or to refinance any loan or loans previously made to the Member by a third party for any of the foregoing purposes; or (ii) such loan is required by the Member for reasons set forth in Section 8.3(g). Effective before March 1, 1991, Section 10.1(b) of the Plan, then designated as Section 9.1(b), read as follows: (b) After-Tax, Pre-Tax, Matching and Rollover Accounts. -------------------------------------------------- Effective on and after a date determined by the Administrative Committee and announced to Members, a Member may borrow an amount from his or her Post-Tax Account, Rollover Account, Matching Account and/or Pre-Tax Account not exceeding 100% of the balance credited to such Accounts. A loan from the Member's Pre-Tax Account will be permitted only if the Administrative Committee determines that the Member is Totally and Permanently Disabled or that the proceeds will be used for a purpose described in Section 8.3(a) through (f). Effective before April 1, 1990 Section 10.1(d) of the Plan, then designated as Section 9.1(c), read as follows: (c) Additional Limitations. No loan will be permitted from the ---------------------- portion of any Account invested in Fund C. No loan will be granted to the extent it would cause the aggregate balance of all loans a Member has outstanding under the Plan to exceed the least of (i) $50,000, less the amount by which such aggregate balance has been reduced by repayments of principal during the one-year period ending on the day before the new loan is made; (ii) 50% of the Member's Vested Interest in all of the Member's Accounts; or (iii) the amount that can be repaid with level EMPLOYEE INVESTMENT PLAN A-12 monthly payments, including interest, equal to 15% of the Member's monthly base Compensation. The amount of any loan will be a multiple of $100 and will not be less than $1,000. In addition, only 2 loans to a Member may be outstanding at any time, and a Member may apply for a loan no more than twice in any Plan Year. Effective before April 1, 1990 Section 10.2 of the Plan, then designated as Section 9.2, read as follows: 9.2 Terms of Loans. All loans will be on such terms and -------------- conditions as the Administrative Committee may determine, provided that all loans will: (a) Be made under a promissory note secured by (i) the residence that the Member acquires, in the case of a loan from the Member's Profit Sharing Account, and (ii) the Account(s) that funded the loan; (b) Be subject to a substantially level payment schedule, as determined by the Administrative Committee, with payments to be made at least quarterly and whenever possible to be made through semi- monthly payroll deductions; (c) Bear interest at a fixed rate determined by the Administrative Committee based upon the prime interest rate in effect at a commercial bank as of the first day of December, March, June or September immediately preceding the date on which the loan is approved, plus 1%; and (d) Provide for repayment in full, whether from the Member's Accounts or otherwise, on or before the earlier of (i) 5 years after the date the loan is made (15 years after the date the loan is made if the loan is used to acquire the Member's principal residence) or (ii) the date the Member's Plan Benefit is distributed under Section 10. Effective for the Period beginning April 1, 1990, and ending November 20, 1990, Section 10.2 of the Plan, then designated as Section 9.2, read as follows: EMPLOYEE INVESTMENT PLAN A-13 9.2 Terms of Loans. All loans will be on such terms and -------------- conditions as the Administrative Committee may determine, provided that all loans will: (a) Be made under a promissory note secured by (i) the residence of the Member, in the case of a loan under Section 9.1(a)(i) or, to the extent agreed upon by the Member and the Administrative Committee, in the case of the loan under 9.1(a)(ii) for reasons set forth in 8.1(b); and (ii) the Account(s) that funded the loan to the extent that such Account(s) funds the loan; provided, however that: (A) in the case of a loan made on or after April 1, 1990, under 9.1(a)(i), or a loan made under 9.1(a)(ii) and secured by the Member's residence, the Plan's security interest in the Member's Profit Sharing Account will not extend to the portion of such Account attributable to amounts which the Member could have elected to receive in cash under Section 5.2 ("Elective Profit Sharing Contributions"); and (B) in the case of any other loan made under Section 9.1(a)(ii), the promissory note with respect to such loan will be secured by portions of the Account other than Elective Profit Sharing Contributions only to the extent that the amount of such loan exceeds the amount of Elective Profit Sharing Contributions available to secure such promissory note; (b) Be subject to a substantially level payment schedule, as determined by the Administrative Committee, with payments to be made at least quarterly and whenever possible to be made through semi- monthly payroll deductions; provided, however, that in the event that payments are not made for a period of up to 90 days due to the Member's temporary absence from active work, such payments may be made (i) in a single sum after the Member returns to active work, (ii) ratably over the remaining period of the loan, (iii) in a single sum together with the final payment provided for under the note, or (iv) in another manner mutually agreed upon by the Member and the Administrative Committee; EMPLOYEE INVESTMENT PLAN A-14 (c) Bear interest at a fixed rate determined by the Administrative Committee based upon the prime interest rate in effect at a commercial bank as of the first day of December, March, June or September immediately preceding the date on which the loan is approved, plus 1%; and (d) Provide for repayment in full, whether from the Member's Accounts or otherwise, on or before the earlier of (i) 5 years after the date the loan is made (15 years after the date the loan is made if the loan is used to acquire the Member's principal residence) or (ii) the date the Member's Plan Benefit is distributed under Section 10. Effective November 21, 1990, Section 10.2 of the Plan, then designated as Section 9.2, was amended to read as set forth in this amended and restated Plan. Effective with respect to loans made before March 1, 1991, Section 10.3 of the Plan, then designated as Section 9.3, read as follows: 9.3 Source of Loans; Application of Loan Payments. As of the --------------------------------------------- first day of the month following the date the Administrative Committee approves a loan, the amount of the loan will be paid to the Member from the vested portion of the Member's Accounts that are being used to fund the loan, in the following order of priority: Post-Tax Account, Rollover Account, Pre-Tax Account, Profit Sharing Account, and the portion attributable to amounts which the Member could have elected to receive in cash under Section 5.2 will be used to fund a loan only after the balance of the Member's Vested Interest in his or her Profit Sharing Account has been so used. Amounts invested in Fund A, Fund B and Fund H will be liquidated and transferred to Fund D for disbursement from Fund D. If less than the entire amount of any Account is required to fund the loan, amounts invested in the Funds will be liquidated to fund the loan in the following order of priority: Fund D, Fund B, Fund H and Fund A. If the Investment Committee determines that it is not feasible for the Trustee to prudently liquidate the necessary amount invested in any Fund in accordance with Members' loan requests, the Investment Committee will so advise the Administrative Committee which will direct that such steps be taken as it considers necessary or desirable for the protection of Members' Accounts, including the reordering of liquidation priorities or a EMPLOYEE INVESTMENT PLAN A-15 pro rata reduction in the amount of each Member's loan. The promissory note executed by the Member will be deposited in the Member's Account(s) that funded the loan. Principal and interest payments will be credited to the Member's Account(s) that funded the loan and invested in Fund D. Effective with respect to loans made before November 26, 1990, the second to last sentence of Section 10.4 of the Plan, then designated as Section 9.4, read as follows: If an involuntary withdrawal from the Member's Profit Sharing Account is declared, the Member's Vested Interest in such Account will be determined as provided in Section 12.2. Effective before November 26, 1990, Section 11.1(a) of the Plan, then designated as Section 10.1(a), read as follows: (a) A Member's Vested Interest in his or her Pre-Tax Account, Post-Tax Account and Rollover Account (if any) will be 100% at all times. Except as provided in Section 10.1(c), a Member's Vested Interest in his or her Matching Account will be 100% at all times. Effective before November 26, 1990, Section 11.1(b) and (c) of the Plan, then designated as Section 10.1(b) and (c), read as follows: (b) A Member's Vested Interest in the portion of his or her Profit Sharing Account attributable to amounts which the Member could have elected to receive in cash under Section 5.2 will be 100% at all times. The Member's Vested Interest in the remainder of his or her Profit Sharing Account will be 100% if the Member attains age 65 as an Employee, dies while an Employee or becomes Totally and Permanently Disabled while an Employee. Until a Member's Vested Interest in the remainder of such Account becomes 100% under the preceding sentence, the Member's Vested Interest in the remainder of such Account will be determined according to the following schedule based on the Member's completed Years of Service: EMPLOYEE INVESTMENT PLAN A-16
Completed Years of Service Vested Interest ---------------- --------------- Less than 1 0% 1 20% 2 40% 3 60% 4 80% 5 or more 100%
(c) If the Administrative Committee determines that any Member who has not reached age 65 and who has completed less than 5 Years of Service engaged in any act of misconduct while an Employee, the Member will have no Vested Interest in his or her Matching Account and the Member's Vested Interest in his or her Profit Sharing Account will consist solely of the amounts described in the first sentence of Section 10.1(b). The balance of such Accounts will be forfeited under Section 10.5. Effective before November 26, 1990, Section 10.2 of the Plan read as follows: 10.2 Vesting After Prior Withdrawals or Distributions. Section ------------------------------------------------ 10.1(b) will be applied as set forth in the following sentence in the case of any Member who received one or more prior withdrawals or distributions from his or her Profit Sharing Account under Section 8, 9.4 or this Section 10, who subsequently remained an Employee or was rehired as an Employee and whose Vested Interest in the entire Profit Sharing Account is not yet 100%. The Member's Vested Interest in such Account will be determined by first applying the appropriate percentage under the schedule in Section 10.1(b) to the sum of the value of such Account plus the aggregate value of the Member's prior withdrawals or distributions from such Account, and then subtracting the aggregate value of such prior withdrawals or distributions. Effective before November 26, 1990, Section 10.5 of the Plan read as follows: 10.5 Forfeitures. If a Member ceases to be an Employee during a ----------- Plan Year and is not rehired as an Employee on or before the date the EMPLOYEE INVESTMENT PLAN A-17 Member incurs a 1-year Service Break, then the portion of the Member's Profit Sharing Account in excess of the Member's Vested Interest will become a Forfeiture as of such date. Effective before August 6, 1990, Section 11.5(a) of the Plan, then designated as Section 10.7(a), read as follows: (a) Monthly installments over a period not exceeding the reasonable life expectancy of the Member (or Beneficiary), as determined under the mortality table specified in Appendix B to the Revised Home Office Pension Plan of Levi Strauss & Co. The amount of each installment will be determined by dividing the value of the portion of the Plan Benefit remaining in the Trust Fund by the number of installments elected less the number of installments already paid. Effective before August 1, 1989, Section 12.2 of the Plan, then designated as Section 15.2, read as follows: 15.2 Combined Limitation on Benefits and Contributions. Except ------------------------------------------------- as otherwise permitted under ERISA, the Tax Equity an Fiscal Responsibility Act of 1982 and the Tax Reform Act of 1986, the sum of a Member's defined benefit plan fraction and his or her defined contribution plan fraction will not exceed 1.0 with respect to any Plan Year. For purposes of this Section 15.2, the terms "defined benefit plan fraction" and "defined contribution plan fraction" will have the meaning given to such terms by section 415(e) of the Code and the regulations thereunder. If a Member would exceed the above limitation, then such Member's benefits under any qualified defined benefit plan(s) that may be maintained by the Affiliated Group will be reduced as necessary to allow his or her Annual Additions to equal the maximum permitted by law and the Plan. Effective before November 21, 1990, Section 12.3 of the Plan, then designated as Section 15.3, read as follows: 15.3 Disposition of Excess Annual Additions. Any Annual -------------------------------------- Additions under this Plan that cannot be allocated to a Member because of the limitation described in Section 15.1 will be processed as follows: EMPLOYEE INVESTMENT PLAN A-18 (a) Profit Sharing Contributions and Forfeitures attributable to Profit Sharing Accounts that cannot be allocated to the Member will be deducted from the amount of Profit Sharing Contributions which otherwise would be made under Section 5, but such reduction will not affect the amounts allocable under Section 5.3 to Members whose Profit Sharing Contribution component of Annual Additions is not reduced. (b) Matching Contributions and Forfeitures attributable to Matching Accounts that cannot be allocated to the Member will be deducted from the amount of Matching Contributions which otherwise would be made under Section 4, but such reduction will not affect the amounts allocable under Section 4.2 to Members whose Matching Contribution component of Annual Additions is not reduced. (c) Post-Tax Contributions made by the Member (increased by any income or reduced by any losses allocable to such Contributions) will be returned to the Member in cash. (d) Pre-Tax Contributions made by the Member will be reduced under Section 3.4. Any Pre-Tax Contributions that cannot be handled in accordance with Section 3.4 will be credited to a suspense account on behalf of the Member. All amounts credited to such account will be treated as Pre-Tax Contributions for successive Plan Years and will be allocated annually to the Member under Section 3 (to the extent such allocation is not prohibited by Section 15.1) until exhausted. No gains or losses will be credited to such account and no additional Pre-Tax Contributions, Matching Contributions or Profit Sharing Contributions will be made by or on behalf of the Member so long as any amount remains in such account. Effective before November 21, 1990, Section 13.1 of the Plan, then designated as 11.1, read as follows: 11.1 Contributions. The Administrative Committee will make ------------- arrangements for the collection of Member Contributions as provided in Section 3. The Company will cause the Participating Companies to make Matching Contributions and Profit Sharing Contributions to the Plan as provided in Sections 4 and 5. EMPLOYEE INVESTMENT PLAN A-19 Effective before November 21, 1990, Section 18.3 of the Plan, then designated as Section 14.3, read as follows: 14.3 Effect of Termination. Upon termination of the Plan, no --------------------- assets of the Plan will revert to any Participating Company or be used for, or diverted to, purposes other than the exclusive purpose of providing benefits to Members and Beneficiaries and of defraying the reasonable expenses of termination. Upon termination of the Plan or upon complete discontinuance of contributions, the Vested Interest of each Member in his or her Matching Account and entire Profit Sharing Account will be 100%. (Each Member's Vested Interest in his or her Pre-Tax Account, Post-Tax Account and Rollover Account is 100% at all times.) Effective before November 21, 1990, Section 20.2 of the Plan, then designated as paragraph (b) in Appendix A, read as follows: (b) Minimum Allocations. For any Plan Year during which the Plan ------------------- is a Top-Heavy Plan, the Pre-Tax Contributions, Matching Contributions, Profit Sharing Contributions and Forfeitures allocated under this Plan and employer contributions and forfeitures allocated under any other defined contribution plan of the Aggregation Group on behalf of any Member who is employed on the last regularly scheduled working day of the Plan Year and who is not a Key Employee will not be less than a percentage of the Member's Total Compensation equal to the lesser of (i) 3%; or (ii) the percentage equal to the largest percentage that any Key Employee for that Plan Year receives of Pre- Tax Contributions, Matching Contributions, Profit Sharing Contributions and Forfeitures allocated on behalf of that Key Employee's Total Compensation for that Plan Year as limited by (e) below. The minimum allocation will be determined without regard to any contributions made or benefits available under the Federal Social Security Act. Effective before November 21, 1990, Section 20.2 of the Plan, then designated as Section 17.7, read as follows: 17.7 Return of Contributions. All Pre-Tax Contributions, ----------------------- Matching Contributions and Profit Sharing Contributions are expressly conditioned upon the deductibility of such Contributions under section 404 EMPLOYEE INVESTMENT PLAN A-20 of the Code. If the deduction of any such Contribution is disallowed, then the amount for which a deduction is disallowed will be returned to the appropriate Participating Company within 12 months after the date of the disallowance. In addition, if any Member Contribution, Matching Contribution or Profit Sharing Contribution is made as a result of a mistake of fact, such Contribution may be repaid to the appropriate Participating Company within 12 months after it is made. Any such Contribution returned under this Section 17.7 will be reduced to reflect losses but will not be increased to reflect gains or income. Any Member Contribution returned under this Section 17.7 will be paid to the Member from whom it was withheld. Effective for the period beginning January 1, 1990 and ending July 16, 1990, Appendix C to the Plan, read as follows: As of January 1, 1990, Members will not make Member Contributions as Pre-Tax Contributions. Effective on and after July 17, 1990, Appendix C to the Plan read as follows: As of January 1, 1990, Members will not make Member Contributions as Pre-Tax Contributions; provided, however, that after July 16, 1990, such provision will not apply to any Member who is not a "Highly Compensated Employee," within the meaning of section 414(q) of the Code. EMPLOYEE INVESTMENT PLAN A-21 EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- APPENDIX B ---------- BLACKOUT PROVISIONS ------------------- 1. In General. Any person or entity authorized to amend the Plan, or any ---------- person or entity designated in writing by such person or entity (the "Blackout Coordinator"), may establish a Blackout Period, as defined below, in the event that the Blackout Coordinator determines that such a Blackout Period is necessary or appropriate in the administration of the Plan. 2. Definitions. ----------- (a) A Blackout Period is a period of time during which Affected Requests shall not be processed or effected. (b) An Affected Request is any of the following requests by a Member (or Beneficiary) for an action or an event under the Plan, or any of the following Plan functions or events: (i) Reinvestment of Accounts pursuant to Section 7 of the Plan; (ii) Valuation of Accounts and distribution of statements pursuant to Section 8 of the Plan; (iii) Withdrawals pursuant to Section 9 of the Plan; (iv) Loans pursuant to Section 10 of the Plan; and (v) Distribution of Plan Benefits pursuant to Section 11 of the Plan. In addition, the Blackout Coordinator, in its declaration of the Blackout Period or in any supplementary action regarding the Blackout Period, may designate as Affected Requests any other requests by a Member (or Beneficiary) or other Plan functions or events which are otherwise allowed or provided for under the Plan, or may declare that specified requests or Plan EMPLOYEE INVESTMENT PLAN B-1 functions or events encompassed by (b)(i)-(v) above shall not constitute Affected Requests, for all or a designated portion of the Blackout Period. 3. Duration. The duration of the Blackout Period shall be determined by -------- the Blackout Coordinator, in its sole discretion. 4. Effect of Blackout Period. Affected Requests will be held by the ------------------------- Administrative Committee until the end of the Blackout Period. At the end of the Blackout Period, the Administrative Committee shall reconfirm the Member's (or Beneficiary's) eligibility for or desire with respect to any Affected Request which had been submitted by such Member (or Beneficiary), but which had not been processed as a result of the Blackout Period. Other Plan functions or events which would have occurred if not for the Blackout Period, will be processed automatically after the expiration of the Blackout Period. EMPLOYEE INVESTMENT PLAN B-2 EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- APPENDIX C ---------- FUNDS ----- - - Fidelity Money Market Trust: Retirement Money Market Portfolio - - Fidelity Investment Grade Bond Fund - - Fidelity Asset Manager: Income - - Fidelity Asset Manager - - Fidelity Asset Manager: Growth - - Fidelity Magellan Fund - - Fidelity Contrafund - - Fidelity Overseas Fund - - Sponsor Stock Fund The Fund designated as the Holding Account referenced in Section 7.1 shall be the Fidelity Retirement Government Money Market Portfolio. The Fund designated as the Fund to receive contributions for which no proper Member investment direction has been received shall be the Fidelity Retirement Government Money Market Portfolio. EMPLOYEE INVESTMENT PLAN C-1 EMPLOYEE INVESTMENT PLAN OF --------------------------- LEVI STRAUSS ASSOCIATES INC. ---------------------------- APPENDIX D ---------- ADDITIONAL ELIGIBLE WITHDRAWALS AND LOANS ----------------------------------------- In accordance with Sections 9.3(a)(viii), 9.3(b)(ii)(B) and 10.1(a)(iii), losses relating to natural disasters described herein may form a basis for withdrawals or loans. (a) Description of Natural Disaster. ------------------------------- Limitations. ----------- EMPLOYEE INVESTMENT PLAN D-1 EX-10.QQ 4 AMENDMENTS TO EMPL. INVESTMENT PLAN Exhibit 10qq EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS ASSOCIATES INC. ----------------- AMENDMENTS WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") has adopted the Employee Investment Plan of Levi Strauss Associates Inc. (the "Plan"); WHEREAS, pursuant to Section 18.1 of the Plan, the Board of Directors of the Company is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company and certain of its major stockholders are considering a transaction intended to ensure the long-term private, family ownership of the Company (the "Transaction") and which would involve the elimination of Company stock as an investment under the Plan; WHEREAS, by resolutions duly adopted on November 30, 1995, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt amendments to the Plan in order to accommodate and reflect the possibility of the Transaction and any related transactions; and WHEREAS, effective as of December 7, 1995 the Company adopted a new Appendix F to the Plan to accommodate and reflect the possibility of the Transaction and any related transactions; WHEREAS, the Company wants to amend Appendix F to delay the application of certain provisions of Appendix F; WHEREAS, the amendments herein are within the scope of such delegated authority of Robert D. Haas; NOW, THEREFORE, effective as of the date hereof, Appendix F of the Plan is hereby amended and restated in its entirety to read as set forth on the attached exhibit. IN WITNESS WHEREOF, the undersigned has set his hand hereunto, on December 7, 1995. /s/ Robert D. Haas __________________________ Robert D. Haas Chairman of the Board and Chief Executive Officer EXHIBIT EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS ASSOCIATES INC. APPENDIX F -------------------- Suspension of Stock Fund Investments and Related Provisions -------------------- 1. Introduction. ------------ Effective as of December 7, 1995, the provisions of this Appendix F to the Plan are applicable with respect to the transactions and events specified below, instead of the provisions of the main text of, or other appendices to, the Plan which would otherwise govern such transactions and events. 2. Special Provisions. ------------------ (a) Stock Fund Transactions. ----------------------- (i) All reinvestment of Accounts under Section 7.3, withdrawals under Section 9, loans under Section 10 and distributions of Plan Benefits under Section 11 shall be suspended effective for requests received on or after the Suspension Date (as such term is defined in Section F.2(c) below), to the extent that such transactions would have resulted in the distribution or transfer of funds from the Stock Fund. (ii) (A) Except as provided in (B) below, any duty, responsibility or function assigned to the Investment Committee with respect to matters relating to the Stock Fund after the Effective Date, including but not limited to obtaining an appraisal of the Fair Market Value of LSAI Stock, is hereby assigned to the Chief Executive Officer of the Company (the "CEO"), or to any person or entity designated in writing by the CEO. The CEO, or the individual or entity designated by the CEO, if any, shall be referred to as the "Coordinator." (B) The assignment provided in (A) above does not apply to any responsibility of the Investment Committee in discharging its duties under the Plan in connection with a transaction or event which may -1- result in the sale, conversion or other disposition of the LSAI Stock held by the Plan, including but not limited to acting on behalf of the Plan with respect to the exercise of stockholders' rights associated with mergers (for example, dissenter's rights under relevant state law) and responses to purchase offers as described in Section 7.7(c). (iii) Nothing herein is intended to require the Coordinator to obtain a Fair Market Value of LSAI Stock during the suspension of Stock Fund transactions provided in Section F.2(a)(i) above. (iv) The responsibilities of the Investment Committee under the Plan which are not described in the assignment provided in Section F.2(a)(ii)(A) above shall remain in full force and effect. (b) Investments and Investment Directions. ------------------------------------- (i) No additional investment of Member Contributions or Company Contributions shall be made to the Stock Fund. (ii) Effective for pay periods beginning December 25, 1995, all Member Contributions held in the Retirement Government Money Market Fund pending potential investment in the Stock Fund shall be transferred to the Retirement Money Market Fund, all current Member Contributions shall be deposited in the fund designated by the Member for the investment of such Member Contributions, and the Retirement Money Market Fund shall be the Fund to receive contributions for which no proper investment direction has been received. (iii) With respect to any Matching Contribution which is made with respect to Member Contributions made on or after May 29, 1995: (A) A transfer of Member Contributions to the Stock Fund is not required in order for the Company to make a Matching Contribution. (B) The first Matching Contribution made after the date of this Appendix shall be made with respect to Member Contributions made on or before December 24, 1995 on behalf of a Member who was an Employee on November 22, 1995, or ceased to be an Employee between May 29, 1995 and November 22, 1995 by reason of an event described in Section 5.1(b)(i)-(iv). Any subsequent Matching Contributions, and the time for making any -2- such Matching Contribution, shall be determined by the Company, in its sole discretion. (C) Matching Contributions shall be made in cash and deposited in the Fund designated by the Member as of the date of deposit for investment of his or her Member contributions or, if no such designation is in effect, in the Retirement Money Market Fund. (c) Suspension Date. For purposes of this Appendix F, the term --------------- "Suspension Date" shall mean the date on which the Company commences distribution (including but not limited to distribution by electronic mail) of a summary of the terms of this Appendix F. -3- Exhibit 10qq EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS ASSOCIATES INC. ----------------- AMENDMENTS WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") has adopted the Employee Investment Plan of Levi Strauss Associates Inc. (the "Plan"); WHEREAS, pursuant to Section 18.1 of the Plan, the Board of Directors of the Company is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company desires to amend the Plan in order to readmit a limited number of Highly Compensated Employees to active participation under certain circumstances; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the Plan and to delegate to any other officer of the Company the authority to adopt certain amendments to the Plan; WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the Plan subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendments herein are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, effective November 27, 1995, the Plan is hereby amended as set forth below: 1. The current text of Section 3.5 is redesignated as Section 3.5(a). 2. Current Sections 3.5(a) through (d) are redesignated as Sections 3.5(a)(i) through (iv). 1 3. The first sentence of current Section 3.5 is amended to read as set forth below: Any Highly Compensated Employee will only be eligible for membership in the Plan as an Inactive Member or as set forth in Section 3.5(b), and in either case only if he or she satisfies the eligibility requirements of Section 3.1. 4. Section 3.5 is amended by a new Section 3.5(b), to read as set forth below: (b) (i) Eligible Highly Compensated Employees. Section ------------------------------------- 3.5(a) notwithstanding, a Highly Compensated Employee who satisfies the eligibility requirements of Section 3.1 may participate in the Plan for all or a portion of a Plan Year as a Member provided that he or she is included in an eligible category of Highly Compensated Employees described in Appendix E to the Plan. (ii) Establishment of Appendix E. Appendix E may be --------------------------- established, amended or revoked from time to time by any individual or entity empowered to amend the Plan. It is intended that Appendix E designate an eligible category of Highly Compensated Employees who can participate in the Plan without resulting in the Plan failing to comply with the nondiscriminatory coverage rules of Code section 410(b) or any successor provision. However, the existence of this provision does not require the Company to designate any Highly Compensated Employees, or the maximum permissible Highly Compensated Employees, to participate in the Plan as Members for any Plan Year. 5. The Plan is amended by a new Appendix E, to read as set forth on the attached exhibit hereto. IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on December 21, 1995. ________________________________ Donna J. Goya Senior Vice President 2 EXHIBIT TO EMPLOYEE INVESTMENT PLAN AMENDMENT EMPLOYEE INVESTMENT PLAN OF LEVI STRAUSS ASSOCIATES INC. APPENDIX E -------------------- Pursuant to Section 3.5(b) of the Plan, the Highly Compensated Employees described below are eligible to participate in this Plan as Members: 6. For the Plan Year ending in 1996, Highly Compensated Employees whose compensation (as determined pursuant to Section 2.23) for the Plan Year ending in 1995 did not exceed $95,000. 3 EX-10.RR 5 EMPL. LONG-TERM INV./SAV. PLAN Exhibit 10rr LEVI STRAUSS ASSOCIATES INC. ---------------------------- EMPLOYEE LONG-TERM INVESTMENT ----------------------------- AND SAVINGS PLAN ---------------- (As Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of April 1, 1995) LEVI STRAUSS ASSOCIATES INC. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN (As Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of April 1, 1995) TABLE OF CONTENTS Page ---- SECTION 1 INTRODUCTION AND PERSONS TO WHOM PLAN APPLIES.............. 1 1.1 Introduction............................................... 1 1.2 Persons to Whom Plan Applies............................... 1 SECTION 2 DEFINITIONS................................................ 2 2.1 "Accounts"................................................. 2 2.2 "Act"...................................................... 2 2.3 "Administrative Committee"................................. 2 2.4 "Affiliated Company"....................................... 2 2.5 "Alternate Payee".......................................... 2 2.6 "Annual Additions"......................................... 2 2.7 "Annuity Starting Date".................................... 3 2.8 "Beneficiary".............................................. 3 2.9 "Board of Directors"....................................... 3 2.10 "Code"..................................................... 4 2.11 "Committee"................................................ 4 2.12 "Company".................................................. 4 2.13 "Compensation"............................................. 4 2.14 "Domestic Relations Order"................................. 4 2.15 "Effective Date"........................................... 4 2.16 "Employee"................................................. 4 2.17 "Fair Market Value"........................................ 6 2.18 "Forfeiture"............................................... 6 2.19 "Fund"..................................................... 6 2.20 "Highly Compensated Employee".............................. 6 2.21 "Highly Compensated Former Employee"....................... 8 2.22 "Hour of Service".......................................... 8 2.23 "Inactive Member".......................................... 8 2.24 "Investment Committee"..................................... 8 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN i Page ---- 2.25 "Investment Manager"....................................... 8 2.26 "IRS"...................................................... 8 2.27 "Labor Department"......................................... 8 2.28 "LS&CO."................................................... 8 2.29 "LSAI Stock"............................................... 8 2.30 "Matching Account"......................................... 9 2.31 "Matching Contribution".................................... 9 2.32 "Member"................................................... 9 2.33 "Member Contributions"..................................... 9 2.34 "Membership Date".......................................... 9 2.35 "Mutual Fund".............................................. 9 2.36 "Normal Retirement Age".................................... 9 2.37 "Participating Company".................................... 9 2.38 "Plan"..................................................... 9 2.39 "Plan Benefit"............................................. 9 2.40 "Plan Year"................................................ 9 2.41 "Post-Tax Account"......................................... 9 2.42 "Post-Tax Contributions"................................... 9 2.43 "Pre-Tax Account".......................................... 10 2.44 "Pre-Tax Contributions".................................... 10 2.45 "Qualified Domestic Relations Order"....................... 10 2.46 "Qualified Member"......................................... 10 2.47 "Registration Rights Agreement"............................ 10 2.48 "Regulations".............................................. 10 2.49 "Required Beginning Date".................................. 10 2.50 "Retiree Coordinator"...................................... 10 2.51 "Rollover Account"......................................... 10 2.52 "Rollover Contributions"................................... 10 2.53 "Service".................................................. 11 2.54 "Special Company Account".................................. 12 2.55 "Special Company Contribution"............................. 12 2.56 "Surviving Spouse"......................................... 12 2.57 "Total Compensation"....................................... 12 2.58 "Totally and Permanently Disabled"......................... 14 2.59 "Trust Agreement".......................................... 14 2.60 "Trust Fund"............................................... 14 2.61 "Trustee".................................................. 14 2.62 "Valuation Date"........................................... 14 2.63 "Vested Interest".......................................... 14 2.64 "Year of Service".......................................... 14 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN ii Page ---- SECTION 3 MEMBERSHIP AND TRANSFER.................................... 15 3.1 Commencement of Membership................................. 15 3.2 Rehired and Transferred Employees.......................... 15 3.3 Suspension of Membership................................... 15 3.4 Termination of Membership.................................. 16 3.5 Highly Compensated Employees............................... 16 SECTION 4 MEMBER CONTRIBUTIONS....................................... 17 4.1 Election to Make Contributions............................. 17 4.2 Maximum Pre-Tax Contributions.............................. 17 4.3 Change or Suspension of Contributions...................... 17 4.4 Resumption of Contributions................................ 17 4.5 Withholding and Deposit With Trustee; Crediting Accounts... 17 4.6 Distribution of Excess Contributions and Deferrals......... 18 4.7 Rollover Contributions..................................... 18 SECTION 5 MATCHING AND SPECIAL COMPANY CONTRIBUTIONS................. 20 5.1 Matching Contribution...................................... 20 5.2 Special Company Contribution............................... 20 5.3 Deposit with Trustee; Crediting Accounts................... 21 5.4 Curtailment or Distribution from Plan of Excess Aggregate Contributions.............................................. 21 SECTION 6 TRUST FUND, INVESTMENTS AND INVESTMENT DIRECTIONS.......... 23 6.1 Trust Fund................................................. 23 6.2 Investment of Contributions................................ 23 6.3 Reinvestment of Contributions.............................. 24 6.4 Investment by Alternate Payees............................. 25 6.5 Allocation of Voting Rights................................ 25 6.6 Exercise of Voting Rights.................................. 26 6.7 Other Instructions by Members.............................. 26 6.8 Participant Directed Accounts.............................. 27 SECTION 7 VALUATIONS AND STATEMENTS.................................. 29 7.1 Valuation of Accounts...................................... 29 7.2 Statements................................................. 29 SECTION 8 WITHDRAWALS................................................ 30 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN iii Page ---- 8.1 Withdrawals from Post-Tax Accounts......................... 30 8.2 Withdrawals from Rollover Accounts......................... 30 8.3 Requirements for Hardship and Disability Withdrawals....... 30 8.4 Payment of Withdrawals..................................... 32 8.5 Valuation Date............................................. 32 8.6 Withdrawals by Alternate Payees............................ 32 SECTION 9 PLAN BENEFITS.............................................. 33 9.1 Vesting in Accounts........................................ 33 9.2 Amount of Plan Benefit..................................... 33 9.3 Valuation of Plan Benefit.................................. 33 9.4 Form of Payment............................................ 33 9.5 Time of Payment............................................ 35 9.6 Death Benefit.............................................. 36 9.7 Limitation on Time of Payment.............................. 36 9.8 Undeliverable Checks....................................... 37 SECTION 10 ALLOCATION LIMITATIONS..................................... 38 10.1 Limitation on Annual Additions............................. 38 10.2 Combined Limitation on Benefits and Contributions.......... 38 10.3 Reduction of Excess Annual Additions....................... 38 10.4 Disposition of Excess Annual Additions..................... 38 SECTION 11 FUNDING POLICY AND METHOD.................................. 40 11.1 Contributions.............................................. 40 11.2 Trust Fund................................................. 40 11.3 Expenses of the Plan....................................... 40 11.4 Cash Requirements.......................................... 40 11.5 Independent Accountant..................................... 40 11.6 Loans from Parties-In-Interest............................. 41 SECTION 12 BENEFICIARIES.............................................. 42 SECTION 13 ADMINISTRATION AND OPERATION OF THE PLAN................... 43 13.1 Plan Administrator......................................... 43 13.2 Control and Management of Plan Assets...................... 43 13.3 Trustees and Investment Managers........................... 43 13.4 Committee Membership....................................... 44 13.5 Reports to Board of Directors.............................. 44 13.6 Employment of Advisers..................................... 44 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN iv Page ---- 13.7 Limitations on Committee Actions........................... 44 13.8 Committee Meetings......................................... 45 SECTION 14 CLAIMS AND REVIEW PROCEDURES............................... 46 14.1 Applications for Benefits.................................. 46 14.2 Denial of Applications..................................... 46 14.3 Requests for Review........................................ 46 14.4 Decisions on Review........................................ 47 14.5 Exhaustion of Administrative Remedies...................... 47 SECTION 15 TERMINATION OF EMPLOYER PARTICIPATION...................... 48 15.1 Termination by Participating Company....................... 48 15.2 Effect of Termination...................................... 48 15.3 IRS Termination Procedure.................................. 48 15.4 Termination of the Plan.................................... 48 SECTION 16 AMENDMENT, MERGER OR TERMINATION OF THE PLAN AND TRUST..... 49 16.1 Right to Amend............................................. 49 16.2 Plan Merger or Consolidation............................... 49 16.3 Termination of the Plan.................................... 49 16.4 Partial Termination of the Plan............................ 49 16.5 Manner of Distribution..................................... 50 16.6 Restrictions on Liquidation of Trust Fund Upon Termination. 50 SECTION 17 INALIENABILITY OF BENEFITS................................. 51 17.1 No Assignment Permitted.................................... 51 17.2 Return of Contributions.................................... 51 17.3 Qualified Domestic Relations Orders........................ 52 SECTION 18 TOP-HEAVY PROVISIONS....................................... 54 18.1 Determination of Top-Heavy Status.......................... 54 18.2 Minimum Allocations........................................ 54 18.3 Minimum Vesting............................................ 55 18.4 Impact on Maximum Benefits................................. 55 SECTION 19 GENERAL LIMITATIONS AND PROVISIONS......................... 56 19.1 No Employment Rights....................................... 56 19.2 Payments from the Trust.................................... 56 19.3 Payments to Minors or Incompetents......................... 56 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN v Page ---- 19.4 Lost Members or Other Persons.............................. 56 19.5 Personal Data to the Administrative Committee.............. 56 19.6 Insurance Contracts........................................ 57 19.7 Notice to the Administrative Committee..................... 57 19.8 Notices to Members and Beneficiaries....................... 57 19.9 Word Usage................................................. 57 19.10 Headings................................................... 57 19.11 Governing Law.............................................. 57 19.12 Heirs and Successors....................................... 57 19.13 Withholding................................................ 58 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN vi Page ---- APPENDIX A PRIOR PLAN PROVISIONS...................................... A-1 APPENDIX B BLACKOUT PROVISIONS........................................ B-1 APPENDIX C FUNDS...................................................... C-1 APPENDIX D ADDITIONAL ELIGIBLE WITHDRAWALS............................ D-1 EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN vii LEVI STRAUSS ASSOCIATES INC. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN (As Amended and Restated Effective November 27, 1989, with main text reflecting certain changes as of April 1, 1995) 1 INTRODUCTION AND PERSONS TO WHOM PLAN APPLIES. - - --------------------------------------------- 1.1 Introduction. Effective August 1, 1989, the Levi Strauss ------------ Associates Inc. Employee Long-Term Investment and Savings Plan ("ELTIS") was established to provide eligible employees ("Employees") with a program of regular savings supplemented by Matching Contributions. ELTIS was amended from time to time after August 1, 1989, to comply with certain provisions of relevant law or effect other changes desired by Levi Strauss Associates Inc. By this amendment and restatement (the "Plan"), Levi Strauss Associates Inc. intends to amend ELTIS (1) effective November 27, 1989 to comply with the Tax Reform Act of 1986 and other applicable legislation and (2) effective April 1, 1995, to effect certain plan design changes, including changes relating to a change in recordkeeper. Levi Strauss Associates Inc. intends that the Plan continue to qualify as a profit sharing plan under section 401(a) and related sections of the Code and as a cash or deferred arrangement under section 401(k) of the Code and that the trust established under the Plan continue to qualify as a tax-exempt trust under section 501(a) of the Code. This amended and restated Plan is generally effective November 27, 1989. Certain provisions of the Plan which were in effect on or after November 27, 1989, but which were amended before April 1, 1995 are included in Appendix A. 1.2 Persons to Whom Plan Applies. This Plan document is not a new ---------------------------- Plan which succeeds the Plan as previously in effect, but is an amendment and restatement of the Plan as in effect before the Effective Date. The amount, right to and form of any benefits under the Plan of each Member who is an Employee on and after the Effective Date, or of persons claiming benefits through such a Member, will be determined under this Plan. The amount, right to and form of any benefits under this Plan of each Member who has separated from Service with Levi Strauss Associates Inc. or an Affiliated Company, or of persons who are claiming benefits through such a Member, will be determined in accordance with the provisions of the Plan in effect on the date of the Member's separation from Service, except as may otherwise be expressly provided under this Plan, or unless the Member again becomes an Employee on or after the Effective Date. This amended and restated Plan will not reduce any Member's Plan EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 1 Benefit under the Plan, as determined on the date immediately preceding the Effective Date, and this Plan will be construed accordingly. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 2 2 DEFINITIONS. - - ----------- When used in this Plan document the following terms will have the following meanings: 2.1 "Accounts" means to the extent applicable to a Member one or more -------- of the following Accounts: (a) Pre-Tax Account; (b) Matching Account; (c) Special Company Account; and (d) Post-Tax Account. 2.2 "Act" means the Employee Retirement Income Security Act of 1974, --- as amended, and any Regulations or rulings issued under the Act. 2.3 "Administrative Committee" means the committee appointed to ------------------------ administer the Plan as described in Section 13.4. 2.4 "Affiliated Company" means: ------------------ (a) A corporation that is a member of a controlled group of corporations (as defined in section 414(b) of the Code) which includes Levi Strauss Associates Inc.; (b) Any trade or business (whether or not incorporated) that is in common control (as defined in section 414(c) of the Code) with Levi Strauss Associates Inc.; (c) An organization (whether or not incorporated) that is a member of an affiliated service group (as defined in section 414(m) of the Code) which includes Levi Strauss Associates Inc.; (d) Any other entity required to be aggregated with Levi Strauss Associates Inc. under section 414(o) of the Code; or (e) Any other entity designated as an Affiliated Company by the Board of Directors. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 3 2.5 "Alternate Payee" means the spouse, former spouse, child or other --------------- dependent of a Member who is recognized under a Domestic Relations Order as having a right to receive all, or a portion, of a Member's Plan Benefit. 2.6 "Annual Additions" means the sum of the following additions to the ---------------- Member's Accounts for the Plan Year: (a) The aggregate employee contributions which the Member contributes to all qualified retirement plans maintained by the Company and all Affiliated Companies, including Post-Tax Contributions to this Plan; (b) The amount of contributions made on behalf of the Member to any qualified defined contribution plan maintained by the Company and all Affiliated Companies under an election by the Member under a qualified cash or deferred arrangement, including Pre-Tax Contributions to this Plan; (c) The amount of employer contributions and forfeitures allocated to the Member under any qualified defined contribution plan maintained by the Company and any Affiliated Company, including Matching Contributions and Special Company Contributions to this Plan; and (d) Contributions allocated to any individual medical benefit account (within the meanings of sections 415(l) and 419A(d)(2) of the Code) that is established for the Member. Employee contributions will be determined without regard to any rollover contributions (as defined in sections 402(a)(5), 403(a)(4), 403(b)(8) and 403(d)(3) of the Code) and without regard to any employee contributions to a simplified employee pension plan which are excludable from income under section 408(k)(6) of the Code. In addition, the 25% of compensation limitation described in section 415(c)(1)(B) of the Code will not apply to any contribution for medical benefits (within the meaning of section 419A(f)(2) of the Code) after the Member's separation from Service which is treated as an Annual Addition. 2.7 "Annuity Starting Date" means the first day of the first month for --------------------- which an amount is payable as an annuity. The Annuity Starting Date for a Member who elects (with the consent of his or her spouse if the Member is legally married) to receive his or her Plan Benefit in a form other than an annuity in accordance with Section 9.4 is the first day on which all events (including the passing of the day on which benefit payments are scheduled to begin) have occurred which entitle the Member to receive his or her first benefit payment from the Plan. 2.8 "Beneficiary" means the beneficiary or beneficiaries designated by ----------- a Member under Section 9.1 and Section 12 (or any other person or persons designated as such under EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 4 applicable law) to receive the amount, if any, payable under the Plan upon the death of the Member. 2.9 "Board of Directors" means the Board of Directors of Levi Strauss ------------------ Associates Inc. The Board of Directors may delegate to any committee, subcommittee or any of its members, or to any agent, its authority to perform any act under the Plan, including without limitation those matters involving the exercise of discretion. Any such delegation of discretion will be subject to revocation at any time at the discretion of the Board of Directors. Any reference to the Board of Directors in connection with such delegated authority will be deemed a reference to the delegate or delegates. 2.10 "Code" means the Internal Revenue Code of 1986, as amended, and ---- any Regulations or rulings issued under the Code. 2.11 "Committee" means the Administrative Committee or Investment --------- Committee, as applicable. 2.12 "Company" means Levi Strauss Associates Inc., LS&CO. and each ------- other Participating Company or any of them. 2.13 "Compensation" means a Member's compensation for a Plan Year paid ------------ by the Company for services while an Employee and a Member during that Plan Year, as reported on IRS Form W-2, including the Member's Pre-Tax Contributions to the Plan for such Plan Year. The term "Compensation" does not include any bonuses (except for cash profit sharing payments), relocation expenses, gifts on account of retirement, severance payments, pay in lieu of notice and noncash compensation such as prizes and awards. A Member's Compensation will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. For Plan Years beginning on and after the November 27, 1989, Compensation for any Plan Year in excess of $200,000 or any successor limitation as provided for the Plan year in section 401(a)(17) of the Code (as adjusted as provided under section 401(a)(17) of the Code) will be disregarded. In determining the Compensation of a Member, the family aggregation rules under section 414(q) of the Code will apply, except that in applying these rules, the term "family" will only include the spouse of the Member and any lineal descendants of the Member who have not reached age 19 before the close of the Plan Year. 2.14 "Domestic Relations Order" means any judgement, decree or order ------------------------ (including approval of a property settlement agreement) that: EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 5 (a) Relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Member; and (b) Is entered or made under the domestic relations or community property laws of any state. 2.15 "Effective Date" means November 27, 1989, except as expressly -------------- stated otherwise in this document or as required by the Tax Reform Act of 1986, as amended, and other applicable legislation. 2.16 "Employee" means any person who is employed by the Company -------- excluding: (a) Any employee of LS&CO. who is paid from the home office of Levi Strauss Associates Inc.; (b) Any stocktaker, Retiree Coordinator or "Temporary Employee;" (c) Any employee who is not employed in a state or territory of the United States or who receives no remuneration from the Company that constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code); (d) An alien who: (i) Receives remuneration from the Company which constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code); and (ii) Has been transferred by the Company from a job outside the United States to a job within the United States, during any period with respect to which the alien is benefiting (by reason of accruing a benefit or making or having contributions made on the alien's behalf) under: (A) A retirement plan established or maintained outside of the United States by a foreign subsidiary (including a domestic subsidiary operating abroad) or foreign division of the Company; or (B) The Levi Strauss International Retirement Plan for Third Country National Employees or any successor or similar plan maintained by the Company or any Affiliated Company; EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 6 (e) A United States citizen locally hired by a foreign subsidiary (including a domestic subsidiary operating abroad) or foreign division of the Company; (f) Any employee who is included in a unit of employees covered by a negotiated collective bargaining agreement which does not provide for his or her membership in the Plan; (g) A "leased employee" (as defined in section 414(n) or section 414(o) of the Code) who is providing services to the Company or an Affiliated Company; (h) An employee who is included in a group or classification of employees on the payroll of a company designated by the Board of Directors as not being eligible to participate in the Plan; or (i) A Highly Compensated Employee, with respect to the eligibility to make Member Contributions or receive an allocation of Matching Contributions only. A member of the board of directors of the Company is not eligible for membership in the Plan unless he or she is also an Employee of the Company. The Board of Directors may, on a nondiscriminatory basis, designate as an Employee any person described in (c), (d) or (e) above. Such designation must be made in writing after receiving the advice of counsel. A "Temporary Employee" means a person who: (i) Is hired to fill, for a period not to exceed 6 calendar months, a position which arises from either an emergency situation or the temporary absence of an Employee; or (ii) Is subject, as a condition of such employment, to termination without prior notice at any time. A person's status as an Employee will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. 2.17 "Fair Market Value" means the value of a share of LSAI Stock, ----------------- determined by the latest independent appraisal of the value of LSAI Stock obtained by the Investment Committee. If LSAI Stock is offered to the public under the Registration Rights Agreement, "Fair Market Value" will mean the net proceeds realized by the Trustee in selling shares of LSAI Stock under such offering until LSAI Stock is reappraised or until a public market for LSAI Stock arises. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 7 2.18 "Forfeiture" means the portion of a Member's Matching Account and ---------- Special Company Contribution Account which is forfeited under Section 9.1. 2.19 "Fund" means any of the investment funds described in Section 6.1. ---- 2.20 "Highly Compensated Employee" means an Employee who: --------------------------- (a) During the preceding Plan Year: (i) Was at any time a 5% owner of the Company or an Affiliated Company (as defined in section 416(i)(1) of the Code); (ii) Received "compensation" from the Company or an Affiliated Company in excess of $75,000 (as adjusted under Regulations or rulings issued by the IRS); (iii) Received "compensation" from the Company or an Affiliated Company in excess of $50,000 (as adjusted under Regulations or rulings issued by the IRS) and was in the top 20% of employees of the Company and all Affiliated Companies when ranked on the basis of "compensation" paid during such Plan Year (referred to as the "Top Paid Group" under IRS Regulations); or (iv) Was at any time an officer of the Company or an Affiliated Company and received "compensation" greater than 50% of the amount in effect under section 415(b)(1)(A) of the Code; or (b) During the Plan Year: (i) Was at any time a 5% owner of the Company or an Affiliated Company (as defined in section 416(i)(1) of the Code); or (ii) Satisfies the requirements of paragraphs (ii), (iii), or (iv) of Section a and is a member of the group consisting of the 100 employees of the Company and all Affiliated Companies paid the greatest "compensation" during the Plan Year. For purposes of determining the number of employees in the Top Paid Group for a Plan Year, the following employees, as described in section 414(q)(8) and section 414(q)(11) of the Code, will be excluded: (i) Those who have not completed 6 months of service; EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 8 (ii) Those who normally work less than 17-1/2 hours per week; (iii) Those who normally work less than 6 months during any year; (iv) Those who have not attained age 21; (v) Those subject to a collective bargaining agreement; and (vi) Nonresident aliens who receive no earned income from sources within the United States. The Administrative Committee will determine whether an employee is an officer based on the responsibilities of the employee with the Company or an Affiliated Company. Of those employees determined to be officers, no more than 50 employees (or, if less, the greater of 3 employees or 10% of the employees, excluding all employees described in section 414(q)(8) and section 414(q)(11) of the Code) will be treated as officers. Further, if no officer receives the level of "compensation" described in Section 2.20(a)(iv), the highest paid officer of the Company and all Affiliated Companies will be treated as a Highly Compensated Employee described in Section 2.20(a)(iv). For purposes of determining whether an employee is a Highly Compensated Employee only, any person who is a member of the family of a 5% owner or of a Highly Compensated Employee in the group consisting of the 10 Highly Compensated Employees paid the greatest "compensation" during the Plan Year: (i) Will not be considered a separate employee; and (ii) Any "compensation" paid to the person and any Company or Employee contributions made on behalf of the person will be treated as if it were paid to or on behalf of the 5% owner or Highly Compensated Employee. For purposes of the immediately preceding sentence, the term "family" means, with respect to any employee, the employee's spouse and lineal ascendants or descendants and the spouses of such lineal ascendants or descendants. "Compensation" means Total Compensation as defined in Section 2.57 of the Plan determined without regard to section 125 of the Code (regarding contributions to a cafeteria plan); section 402(a)(8) of the Code (regarding contributions to a 401(k) plan); and section 402(h)(1)(B) of the Code (regarding contributions to a simplified employee pension plan), and in the case of employer contributions made under a salary reduction agreement, without regard to section 403(b) (regarding annuity contracts). EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 9 2.21 "Highly Compensated Former Employee" means a former employee who ---------------------------------- separates from Service before the beginning of the Plan Year and who was a Highly Compensated Employee for either: (a) The employee's year of separation from Service, or (b) Any Plan Year ending on or after the employee's 55th birthday. An employee who performs no services for the Company or an Affiliated Company during the Plan Year will be treated as a former employee. 2.22 "Hour of Service" means an hour of employment for which an --------------- Employee is paid or is entitled to payment for the performance of duties as determined under the Labor Department Regulations governing the computation of hours of service. 2.23 "Inactive Member" means an individual participating in the Plan --------------- under Section 3.3 and 3.5. 2.24 "Investment Committee" means the committee appointed to manage and -------------------- control the Plan's assets as described in Section 13.4. 2.25 "Investment Manager" means a person who is appointed to direct the ------------------ investment of all or any part of the Trust Fund under Section 13.2 and is either a bank, an insurance company or a registered investment adviser under the Investment Advisers Act of 1940 and who has acknowledged in writing that it is a fiduciary with respect to the Plan. 2.26 "IRS" means the United States Internal Revenue Service. --- 2.27 "Labor Department" means the United States Department of Labor. ---------------- 2.28 "LS&CO." means Levi Strauss & Co., a Delaware corporation. ------ 2.29 "LSAI Stock" means shares of common or preferred stock of Levi ---------- Strauss Associates Inc. that have been authorized for issuance to or ownership by the Trustee. 2.30 "Matching Account" means the account maintained for a Member to ---------------- hold the Member's Matching Contributions. 2.31 "Matching Contribution" means the contribution made by the Company --------------------- under Section 5.1. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 10 2.32 "Member" means a person who is either an "Active Member" who ------ participates in all features of the Plan or an "Inactive Member" who only participates in certain features of the Plan under Section 3.3 or Section 3.5. 2.33 "Member Contributions" means Post-Tax Contributions and/or Pre-Tax -------------------- Contributions. 2.34 "Membership Date" means the first day of each payroll period. --------------- 2.35 "Mutual Fund" means a regulated investment company, as defined in ----------- Section 851 of the Code. 2.36 "Normal Retirement Age" means age 65. --------------------- 2.37 "Participating Company" means LS&CO. or any Affiliated Company, --------------------- the board of directors or equivalent governing body of which adopts the Plan and the Trust Agreement by appropriate action with the written consent of the Board of Directors. Any Affiliated Company which so adopts the Plan will be deemed to appoint Levi Strauss Associates Inc., the Administrative Committee, the Investment Committee and the Trustee as its exclusive agents to exercise on its behalf all of the power and authority conferred under this Plan, or by the Trust Agreement, upon the Company. The authority of Levi Strauss Associates Inc., the Committees and the Trustee to act as such agents will continue until the Plan is terminated as to the Affiliated Company and the relevant portion of the Trust Fund has been distributed by the Trustee as provided in Section 15.2. 2.38 "Plan" means this Levi Strauss Associates Inc. Employee Long-Term ---- Investment and Savings Plan, as amended from time to time. 2.39 "Plan Benefit" means the benefit distributable to a Member or ------------ Beneficiary under Section 9. 2.40 "Plan Year" means the annual period corresponding to LS&CO.'s --------- fiscal year for federal income tax purposes. 2.41 "Post-Tax Account" means the account maintained for a Member to ---------------- hold the Member's Post-Tax Contributions. 2.42 "Post-Tax Contributions" means post-tax contributions made by a ---------------------- Member under Section 4.1. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 11 2.43 "Pre-Tax Account" means the account maintained by a Member to hold --------------- the Member's Pre-Tax Contributions. 2.44 "Pre-Tax Contributions" means the contributions made to the Plan --------------------- on behalf of a Member under Section 4.1. 2.45 "Qualified Domestic Relations Order" means a Domestic Relations ---------------------------------- Order that satisfies the requirements described in Section 17.3. 2.46 "Qualified Member" means a Member who has reached age 63, or who ---------------- has reached age 53 and completed at least 13 Years of Service. 2.47 "Registration Rights Agreement" means the registration rights ----------------------------- agreement entered into by Levi Strauss Associates Inc. and the Trustee, as amended from time to time, under which the Trustee may require Levi Strauss Associates Inc. under certain circumstances to register Stock under the Securities Act of 1933. 2.48 "Regulations" means the applicable regulations issued under the ----------- Code or the Act by the IRS or the Labor Department or any other governmental authority and any temporary rules promulgated by such authorities pending the issuance of such regulations. 2.49 "Required Beginning Date" generally means April 1 of the calendar ----------------------- year following the calendar year in which the Member attains age 70-1/2. However, the Required Beginning Date for a Member who is not a 5% owner, within the meaning of section 416(i)(1)(B)(i) of the Code, who attained age 70-1/2 during 1988, and had not retired by the Effective Date, will be April 1, 1990. In addition, the Required Beginning Date for a Member who attained age 70-1/2 before January 1, 1988, and who was not a 5% owner, within the meaning of section 416(i)(1)(B)(i) of the Code, during any Plan Year ending with or within the Plan Year in which he or she reached age 66-1/2 or any subsequent year, is the April 1 following the later of the calendar year in which the Member reaches ----- age 70-1/2 or retires. Lastly, the Required Beginning Date for a Member who filed a written election under section 242(b) of the Tax Equity and Fiscal Responsibility Act of 1982 before January 1, 1984, will be the date specified in such election if the election satisfies all of the applicable requirements specified by the IRS, as determined by the Administrative Committee. 2.50 "Retiree Coordinator" means a retired Employee of the Company who ------------------- resumes employment with the Company or an Affiliated Company on a temporary basis for the purpose of providing personal relations type services to other retired employees of the Company or an Affiliated Company. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 12 2.51 "Rollover Account" means the account maintained for a Member to ---------------- hold the Member's Rollover Contributions. 2.52 "Rollover Contributions" means the rollover contributions made by ---------------------- a Member under Section 4.7. 2.53 "Service" means employment (whether or not as an Employee) with ------- the Company or an Affiliated Company. Service will begin on the date an Employee first performs 1 Hour of Service for the Company or an Affiliated Company. Service will end on the earlier of: ------- (a) The date the Employee retires; (b) The date the Employee dies; (c) The date the Employee terminates employment; or (d) The first anniversary of the date the Employee is absent from Service for any other reason (e.g. an authorized leave of absence as described in paragraphs (i) and (ii), etc. below). Subject to any applicable rules of the Administrative Committee (which rules will be uniformly applicable to all Employees similarly situated), Service includes: (i) Periods of vacation; (ii) Periods of absence whether or not the Employee is paid, not to exceed 12 calendar months, authorized by the Company for sickness, temporary disability or personal reasons; (iii) Periods of service in the Armed Forces of the United States, if and to the extent required by the Military Selective Services Act, as amended, or any other federal law of similar import; provided that the Employee returns to Service with the Company or an Affiliated Company within the time his or her employment rights are protected by such law; and (iv) Any period of 12 consecutive months or less, beginning on the first day of a month after a Member terminates employment and ending on the last day of the month preceding the Member's reemployment date, if the Member performs at least 1 Hour of Service within the first month of reemployment. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 13 If an Employee is on a leave of absence for more than 12 months, the Employee will be deemed to have quit and terminated Service as of the end of such 12 month period if the Employee fails to abide by the terms and conditions of such leave (which may include a requirement of reemployment), as established from time to time by the Administrative Committee. If an Employee retires, dies or terminates employment while on leave of absence, vacation, holiday or jury duty or while disabled or sick, his or her Service will terminate on the earlier of: - ------- (i) The date of such retirement, death or termination; or (ii) 12 months after the start of a leave, vacation or holiday or onset of disability or sickness. All Service will be aggregated, whether or not such Service is performed consecutively, and every partial month will be deemed to be one full month of Service. An Employee's Period of Service will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. 2.54 "Special Company Account" means the account maintained for a ----------------------- Member to hold the Member's Special Company Contributions. 2.55 "Special Company Contribution" means the contribution made by a ---------------------------- Company under Section 5.2. 2.56 "Surviving Spouse" means, with respect to any deceased Member, the ---------------- individual (if any) who is considered to be the spouse of such Member under local law at the time of such Member's death. 2.57 "Total Compensation" means all wages, salaries, and fees for ------------------ professional services and other amounts received during the Plan Year for personal services actually rendered in the course of employment with an Affiliated Company (including, but not limited to, commissions paid sales representatives, account executives and account managers compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements, and other expenses under a nonaccountable plan (as described in section 1.62 of the Code) determined without regard to any exclusions from income under section 931 and section 933 of the Code. "Total Compensation" will also include: ------- (a) In the case of a Member who is an employee within the meaning of section 401(c) of the Code, the Member's earned income (as described under section 401(c)(2) of the EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 14 Code), determined without regard to any exclusions from gross income similar to those under section 931 and section 933 of the Code; (b) Any foreign earned income as defined under section 911(b) of the Code, regardless of whether such income is excludable from the gross income of the Member under section 911 of the Code; (c) Amounts described in sections 104(a)(3), 105(a) and 105(b) of the Code, but only to the extent that such amounts are includable in the gross income of the Member; (d) Amounts paid or reimbursed by the Company or an Affiliated Company for moving expenses incurred by the Member, but only to the extent that such amounts are not deductible by the Member under section 217 of the Code; (e) The value of a nonqualified stock option granted to the Member by the Company or an Affiliated Company, but only to the extent that the value of the option is includable in the gross income of the Member for the taxable year when granted; and (f) The amount includable in the gross income of the Member upon making an election described in section 83(b) of the Code. "Total Compensation" will not include: ----------- (a) Company contributions to a plan of deferred compensation, to the extent that before the application of the limitations under section 415 of the Code to that plan, the contributions are not includable in the Member's gross income for federal income tax purposes in the taxable year of the Member in which the contributions are made; (b) Company contributions under a simplified employee pension plan described in section 408(k) of the Code to the extent that such contributions are not considered as compensation for the taxable year in which contributed; (c) Any distributions from a plan of deferred compensation regardless of whether such amounts are includable in gross income of the Member for federal income tax purposes in the taxable year of distribution; (d) Amounts realized from the exercise of a nonqualified stock option; (e) Amounts realized when restricted stock (or property) held by the Member either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 15 (f) Amounts realized from the sale, exchange or other distribution of stock acquired under an incentive stock option; and (g) Other amounts that receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Member) or contributions made by an employer (whether or not under a salary reduction arrangement) towards the purchase of an annuity contract described in section 403(b) of the Code (whether or not the contributions are excluded from the gross income of the Member. For Plan Years beginning on and after the Effective Date, Total Compensation in excess of $200,000 or any successor limitation as provided for the Plan Year in section 401(a)(17) of the Code (as adjusted as provided under section 401(a)(17) of the Code) will be disregarded. In determining the Total Compensation of a Member, the family aggregation rules under section 414(q) of the Code will apply, except that in applying those rules the term "family" will only include the spouse of the Member and any lineal descendants of the Member who have not reached age 19 before the close of the Plan Year. 2.58 "Totally and Permanently Disabled" means the Member is eligible to -------------------------------- receive disability benefits under the Federal Social Security Act, or alternatively, has been determined to be totally and permanently disabled by the Administrative Committee based on competent medical evidence. 2.59 "Trust Agreement" means the trust agreement or agreements between --------------- Levi Strauss Associates Inc. and a Trustee under which the assets of the Plan are managed. 2.60 "Trust Fund" means the trust fund or funds consisting of the ---------- assets of the Plan and maintained by the Trustee under the Plan and the Trust Agreement. 2.61 "Trustee" means the trustee or trustees of the Trust Fund. ------- 2.62 "Valuation Date" means any business day. -------------- 2.63 "Vested Interest" means the nonforfeitable interest of a Member in --------------- a particular Account, determined in accordance with Section 9.1. 2.64 "Year of Service" means a 12 month period of Service in which the --------------- Member has Service under Section 2.53. A Member's Years of Service will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 16 3 MEMBERSHIP AND TRANSFER. - - ----------------------- 3.1 Commencement of Membership. Each Employee who was a Member in the -------------------------- Plan on the Effective Date, will continue to be a Member. Each Employee who was not a Member in the Plan on the Effective Date, will become a Member in the Plan under paragraphs (a), (b) and (c) below. (a) Pre-Tax Contributions and Matching Contributions. ------------------------------------------------ Membership in the Plan is voluntary for the Pre-Tax Contributions provided for in Section 4.1 and the Matching Contributions provided for in Section 5.1. An Employee may become a Member in the Plan with respect to Pre-Tax Contributions and Matching Contributions on the first day of the first pay period coinciding with or next following the day on which he or she completes a Year of Service, by filing the prescribed form with the Administrative Committee in advance. (b) Special Company Contributions. Membership for Special ----------------------------- Company Contributions provided for in Section 5.2 is automatic. An Employee who is hired on or before November 30 of the prior Plan Year, and who maintains an employment relationship with the Company or an Affiliated Company from such date until the last day of such Plan Year, will become a Member in the Plan for any Special Company Contribution as of the last day of such Plan Year. (c) Post-Tax Contributions. Effective as of the first day of ---------------------- the first pay period ending after June 1, 1995, an Employee may become a Member with respect to Post-Tax Contributions on the first day of the first pay period coinciding with or next following the day on which he or she completes a Year of Service, by filing the prescribed form with the Administrative Committee in advance. Upon becoming a Member, an Employee will designate a Beneficiary under Section 2.8 and Section 12. 3.2 Rehired and Transferred Employees. A former Employee who is --------------------------------- rehired, will be eligible to begin or resume membership in the Plan on the first day of the first pay period coinciding with or next following the date he or she returns to the status of an Employee and has completed a Year of Service. Similarly, an employee of the Company or an Affiliated Company who becomes an Employee after the Membership Date following his or her completion of a Year of Service, will be eligible to begin or resume membership in the Plan on the first day of the first pay period coinciding with or next following the date he or she attains or returns to the status of an Employee. 3.3 Suspension of Membership. A Member's membership in the Plan will ------------------------ be suspended for any period during which the Member is an employee of the Company or an EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 17 Affiliated Company but not an Employee. A Member whose membership is suspended may not make Member Contributions or receive an allocation of Matching Contributions and Special Company Contributions with respect to the period of suspension, but the Member's Accounts will continue to share in the income, gains, losses and expenses of the Trust Fund. 3.4 Termination of Membership. A Member's membership in the Plan will ------------------------- end when his or her Plan Benefit has been distributed or on the date of his or her death, whichever occurs first. 3.5 Highly Compensated Employees. Any Employee who is a Highly ---------------------------- Compensated Employee will only be eligible for membership in the Plan as an Inactive Member, provided that he or she otherwise satisfies the eligibility requirements of Section 9.1. An Inactive Member will not be eligible to make Member Contributions under Section 4 of the Plan or to receive any allocation of Matching Contributions under Section 5 of the Plan. An Inactive Member will, however, be eligible to: (a) Direct the investment of his or her Accounts under Section 6; and (b) Make withdrawals from his or her Accounts under Section 8. An Inactive Member will continue to be subject to the remaining provisions of the Plan. The Administrative Committee will periodically determine whether Members in the Plan are Highly Compensated Employees and any such Member's status will change from an Active Member to an Inactive Member as soon as practicable after the Administration Committee makes such determination. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 18 4 MEMBER CONTRIBUTIONS. - - -------------------- 4.1 Election to Make Contributions. A Member whose membership is not ------------------------------ suspended under Section 3.3 or Section 3.5 may elect to make Pre-Tax Contributions or, effective as of the first day of the first pay period after June 1, 1995, Pre-Tax Contributions, Post-Tax Contributions, or any combination of Pre-Tax Contributions or Post-Tax Contributions to the Plan at the rates specified in paragraph (a) and (b) below: (a) Up to 10% of his or her Compensation, in 1% increments; or (b) From $5 to $25, in $5 increments. A Member's election to make Pre-Tax Contributions will constitute an election (for federal tax purposes and, wherever permitted, for state and local tax purposes) to have his or her taxable Compensation reduced by the amount of all Pre-Tax Contributions. 4.2 Maximum Pre-Tax Contributions. A Member's Pre-Tax Contributions ----------------------------- to the Plan for any calendar year will not exceed $7,000 (as adjusted under section 402(g)(5) of the Code for cost of living increases). Effective as of the first day of the first pay period after June 1, 1995, if any Member's Pre-Tax Contributions are affected by this limitation, the Member will continue to make such contributions as Post-Tax Contributions to the Plan unless the Member elects to suspend such Contributions as provided in Section 4.3. 4.3 Change or Suspension of Contributions. A Member, at any time, may ------------------------------------- change the rate of his or her Member Contributions within the percentage and dollar limitations described in Section 4.1 by filing the prescribed form with the Administrative Committee or by utilizing such other notification procedure as is prescribed by the Administrative Committee. A Member may suspend all Member Contributions by filing the prescribed form with the Administrative Committee or by utilizing such other notification procedure as is prescribed by the Administrative Committee. Such changes in rate of contributions or suspension will be effective as soon as reasonably practicable after the date the form is filed with or notice is received by the Administrative Committee. 4.4 Resumption of Contributions. A Member who has suspended all --------------------------- Member Contributions under Section 4.3 may resume Member Contributions to the Plan at any time by filing the prescribed advance notice with the Administrative Committee. The resumption in contributions shall be effective as soon as reasonably practicable after the applicable notice is received by the Administrative Committee. 4.5 Withholding and Deposit With Trustee; Crediting Accounts. All -------------------------------------------------------- Member Contributions to the Plan will be withheld through payroll deductions from the Member's EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 19 Compensation and will be paid to the Trustee as soon as reasonably practicable following the end of the pay period in which they are withheld. A Member's Pre- Tax Contributions will be credited to his or her Pre-Tax Account, and the Member's Post-Tax Contributions shall be credited to his or her Post-Tax Account. 4.6 Distribution of Excess Contributions and Deferrals. -------------------------------------------------- (a) Excess Contributions. If a Member who is a Highly -------------------- Compensated Employee makes Pre-Tax Contributions which constitute "Excess Contributions" (as defined in section 401(k)(8)(B) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) with respect to a Plan Year, such Excess Contributions (and the earnings on such contributions) will be distributed to the Member after the end of such Plan Year. Such distribution will be made as soon as administratively practicable, but in no event later than the end of the next Plan Year. Pre-Tax Contributions and any earnings on such contributions directed by the Highly Compensated Employees having the highest rate of Pre-Tax Contributions (as a percentage of Compensation) will be refunded first under the provisions of the applicable Regulations. Any refund of Pre-Tax Contributions and earnings will be limited to the amount that, in the judgment of the Administrative Committee, will result in the Plan satisfying the requirements of section 401(k)(3)(A) of the Code. (b) Excess Deferrals. If a Member makes Pre-Tax Contributions ---------------- which constitute "Excess Deferrals" (as defined in section 402(g)(2)(A) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) to one or more plans, with respect to a calendar year, the Member may allocate the Excess Deferrals among the plans to which such deferrals were made and notify the Administrative Committee in writing by March 1 of the next calendar year of the Excess Deferrals allocated to the Plan. Upon the Administrative Committee's receipt of such notice, the amount of the Excess Deferrals designated by the Member (and any earnings on such amount) will be distributed to the Member by April 15 of such year. 4.7 Rollover Contributions. An Employee may make a Rollover ---------------------- Contribution to the Plan in an amount equal to all or part of a previous distribution from a plan that, at the time of the distribution, met the requirements of section 401(a) of the Code. The Rollover Contribution must be made in cash within 60 days after its receipt by the Employee either from the qualified plan or from an individual retirement account which meets the requirements of section 408 of the Code and has only been used to hold qualified plan distributions. A Rollover Contribution will be permitted only if the Employee establishes that: (a) The Rollover Contribution includes no assets other than those attributable to employer contributions, earnings on employer contributions and earnings on employee contributions under plans qualified under section 401(a) of the Code; and EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 20 (b) If the amount was received by the Employee from a qualified plan, the Rollover Contribution qualifies as an "eligible rollover distribution" under section 402(c)(4) of the Code; or (c) If the amount was received by the Employee from an individual retirement account, which contains funds described in Section 4.7(a) only, the distribution from such account represented a total distribution of such account. The Rollover Contribution will be paid to the Trustee as soon as practicable, credited to the Employee's Rollover Account and invested as described in Section 6. If it is determined that a Member's Rollover Contribution mistakenly failed to qualify under the Code as a tax-free rollover, then the balance in the Member's Rollover Account attributable to the mistaken contribution immediately will be segregated from all other Plan assets, treated as a nonqualified trust established by and for the benefit of the Member, and distributed to the Member. Such a mistaken contribution will be deemed never to have been a part of the Plan. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 21 5 MATCHING AND SPECIAL COMPANY CONTRIBUTIONS. - - ------------------------------------------ 5.1 Matching Contribution. Except as provided below, for each period --------------------- (an "Accumulation Period") during a Plan Year with respect to which a transfer of Member Contributions to the Stock Fund is permitted in accordance with Section 6.2(b), the Company will make a Matching Contribution to the Plan in an amount equal to 50% of each Member's Member Contributions for the Accumulation Period. The Matching Contribution will be reduced by any amount which cannot be allocated to the Member because of the contribution limitation described in Section 10.1. The Board of Directors may determine in its sole discretion that: (a) No Matching Contribution will be made for a particular Plan Year or portion of a Plan Year; (b) A lesser Matching Contribution will be made, in view of Company performance, and economic and financial conditions prevailing and anticipated at the time; or (c) A greater Matching Contribution will be made for a particular Plan Year or portion of a Plan Year. No Matching Contribution will be made for a Member unless he or she: (a) Is an Employee on the last day of the final preceding payroll period with respect to which a Member may make a Member Contribution which would be matched by a portion of such Matching Contribution; or (b) Ceased to be an Employee during the Plan Year: (i) After attaining age 55 and completing 15 years of Service; (ii) After attaining Normal Retirement Age; (iii) By reason of death; or (iv) By reason of Total and Permanent Disability, and his or her Accounts have not been distributed under Section 9. The Matching Contribution may be made in the form of cash or in the form of shares of LSAI Stock, or a combination of both. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 22 5.2 Special Company Contribution. The Company may make a Special ---------------------------- Company Contribution, from Company profits, to the Plan for each Plan Year in such amount as may be determined by the Board of Directors. Any Special Company Contribution may be made in the form of cash or in shares of LSAI Stock, or a combination of both. 5.3 Deposit with Trustee; Crediting Accounts. Any Matching ---------------------------------------- Contribution for any Accumulation Period will be paid to the Trustee at the time when Member Contributions designated for Investment in the Stock Fund may be transferred to the Stock Fund under Section 6.2 and will be allocated among Members in proportion to their Member Contributions during the Accumulation Period to any Fund. A Member's share of the Matching Contribution will be allocated and credited to the Member's Matching Account as of the earlier of: ------- (a) The date the Matching Contribution is made to the Plan; or (b) The end of the Plan Year during which the Member made the Member Contributions with respect to which such Matching Contribution is made. Forfeitures arising under Section 9.1 with respect to any Member's Matching Account during a Plan Year will be allocated among other Members as an additional Matching Contribution for such Plan Year and credited to such Members' Matching Accounts. Any Special Company Contribution will be paid to the Trustee on or before the due date (including extensions) for filing the Company's consolidated federal income tax return for the Plan Year. Any Special Company Contribution for a Plan Year will be allocated among Members who are Employees on the last working day of such Plan Year either: ------ (i) In proportion to each Member's Compensation for such Plan Year including, in the case of a Member who was a Member for only part of the Plan Year, amounts that would have been Compensation if the Member had been a Member for the full Plan Year; or (ii) In an equal amount for each Member, as determined by the Board of Directors in their sole discretion. Such allocation will be reduced on a pro rata basis for a Member who transfers from a job paid from the field payroll of the Company to a job paid from the home office payroll of the Company, or vise versa, based on the number of months the Member was employed in the job paid from the field payroll. A Member's share of any Special Company Contribution will be credited to the Member's Special Company Account. Forfeitures arising under Section 9.1 with respect to any Member's Special Company Account during a Plan Year will be allocated among other Members EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 23 as an additional Special Company Contribution for such Plan Year and credited to such Members' Special Company Accounts. 5.4 Curtailment or Distribution from Plan of Excess Aggregate --------------------------------------------------------- Contributions. If any Matching Contribution otherwise allocable to a Member who - ------------- is a Highly Compensated Employee would constitute an "Excess Aggregate Contribution" (as defined in section 401(m)(6)(B) of the Code and the Regulations issued under such Code section which are expressly incorporated by this reference) with respect to the Plan Year, then: (a) The Matching Contribution will not be made to the Plan, if the Matching Contribution has not been made to the Plan as of the date on which the Matching Contribution is determined to constitute an Excess Aggregate Contribution; or (b) The Matching Contribution (and any earnings on such Matching Contribution) will be distributed to each affected Member after the end of such Plan Year, if the Matching Contribution has been made to the Plan before the date on which the Matching Contribution is determined to constitute an Excess Aggregate Contribution. The Matching Contribution made on behalf of Highly Compensated Employees having the highest rate of Matching Contribution will be reduced and/or distributed first, under the terms of the applicable Regulations. Any reduction and/or distribution of the Matching Contribution made will be limited to the amount which, in the judgment of the Administrative Committee, is expected to meet the requirements of Section 401(m) of the Code. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 24 6 TRUST FUND, INVESTMENTS AND INVESTMENT DIRECTIONS. - - ------------------------------------------------- 6.1 Trust Fund. ---------- (a) In General. All contributions to the Plan will be held by ---------- the Trustee for investment and reinvestment as part of the Trust Fund under the Trust Agreement. The Trust Fund will consist of the Funds designated on Appendix C to the Plan. One of such Funds will be designated as the Fund which will hold Member Contributions designated for potential investment in the Stock Fund (the "Holding Account"). (b) Stock Fund. One of the Funds available for investment of ---------- the Trust Funds will be the Stock Fund. The Stock Fund will be invested and reinvested in LSAI Stock to the extent LSAI Stock is available for purchase by the Trustee in accordance with Section 6.2, and in cash or interest-bearing short-term debt obligations of any kind (i) pending investment in LSAI Stock, or (ii) to the extent required to pay expenses of the Plan or meet anticipated cash distributions to Members and Beneficiaries, as determined and directed by the Administrative Committee. The Stock Fund will consist of all Stock Fund investments held by the Trustee and all cash held by the Trustee which is derived from dividends, interest or other income from Stock Fund investments, contributions to be invested in the Stock Fund and proceeds from the sale or redemption of Stock Fund investments. 6.2 Investment of Contributions. All Matching Contributions and --------------------------- Special Company Contributions will be deposited in the Stock Fund. All Member Contributions will be deposited in the Fund designated by the Member for such investment in 1% increments of such contribution as directed by the Member in accordance with procedures established by the Administrative Committee. A Member's investment directions will remain in effect until changed by the Member. If the Member fails to file any investment directions, his or her Pre- Tax Contributions will be deposited in the Fund designated in Appendix C for investment of contributions for which no investment direction has been received. Generally, twice each Plan Year, the Investment Committee will obtain an independent appraisal of the Fair Market Value of LSAI Stock. The Investment Committee will notify the Trustee of such Fair Market Value promptly after completion of the appraisal. (a) If Fair Market Value of LSAI Stock Exceeds Adequate --------------------------------------------------- Consideration. If the Trustee determines that the Fair Market Value of LSAI - ------------- Stock exceeds "Adequate Consideration" for LSAI Stock within the meaning of section 3(18) of the Act, all Member Contributions that are held in the Holding Account and any earnings on such contributions will be transferred to an alternative Fund as designated by the Member, and no Matching EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 25 Contribution will be made with respect to such Member Contributions unless the Investment Committee effects a "Suspension" as described below. The Investment Committee will effect a Suspension, in its sole discretion, by determining that the Member Contributions held in the Holding Account and earnings on such contributions will remain in the Holding Account rather than be transferred to another Fund. If the Investment Committee effects a Suspension, the Administrative Committee, in such manner and under such procedures as it deems appropriate, will promptly provide Members whose Member Contributions and earnings are subject to the Suspension the opportunity to elect whether such amounts will remain held in the Holding Account. If the Member fails to file an election on the prescribed form by the date determined by the Administrative Committee, such amounts will remain in the Holding Account subject to the remaining provisions of the Plan. If a Member elects to have such amounts transferred to another Fund, such amounts will be transferred to such other Fund. (b) If Fair Market Value of LSAI Stock Does Not Exceed Adequate ----------------------------------------------------------- Consideration. Conversely, if the Trustee determines that the Fair Market Value - ------------- of LSAI Stock does not exceed Adequate Consideration for LSAI Stock, the Administrative Committee will notify Members of such Fair Market Value. Each Member who has Member Contributions held in the Holding Account will have the opportunity to elect to have such Member Contributions and any earnings on such contributions transferred from the Holding Account to any Fund in 1% increments of such Member Contributions and earnings. If a Member files such an election in the prescribed manner by the date determined by the Administrative Committee, the Member's Member Contributions that are held in the Holding Account and any earnings on such contributions will be transferred to the Fund or Funds elected by the Member. If a Member fails to file such an election by the date determined by the Administrative Committee, the Member's Member Contributions that are held in the Holding Account and any earnings on such contributions automatically will be transferred to the Stock Fund. At the time when Member Contributions and earnings are transferred to the Stock Fund, the Company will make a Matching Contribution under Section 5.1 unless the Board of Directors determines that no Matching Contribution will be made. To the extent that any cash Matching Contributions and cash Special Company Contributions deposited in the Stock Fund and any Member Contributions transferred to the Stock Fund exceed the cash requirements of the Stock Fund, as determined by the Administrative Committee, the Trustee will seek to acquire LSAI Stock for the Stock Fund at a price no greater than Fair Market Value. The Trustee may acquire LSAI Stock from a "Party-in-Interest" (as defined in section 3(14) of the Act) or a "Disqualified Person" (as defined in section 4975(e)(2) of the Code) for no more than Adequate Consideration in accordance with the requirements of section 408(e) of the Act. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 26 6.3 Reinvestment of Contributions. A Member may elect to change the ----------------------------- investment of his or her Accounts under the applicable paragraph (a) or (b), subject to the limitations of paragraph (c). (a) General Rules Regarding Investment of Accounts. On any ---------------------------------------------- business day, a Member may elect to transfer amounts invested in any Fund other than the Stock Fund among such Funds in 1% increments of the balance credited to the Member's Accounts invested in such Funds as of such day. A Member's election must be made in a manner prescribed by the Administrative Committee. (b) Rules Regarding Investment of Accounts by Qualified Members. ----------------------------------------------------------- As of any business day, a Qualified Member (i.e., any Member who has reached age ---- 63, or reached age 53 and completed at least 13 Years of Service) may elect to have amounts credited to his or her Accounts invested in the Stock Fund transferred to any other Fund in 1% increments by filing the notice prescribed by the Administrative Committee. A Qualified Member may make only 1 such election in any Plan Year. (c) Certain Limitations on Investment Due to Liquidity of the --------------------------------------------------------- Trust Fund. The Investment Committee may determine that it is not feasible for - ---------- the Trustee to prudently liquidate and transfer the necessary amount from one Fund to another in accordance with Qualified Members' reinvestment elections. If the Investment Committee so determines, it will advise the Administrative Committee which will direct that such steps be taken as it considers necessary or desirable for the protection of Qualified Members' Accounts, including a pro rata reduction in the amount transferred with respect to each Member, or the scheduling of transfers over a period consistent with prudent liquidation. 6.4 Investment by Alternate Payees. The Administrative Committee will ------------------------------ determine, in its sole and absolute discretion, if an Alternate Payee is entitled to a portion of a Member's Accounts under the terms of a Qualified Domestic Relations Order. If the Administrative Committee so determines, it will segregate the Alternate Payee's portion of the Member's Accounts into separate Matching Contribution, Pre-Tax Contribution, Post-Tax Contribution and Special Company Contribution Accounts, as appropriate. The Alternate Payee will only be entitled to direct the investment of his or her Accounts under the provisions of this Section 6 in the same manner, at the same times, and subject to the same conditions as Members in the Plan. 6.5 Allocation of Voting Rights. Except as specifically authorized in --------------------------- this Section 6.5, the Trustee will vote all shares of LSAI Stock held in the Trust Fund at the direction of the Investment Committee. If the stockholders of Levi Strauss Associates Inc. are entitled to vote with respect to any of the following matters, then only in connection with such matters, the Trustee will vote the EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 27 shares of LSAI Stock held in the Trust Fund in accordance with the Members' directions to the Trustee as provided in Section 6.6: (a) Any merger or consolidation of Levi Strauss Associates Inc. with any other corporation, unless the stockholders of Levi Strauss Associates Inc. immediately before the merger or consolidation would own (immediately after the merger or consolidation) equity securities of the surviving corporation or acquiring corporation or a parent entity possessing more than 5/6 of the voting power of the surviving corporation or acquiring corporation or parent entity; (b) Any plan of complete liquidation of Levi Strauss Associates Inc.; (c) Any dissolution of Levi Strauss Associates Inc.; or (d) Any plan or agreement for the sale or disposition by Levi Strauss Associates Inc. of all or substantially all of its assets, unless the stockholders of Levi Strauss Associates Inc. immediately before the sale or disposition would own (immediately after the sale or disposition) equity securities of the acquiring entity or a parent entity possessing more than 5/6 of the voting power of the acquiring entity or parent entity. 6.6 Exercise of Voting Rights. When Members are entitled to direct ------------------------- the voting of LSAI Stock under Section 6.5, each Member will be entitled to direct the Trustee with respect to the voting of all whole and fractional shares of LSAI Stock which are allocated to his or her Accounts (or represented by units allocated to such Accounts) as of the last Valuation Date coinciding with or preceding the applicable record date. The Administrative Committee will conclusively determine the number of the shares of LSAI Stock that are subject to each Member's voting instructions and will advise the Trustee accordingly. Before any annual or special meeting at which LSAI Stock will be voted on the matters described in Section 6.5, the Board of Directors will cause to be delivered to each Member the proxy statement and any related materials prepared for holders of LSAI Stock, a request for written voting instructions, and the voting instructions form prescribed by the Board of Directors for this purpose. Each Member who wishes to exercise his or her voting rights must complete and return such form to the Trustee before the date prescribed by the Board of Directors. Once received by the Trustee, a Member's voting instructions may be revoked, subject to such conditions as the Trustee may impose. Any shares of LSAI Stock with respect to which the Trustee receives timely, written voting instructions from Members will be voted by the Trustee in accordance with such instructions on the matters described in Section 6.5. The Trustee also will determine the ratio of affirmative votes, negative votes and abstentions with respect to each matter described in Section EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 28 6.5 for which it has received timely voting instructions from Members. The Trustee will then vote on such matters all shares of LSAI Stock allocated to Members' Accounts with respect to which it has not received timely voting instructions, in accordance with the ratios so determined. If the Trustee determines that voting the shares in accordance with such ratios would violate its fiduciary responsibilities under the Act, it will vote such shares of stock in accordance with such fiduciary requirements. The Trustee will aggregate any fractional shares and, after rounding down to the next lower integer if the total is not a whole number, will vote an equivalent number of whole shares of LSAI Stock. For purposes of this Section 6.6, each Member will be a "Named Fiduciary" as defined under section 402(a) of the Act with respect to the shares of LSAI Stock allocated to his or her Accounts. 6.7 Other Instructions by Members. ----------------------------- (a) Sale to Levi Strauss Associates Inc. of LSAI Stock. Except -------------------------------------------------- as provided in this Section 6.7 and in the Registration Rights Agreement, the Trustee may sell LSAI Stock held in the Trust Fund only to Levi Strauss Associates Inc. (b) Acquisition Offers. If any person or group makes an offer ------------------ to acquire all or part of the outstanding LSAI Stock (an "Acquisition Offer"), the Trustee will tender the LSAI Stock held in the Trust Fund to such person or group only to the extent that it has been directed to do so by Members. "Acquisition Offers" will not include: ----------- (i) Any offer to purchase LSAI Stock by Levi Strauss Associates Inc.; (ii) Any offer to purchase less than 5% of all of the outstanding shares of common stock of Levi Strauss Associates Inc., including LSAI Stock held in the Trust Fund; or (iii) Any public offering of LSAI Stock under the Registration Rights Agreement. In the event of an Acquisition Offer, each Member will be entitled to instruct the Trustee confidentially (on a form to be prescribed by the Administrative Committee) with respect to the disposition of those shares of LSAI Stock which then would be subject to the Member's voting instructions under Section 6.6. If the Trustee receives such an instruction by a date determined by the Trustee and communicated to Members, the Trustee will tender such LSAI Stock in accordance with such instruction. Any LSAI Stock as to which the Trustee does not receive instructions within such period will not be tendered by the Trustee. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 29 The Trustee will obtain and distribute to each Member all appropriate materials pertaining to the Acquisition Offer, including any statement of the position of Levi Strauss Associates Inc. with respect to such offer issued under Regulation 14e-2 promulgated under the Securities Exchange Act of 1934, as soon as practicable after such materials are issued. If Levi Strauss Associates Inc. is not required to or fails to issue such statement within 5 business days after the commencement of such offer, the Trustee will distribute such materials to each Member without such statement by Levi Strauss Associates Inc. and will separately distribute such statement, if any, as soon as practicable after it is issued. Levi Strauss Associates Inc. may require verification of the Trustee's compliance with the Members' confidential voting instructions by an independent auditor selected by Levi Strauss Associates Inc. For purposes of this Section b, each Member will be a "Named Fiduciary" as defined under section 402(a) of the Act with respect to the shares of LSAI Stock allocated to his or her Accounts. (c) Acquisitions by Levi Strauss Associates Inc. If Levi ------------------------------------------- Strauss Associates Inc. makes an offer to purchase LSAI Stock, the Investment Committee will determine whether, and to what extent, the Plan will sell LSAI Stock to Levi Strauss Associates Inc. in connection with such offer. 6.8 Participant Directed Accounts. It is intended that transactions ----------------------------- by Members pursuant to this Section 6 satisfy the conditions set forth in Department of Labor Regulation Section 2550.404c-1, except to the extent that such transactions are not covered by such regulation. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 30 7 VALUATIONS AND STATEMENTS. - - ------------------------- 7.1 Valuation of Accounts. As of each Valuation Date, the --------------------- Administrative Committee will value each Member's Accounts at fair market value and will adjust such Accounts to reflect the Member's share of any realized or unrealized investment income, gains, losses and expenses of the Fund or Funds in which the Accounts were invested which have accrued since the preceding Valuation Date. For this and all other purposes under the Plan, LSAI Stock will be taken into account at its Fair Market Value. 7.2 Statements. The Administrative Committee will prepare and ---------- distribute a statement to each Member at least annually. Such statement will reflect the status of the Member's Accounts (including the fair market value thereof) and will contain such other information as the Administrative Committee may prescribe. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 31 8 WITHDRAWALS. - - ----------- 8.1 Withdrawals from Post-Tax Accounts. A Member may withdraw all or ---------------------------------- part of the balance credited to his or her Post-Tax Account invested in any Fund (although the timing of a withdrawal from the Stock Fund is subject to the availability of cash) or combination of such Funds. 8.2 Withdrawals from Rollover Accounts. A Member may withdraw all or ---------------------------------- part of the balance credited to his or her Rollover Account invested in any Fund or combination of such Funds. 8.3 Requirements for Hardship and Disability Withdrawals. A Member ---------------------------------------------------- who incurs a hardship or who becomes Totally and Permanently Disabled may make withdrawals from the Member's Pre-Tax Account, Matching Account and Special Company Account as specified in paragraphs (a), (b), (c) and (d) below. (a) Limits on Hardship Withdrawals. A Member's hardship ------------------------------ withdrawals from his or her Account under this Section 8.3 will not exceed the lesser of: - --------- (i) The Member's aggregate Pre-Tax Contributions, reduced by the sum of all Pre-Tax Contributions previously withdrawn by or distributed to the Member; or (ii) The balance credited to his or her Pre-Tax Account, Matching Account and Special Company Account. The minimum amount that may be withdrawn will be $1,000. A Member may not withdraw earnings credited to his or her Pre-Tax Account after November 27, 1988. (b) Hardship Requirements. Subject to the limits specified in --------------------- paragraph (a), a hardship withdrawal will be permitted only if the entire amount requested is not reasonably available from other resources of the Member and is required to meet an "Immediate and Heavy Financial Need" of the Member arising solely from one or more of the following: ----------- (i) Expenses for extraordinary and unreimbursed medical or hospital expenses incurred by the Member, the Member's spouse, any dependent of the Member, or a nondependent parent or child of the Member; (ii) Amounts necessary for the Member, the Member's spouse, any dependent of the Member, or a nondependent parent or child of the Member to obtain medical or hospital care; EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 32 (iii) The payment of tuition and related educational expenses (including room and board) for the next 12 months of post- secondary education for the Member, the Member's spouse or child, or any dependent of the Member; (iv) The payment of expenses incurred by the Member in purchasing his or her primary residence; (v) The need to prevent the eviction of the Member from his or her primary residence or foreclosure on the mortgage of the Member's primary residence; (vi) The payment of funeral expenses for a family member or relative of the Member; (vii) The loss of income resulting from an abbreviated work schedule required by the Member's health, the loss of employment by the Member's working spouse or garnishment of the Member's wages; (viii) The loss of income, real property or personal property as a result of any natural disaster as specified in Appendix D to the Plan by any individual or entity empowered to amend the Plan; or (ix) Effective July 1, 1995, the need to pay attorney's fees, fines, penalties, judgements, assessments or other costs related to legal proceedings on behalf of the Member or the Member's spouse or dependents. (c) Immediate and Heavy Financial Need. An amount will be ---------------------------------- considered necessary to satisfy the Member's Immediate and Heavy Financial Need only if the Administrative Committee determines that the need cannot be relieved by any of the following: --- (i) Reimbursement or compensation by insurance or otherwise; (ii) Reasonable liquidation of the Member's assets, including assets of the Member's spouse and minor children that are reasonably available to the Member, to the extent such liquidation would not itself cause an immediate and heavy financial need; (iii) Cessation of Pre-Tax Contributions; or (iv) A loan from a commercial source on reasonable commercial terms. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 33 Unless the Member requests otherwise, the amount of the Member's hardship withdrawal will include the amount of any federal, state or local taxes or any penalties reasonably anticipated to result from the withdrawal. Such sums will be withheld at the time such hardship withdrawal is distributed to the Member. (d) Disability Withdrawals. A Member who is Totally and ---------------------- Permanently Disabled may withdraw all or any part of his or her Accounts under the Plan. 8.4 Payment of Withdrawals. A Member may request a withdrawal by ---------------------- filing the prescribed form with the Administrative Committee. A withdrawal will be paid to the Member in cash as soon as reasonably practicable after the Administrative Committee receives the prescribed form and determines that the withdrawal request meets the requirements of Section 8.1, 8.2 or 8.3, as applicable. The Administrative Committee may delay payment of a withdrawal from the Stock Fund until sufficient cash is available in the Stock Fund to permit the withdrawal to be paid. 8.5 Valuation Date. The value of a Member's Accounts will be -------------- determined as of the Valuation Date immediately preceding the date the withdrawal is processed. 8.6 Withdrawals by Alternate Payees. An Alternate Payee who is ------------------------------- entitled to a portion of a Member's Accounts under the terms of a Qualified Domestic Relations Order may withdraw amounts from his or her Accounts under this Section 8 in the same manner, at the same times and subject to the same conditions as Members in the Plan. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 34 9 PLAN BENEFITS. - - ------------- 9.1 Vesting in Accounts. ------------------- (a) General Rule. A Member's Vested Interest in his or her ------------ Account shall be 100% at all times. 9.2 Amount of Plan Benefit. If a Member ceases to be an Employee for ---------------------- any reason or becomes Totally and Permanently Disabled while an Employee, the Member (or, in the event of a Member's death, the Member's Beneficiary) will be entitled to receive a Plan Benefit equal to the Member's Vested Interest in his or her Accounts. 9.3 Valuation of Plan Benefit. The value of the Vested Interest in a ------------------------- Member's Accounts to be distributed as a Plan Benefit will be determined as of the Valuation Date which occurs on or most recently prior to the later of the date of the termination of the Member's employment or the date on which the distribution is requested. 9.4 Form of Payment. Unless a Member (or Beneficiary) elects --------------- otherwise, the Member's Plan Benefit will be paid in the form of a lump sum in cash. If the value of the Member's Plan Benefit exceeds $3,500, the Member (or Beneficiary) may elect to have all or a portion of such Plan Benefit paid in one of the following forms by filing the prescribed form with the Administrative Committee: (a) Installments. The Member (or Beneficiary) may elect to have ------------ the Member's Plan Benefit paid in the form of monthly installments over a period not exceeding the reasonable life expectancy of the Member (or Beneficiary), as determined under the mortality table specified in Section 25 of the Levi Strauss Associates Inc. Revised Employee Retirement Plan. The amount of each installment will be determined by dividing the value of the portion of the Member's Plan Benefit remaining in the Trust Fund by the number of installments elected, less the number of installments already paid. (b) Annuity Contract. The Member (or Beneficiary) may elect to ---------------- have the Member's Plan Benefit paid in the form of a single premium annuity contract purchased from an insurer. The normal form of annuity contract for a single Member will be a life annuity contract which will provide the Member with a monthly income for his or her life. The normal form of annuity contract for a married Member will be a joint and survivor annuity contract which will provide the Member with a monthly income for his or her life, and upon his or her death, monthly income to his or her spouse, in an amount not less than 50% nor more than 100% of the amount payable to the Member. If the Member dies before the Annuity Starting Date, his or her spouse will be entitled to a survivor's annuity which will provide the spouse with a monthly EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 35 income for his or her life equal to 50% of the amount that would have been paid to the Member if his or her annuity payments had begun on the date of the Member's death. If the Member elects that only a portion of his Plan Benefit be paid in the form of installments or an annuity, then the remainder of such benefit will be paid in a lump sum. A married Member may elect another form of annuity or may designate another joint annuitant with his or her spouse's consent. The spouse's consent must: (i) Be in writing; (ii) Acknowledge the effect of the alternate form of annuity or specifically identify the alternate joint annuitant; (iii) Be witnessed by a notary public; and (iv) Be given within 90 days before the Annuity Starting Date. The spouse's consent to receive an alternate form of annuity or to the designation of a Beneficiary will not be binding on a subsequent spouse if the Member remarries. The Member may revoke such an election at any time before the Annuity Starting Date, in which case the Member's benefit will be paid in the form of a joint and survivor annuity to the Member and his or her spouse, unless the Member elects an alternate form of benefit or Beneficiary designation with his or her spouse's consent. If benefits are payable to a joint annuitant other than the Member's spouse, the present value of the benefits payable to the joint annuitant will not exceed 50% of the present value of the benefits payable to the Member (determined as of the Annuity Starting Date). The Administrative Committee will provide to each Member who elects to receive an annuity a written explanation in nontechnical language containing the following information: (i) A description of the terms and conditions of the joint and survivor annuity and the single life annuity; (ii) A statement that the Member may elect during the "Election Period" described below to waive the joint and survivor annuity or life annuity by electing any optional form of benefit provided under the Plan; (iii) A statement that the Member may revoke the waiver of the joint and survivor annuity or life annuity during the election period and the effect of such revocation; EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 36 (iv) Notice of the requirement that the Member's spouse must consent to the waiver of the joint and survivor annuity and election of any optional form of benefit; (v) A general explanation of the financial effect of election of each of the optional forms of benefit provided under the Plan; and (vi) A statement that the Member may request an explanation of the specific financial effect, in terms of monthly payments, on the Member's Plan Benefit of making an election. The Election Period will begin 90 days before the Annuity Starting Date and end on the Annuity Starting Date, unless the Member requests additional information from the Administrative Committee, in which case it will end no later than 90 days after the Member receives such additional information. During the Election Period any election not to take the joint and survivor annuity or life annuity will be revocable. Upon the expiration of the Election Period, any election made will be irrevocable and the Member will not be required nor eligible to make an election if no election had been made. (c) Direct Transfer. A Member (or eligible Beneficiary) may --------------- elect to have the Member's Plan Benefit paid by a direct transfer to a plan qualified under section 401(a) of the Code which accepts direct transfer contributions, 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), or an annuity plan described in section 403(a) of the Code. The Member (or Beneficiary) may elect to have his or her Plan Benefit paid in the form of a direct transfer at any time after the Administrative Committee provides the Member with notice of the direct transfer option as required by section 402(f) of the Code (the "Section 402(f) Notice"). 9.5 Time of Payment. A Member's Plan Benefit will be paid in full or --------------- will begin to be paid on the Member's Required Beginning Date. However, subject to the rules stated in paragraphs (a), (b) and (c) below, a Member may elect to receive his or her Plan Benefit earlier, on or as soon as reasonably practicable after the last day of any month after the Member ceases to be an Employee. The following rules will govern benefit payments from the Plan. (a) Mandatory Cashout of Benefits Less Than $3,500. Except as ---------------------------------------------- provided in Section b, a Member's Plan Benefit will be paid in a lump sum cash payment as soon as reasonably practicable after the Member ceases to be an Employee if the value of his or her Plan EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 37 Benefit does not exceed $3,500. Alternatively, effective January 1, 1993, a Member may elect to have his or her Plan Benefit paid by a direct transfer to a plan qualified under section 401(a) of the Code which accepts direct transfer contributions, 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), or an annuity plan described in section 403(a) of the Code. The Member may elect to have his or her Plan Benefit paid in the form of a direct transfer at any time after the Administrative Committee provides the Member with notice of the direct transfer option as required by section 402(f) of the Code (the "Section 402(f) Notice"). (b) Insufficient Cash in the Stock Fund. If the Administrative ----------------------------------- Committee determines that the cash available in the Stock Fund is insufficient for the payment of a Member's Plan Benefit, the payment will be delayed until the Administrative Committee determines that sufficient cash is available. Except as provided in Section c (regarding Code section 401(a)(9) compliance) and in Section 9.7 (regarding limitations on time of payment), no payment delayed under the Plan will be made later than: ----- (i) 1 year after the last day of the Plan Year in which the Member ceases to be an Employee by reason of reaching Normal Retirement Age, Total and Permanent Disability or death; (ii) 5 years after the last day of the Plan Year in which the Member ceases to be an Employee for any other reason; or (iii) The Member's Required Beginning Date. If a payment with respect to an Account invested in the Stock Fund has been delayed to the Member's Required Beginning Date and the Administrative Committee determines that the cash in the Stock Fund is insufficient to make such payment, LSAI Stock will be paid to the Member or Beneficiary unless the Company redeems sufficient shares of LSAI Stock at Fair Market Value to make such payment in cash. (c) 401(a)(9) Compliance. All benefit payments under the Plan -------------------- will be made in accordance with the minimum distribution and incidental benefit requirements of section 401(a)(9) of the Code, which require generally that certain minimum amounts be paid to the Member each calendar year, beginning with the calendar year in which the Member's Required Beginning Date occurs, in order to assure that certain minimum amounts be paid to the Member and that only "incidental" benefits be provided to Member's Beneficiaries. Furthermore, any payment option required by section 401(a)(9) of the Code will override and supersede any inconsistent payment provision provided for in the Plan. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 38 9.6 Death Benefit. If a Member dies before payment of his or her Plan ------------- Benefit has begun, then the Member's Beneficiary will be entitled to receive the Member's Plan Benefit as soon as reasonably practicable after the Beneficiary files a claim with the Administrative Committee on the prescribed form. If the Beneficiary fails to file the prescribed claim form, the Member's Plan Benefit will be paid to the Beneficiary in full no later than 5 years after the Member's death. If the Member dies after installment payments have begun under Section a, the remainder of the Member's Plan Benefit will be paid to the Member's Beneficiary in a single lump sum as soon as reasonably practicable after the Member's death. 9.7 Limitation on Time of Payment. Unless a Member elects otherwise, ----------------------------- payment of his or her Plan Benefit will occur or commence not later than 60 days after the latest of the following: ------ (a) The last day of the Plan Year in which the Member reaches Normal Retirement Age; (b) The last day of the Plan Year in which the Member ceases to be an Employee; (c) The earliest date on which the Administrative Committee can reasonably ascertain the amount of the Member's Plan Benefit; or (d) The earliest date on which the Administrative Committee can reasonably locate the Member (or his or her Beneficiary). In no event, however, will the payment of a Member's Plan Benefit begin later than the Member's Required Beginning Date. 9.8 Undeliverable Checks. In the event that a Benefit cannot be -------------------- delivered, the Account of the Member (or Beneficiary, as applicable) shall be recredited with the amount of the Benefit which cannot be delivered, but such Account shall be allocated to the money market fund referenced in Appendix C, or in such fund referenced in Appendix C as the Administrative Committee, in its sole discretion determines is most similar to a money market fund with respect to its risk characteristics. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 39 10 ALLOCATION LIMITATIONS. - -- ---------------------- 10.1 Limitation on Annual Additions. The Annual Additions allocated to ------------------------------ a Member for any Plan Year will not exceed the lesser of the following: ------ (a) $30,000 (or, if greater, 1/4 of the dollar limitation for defined benefit plans in effect under section 415(b)(1)(A) of the Code) as adjusted to take into account changes in the cost of living; or (b) 25% of the Member's Total Compensation for such Plan Year. If a Member's Annual Additions would exceed the above limitation, then such Annual Additions will be reduced by reducing the components of such additions, as necessary, in the order in which they are listed in Section 2.6. The Plan Year will be the "limitation year" (as defined under section 415 of the Code) unless the Board of Directors designates another 12 consecutive month period as the limitation year under a written resolution adopted by the Board of Directors. 10.2 Combined Limitation on Benefits and Contributions. If a Member ------------------------------------------------- also participates in one or more qualified defined benefit plans (as defined in section 414(j) of the Code) maintained by the Company or any Affiliated Company, the Member's benefits under any of the qualified defined benefit plans will be reduced to the extent necessary to ensure that the sum of the "Defined Benefit Fraction" (as defined in section 415(e)(2) of the Code) for the Plan Year plus the "Defined Contribution Fraction" (as defined in section 415(e)(3) of the Code) for the Plan Year does not exceed 1.0. 10.3 Reduction of Excess Annual Additions. Any Pre-Tax Contributions ------------------------------------ will be credited to a suspense account on behalf of the Member. All amounts credited to such suspense account will be treated as Pre-Tax Contributions for successive Plan Years and will be allocated annually to the Member under Section 4 (to the extent such allocation is not prohibited by Section 10.1) until exhausted. No gains or losses will be credited to such suspense account and no additional Pre-Tax Contributions, Matching Contributions and Special Company Contributions will be made by or on behalf of the Member so long as any amount remains in such suspense account. Any amounts that cannot be allocated to the Member as a Matching Contribution and/or Special Company Contribution will be deducted from the amount of the Matching Contribution and/or Special Company Contribution that otherwise would be made as described in Sections 5.1 and 5.2, but such reduction will not affect the amounts allocable under Sections 5.1 and 5.2 to Members whose Matching Contribution and/or Special Company Contribution component of Annual Additions is not reduced. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 40 10.4 Disposition of Excess Annual Additions. If the Company elects to -------------------------------------- make a Special Company Contribution for the Plan Year under Section 5.3 of the Plan and allocates such contribution to each Member's Account based on the Committee's best estimate of the Member's Compensation for the Plan Year and it is subsequently determined that such Compensation estimate was incorrect and that the allocation of the Special Company Contribution to the Member's Account would violate the limitations contained in Section 10.1 of the Plan, then that portion of the Special Company Contribution that exceeds the Section 10.1 limitations (the "Excess Contribution") will not be deemed an Annual Addition for the Plan Year. The Administrative Committee may, in its sole and absolute discretion, treat such Excess Contribution in any of the following ways: (a) Allocate and reallocate the Excess Contribution to other Members in the Plan to the extent that such allocation or reallocation does not cause the limitations in Section 10.1 to be exceeded with respect to each Member for the Plan Year. If the allocation or reallocation would cause the limitations in Section 10.1 to be exceeded with respect to each Member, then the Excess Contribution must be held unallocated in a suspense account to be allocated or reallocated to Members in subsequent Plan Years. (b) Use the Excess Contribution to reduce the Matching Contribution and/or Special Company Contribution to the Member for the next Plan Year (and succeeding Plan Years, as necessary) if the Member is still participating in the Plan at the end of such Plan Year (or Plan Years). If the Member is not participating in the Plan at the end of the Plan Year, then the Excess Contribution must be held unallocated in a suspense account for such Plan Year and allocated and reallocated in the next Plan Year (and succeeding Plan Years, as necessary) to all of the remaining Members in the Plan in accordance with the rules stated in Section a. In addition, the Excess Contribution must be used to reduce the Matching Contribution and Special Company Contribution, if any, to the Plan for the next Plan Year (and succeeding Plan Years, as necessary) for all of the remaining Members in the Plan. (c) Hold the Excess Contribution in a suspense account for the Plan Year and allocate and reallocate such contribution in the next Plan Year to all Members in the Plan in accordance with Section a. The Excess Contribution must be used to reduce the Matching Contribution and Special Company Contribution, if any, for the next Plan Year (and succeeding Plan Years, as necessary) for all Members in the Plan. (d) Refund any Pre-Tax Contributions made by the Member to the Plan for the Plan Year to the extent necessary to eliminate the Excess Contribution. However, any such refund may not be made if it will result in prohibited discrimination in favor of Highly Compensated Employees. If such prohibited discrimination will result from the refund of Pre-Tax Contributions, the Excess Contribution must be treated in accordance with Sections 10.4(a), (b), or (c). EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 41 11 FUNDING POLICY AND METHOD. - -- ------------------------- 11.1 Contributions. The Administrative Committee will make arrangements ------------- for the collection of Pre-Tax Contributions as provided in Section 4. The Company will make Matching Contributions and Special Company Contributions to the Plan as provided in Section 5. 11.2 Trust Fund. All monies, securities or other property received as ---------- contributions under the Plan will be delivered to the Trustee under the Trust Fund, to be managed, invested, reinvested and distributed in accordance with the Plan, the Trust Agreement, and any agreement with an insurance company or other financial institution constituting a part of the Plan and Trust Agreement. 11.3 Expenses of the Plan. The expenses of administering the Plan will -------------------- include but not be limited to: (a) The fees and expenses of any employee and of the Trustee for the performance of their duties under the Trust Agreement; (b) The expenses incurred by the members of the Administrative Committee and of the Investment Committee in the performance of their duties under the Plan (including reasonable compensation for any legal counsel, certified public accountants and actuaries and any outside agents and cost of services provided for the Plan); and (c) All other proper charges and disbursements of the Trustee or the members of the Administrative Committee and of the Investment Committee (including settlements of claims or legal actions approved by counsel to the Plan). The expenses of administering the Plan may be paid out of the Trust Fund if the Participating Companies do not pay such expenses directly in such proportions as determined by the Administrative Committee. An election by the Participating Companies to pay all or a part of the above expenses directly will not bind such companies as to their rights to elect, with respect to the same or other expenses, at any other time to have such expenses paid from the Trust Fund or to have the Trustee reimburse the Participating Companies for expenditures already made. In estimating costs under the Plan, administrative costs may be anticipated. 11.4 Cash Requirements. From time to time the Administrative Committee ----------------- will estimate the Plan Benefits, withdrawals and administrative expenses to be paid out of the Trust Fund during the period for which the estimate is made and will also estimate the contributions to be made to the Plan during that period. The Administrative Committee will inform the Trustee and each Investment Manager of the estimated cash needs of, and contributions to, the Plan EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 42 during the periods for which the estimates are made. The estimates will be made on an annual, quarterly, monthly or other basis, as the Administrative Committee may determine. 11.5 Independent Accountant. The Administrative Committee will engage ---------------------- an independent qualified public accountant to conduct such examinations and to express such opinions as may be required by section 103(a)(3) of the Act. The Administrative Committee may remove and discharge the person so engaged, in which event it will engage a successor independent qualified public accountant to perform such examinations and to express such opinions. 11.6 Loans from Parties-In-Interest. The Investment Committee, in its ------------------------------ sole discretion, may borrow money or receive credit from a party-in-interest (within the meaning of Section 3(14) of ERISA), providing such loan or extension of credit satisfies the applicable conditions of Department of Labor Prohibited Transactions Class Exemption No. 80-26, or such successor exemption which may from time to time be applicable, and otherwise satisfies the prohibited transactions provisions of ERISA and the Code. The proceeds of such a loan shall be allocated to such investment fund or funds as the Investment Committee deems appropriate. In connection with such a loan or extension of credit, the Investment Committee or its designee may execute such promissory notes or loan or other documents as it deems appropriate. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 43 12 BENEFICIARIES. - -- ------------- If no Beneficiary designation is in effect under Section 2.8 at the time of a Member's death, or if no designated Beneficiary survives the Member, the payment of the Member's Plan Benefit, if any, will be made to the following persons in the order listed: (a) To the Member's Surviving Spouse, if any; (b) If the Member has no Surviving Spouse, then to his or her living children; (c) If the Member has no living children, then to his or her living parents; (d) If the Member has no living parents, then to his or her living brothers and sisters; or (e) If the Member has no living brothers and sisters, then to his or her estate. The Administrative Committee will, in its sole and absolute discretion, determine the right of such persons to receive the Member's Plan Benefit, if any. If the Administrative Committee is in doubt as to the right of any person to receive such benefit, the Administrative Committee may direct the Trustee to retain such benefit, without liability for any interest, until the rights to such benefit are determined, or, alternatively, may direct the Trustee to pay such benefit into any court of appropriate jurisdiction and such payment will be a complete discharge of the liability of the Plan and the Trust Fund. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 44 13 ADMINISTRATION AND OPERATION OF THE PLAN. - -- ---------------------------------------- 13.1 Plan Administrator. The Administrative Committee is the "Plan ------------------ Administrator" of the Plan (as such term is defined in the Act) and the "Named Fiduciary" as defined in section 402(a) of the Act with respect to the operation and administration of the Plan. The Administrative Committee will make such rules and regulations and take any other actions to administer the Plan as it may deem appropriate. The Administrative Committee may adopt periods in which advance notice required under the Plan must be given and will communicate such periods to Employees. The Administrative Committee will have sole discretion to interpret the terms of the Plan and to determine eligibility for benefits under the objective criteria described in the Plan. The Administrative Committee's rules, interpretations, computations and actions will be conclusive and binding on all persons. In administering the Plan, the Administrative Committee (a) will act in a nondiscriminatory manner to the extent required by section 401(a) and related sections of the Code, and (b) will at all times discharge its duties in accordance with the standards described in section 404(a)(1) of the Act. 13.2 Control and Management of Plan Assets. The Investment Committee ------------------------------------- is the "Named Fiduciary" as defined in section 402(a) of the Act with respect to the management and control of the assets of the Plan, but only to the extent that it will have the authority to: (a) Appoint 1 or more trustees to hold the assets of the Plan in trust and to enter into a trust agreement with each trustee it appoints; (b) Appoint 1 or more Investment Managers for any assets of the Plan and to enter into an investment management agreement with each Investment Manager it appoints; (c) Direct the investment of any Plan assets not assigned to an Investment Manager or to the Trustee; and (d) Perform such other functions as are specifically assigned to the Investment Committee under the Plan. 13.3 Trustees and Investment Managers. Each trustee appointed under -------------------------------- Section 13.2 will have the exclusive authority and discretion to manage and control the Plan assets held in trust by it, except to the extent that: (a) The Investment Committee directs how those assets will be invested; EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 45 (b) The Investment Committee allocates the authority to manage those assets to one or more Investment Managers; or (c) The Plan prescribes how those assets will be invested. Each Investment Manager appointed under Section 13.2 will have the exclusive authority to manage, including the power to acquire and dispose of, the Plan assets assigned to it by the Investment Committee, except to the extent that the Plan prescribes how those assets will be invested. The Trustee and each Investment Manager will be solely responsible for diversifying the investment, in accordance with section 404(a)(1)(C) of the Act, of the Plan assets assigned to them by the Investment Committee, except to the extent that the Investment Committee directs or the Plan prescribes how those assets will be invested. 13.4 Committee Membership. Both the Administrative Committee and the -------------------- Investment Committee will consist of at least 3 members. Each member will be appointed by, will remain in office at the will of, and may be removed, with or without cause, by the Board of Directors. Any member of either Committee may resign at any time. The Board of Directors will designate the chairman of each Committee. To the maximum extent permitted by law, no member of either Committee will be personally liable by reason of any contract or other instrument executed by him or her or on his or her behalf in his or her capacity as a member of such Committee nor for any mistake of judgment made in good faith. The Company will indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums of which are paid from the Company's own assets), each member of the Administrative Committee and Investment Committee and each other officer, employee or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan or to the management and control of the assets of the Plan may be delegated or allocated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan, unless arising out of such person's own fraud or willful misconduct. 13.5 Reports to Board of Directors. Each Committee will report to the ----------------------------- Board of Directors, or to its designee for this purpose, annually and at such other times specified by the Board of Directors or such designee, concerning the matters for which it is responsible under the Plan. 13.6 Employment of Advisers. The Administrative Committee and the ---------------------- Investment Committee may make use of employees of the Company or outside agents as they require or may deem advisable for purposes of performing their respective duties under the Plan. Either Committee may rely upon the written opinion or advice of counsel provided by the Company, EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 46 fairness opinions provided by investment bankers and written opinions or advice by actuaries or accountants engaged by the Administrative Committee. Either Committee may delegate to any such agent or to any subcommittee or member of the Committee its authority to perform any act under the Plan, including, without limitation, those matters involving the exercise of discretion. Any such delegation of discretion will be subject to revocation at any time at the discretion of the appropriate Committee. 13.7 Limitations on Committee Actions. No member of either Committee -------------------------------- will be entitled to act on or decide any matter relating solely to himself or herself or any of his or her rights or benefits under the Plan. The members of the Administrative Committee and of the Investment Committee will not receive any special compensation for serving in their capacities as members of such Committees but will be reimbursed for any reasonable expenses incurred in performing their Committee duties. Except as otherwise required by the Act, no bond or other security will be required of either Committee or any Committee member in any jurisdiction. Any person may serve on both Committees, and any member of either Committee, any subcommittee or agent to whom either Committee delegates any authority, and any other person or group of persons, may serve in more than one fiduciary capacity (including service both as a trustee and an administrator) with respect to the Plan. 13.8 Committee Meetings. Each Committee will establish its own ------------------ procedures and the time and place for its meetings, and provide for the keeping of minutes of all meetings. A majority of the members of a Committee will constitute a quorum for the transaction of business at a meeting of the Committee. Any action of a Committee may be taken upon the affirmative vote of a majority of the members of the Committee at a meeting or, at the direction of its Chairman, without a meeting by "mail," telegraph or telephone, provided that all of the members of the Committee are informed by mail, telegraph or telephone of their right to vote on the proposal and of the outcome of the vote. "Mail" will include any written or electronic interoffice communication. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 47 14 CLAIMS AND REVIEW PROCEDURES. - -- ---------------------------- 14.1 Applications for Benefits. Any application for a Plan Benefit must ------------------------- be submitted to the Administrative Committee at the Company's principal office. Such application must be in writing on the prescribed form and must be signed by the applicant. 14.2 Denial of Applications. In the event that any application for ---------------------- a Plan Benefit is denied in whole or in part, the Administrative Committee will notify the applicant in writing of the right to a review of the denial. The written notice will state, in a manner reasonably calculated to be understood by the applicant: (a) The specific reasons for the denial; (b) The specific references to the Plan provisions on which the denial was based; (c) A description of any information or material necessary to perfect the application; (d) An explanation of why such material is necessary; and (e) An explanation of the Plan's review procedure. The written notice will be given to the applicant within 90 days after the Administrative Committee receives the application, unless special circumstances require an extension of time for processing the application. In no event will the extension exceed a period of 90 days from the end of the initial 90-day period. If an extension is required, written notice of the need for the extension will be given to the applicant before the end of the initial 90-day period. The notice will indicate the special circumstances requiring an extension of time and the date by which the Administrative Committee expects to give a decision. If written notice is not given to the applicant within the initial 90-day period, then the application will be deemed to have been denied (for purposes of Section 14.3) upon the expiration of such period. 14.3 Requests for Review. Any person whose application for a Plan ------------------- Benefit is denied in whole or in part (or such person's duly authorized representative) may appeal the denial by submitting to the Administrative Committee a request for a review of such application within 60 days after receiving written notice of the denial. The Administrative Committee will give the applicant or such representative an opportunity to review pertinent documents (except legally privileged materials) in preparing such request for review and to submit issues and comments in writing. The request for review must be in writing and must be addressed to the Company's principal office. The request for review must state all of the grounds on which it is based, all EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 48 facts in support of the request and any other matters which the applicant deems pertinent. The Administrative Committee may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. 14.4 Decisions on Review. The Administrative Committee will act upon ------------------- each request for review within 60 days after it receives the request, unless special circumstances require an extension of time for processing, but in no event will the decision on review be given more than 120 days after the Administrative Committee receives the request for review. If an extension is required, written notice of the need for the extension will be given to the applicant before the end of the initial 60-day period. The Administrative Committee will give prompt, written notice of its decision to the applicant. If the Administrative Committee confirms the denial of the application for benefits in whole or in part, the notice will state, in a manner calculated to be understood by the applicant, the specific reasons for the denial and specific references to the Plan provisions on which the decision is based. To the extent that the Administrative Committee overrules the denial of the application for a Plan Benefit, such benefit will be paid to the applicant. 14.5 Exhaustion of Administrative Remedies. No legal or equitable ------------------------------------- action for a Plan Benefit will be brought unless and until the claimant has: (a) Submitted a written application for a Plan Benefit in accordance with Section 14.1; (b) Been notified that the application is denied; (c) Filed a written request for a review of the application in accordance with Section 14.3; and (d) Been notified in writing that the Administrative Committee has affirmed the denial of the application; A Member may bring an action without completing the above steps after the Administrative Committee has failed to act on the claim within the time prescribed in Section 14.2 and Section 14.4. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 49 15 TERMINATION OF EMPLOYER PARTICIPATION. - -- ------------------------------------- 15.1 Termination by Participating Company. Any Participating Company ------------------------------------ may terminate its participation in the Plan by giving the Board of Directors prior written notice specifying a termination date which will be the last day of a month at least 60 days after the date such notice is received by the Board of Directors. If the specified termination date is not at least 60 days after the date the notice of termination is received by the Board of Directors, the specified termination date will automatically be changed to the last day of the first month which is at least 60 days after the date the notice is received. The Board of Directors may waive such 60 day notice requirement and terminate the Participating Company's participation in the Plan as of any earlier date. The Board of Directors may also terminate any Participating Company's participation in the Plan, as of any termination date specified by the Board of Directors, for the failure of the Participating Company to make proper contributions, to comply with any other provision of the Plan, or for any other reason the Board of Directors deems appropriate. In any event, the Administrative Committee will promptly notify the IRS and other appropriate governmental authorities under Sections 15.3 and 16.3 of the Plan. 15.2 Effect of Termination. Upon termination of the Plan as to any --------------------- Participating Company, the interest in the Accounts of any Members who were or are currently employed by such Participating Company will continue to be 100% vested and nonforfeitable and no amount will subsequently be payable under the Plan to or with respect to such Members except as provided in this Section 15. Subject to any conditions which the IRS or any other governmental authority may impose, the Administrative Committee will direct the Trustee to segregate that portion of the Trust Fund attributable to the Members' Accounts of that Participating Company. To the maximum extent permitted by the Code and the Act, any rights of Members or former Members of that Participating Company and their Beneficiaries and other eligible survivors will be unaffected by a termination of the Plan as to such Participating Company. 15.3 IRS Termination Procedure. If the Plan is terminated with respect ------------------------- to a Participating Company, the Administrative Committee or the appropriate Company office must submit the Plan to the IRS for a determination that the termination of the Plan with respect to the Participating Company will not adversely affect the qualified status of the Plan and the Trust Fund under sections 401(a) and 501(a) of the Code. No distributions of assets will be made in connection with the termination of the Plan until the IRS has issued a determination as to the effect of such termination. The Participating Company may, by written notice delivered to the Administrative Committee and the Trustee, waive its right to apply for such a determination. Any such waiver request must be approved by the Board of Directors. 15.4 Termination of the Plan. If the Plan is terminated with respect to ----------------------- all Participating Companies, the provisions of this Section 15 will be applied to each of the Participating EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 50 Companies individually or collectively as determined by the Administrative Committee in its sole and absolute discretion. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 51 16 AMENDMENT, MERGER OR TERMINATION OF THE PLAN AND TRUST. - -- ------------------------------------------------------ 16.1 Right to Amend. The Board of Directors have the right at any time, -------------- to modify, alter or amend this Plan, in whole or in part, prospectively or retroactively. No amendment will reduce any Member's Plan Benefit, calculated as of the date on which the amendment is adopted, except to the extent as may be appropriate or necessary to enable the Plan and Trust Fund to continue to satisfy the requirements of section 401(a) and section 501(a) of the Code or other applicable law. Any such amendment will be evidenced by an instrument in writing duly executed, acknowledged and delivered to the Administrative Committee and the Trustee. If the Plan is amended by the Board of Directors after it is adopted by an Affiliated Company, unless otherwise expressly provided, it will be treated as so amended by the Affiliated Company without the necessity of any action on the part of the Affiliated Company. 16.2 Plan Merger or Consolidation. The Board of Directors reserves the ---------------------------- right to merge or consolidate this Plan with any other plan or to direct the Trustee to transfer the assets held in the Trust Fund and/or the liabilities of this Plan to any other plan or to accept a transfer of assets and liabilities from any other plan. In the event of the merger or consolidation of this Plan and the Trust Fund with any other plan, or a transfer of assets or liabilities to or from the Trust Fund to or from any other such plan, then each Member will be entitled to a benefit immediately after the merger, consolidation or transfer (determined as if the Plan was then terminated) that is equal to or greater than the benefit he or she would have been entitled to receive immediately before such merger, consolidation or transfer (if this Plan had then terminated). 16.3 Termination of the Plan. The Board of Directors hopes and expects ----------------------- to continue the Plan indefinitely. Nevertheless, to the full extent permitted by law, the Board of Directors reserves the right to terminate the Plan or to completely discontinue contributions under the Plan. As required by law, before the termination or discontinuance of contributions, the Board of Directors, or its designee, will notify the Administrative Committee, the Trustee, or any other fiduciary of its intent to terminate the Plan or to discontinue contributions under the Plan. Upon such termination or discontinuance of contributions, the interest of each Member in his or her Accounts will continue to be 100% vested and nonforfeitable. 16.4 Partial Termination of the Plan. Upon a curtailment of the Plan or ------------------------------- a discontinuance of the Plan with respect to a group or class of Members that constitutes a "Partial Termination" under section 411(d)(3) of the Code, the interest of each Member in his or her Accounts will continue to be 100% vested and nonforfeitable. If a Partial Termination occurs, the Accounts of the Members affected by the Partial Termination will be segregated by the Trustee and used to pay benefits under the Plan to such Members in accordance with Section 16.5 as though the Plan had been completely terminated. Alternatively, the Administrative EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 52 Committee may postpone benefit payments to those Members until their subsequent termination of Service with the Company in accordance with other provisions of the Plan. 16.5 Manner of Distribution. Upon termination of the Plan, the ---------------------- Administrative Committee may, in its sole and absolute discretion, direct the Trustee to convert the Trust Fund into cash and liquidate it by making benefit payments to Members in accordance with the modes of payment provided for in Section 9.4. Alternatively, with the consent of the Board of Directors, or its designee, the Administrative Committee may direct the Trustee to hold the Members' Plan Benefit in the Trust Fund until such Members or their Beneficiaries become eligible to receive benefit payments under the terms and provisions of this Plan. 16.6 Restrictions on Liquidation of Trust Fund Upon Termination. In no ---------------------------------------------------------- event, however, will a Member's Pre-Tax Account be distributed before the first ----- to occur of the following events: (a) The Member's retirement; (b) The Member's death; (c) The Member's disability (as determined by the Administrative Committee); (d) The Member's termination of employment; (e) The Member's attainment of age 59-1/2; (f) The termination of the Plan, provided that neither the Company nor an Affiliated Company maintains a successor plan; (g) The disposition, to a corporation that is not an Affiliated Company, of substantially all of the assets (within the meaning of section 409(d)(2) of the Code) used by the Company in the trade or business in which the Member is employed, provided that the Member continues employment with the transferee corporation and the Company continues to maintain the Plan; or (h) The disposition, to a corporation that is not an Affiliated Company, of the Company's interest in a subsidiary in which the Member is employed, provided that the Member continues employment with the subsidiary and the Company continues to maintain the Plan. A distribution may be made under (f), (g), or (h) above only if it constitutes a total distribution of the entire balance of the Member's Accounts. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 53 17 INALIENABILITY OF BENEFITS. - -- -------------------------- 17.1 No Assignment Permitted. Except as may otherwise be required ----------------------- by law, no amount payable at any time under the Plan and the Trust Agreement will be used or diverted for purposes other than for the exclusive benefit of Members and their Beneficiaries. No amount payable at any time under the Plan and Trust Agreement will be subject to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any Member, Beneficiary or Alternate Payee. Any attempt to so alienate or subject any such amount will be void. If any Member, Beneficiary or Alternate Payee attempts to, or alienates, sells, transfers, assigns, pledges, attaches or otherwise encumbers any amount payable under the Plan and Trust Agreement, or any portion of such amount, or if by reason of his or her bankruptcy or other event, such amount would be made subject to his or her debts or liabilities, or would otherwise not be enjoyed by him or her, then the Administrative Committee, if it so elects, may direct that such amount be withheld and that such amount or any portion of such amount be paid or applied to or for the benefit of such person, his or her spouse, children or other dependents or any of them, in such manner and proportion as the Administrative Committee may deem proper. The following arrangements are not prohibited under the Plan: (a) Arrangements for the withholding of tax from benefit distributions; (b) Arrangements for the recovery of benefit overpayments; or (c) Arrangements for direct deposit of benefit payments to an account in a bank, savings and loan association or credit union (provided that such arrangement is not part of an arrangement constituting an assignment or alienation). In addition, the return of Company Contributions under Section 17.2 and the creation, assignment or recognition of a right to all or a portion of a Member's Plan Benefit under a Qualified Domestic Relations Order under Section 17.3 will not violate this Section 17.1. 17.2 Return of Contributions. All Pre-Tax Contributions, Post-Tax ----------------------- Contributions, Matching Contributions and Special Company Contributions are expressly conditioned upon the deductibility of such contributions under section 404 of the Code. If the deduction of any Pre-Tax Contribution, Post-Tax Contribution, Matching Contribution or Special Company Contribution is disallowed, then the amount for which a deduction is disallowed will be returned to the appropriate Participating Company within 12 months after the date of the disallowance. In addition, if any Pre-Tax Contribution, Post-Tax Contribution, Matching Contribution or Special Company Contribution is made as a result of a mistake of fact, such contribution may be repaid to the appropriate Participating Company within 12 months after it is made. Any Pre-Tax EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 54 Contribution, Post-Tax Contribution, Matching Contribution or Special Company Contribution so returned will be reduced to reflect losses but will not be increased to reflect gains or income. Any Pre-Tax Contribution or Post-Tax Contribution so returned will be paid to the Member from whom it was withheld. 17.3 Qualified Domestic Relations Orders. The Administrative Committee ----------------------------------- will honor the terms of a Qualified Domestic Relations Order that satisfies the following requirements. (a) Requirements. In accordance with Section 414(p) of the Code, ------------ a Domestic Relations Order will not be treated as a Qualified Domestic Relations Order unless it satisfies all of the following conditions: --- (i) The Domestic Relations Order clearly specifies the name and last known mailing address (if any) of the Member and the name and last known mailing address of each Alternate Payee covered by the order, the amount or percentage of the Member's Plan Benefit to be paid to each Alternate Payee or the manner in which such amount or percentage is to be determined, and the number of payments or period to which such order applies. (ii) The Domestic Relations Order specifically indicates that it applies to this Plan. (iii) The Domestic Relations Order does not require this Plan to provide any type or form of benefit, or any option, not otherwise provided under the Plan, and it does not require the Plan to provide increased benefits. (iv) The Domestic Relations Order does not require the payment of all or a portion of a Member's Plan Benefit to an Alternate Payee which is required to be paid to another Alternate Payee under another order previously determined to qualify as a Qualified Domestic Relations Order. (b) Early Commencement of Payments to Alternate Payees. A -------------------------------------------------- Domestic Relations Order requiring payment to an Alternate Payee before a Member has separated from employment may qualify as a Qualified Domestic Relations Order as long as the order does not require payment before the Member's "Earliest Retirement Age," which is the earliest date on which the Member could elect to receive a Plan Benefit. If the order requires payments to begin after a Member's Earliest Retirement Age but before the Member's actual retirement, the amount of the payments must be determined as if the Member had begun receiving benefit payments on the date on which the payments are to begin under the order, but taking into account only the value of the Member's Accounts at that time. The Plan Benefit payable to an Alternate Payee will not be recalculated upon the Member's actual retirement. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 55 (c) Alternate Payment Forms. The Domestic Relations Order may ----------------------- call for the payment of the Member's Plan Benefit to an Alternate Payee in any form in which benefits may be paid under the Plan to the Member, other than in the form of a qualified joint and survivor annuity, as defined in section 417(b) of the Code, with respect to the Alternate Payee and his or her subsequent spouse. (d) Processing of Qualified Domestic Relations Orders. The ------------------------------------------------- Administrative Committee will promptly notify the Member, and any Alternate Payee (including any Alternate Payee who may be entitled to benefits under a previously received Qualified Domestic Relations Order) of the receipt of any Domestic Relations Order which could qualify as a Qualified Domestic Relations Order. At the same time, the Administrative Committee will advise the Member and each Alternate Payee of the Plan provisions relating to the determination of the qualified status of such orders. Within a reasonable period of time after receipt of a copy of the Domestic Relations Order, the Administrative Committee will determine whether the order is a Qualified Domestic Relations Order and notify the Member and each Alternate Payee of its determination. The determination of the status of a Domestic Relations Order as a Qualified Domestic Relations Order will be made in accordance with such uniform and nondiscriminatory rules and procedures as may be adopted by the Administrative Committee from time to time. If monthly benefits are presently being paid with respect to a Member named in a Domestic Relations Order which may qualify as a Qualified Domestic Relations Order, or if the Member's Plan Benefit becomes payable after receipt of the order, the Administrative Committee will notify the Trustee to segregate and hold the amounts which would be payable to the Alternate Payee or payees designated in the order if the order is ultimately determined to be a Qualified Domestic Relations Order. If the Administrative Committee determines that the Domestic Relations Order is a Qualified Domestic Relations Order within 18 months of receipt of the order, the Administrative Committee will instruct the Trustee to pay the segregated amounts (plus any earnings on such amounts) to the Alternate Payee specified in the Qualified Domestic Relations Order. Conversely, if within the same 18 month period the Administrative Committee determines that the Domestic Relations Order is not a Qualified Domestic Relations Order, or if the status of the order as a Qualified Domestic Relations Order is not resolved, the Administrative Committee will instruct the Trustee to pay the segregated amounts (plus any earnings on such amounts) to the person or persons who would have been entitled to such amounts if the order had not been entered. If the Administrative Committee determines that a Domestic Relations Order is a Qualified Domestic Relations Order after the close of the 18 month period mentioned above, the determination will be applied prospectively only. The determination of the Administrative Committee as to the status of a Domestic Relations Order as a Qualified Domestic Relations EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 56 Order will be binding and conclusive on all interested parties, present and future, subject to the claims review provisions of Section 14. (e) Responsibility of Alternate Payees. Any person claiming to be ---------------------------------- an Alternate Payee under a Qualified Domestic Relations Order will be responsible for supplying the Administrative Committee with a certified or otherwise authenticated copy of the order and any other information or evidence that the Administrative Committee deems necessary in order to substantiate the person's claim or the status of the order as a Qualified Domestic Relations Order. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 57 18 TOP-HEAVY PROVISIONS. - -- -------------------- 18.1 Determination of Top-Heavy Status. If the Plan becomes "Top --------------------------------- Heavy," the provisions of this Section 18 will become operative. The Plan will be Top Heavy for a Plan Year if, on the last day of the prior Plan Year (the "Determination Date"), the cumulative balances credited to the Accounts of all Members who are "Key Employees" under the Plan exceed 60% of the cumulative balances credited to the Accounts of all Members under the Plan. The Plan will be "Super Top Heavy" if, on the Determination Date, the cumulative balances credited to the Accounts of all Members who are "Key Employees" under the Plan exceed 90% of the cumulative balances credited to the Accounts of all Members. A "Key Employee" means a key employee as defined in section 416 of the Code. If the Administrative Committee, in its sole and absolute discretion, but under the provisions of section 416 of the Code, determines that the Plan is a constituent in an "Aggregation Group" this Plan will be considered Top Heavy or Super Top Heavy only if the Aggregation Group is a "Top Heavy Group" or a "Super Top Heavy Group." An "Aggregation Group" includes: (a) Each plan intended to qualify under section 401(a) of the Code sponsored by the Company or an Affiliated Company in which 1 or more Key Employees participate; (b) Each other plan of the Company or an Affiliated Company that is considered in conjunction with such plans in determining whether or not the discrimination and coverage requirements of section 401(a)(4) and section 410 of the Code are satisfied; and (c) In the discretion of the Administrative Committee, any other such plan of the Company or an Affiliated Company, which, when considered in conjunction with the plans referred to above, satisfies the nondiscrimination and coverage requirements of section 401(a)(4) and section 410 of the Code. A "Top Heavy Group" is an Aggregation Group in which the sum (determined as of the Determination Date) of the aggregate of the amounts credited to the accounts of Key Employees under all "defined contribution plans" (as defined in section 414(i) of the Code) included in such group plus the present value of the cumulative accrued benefits for Key Employees under all "defined benefit plans" (as defined in section 414(j) of the Code) included in such group, exceed 60% of the total of such amounts for all employees and beneficiaries covered by such plans. A "Super Top Heavy Group" is an Aggregation Group for which the sum so determined for Key Employees exceeds 90% of the sum so determined for all employees and beneficiaries. Such EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 58 determination will be made by the Administrative Committee in accordance with section 416 of the Code. 18.2 Minimum Allocations. For any Plan Year during which the Plan is a ------------------- Top-Heavy Plan, the Matching Contributions and Special Company Contributions allocated under this Plan and employer contributions and forfeitures allocated under any other defined contribution plan of the Aggregation Group on behalf of any Member who is (a) employed on the last regularly scheduled working day of the Plan Year, and (b) who is not a Key Employee will not be less than a percentage of the Member's Total Compensation, equal to the lesser of: ------ (a) 3%; or (b) The percentage equal to the largest percentage that any Key Employee for that Plan Year receives of Pre-Tax Contributions, Matching Contributions and Special Company Contributions allocated on behalf of that Key Employee's Total Compensation for that Plan Year, as limited by Section 18.4 below. The minimum allocation will be determined without regard to any contributions made or benefits available under the federal Social Security Act. 18.3 Minimum Vesting. If a Member (other than a Member who did not --------------- complete any Period of Service after the Plan became a Top-Heavy Plan) ceases to be an Employee while the Plan is a Top-Heavy Plan and after such Member has completed 3 or more Years of Service, such Member's Vested Interest in his or her Matching Account and Special Company Account will be 100% and will no longer be subject to forfeiture for an act of Misconduct under Section 9.1. If a Member ceases to be an Employee while the Plan is a Top-Heavy Plan and before the Member has completed 3 Years of Service, the Members Vested Interest in his or her Matching Account and Special Company Contribution Account will be determined in accordance with Section 9.1. 18.4 Impact on Maximum Benefits. For any Plan Year in which the Plan is -------------------------- a Top-Heavy Plan, the number "1.00" will be substituted for the number "1.25" wherever it appears in section 415(e)(2) and section 415(e)(3) of the Code. Such substitution will not have the effect of reducing any benefit accrued under a defined benefit plan maintained by a Participating Company before the first day of the Plan Year in which this provision becomes applicable. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 59 19 GENERAL LIMITATIONS AND PROVISIONS. - -- ---------------------------------- 19.1 No Employment Rights. Nothing in the Plan will give any employee -------------------- the right to be retained in the employment of the Company or an Affiliated Company or affect the right of the Company or an Affiliated Company to terminate a person's employment with or without cause. 19.2 Payments from the Trust Fund. The Trust Fund will be the sole ---------------------------- source of benefits under the Plan and, except as otherwise required by the Act, the Company, the Administrative Committee and the Investment Committee assume no liability or responsibility for payment of such benefits. Each Member, Beneficiary or other person who will claim the right to any payment under the Plan will be entitled to look only to the Trust Fund for such payment and will not have the right, claim or demand for such amount against the Company, the Administrative Committee or the Investment Committee or any member of the Committees, or any employee or member of the board of directors of the Company. 19.3 Payments to Minors or Incompetents. If the Administrative ---------------------------------- Committee finds that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due him or her or his or her estate (unless a prior claim therefore has been made by a duly appointed legal representative) may, if the Administrative Committee so elects, be paid to his or her spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Administrative Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment will be a complete discharge of the liability of the Plan and the Trust Fund. 19.4 Lost Members or Other Persons. If the Administrative Committee is ----------------------------- unable to locate a Member, Beneficiary or other person who is entitled to receive a benefit under the Plan, the Administrative Committee may (but need not) direct that such benefit be applied to reduce the Company's Matching Contribution and/or any Special Company Contribution to the Plan. If the person later makes a claim for his or her benefit before the date final distributions are made from the Trust Fund following the termination of the Plan, the Company that employed the Member with respect to whom the benefit is payable, will reinstate such benefit (without income, gains or other adjustment) by making a special contribution to the Plan as soon as reasonably practicable after such claim is made. However, if the benefit would have been lost by reason of escheat under applicable state law, then the benefit will not be subject to reinstatement. If the Plan is terminated and final distributions are made from the Trust Fund before the applicable escheat period has expired, the Administrative Committee may transfer the affected person's benefit to an individual retirement account established for such person. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 60 19.5 Personal Data to the Administrative Committee. Each Member must --------------------------------------------- file with the Administrative Committee such pertinent information concerning himself or herself, his or her Beneficiary or any other person as the Administrative Committee may specify, and no member, Beneficiary or other person will have any rights to any benefit under the Plan unless such information is filed by or with respect to him or her. The Administrative Committee is entitled to rely on personal data given to it by a Member. 19.6 Insurance Contracts. If the payment of any benefit under the Plan ------------------- is provided for by a contract with an insurance company the payment of such benefit will be subject to all the provisions of such contract. 19.7 Notice to the Administrative Committee. All elections, -------------------------------------- designations, requests, notices, instructions and other communications from a Participating Company, a Member, Beneficiary, or other person to the Administrative Committee, required or permitted under the Plan, will be: (a) In such form as is prescribed from time to time by the Administrative Committee; (b) Mailed by first-class mail or delivered to such location as will be specified by the Administrative Committee, or provided by electronic means, including telephone, as permitted by the Administrative Committee; and (c) Deemed to have been given and delivered only upon actual receipt by the Administrative Committee or its designee at the location. 19.8 Notices to Members and Beneficiaries. All notices, statements, ------------------------------------ reports and other communications from a Participating Company or the Administrative Committee or Investment Committee to any employee, Member, Beneficiary or other person (other than the Administrative Committee) required or permitted under the Plan will be deemed to have been duly given when delivered to, or when mailed by first-class mail, postage prepaid and addressed to, the employee, Member, Beneficiary or other person at his or her address last appearing on the records of the Administrative Committee. 19.9 Word Usage. Whenever used in the Plan the masculine gender ---------- includes the feminine, and wherever the context of the Plan dictates, the plural will be read as the singular and the singular as the plural. Uses of the term "Sections" as a cross-reference will be to other Sections contained in the Plan and not to another instrument, document or publication unless specifically stated otherwise. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 61 19.10 Headings. The titles and headings of Sections are included -------- for convenience of reference only and are not to be considered in construing the provisions of the Plan. 19.11 Governing Law. The Plan and all rights under the Plan will be ------------- interpreted and construed in accordance with California law except to the extent such law is preempted by the Act and Code. 19.12 Heirs and Successors. All of the provisions of the Plan will be -------------------- binding upon all persons who will be entitled to any benefits under the Plan, their heirs and legal representatives. 19.13 Withholding. Payment of benefits under this Plan will be subject ----------- to applicable law governing the withholding of taxes from benefit payments, and the Trustee and Administrative Committee will be authorized to withhold taxes from the payment of any benefits under the Plan, in accordance with applicable law. IN WITNESS WHEREOF, LEVI STRAUSS ASSOCIATES INC. has caused this Plan to be executed and its corporate seal to be hereunto affixed by its duly authorized officers, as of this _____ day of _______________, 1995. LEVI STRAUSS ASSOCIATES INC. By: ____________________________________ Its: _____________________________ EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN 62 LEVI STRAUSS ASSOCIATES INC. ---------------------------- EMPLOYEE LONG-TERM INVESTMENT ----------------------------- AND SAVINGS PLAN ---------------- APPENDIX A ---------- PRIOR PLAN PROVISIONS --------------------- This Appendix A states the provisions of the Plan in effect on or after the Effective Date (November 27, 1989) which were amended before April 1, 1995. The provisions of the Plan in effect as of April 1, 1995 are presented in the main text of this amended and restated Plan. 20 Effective before November 21, 1990, Section 2.1 of the Plan, then designated as Section 16.1, read as follows: 16.1 "Account" means the Account maintained for a Member ------- to which are credited the Member's Pre-Tax Contributions and Company Contributions. 21 Effective before November 21, 1990, Section 2.6 of the Plan, then designated as Section 13.4, read as follows: 13.4 Annual Additions. For purposes of this Section 13, ---------------- a Member's "Annual Additions" for a Plan Year will be equal to the sum of the following: (a) The aggregate employee contributions which the Member contributes during such Plan Year to all qualified retirement plans maintained by the Affiliated Group; (b) The amount of contributions made on behalf of the Member for such Plan Year to any qualified defined contribution plan maintained by the Affiliated Group under an election by the Member under a qualified cash or deferred arrangement, including Pre-Tax Contributions to this Plan; and (c) The amount of employer contributions and forfeitures allocated to the Member as of any date within such Plan Year EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-1 under any qualified defined contribution plan maintained by the Affiliated Group, including Company Contributions to this Plan. 22 Effective August 13, 1990, the following clause was added to the end of the first sentence in Section 2.8 of the Plan, then designated as Section 8.6: "or the Administrative Committee is satisfied that the spouse cannot be located." 23 Effective before January 1, 1992, Section 2.16 of the Plan, then designated as Section 16.11, read as follows: 16.11 "Eligible Employee" means an Employee who is on the ----------------- payroll of a Participating Company other than an Employee who is paid from the home office of the Company. The Board of Directors, in designating a Participating Company, may specify that only certain named Employees or only certain classifications of Employees on the payroll of such Participating Company will not be "Eligible Employees." In addition, the term "Eligible Employee" will not include an Employee who is: (A) Included in a unit of employees covered by a collective-bargaining agreement which does not provide that such Employee will be eligible to participate in the Plan; (B) A stocktaker or Temporary Employee; (C) A nonresident alien who receives no remuneration from a Participating Company that constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code); (D) An alien who receives no remuneration from a Participating Company that constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code), if the alien has been transferred by a Participating Company from a job outside the United Sates to a job within the United States and the duration of such transfer is expected to be less than 24 months; (E) A United States citizen locally hired by a foreign subsidiary (including a domestic subsidiary operating abroad) or foreign division of a Participating Company; or EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-2 (F) A "leased employee" (as defined in section 414(n) of the Code) who is providing services to a member of the Affiliated Group. The Board of Directors on a nondiscriminatory basis may designate as an Eligible Employee any person described in (c), (d) or (e) above. Such designation must be made in writing after receiving the advice of counsel. A person's status as an Eligible Employee will be determined by the Administrative Committee and such determination will be conclusive and binding on all persons. 24 Section 2.19 and Section 2.20 of the Plan, then designated as Section 16.18, were added to the Plan, effective November 21, 1990. 25 Effective before January 1, 1992, Section 2.30 of the Plan, then designated as Section 16.22, read as follows: 16.22 "Member" means a person who participates in the Plan ------ under Section 2. 26 Section 2.46, then designated as Section 16.28, was added to the Plan effective November 21, 1990. 27 Effective before November 21, 1990, Section 3.1 of the Plan, then designated as Section 2.1, read as follows: 2.1 Commencement of Membership. Membership in the Plan is -------------------------- voluntary. By filing the prescribed form with the Administrative Committee in advance, an Eligible Employee may commence participation in the Plan on the first day of the first pay period of any month coinciding with or next following any Entry Date after he or she completes a 365-day Period of Service. Upon becoming a Member, the Eligible Employee will designate a Beneficiary under Section 8.6. 28 Effective for the period beginning November 21, 1990, and ending May 28, 1991, Section 3.1 of the Plan, then designated as Section 2.1, read as follows: 2.1 Commencement of Membership. With respect to Pre-Tax -------------------------- Contributions provided for in Section 2.1 and Matching Contributions EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-3 provided for in Section 3.1, membership in the Plan is voluntary. By filing the prescribed form with the Administrative Committee in advance, an Eligible Employee may commence participation in the Plan with respect to such provisions on the first day of the first pay period of any month coinciding with or next following any Entry Date after he or she completes a 365-day Period of Service. With respect to Special Company Contributions provided for in Section 3.2, an Eligible Employee who is (a) employed by the Company or a Participating Company on or before May 31 of a Plan Year and (b) employed by the Company or a Participating Company on the last day of such Plan Year, will be eligible to participate in the Plan with respect to such contributions for such Plan Year. Upon becoming a Member, the Eligible Employee will designate a Beneficiary under Section 8.6. 29 Effective for the period beginning May 29, 1991, and ending November 23, 1991, Section 3.1 of the Plan, then designated as Section 2.1, read as follows: 2.1 Commencement of Membership. Membership in the Plan -------------------------- is voluntary for Pre-Tax Contributions provided for in Section 2.1 and the Matching Contribution provided for in Section 3.1. By filing the prescribed form with the Administrative Committee in advance, an Eligible Employee may commence participation in the Plan on the first day of the first pay period of any month coinciding with or next following any Entry Date after he or she completes a 365-day Period of Service. Membership for the Special Company Contribution provided under Section 3.2 is automatic and an Eligible Employee will commence participation in the Plan for such contribution on the first day coinciding with or next following any Entry Date after he or she completes a 365-day Period of Service. Upon becoming a Member, an Eligible Employee will designate a Beneficiary under Section 8.6. 30 The existing Section 3.1 of the Plan was added to the Plan, effective for the Plan Year ending November 24, 1991. 31 The existing Section 3.5 of the Plan was added to the Plan, effective January 1, 1992. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-4 32 Effective before November 21, 1990, Section 5 of the Plan, then designated as Section 4, read as follows: 4.1 Amount and Form. The Participating Companies will make --------------- a Company Contribution to the Plan for each Plan Year in an amount equal to 50% of each Member's Pre-Tax Contributions for such Plan Year which are transferred to Fund Y pursuant to Section 5.2, reduced by any amount which cannot be allocated to the Member because of the contribution limitation described in Section 13.1. The Board of Directors may determine that no Company Contribution will be made for a particular Plan Year or portion of a Plan Year, or may determine that a lesser Company Contribution will be made, in view of Company performance and economic and financial conditions prevailing and anticipated at the time. The Board of Directors also may determine in its sole discretion that a greater Company Contribution will be made for a particular Plan Year or portion of a Plan Year. No Company Contribution will be made for a Member unless he or she (a) is an Employee on the date as of which a Company Contribution is allocated or (b) ceased to be an Employee during the Plan Year after attaining age 55 and completing 15 years of Service, after attaining age 65 or by reason of death and his or her Account has not been distributed under Section 8. Company Contributions may be made in the form of cash or in the form of shares of LSAI Stock, or a combination of both. 4.2 Deposit With Trustee; Crediting Accounts. Company ---------------------------------------- Contributions for any Plan Year will be paid to the Trustee at the time when Pre-Tax Contributions are transferred to Fund Y under Section 5.2 and will be allocated among Members in proportion to their Pre-Tax Contributions which are transferred to Fund Y. A Member's share of the Company Contributions will be allocated and credited to the Member's Account as of the earlier of the date the Company Contributions are made to the Plan or the end of the Plan Year during which the Member made the Pre-Tax Contributions with respect to which such Company Contributions are made. 4.3 Curtailment or Distribution of Excess Aggregate ----------------------------------------------- Contributions. If any Company Contributions otherwise allocable to ------------- a Member would constitute "excess aggregate contributions" (as defined in section 401(m)(6)(B) of the Code) with respect to a Plan Year, (a) such Company Contributions will not be made to the Plan, if such Company EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-5 Contributions have not been made to the Plan as of the date on which such Company Contributions are determined to constitute excess aggregate contributions, or (b) such Company Contributions (and any income allocable to such Company Contributions) will be distributed to the Member no later than 2-1/2 months after the end of such Plan Year, if such Company Contributions have been made to the Plan prior to the date on which such Company Contributions are determined to constitute excess aggregate contributions. 33 Effective before the Plan Year ending November 24, 1991, paragraph 2 of Section 5.3 of the Plan, then designated as Section 4.3, read as follows: The Special Company Contribution will be paid to the Trustee on or before the due date (including extensions) for filing the Company's consolidated federal income tax return for the Plan Year. The Special Company Contribution for a Plan Year will be allocated among Members who are Employees on the last working day of such Plan Year either (a) in proportion to each Member's Compensation for such Plan Year including, in the case of a Member who was a Member for only part of the Plan Year, amounts that would have been Compensation if the Member had been a Member for the full Plan Year or (b) in an equal amount for each Member, as determined by the Board of Directors in their sole discretion. A Member's share of the Special Company Contribution will be credited to the Member's Special Company Account. 34 Effective before November 21, 1990, Section 6.2 of the Plan, then designated as Section 5.2, read as follows: 5.2 Investment of Contributions. All Company Contributions --------------------------- will be deposited in Fund Y. All Pre-Tax Contributions initially will be deposited in the Segregated Account. Twice each Plan Year, the Investment Committee will obtain an independent appraisal of the Fair Market Value of LSAI Stock. The Investment Committee will notify the Trustee of such Fair Market Value promptly after completion of the appraisal. If the Trustee determines that the Fair Market Value exceeds adequate consideration for LSAI Stock within the meaning of section 3(18) of ERISA, all Pre-Tax Contributions that are invested in the Segregated Account and any earnings on such contributions will be transferred to Fund Z, and no Company Contribution will be made with respect to such Pre-Tax Contributions. If the Trustee determines that the Fair Market Value does not exceed adequate consideration for LSAI Stock, the EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-6 Administrative Committee will notify Members of such Fair Market Value and the Company's stockholders of the Trustee's intention to purchase LSAI Stock. Each Member who has Pre-Tax Contributions invested in the Segregated Account will have the opportunity to elect to have such Pre-Tax Contributions and any earnings on such contributions transferred from the Segregated Account to Fund Z and/or Fund Y in 25% increments of such Pre-Tax Contributions and earnings. If a Member files such an election on the prescribed form by the date determined by the Administrative Committee, the Member's Pre-Tax Contributions that are invested in the Segregated Account and any earnings on such contributions will be transferred to the Fund elected by the Member. If a Member fails to file such an election on the prescribed form by the date determined by the Administrative Committee, the Member's Pre-Tax Contributions that are invested in the Segregated Account and any earnings on such contributions automatically will be transferred to Fund Y. At the time when Pre-Tax Contributions and earnings are transferred to Fund Y, the Participating Companies will make a Company Contribution under Section 4.1 unless the Board of Directors determines that no Company Contribution will be made. The Trustee will seek to acquire LSAI Stock for Fund Y at a price no greater than Fair Market Value to the extent any cash Company Contributions deposited in Fund Y and Pre-Tax Contributions transferred to Fund Y exceed the cash requirements of Fund Y as determined by the Administrative Committee. The Trustee may acquire LSAI Stock from a party in interest or a disqualified person for no more than adequate consideration (as defined in section 3(18) of ERISA) in accordance with the requirements of section 408(e) of ERISA. If any Member's Pre-Tax Contributions in excess of the cash requirements of Fund Y have not been invested in LSAI Stock when the Fair Market Value of LSAI Stock is next determined because insufficient LSAI Stock was available to the Trustee, the Member may elect to have such Pre-Tax Contributions and any earnings on such contributions transferred to Fund Z in accordance with procedures established by the Administrative Committee. In the absence of such an election, the Pre-Tax Contributions and earnings will remain in Fund Y for investment in LSAI Stock at the new Fair Market Value to the extent LSAI Stock is available. Any Company Contributions and earnings on such contributions that have not been invested in LSAI Stock will remain in Fund Y, whether or not the Member elects to transfer the excess Pre-Tax Contributions to Fund Z. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-7 Any Member who requests a distribution of his or her Plan Benefit under Section 8 prior to a date on which Company Contributions are made to the Plan will be deemed to have elected not to invest in Fund Y the Member's Pre-Tax Contributions and earnings on such contributions which were held in the Segregated Account immediately prior to such request. 35 Section 6.2 of the Plan, then designated as Section 5.2, was amended to give the Investment Committee the authority to effect a Suspension, effective October 29, 1990. 36 Section 6.4 of the Plan, then designated as Section 5.4, was added to the Plan, effective January 1, 1991. 37 Effective before February 28, 1991, Section 6.7(b)(i) of the Plan, then designated as Section 15.5(i), read as follows: (i) Any offer to purchase LSAI Stock by the Company for purposes of making cash distributions from the Plan. 38 Section 6.7(c) of the Plan, then designated as Section 15.5(b), was added to the Plan, effective February 28, 1991. 39 Effective before November 21, 1990, the first and second paragraphs of Section 8.1 of the Plan, then designated as Section 7.1, read as follows: 7.1 Requirements for Withdrawals. A Member who incurs a ---------------------------- hardship or who becomes Totally and Permanently Disabled may withdraw from the Member's Account an amount not exceeding the lesser of (1) the Member's aggregate Pre-Tax Contributions, reduced by the sum of all Pre-Tax Contributions previously withdrawn by or distributed to the Member, or (2) the balance credited to his or her Account. The minimum amount that may be withdrawn will be $1,000. A Member may not make more than 2 hardship withdrawals in any Plan Year. A hardship withdrawal will be permitted only if the entire amount requested is not reasonably available from other resources of the Member and is required to meet immediate and heavy financial needs of the Member arising solely from 1 or more of the following: (a) The payment of extraordinary and unreimbursed medical or hospital expenses incurred by the Member, the Member's EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-8 spouse, any dependent of the Member, or a nondependent parent or child of the Member; (b) The payment of tuition expenses for the next quarter or semester of post-secondary education for the Member, the Member's spouse or child, or any dependent of the Member; (c) The payment of expenses incurred by a Member in purchasing his or her primary residence; (d) The need to prevent the eviction of the Member from his or her primary residence or foreclosure on the mortgage of the Member's primary residence; (e) The payment of funeral expenses for a family member or relative of the Member; or (f) The loss of income resulting from an abbreviated work schedule required by the Member's health, the loss of employment by the Member's working spouse or garnishment of the Member's wages. An amount will be considered necessary to satisfy the Member's immediate and heavy financial need only if the Administrative Committee determines that the need cannot be relieved by any of the following: (i) Reimbursement or compensation by insurance or otherwise; (ii) Reasonable liquidation of the Member's assets, including assets of the Member's spouse and minor children that are reasonably available to the Member, to the extent such liquidation would not itself cause an immediate and heavy financial need; (iii) Cessation of Pre-Tax Contributions; or (iv) A loan from a commercial source on reasonable commercial terms. 40 The final paragraph of Section 8.1 of the Plan, then designated as Section 7.1, was added to the Plan, effective August 13, 1990. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-9 41 Effective before November 21, 1990, Section 9.1 of the Plan, then designated as Section 8.1, read as follows: 8.1 Vesting in Accounts. A Member's interest in his or ------------------- her Account will be 100 percent vested and nonforfeitable at all times. 42 Effective before November 21, 1990, Section 10.4 of the Plan, then designated as Section 13.3, read as follows: 13.3 Disposition of Excess Annual Additions. Any Pre-Tax -------------------------------------- Contributions that cannot be credited to a Member because of the limitation described in Section 13.1 will be reduced under Section 3.5. Any Pre-Tax Contributions that cannot be handled in accordance with the preceding sentence will be credited to a suspense account on behalf of the Member. All amounts credited to such account will be treated as Pre-Tax Contributions for successive Plan Years and will be allocated annually to the Member under Section 3 (to the extent such allocation is not prohibited by Section 13.1) until exhausted. No gains or losses will be credited to such account and no additional Pre-Tax Contributions or Company Contributions will be made by or on behalf of the Member so long as any amount remains in such account. Any amounts that cannot be allocated to the Member as Company Contributions will be deducted from the amount of Company Contributions that otherwise would be made as described in Section 4.1, but such reduction will not affect the amounts allocable under Section 4.1 to Members whose Company Contribution component of Annual Additions is not reduced. 43 Effective November 27, 1989, Section 10.4 of the Plan, then designated as Section 13.4, was added to the Plan. 44 Effective before November 21, 1990, Section 11.1 of the Plan, then designated as Section 9.1, read as follows: 9.1 Contributions. The Administrative Committee will make ------------- arrangements for the collection of Pre-Tax Contributions as provided in Section 3. The Company will cause the Participating Companies to make Company Contributions to the Plan as provided in Section 4. 45 Effective before November 21, 1990, Section 18.2 of the Plan, then designated as Appendix A, paragraph (b), read as follows: EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-10 (b) Minimum Allocations. For any Plan Year during ------------------- which the Plan is a Top-Heavy Plan, the Pre-Tax Contributions and Company Contributions allocated under this Plan and employer contributions and forfeitures allocated under any other defined contribution plan of the Aggregation Group on behalf of any Member who is employed on the last regularly scheduled working day of the Plan Year and who is not a Key Employee will not be less than a percentage of the Member's Total Compensation equal to the lesser of (i) 3% or (ii) the percentage equal to the largest percentage that any Key Employee for that Plan Year receives of Pre-Tax Contributions and Company Contributions allocated on behalf of that Key Employee's Total Compensation for that Plan Year. The minimum allocation will be determined without regard to any contributions made or benefits available under the Federal Social Security Act. 46 Effective before November 21, 1990, the Plan contained a Section 16.9 which read as follows: 16.9 "Company Contribution" means the contribution made by -------------------- the Participating Companies under Section 4.1. 47 Effective before November 21, 1990, Section 19.2 of the Plan, then designated as Section 15.7, read as follows: 15.7 Return of Contributions. Pre-Tax Contributions ----------------------- and Company Contributions are expressly conditioned upon the initial determination by the Secretary of the Treasury or his delegate that the Plan meets the requirements of section 401(a) of the Code and upon the deductibility of such Contributions under section 404 of the Code. If such initial determination is not favorable, then all Pre-Tax Contributions and Company Contributions will be returned to the Participating Companies within 12 months after the date of the initial determination. If the deduction of any Pre-Tax Contribution or Company Contribution is disallowed, then the amount for which a deduction is disallowed will be returned to the appropriate Participating Company within 12 months after the date of the disallowance. In addition, if any Pre-Tax Contribution or Company Contribution is made as a result of a mistake of fact, such Contribution may be repaid to the appropriate Participating Company within 12 months after it is made. Any Pre-Tax Contribution or Company Contribution returned under this Section 15.7 will be reduced to reflect EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-11 losses but will not be increased to reflect gains or income. Any Pre-Tax Contribution returned under this Section 15.7 will be paid to the Member from whom it was withheld. 48 Effective with respect to the Plan Year ending in 1989, Appendix B of the Plan read as follows: If Matching Contributions are made with respect to Pre-Tax Contributions made during the Plan Year ended in 1989, such Matching Contributions will be made with respect to such Pre-Tax Contributions made by a Member who was employed by the Company on the last day of such Plan Year but received a distribution of his or her Plan Benefit under Section 8 before the date on which such Matching Contributions are made to the Plan, without regard to whether such Pre-Tax Contributions are transferred to Fund Y (the "Special Carryover Match"). The Special Carryover Match will be allocated to such Member's account as of the last day of the Plan Year ended in 1989, and will become distributable under Section 8 of the Plan. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN A-12 LEVI STRAUSS ASSOCIATES INC. ---------------------------- EMPLOYEE LONG-TERM INVESTMENT ----------------------------- AND SAVINGS PLAN ---------------- APPENDIX B ---------- BLACKOUT PROVISIONS ------------------- 1. In General. The Administrative Committee or its designee (either ---------- referred to herein as the "Blackout Coordinator") may establish a Blackout Period, as defined below, in the event that the Blackout Coordinator determines that such a Blackout Period is necessary or appropriate in the administration of the Plan. 2. Definitions. ----------- (a) A Blackout Period is a period of time during which Affected Requests shall not be processed or effected. (b) An Affected Request is any of the following requests by a Member (or Beneficiary) for an action or an event under the Plan, or any of the following Plan functions or events: (i) Reinvestment of Accounts pursuant to Section 6 of the Plan; (ii) Valuation of Accounts and distribution of statements pursuant to Section 7 of the Plan; (iii) Withdrawals pursuant to Section 8 of the Plan; and (iv) Distribution of Plan Benefits pursuant to Section 9 of the Plan. In addition, the Blackout Coordinator, in its declaration of the Blackout Period or in any supplementary action regarding the Blackout Period, may designate as Affected Requests any other requests by a Member (or Beneficiary) or other Plan functions or events which are otherwise allowed or provided for under the Plan, or may declare that specified requests or Plan functions or events encompassed by (b)(i)-(iv) above shall not constitute Affected Requests, for all or a designated portion of the Blackout Period. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN B-1 3. Duration. The duration of the Blackout Period shall be determined -------- by the Blackout Coordinator, in its sole discretion. 4. Effect of Blackout Period. Affected Requests will be held by the ------------------------- Administrative Committee until the end of the Blackout Period. At the end of the Blackout Period, the Administrative Committee shall reconfirm the Member's (or Beneficiary's) eligibility for or desire with respect to any Affected Request which had been submitted by such Member (or Beneficiary), but which had not been processed as a result of the Blackout Period. Other Plan functions or events which would have occurred if not for the Blackout Period, will be processed automatically after the expiration of the Blackout Period. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN B-2 LEVI STRAUSS ASSOCIATES INC. ---------------------------- EMPLOYEE LONG-TERM INVESTMENT ----------------------------- AND SAVINGS PLAN ---------------- APPENDIX C ---------- FUNDS ----- - - Fidelity Money Market Trust: Retirement Money Market Portfolio - - Fidelity Asset Manager - - Fidelity Magellan Fund - - Sponsor Stock Fund The Fund designated as the Holding Account referenced in Section 7.1 shall be the Fidelity Retirement Government Money Market Portfolio. The Fund designated as the Fund to receive contributions for which no proper Member investment direction has been received shall be the Fidelity Retirement Government Money Market Portfolio. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN C-1 LEVI STRAUSS ASSOCIATES INC. ---------------------------- EMPLOYEE LONG-TERM INVESTMENT ----------------------------- AND SAVINGS PLAN ---------------- APPENDIX D ---------- ADDITIONAL ELIGIBLE WITHDRAWALS ------------------------------- In accordance with Section 8.3(b)(viii), losses relating to natural disasters described herein may form a basis for withdrawals. (a) (a) Description of Natural Disaster. ------------------------------- (I) Limitations. ----------- EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN D-1 EX-10.SS 6 AM. TO LSAI EMPL LONG-TERM INV/SAV. PLAN Exhibit 10ss LEVI STRAUSS ASSOCIATES INC. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN ----------------- AMENDMENTS WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") has adopted the Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan (the "Plan"); WHEREAS, pursuant to Section 16.1 of the Plan, the Board of Directors of the Company is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company and certain of its major stockholders are considering a transaction intended to ensure the long-term private, family ownership of the Company (the "Transaction") and which would involve the elimination of Company stock as an investment under the Plan; WHEREAS, by resolutions duly adopted on November 30, 1995, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt amendments to the Plan in order to accommodate and reflect the possibility of the Transaction and any related transactions; and WHEREAS, effective as of December 7, 1995 the Company adopted a new Appendix E to the Plan to accommodate and reflect the possibility of the Transaction and any related transactions; WHEREAS, the Company wants to amend Appendix E to delay the application of certain provisions of Appendix E; WHEREAS, the amendments herein are within the scope of such delegated authority of Robert D. Haas; NOW, THEREFORE, effective as of the date hereof, Appendix E of the Plan is hereby amended and restated in its entirety to read as set forth on the attached exhibit. IN WITNESS WHEREOF, the undersigned has set his hand hereunto, on December 7, 1995. /s/ Robert D. Haas ______________________________ Robert D. Haas Chairman of the Board and Chief Executive Officer EXHIBIT LEVI STRAUSS ASSOCIATES INC. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN APPENDIX E -------------------- Suspension of Stock Fund Investments and Related Provisions -------------------- 1. Introduction. ------------ Effective as of December 7, 1995, the provisions of this Appendix E to the Plan are applicable with respect to the transactions and events specified below, instead of the provisions of the main text of, or other appendices to, the Plan which would otherwise govern such transactions and events. 2. Special Provisions. ------------------ (a) Stock Fund Transactions. ----------------------- (i) All reinvestment of Accounts under Section 6.3, withdrawals under Section 8 and distributions of Plan Benefits under Section 9 shall be suspended effective for requests received on or after the Suspension Date (as such term is defined in Section E.2(c) below), to the extent that such transactions would have resulted in the distribution or transfer of funds from the Stock Fund. (ii) (A) Except as provided in (B) below, any duty, responsibility or function assigned to the Investment Committee with respect to matters relating to the Stock Fund after the Effective Date, including but not limited to obtaining an appraisal of the Fair Market Value of LSAI Stock, is hereby assigned to the Chief Executive Officer of the Company (the "CEO"), or to any person or entity designated in writing by the CEO. The CEO, or the individual or entity designated by the CEO, if any, shall be referred to as the "Coordinator." (A) The assignment provided in (A) above does not apply to any responsibility of the Investment Committee in discharging its duties under the Plan in connection with a transaction or event which may -1- result in the sale, conversion or other disposition of the LSAI Stock held by the Plan, including but not limited to acting on behalf of the Plan with respect to the exercise of stockholders' rights associated with mergers (for example, dissenter's rights under relevant state law) and responses to purchase offers as described in Section 6.7(c). (iii) Nothing herein is intended to require the Coordinator to obtain a Fair Market Value of LSAI Stock during the suspension of Stock Fund transactions provided in Section E.2(a)(i) above. (iv) The responsibilities of the Investment Committee under the Plan which are not described in the assignment provided in Section E.2(a)(ii)(A) above shall remain in full force and effect. (b) Investments and Investment Directions. ------------------------------------- (i) No additional investment of Member Contributions or Company Contributions shall be made to the Stock Fund. (ii) Effective for pay periods beginning December 25, 1995, all Member Contributions held in the Retirement Government Money Market Fund pending potential investment in the Stock Fund shall be transferred to the Retirement Money Market Fund, all current Member Contributions shall be deposited in the fund designated by the Member for the investment of such Member Contributions, and the Retirement Money Market Fund shall be the Fund to receive contributions for which no proper investment direction has been received. (iii) With respect to any Matching Contribution which is made with respect to Member Contributions made on or after May 29, 1995: (A) A transfer of Member Contributions to the Stock Fund is not required in order for the Company to make a Matching Contribution. (B) The first Matching Contribution made after the date of this Appendix shall be made with respect to Member Contributions made on or before December 24, 1995 on behalf of a Member who was an Employee on November 22, 1995, or ceased to be an Employee between May 29, 1995 and November 22, 1995 by reason of an event described in Section 5.1(b)(i)-(iv). Any subsequent Matching Contributions, and the time for making any -2- such Matching Contribution, shall be determined by the Company, in its sole discretion. (C) Matching Contributions shall be made in cash and deposited in the Fund designated by the Member as of the date of deposit for investment of his or her Member contributions or, if no such designation is in effect, in the Retirement Money Market Fund. (c) Suspension Date. For purposes of this Appendix E, the term --------------- "Suspension Date" shall mean the date on which the Company commences distribution (including but not limited to distribution by electronic mail) of a summary of the terms of this Appendix E. -3- Exhibit 10ss LEVI STRAUSS ASSOCIATES INC. EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN ----------------- AMENDMENTS WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") has adopted the Levi Strauss Associates Inc. Employee Long-Term Investment and Savings Plan (the "Plan"); WHEREAS, pursuant to Section 16.1 of the Plan, the Board of Directors of the Company is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company desires to amend the Plan in order to readmit a limited number of Highly Compensated Employees to active participation under certain circumstances; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the Plan and to delegate to any other officer of the Company the authority to adopt certain amendments to the Plan; WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the Plan subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendments herein are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, effective November 27, 1995, the Plan is hereby amended as set forth below: 1. The current text of Section 3.5 is revised in its entirety to read as set forth below: 3.5 Highly Compensated Employees. ---------------------------- (a) Any Highly Compensated Employee will only be eligible for membership in the Plan as an Inactive Member or as set forth in Section 3.5(b) and, in either case, only if he or she otherwise satisfies the eligibility requirements of Section 3.1. An Inactive Member will not be 1 eligible to make Member Contributions under Section 4 of the Plan or receive any allocation of Matching Contributions under Section 5 of the Plan. An Inactive Member will, however, be eligible to: (i) Make Rollover Contributions to the Plan under Section 4.7; (ii) Direct the investment of his or her Accounts under Section 6; and (iii) Make withdrawals from his or her Accounts under Section 8. An Inactive Member will continue to be subject to the remaining provisions of the Plan. The Administrative Committee will periodically determine whether Members in the Plan are Highly Compensated Employees and any such Member's status will change from an Active Member to an Inactive Member as soon as practicable after the Administration Committee makes such determination. (b) (i) Eligible Highly Compensated Employees. ------------------------------------- Section 3.5(a) notwithstanding, a Highly Compensated Employee who satisfies the eligibility requirements of Section 3.1 may participate in the Plan for all or a portion of a Plan Year as a Member provided that he or she is included in an eligible category of Highly Compensated Employees described in Appendix F to the Plan. (ii) Establishment of Appendix F. Appendix F may be --------------------------- established, amended or revoked from time to time by any individual or entity empowered to amend the Plan. It is intended that Appendix F designate an eligible category of Highly Compensated Employees who can participate in the Plan without resulting in the Plan failing to comply with the nondiscriminatory coverage rules of Code section 410(b) or any successor provision. However, the existence of this provision does not require the Company to designate any Highly Compensated Employees, or the maximum permissible Highly Compensated Employees, to participate in the Plan as Members for any Plan Year. 2. The Plan is amended by a new Appendix F, to read as set forth on the attached exhibit hereto. IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on December 21, 1995. 2 ________________________________ Donna J. Goya Senior Vice President 3 EXHIBIT TO EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN AMENDMENT EMPLOYEE LONG-TERM INVESTMENT AND SAVINGS PLAN OF LEVI STRAUSS ASSOCIATES INC. APPENDIX F -------------------- Pursuant to Section 3.5(b) of the Plan, the Highly Compensated Employees described below are eligible to participate in this Plan as Members: 3. For the Plan Year ending in 1996, Highly Compensated Employees whose compensation (as determined pursuant to Section 2.20) for the Plan Year ending in 1995 did not exceed $95,000. 4 EX-10.TT 7 AM TO LSAI RETIREMENT PLAN Exhibit 10tt LEVI STRAUSS ASSOCIATES INC. RETIREMENT PLAN FOR OVER-THE-ROAD TRUCK DRIVERS AND DISPATCHERS -------------------- AMENDMENT The Levi Strauss Associates Inc. Retirement Plan for Over-the-Road Truck Drivers and Dispatchers is hereby amended as set forth below: Effective as of the first day of the Plan Year beginning in 1993, Section 11 is amended by the addition of a new Section 11.7, to read as set forth below: 11.7 Direct Rollovers. A distributee may elect at the time and in ---------------- the manner prescribed by the Administrative Committee to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The terms used in this paragraph are defined as follows: (a) Eligible rollover distribution. Any distribution of all or any portion of the balance to the credit of the distributee, except that it does not include: (i) Any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more. (ii) Any distribution to the extent it is required under section 401(a)(9) of the Code. (iii) The portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). (b) Eligible retirement plan. 1 (i) An individual retirement account described in section 408(a) of the Code. (ii) An individual retirement annuity described in section 408(b) of the Code. (iii) An annuity plan described in section 403(a) of the Code. (iv) A qualified trust described in section 401(a) of the Code that accepts the distributee's eligible rollover distribution. (v) However, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee. A Member or former Member, his or her surviving spouse, or his or her spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order. (d) Direct rollover. A payment by the Plan to the eligible retirement plan specified by the distributee. To facilitate installment payments under Section 11.7, the Administrative Committee, in its sole discretion, may segregate all or any part of the Participant's Benefit in a separate account. Dated: November ____, 1995. /s/ Donna J. Goya __________________________________ Donna J. Goya Senior Vice President 2 EX-10.UU 8 REVISED HOME OFFICE PENSION PLAN Exhibit 10uu REVISED HOME OFFICE PENSION PLAN OF LEVI STRAUSS ASSOCIATES INC. -------------------- AMENDMENT The Revised Home Office Pension Plan of Levi Strauss Associates Inc. is hereby amended as set forth below: 1. Effective November 28, 1994, Section 5 is amended by a new Section 5.5, to read as set forth below: 5.5 Certain Benefits Protected. With respect to any Member whose -------------------------- current accrued benefit under the Plan as of November 28, 1994 is based on compensation for Plan Years beginning before such Plan Year that exceeded $150,000, the Member's accrued benefit, unless otherwise provided in the Plan, will be the greater of the accrued benefit determined for the Member under (a) or (b) below: (a) The Member's accrued benefit determined with respect to the benefit formula applicable for the Plan Year beginning as of November 28, 1994, as applied to the Member's total years of Benefit Service taken into account under the Plan for purposes of benefit accruals, or (b) The sum of: (i) The Member's accrued benefit as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with section 1.401(a)(4)-13 of the Code, and (ii) The Member's accrued benefit determined under the benefit formula applicable for the Plan Year beginning as of November 28, 1994, as applied to the Member's Benefit Service for Plan Years beginning after 1993. 1 2. Effective as of the first day of the Plan Year beginning in 1993, Section 11 is amended by the addition of a new Section 11.7, to read as set forth below: 11.7 Direct Rollovers. A distributee may elect at the time and in ---------------- the manner prescribed by the Administrative Committee to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The terms used in this paragraph are defined as follows: (a) Eligible rollover distribution. Any distribution of all or any portion of the balance to the credit of the distributee, except that it does not include: (i) Any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more. (ii) Any distribution to the extent it is required under section 401(a)(9) of the Code. (iii) The portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). (b) Eligible retirement plan. (i) An individual retirement account described in section 408(a) of the Code. (ii) An individual retirement annuity described in section 408(b) of the Code. (iii) An annuity plan described in section 403(a) of the Code. (iv) A qualified trust described in section 401(a) of the Code that accepts the distributee's eligible rollover distribution. (v) However, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. 2 (c) Distributee. A Member or former Member, his or her surviving spouse, or his or her spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order. (d) Direct rollover. A payment by the Plan to the eligible retirement plan specified by the distributee. To facilitate installment payments under Section 11.7, the Administrative Committee, in its sole discretion, may segregate all or any part of the Participant's Benefit in a separate account. Dated: November ____, 1995. /s/ Donna J. Goya _________________________________ Donna J. Goya Senior Vice President 3 EX-10.VV 9 AM. TO LSAI REVISED EMPL RETIREMENT PLAN Exhibit 10vv LEVI STRAUSS ASSOCIATES INC. REVISED EMPLOYEE RETIREMENT PLAN ---------------- AMENDMENT WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") has adopted the Levi Strauss Associates Inc. Revised Employee Retirement Plan (the "Plan"); WHEREAS, pursuant to Section 21.1 of the Plan, the Board of Directors of the Company is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company desires to amend the Plan to provide an early retirement program; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the Plan and to delegate to any other officer of the Company the authority to adopt certain amendments to the Plan; WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the Plan, subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; and WHEREAS, the amendment herein is within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, the Plan is amended by the addition of an Appendix C, to read as set forth on the attached exhibit. IN WITNESS WHEREOF, the undersigned has set her hand hereunto on January 10, 1995. /s/ Donna J. Goya ___________________________ Donna J. Goya Senior Vice President Exhibit 10vv LEVI STRAUSS ASSOCIATES INC. REVISED EMPLOYEE RETIREMENT PLAN -------------------- AMENDMENT The Levi Strauss Associates Inc. Revised Employee Retirement Plan is hereby amended as set forth below: Effective for the Plan Year beginning in 1993, Section 12 is amended by the addition of a new Section 12.6, to read as set forth below: 12.6 Direct Rollovers. A distributee may elect at the time and in the ---------------- manner prescribed by the Administrative Committee to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The terms used in this paragraph are defined as follows: (a) Eligible rollover distribution. Any distribution of all or any portion of the balance to the credit of the distributee, except that it does not include: (i) Any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more. (ii) Any distribution to the extent it is required under section 401(a)(9) of the Code. (iii) The portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). (b) Eligible retirement plan. 1 (i) An individual retirement account described in section 408(a) of the Code. (ii) An individual retirement annuity described in section 408(b) of the Code. (iii) An annuity plan described in section 403(a) of the Code. (iv) A qualified trust described in section 401(a) of the Code that accepts the distributee's eligible rollover distribution. (v) However, in the case of an eligible rollover distribution to a surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) Distributee. A Member or former Member, his or her surviving spouse, or his or her spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order. (d) Direct rollover. A payment by the Plan to the eligible retirement plan specified by the distributee. To facilitate installment payments under Section 12.6, the Administrative Committee, in its sole discretion, may segregate all or any part of the Participant's Benefit in a separate account. Dated: November 22, 1995. /s/ Donna J. Goya ___________________________ Donna J. Goya Senior Vice President 2 EX-10.WW 10 AM TO E S P AND S A P OF LSAI Exhibit 10ww EMPLOYEE STOCK PURCHASE AND STOCK AWARD PLAN OF LEVI STRAUSS ASSOCIATES INC. ----------------- AMENDMENTS WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") has adopted the Employee Stock Purchase and Stock Award Plan of Levi Strauss Associates Inc. (the "Plan"); WHEREAS, pursuant to Section 10.1 of the Plan, the Board of Directors of the Company is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company and certain of its major stockholders are considering a transaction intended to ensure the long-term private, family ownership of the Company (the "Transaction") and which would involve the elimination of Company stock as an investment under the Plan; WHEREAS, by resolutions duly adopted on November 30, 1995, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt amendments to the Plan in order to accommodate and reflect the possibility of the Transaction and any related transactions; and WHEREAS, effective as of December 7, 1995 the Company adopted a new Appendix A to the Plan to accommodate and reflect the possibility of the Transaction and any related transactions; WHEREAS, the Company wants to amend Appendix A to delay the application of certain provisions of Appendix A; WHEREAS, the amendments herein are within the scope of such delegated authority of Robert D. Haas; NOW, THEREFORE, effective as of the date hereof, Appendix A of the Plan is hereby amended and restated in its entirety to read as set forth on the attached exhibit. IN WITNESS WHEREOF, the undersigned has set his hand hereunto, on December 7, 1995. /s/ Robert D. Haas _________________________________________ Robert D. Haas Chairman of the Board and Chief Executive Officer EXHIBIT EMPLOYEE STOCK PURCHASE AND STOCK AWARD PLAN APPENDIX A -------------------- 1. Introduction. ------------ Effective as of the Suspension Date (as such term is defined below), the provisions of this Appendix A to the Plan are applicable with respect to the transactions and events specified below, instead of the provisions of the main text of the Plan which would otherwise govern such transactions and events. For purposes of this Appendix A, the term "Suspension Date" shall mean the date on which the Company commences distribution (including but not limited to distribution by electronic mail) of a summary of the terms of this Appendix A. 2. Closing of Participation. ------------------------ On and after December 25, 1995, no Eligible Employee who was not a Participant in the Plan on the date before the Suspension Date may become a Participant in the Plan. 3. Termination of Purchases and Awards. ----------------------------------- On and after the Suspension Date, there will be no purchases or awards of Class E Stock under Articles IV and V of the Plan, respectively. At a time after the Suspension Date determined by the Administrator (as defined in the rules prescribed by the Committee), the Administrator shall terminate all contributions to the Plan and distribute to each Participant the value of his or her Account under the Plan. 4. Suspension of Stock Transactions. -------------------------------- Hardship Sales under Section 7.1, Demand Sales under Section 7.2 and sales subsequent to Termination of Employment under Section 7.4 (except for sales required by the Company pursuant to Section 7.4) shall be suspended, effective for any request for such a transaction received by the Committee on or after the Suspension Date. The suspension of such transactions shall remain in effect until terminated by the Chief Executive Officer of the Company. All requests for transactions under Sections 7.1, 7.2 and 7.4 which are received before the Suspension Date shall be processed as if the Suspension Date is a Purchase Date and at the Fair Market Value in effect as of the most recent preceding Purchase Date. EX-10.XX 11 AM TO EXC. BEN. RESTOR. PLAN, ETC. Exhibit 10xx LEVI STRAUSS ASSOCIATES INC. EXCESS BENEFIT RESTORATION PLAN ---------------- LEVI STRAUSS ASSOCIATES INC. SUPPLEMENTAL BENEFIT RESTORATION PLAN ---------------- AMENDMENTS WHEREAS, Levi Strauss Associates Inc. (the "Company") has established the Levi Strauss Associates Inc. Excess Benefit Restoration Plan and the Levi Strauss Associates Inc. Supplemental Benefit Restoration Plan (individually, the "Excess BRP" and the "Supplemental BRP," respectively, collectively, the "BRPs"); WHEREAS, the Company desires to amend the BRPs to provide for an orderly and systematic division of interests under the BRPs pursuant to an appropriate domestic relations order; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the employee benefit plans of the Company and to delegate to any other officer of the Company the authority to adopt certain amendments to such plans (the "Delegation"); and WHEREAS, on June 1, 1993, pursuant to the Delegation, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the employee benefit plans of the Company subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; NOW, THEREFORE, effective as of the date hereof, the Company amends the BRPs as set forth below: 1. The Excess BRP is amended by the addition of a new Section 10 to read as set forth below: Section 10 Alienation in Response to Qualified Domestic Relations Order ------------------------------------------------------------ Any other provision of this Plan notwithstanding, an Eligible Employee's benefit under the Plan shall be payable to any "alternate payee," as such person is defined in section 414(p)(8) of 1 the Code, as provided in a domestic relations order with respect to the Plan which would constitute a qualified domestic relations order within the meaning of section 414(p)(1)(A) of the Code if the Plan were subject to section 414(p) of the Code. Determinations under this Section 10, including but not limited to determination of whether an order would constitute a qualified domestic relations order, shall be made by the Committee, or its designee, in its sole discretion. The rights of any alternate payee hereunder are subject to the provisions of the Plan as administered with respect to alternate payees, and the Committee may require an alternate payee to acknowledge that his or her rights are subject to such provisions. 2. The Supplemental BRP is amended by the addition of a new Section X to read as set forth below: Section X Alienation in Response to Qualified Domestic Relations Order ------------------------------------------------------------ Any other provision of this Plan notwithstanding, an Eligible Employee's benefit under the Plan shall be payable to any "alternate payee," as such person is defined in section 414(p)(8) of the Code, as provided in a domestic relations order with respect to the Plan which would constitute a qualified domestic relations order within the meaning of section 414(p)(1)(A) of the Code if the Plan were subject to section 414(p) of the Code. Determinations under this Section 10, including but not limited to determination of whether an order would constitute a qualified domestic relations order, shall be made by the Committee, or its designee, in its sole discretion. The rights of any alternate payee hereunder are subject to the provisions of the Plan as administered with respect to alternate payees, and the Committee may require an alternate payee to acknowledge that his or her rights are subject to such provisions. IN WITNESS WHEREOF, the undersigned has set her hand hereunto as of the date set forth below. ________________________ ___________________________________________ Date Donna J. Goya 2 EX-10.YY 12 AM TO DEFERRED COMP. PLAN FOR EXECUTIVES Exhibit 10yy LEVI STRAUSS ASSOCIATES INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES ---------------- AMENDMENTS WHEREAS, Levi Strauss Associates Inc. (the "Company") has established the Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (the "DCPE"); WHEREAS, the Company desires to amend the DCPE to provide for an orderly and systematic division of interests under the DCPE pursuant to an appropriate domestic relations order; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the employee benefit plans of the Company and to delegate to any other officer of the Company the authority to adopt certain amendments to such plans (the "Delegation"); and WHEREAS, on June 1, 1993, pursuant to the Delegation, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the employee benefit plans of the Company subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; NOW, THEREFORE, effective as of the date hereof, the Company amends section (a) of Article 11 of the DCPE to read as set forth below: 1. The first sentence shall be amended by the addition of the following at the end thereof: or in the final paragraph of this Section 11(a) with respect to domestic relations orders. 2. The following new paragraph shall be added after the existing paragraph: Any other provision of this Plan notwithstanding, an Eligible Employee's Deferred Compensation under the Plan shall be payable to any "alternate payee," as such person is defined in section 414(p)(8) of the Code, as provided in any domestic 1 relations order with respect to the Plan which would constitute a qualified domestic relations order within the meaning of section 414(p)(1)(A) of the Code if the Plan were subject to section 414(p) of the Code. Determinations under this section (a), including but not limited to determination of whether an order would constitute a qualified domestic relations order, shall be made by the Administrator, or its designee, in its sole discretion. The rights of any alternate payee hereunder are subject to the provisions of the Plan as administered with respect to alternate payees, and the Administrator may require an alternate payee to acknowledge that his or her rights are subject to such provisions. IN WITNESS WHEREOF, the undersigned has set her hand hereunto as of the date set forth below. _________________________ _______________________________________________ Date Donna J. Goya 2 EX-10.ZZ 13 AM TO LONG-TERM PERF. PLAN FOR EXECUTIVES Exhibit 10zz LEVI STRAUSS ASSOCIATES INC. LONG-TERM PERFORMANCE PLAN ________________ AMENDMENTS WHEREAS, Levi Strauss Associates Inc. (the "Company") has established the Levi Strauss Associates Inc. Long-Term Performance Plan (the "LTPP"); WHEREAS, the Company desires to amend the LTPP to provide for an orderly and systematic division of interests under the LTPP pursuant to an appropriate domestic relations order; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the employee benefit plans of the Company and to delegate to any other officer of the Company the authority to adopt certain amendments to such plans (the "Delegation"); and WHEREAS, on June 1, 1993, pursuant to the Delegation, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the employee benefit plans of the Company subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; NOW, THEREFORE, effective as of the date hereof, the Company amends Section 4.8 of the LTPP by the addition of the following new paragraph after the existing paragraph: The foregoing provisions notwithstanding, any Right or entitlement to payment with respect to any Right under the Plan may be transferred to any "alternate payee," as such person is defined in section 414(p)(8) of the Code, as provided in any domestic relations order with respect to the Plan which would constitute a qualified domestic relations order within the meaning of section 414(p)(1)(A) of the Code if the Plan were subject to section 414(p) of the Code. Determinations under this paragraph, including but not limited to determination of whether an order would constitute a qualified domestic relations order, shall be made by the Committee in its sole discretion. The rights of any alternate payee hereunder are subject to the provisions of the Plan as administered with respect to alternate payees, and the 1 Committee may require an alternate payee to acknowledge that his or her rights are subject to such provisions. IN WITNESS WHEREOF, the undersigned has set her hand hereunto as of the date set forth below. _____________________ _________________________________________ Date Donna J. Goya 2 EX-10.AAA 14 AM TO EXEC STOCK APPR. RIGHTS PLAN Exhibit 10aaa LEVI STRAUSS ASSOCIATES INC. 1992 EXECUTIVE STOCK APPRECIATION RIGHTS PLAN ________________ AMENDMENTS WHEREAS, Levi Strauss Associates Inc. (the "Company") has established the Levi Strauss Associates Inc. 1992 Executive Stock Appreciation Rights Plan (the "SAR Plan"); WHEREAS, the Company desires to amend the SAR Plan to provide for an orderly and systematic division of interests under the SAR Plan pursuant to an appropriate domestic relations order; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the employee benefit plans of the Company and to delegate to any other officer of the Company the authority to adopt certain amendments to such plans (the "Delegation"); and WHEREAS, on June 1, 1993, pursuant to the Delegation, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the employee benefit plans of the Company subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof; NOW, THEREFORE, effective as of the date hereof, the Company amends Section 7 of the SAR Plan in its entirety to read as set forth below: No Rights or other rights granted under or provided by this Plan are assignable or otherwise transferable by holders or Employees, except by will, by the laws of descent and distribution, or as provided in the following paragraph. The foregoing provisions notwithstanding, any Right or other right under the Plan may be transferred to any "alternate payee," as such person is defined in section 414(p)(8) of the Code, as provided in any domestic relations order with respect to the Plan which would constitute a qualified domestic relations order within the meaning of section 414(p)(1)(A) of the Code if the Plan were subject to section 414(p) of the Code. Determinations under this paragraph, including but not limited to determination of whether an order would constitute a qualified domestic relations order, shall be 1 made by the Committee in its sole discretion. The rights of any alternate payee hereunder are subject to the provisions of the Plan as administered with respect to alternate payees, and the Committee may require an alternate payee to acknowledge that his or her rights are subject to such provisions. IN WITNESS WHEREOF, the undersigned has set her hand hereunto as of the date set forth below. _____________________ _________________________________________ Date Donna J. Goya 2 EX-21 15 SUBSIDIARIES OF LSAI Exhibit 21 SUBSIDIARIES As of November 26, 1995
State or Country Name of Incorporation - ---- ---------------- Levi Strauss Associates Inc. Delaware Brittania Sportswear Ltd. California Brittsport Limited Hong Kong Levi Strauss & Co. Delaware Battery Street Enterprises, Inc. Delaware LS Reconveyance Corporation California Custom Clothing Technology Corp. Massachusetts Jeans Tech, Inc*. Ohio Levi Strauss (Budapest) Jeanswear Co. Ltd. (joint venture) Hungary Levi Strauss Employee Purchase Plan, Inc. Arkansas Levi Strauss Eximco (Asia) Pte. Ltd. Singapore Levi Strauss Eximco Chile Limitada Chile Levi Strauss Eximco Columbia Columbia Levi Strauss Eximco Limited Hongkong Levi Strauss Eximco Europe Belgium Levi Strauss Eximco (Hellas) E.P.E. Greece Levi Strauss Export Sales Corp. California Levi Strauss Foreign Sales Corporation Barbados Levi Strauss (Geneva) S.A. Switzerland Levi Strauss (Budapest) Jeanswear Co. Ltd. Hungary Levi Strauss Japan K.K. Japan Levi's Only Stores, Inc. Delaware LDJV, Inc. Delaware Majestic Insurance International Ltd. Bermuda Miratrix, S.A. Costa Rica NF Industries, Inc. Nevada Vogue Insurance International Ltd. Bermuda Wharf Clothiers, Inc. California
SUBSIDIARIES As of November 26, 1995
State or Country Name of Incorporation - ---- ---------------- Levi Strauss Associates Inc. Levi Strauss & Co. Levi Strauss International California Creative Apparel Enterprises, S.A. Belgium Levi Strauss Advisory Services B.V. i.o. The Netherlands Levi Strauss Argentina S.A. Argentina Levi Strauss (Asia) Ltd. Hong Kong Levi Strauss (Australia) Pty. Ltd. New South Wales Levi Strauss Belgium, S.A. Belgium Levi Strauss & Co. (Canada), Inc. Canada Levi Strauss Chile Limitada Chile Levi Strauss Continental, S.A. Belgium Levi Strauss & Co. - Europe, S.A. Belgium Levi Strauss Financial Services, S.A. Belgium (Belgian Finserv or Finserv S.A.) Levi Strauss de Espana, S.A. Spain Confecciones Olvega, S.A. Spain Levi Strauss (Far East) Ltd. Hong Kong Levi Strauss do Brasil Industria e Comercio Ltda. Brazil Levi Strauss Far East Pte. Ltd. Singapore Levi Strauss France, S.A. France Levi Strauss Germany GmbH Germany Levi Strauss (Hungary) Ltd. Hungary Levi Strauss Indonesia Indonesia Levi Strauss International Finance Company., N.V. Netherlands Antilles Levi Strauss Istanbul Konfeksiyon Sanayi ve Ticaret A.S. Turkey Levi Strauss Italia Srl Italy Eximco Italia Levi Strauss Srl Italy Levi Strauss Korea Korea Levi Strauss Latin America, Inc. Delaware Levi Strauss Latin America, Inc. & C.I.A. (Partnership) Brazil Levi Strauss (Malaysia) Sdn. Bna. Malaysia
-2- SUBSIDIARIES As of November 26, 1995
State or Country Name of Incorporation - ---- ---------------- Levi Strauss Associates Inc. Levi Strauss & Co. Levi Strauss International Levi Strauss Eximco Mauritius Limited Mauritius Levi Strauss (India) Private Limited India Levi Strauss de Mexico, S.A. de C.V. Mexico Levi Strauss Nederland B. V. Netherlands Dockers Europe B.V. The Netherlands Dockers Austria GmbH Austria Dockers Denmark ApS Denmark Dockers Germany Vertriebs GmbH Germany Dockers Hispania Spain Dockers Italia S.R.L. Italy Dockers France S.A.R.L. France Dockers Nederland B.V. The Netherlands Dockers Norway AS Norway Dockers Spain Spain Dockers Sweden AB Sweden Dockers U.K. Limited United Kingdom First American Casual Clothing Co. AB Sweden Levi Strauss Hellas, S.A. Greece Levi Strauss Poland Z.o.o. (=Ltd.) Poland Levi Strauss Prague Czech Republic Levi Strauss South Africa (Proprietary) Limited South Africa Levi Strauss (New Zealand) Ltd. New Zealand Levi Strauss Norway A/S Norway Buksehjornet A/S (joint stock company) Norway Buva A/S Norway Buva Ans A/S (Joint Partnership) Norway Levi Strauss Overseas Finance, N.V. Netherland Antilles Levi Strauss Pension Trustee Ltd. United Kingdom Levi Strauss del Peru S.A. Peru Levi Strauss (Philippines) Inc. Philippines Levi Strauss (Philippines) Inc. II Philippines
-3- SUBSIDIARIES As of November 26, 1995
State or Country Name of Incorporation - ---- ---------------- Levi Strauss Associates Inc. Levi Strauss & Co. Levi Strauss International Levi Strauss (Russia) Ltd. Russia Levi Strauss South Africa (Pty.) Ltd. South Africa Levi Strauss (Suisse) S.A. Switzerland Levi Strauss Trading Limited Liability Company Hungary Levi Strauss (U.K.) Ltd. United Kingdom Farvista Limited United Kingdom Levi Strauss de Venezuela, C.A. * Venezuela Retail Index Limited United Kingdom Saddleman South America, Inc. Delaware Soumen Levi Strauss OY Finland
* In process of liquidation. All subsidiaries of the Company are 100% owned (except as noted) and are included in the consolidated financial statements. Indirect subsidiaries are noted by indentation. -4- EX-23 16 CONSENT OF INDEPENDENT PUBLIC ACCTS. Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS To Levi Strauss Associates Inc.: As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K into the Company's previously filed Registration Statements on Form S-8, File Nos. 33-40947 and 33-41332. ARTHUR ANDERSEN LLP San Francisco, California, February 21, 1996 EX-27 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF LEVI STRAUSS ASSOCIATES INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS NOV-26-1995 NOV-28-1994 NOV-26-1995 1,088,032 0 1,004,788 34,939 879,083 3,071,172 1,431,792 525,037 4,709,157 1,397,536 16,366 194,146 246,609 0 1,921,147 4,709,157 6,707,631 6,707,631 3,930,132 3,930,132 0 0 15,659 1,034,837 300,101 734,736 0 0 0 734,736 13.94 0
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