-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PnWf2u5TN+StIFeNFOYIHokl1lwHECCEtize3dIkzJBzz5MmN9zV1JiIyZiyg5Pi LiDD2kaOeF8cMZAq3otD/Q== 0000725457-95-000005.txt : 19950615 0000725457-95-000005.hdr.sgml : 19950615 ACCESSION NUMBER: 0000725457-95-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19941230 FILED AS OF DATE: 19950310 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PRESIDENT COMPANIES LTD CENTRAL INDEX KEY: 0000725457 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 942911022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08544 FILM NUMBER: 95520048 BUSINESS ADDRESS: STREET 1: 1111 BROADWAY CITY: OAKLAND STATE: CA ZIP: 94607 BUSINESS PHONE: 4152718000 10-K 1 1994 FORM 10-K FOR APC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended December 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from __________________ to __________________ Commission File Number 1-8544 AMERICAN PRESIDENT COMPANIES, LTD. (Exact name of registrant as specified in its charter) Delaware 94-2911022 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1111 Broadway Oakland, CA 94607 (Address of principal executive offices) Registrant's telephone number: (510) 272-8000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, Par New York Stock Exchange Value $.01 Pacific Stock Exchange Rights to Purchase Series A New York Stock Exchange Junior Participating Preferred Stock Pacific Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None ______________ 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 the 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) 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 ( ) ______________ At March 1, 1995 the number of shares of Common Stock outstanding was 27,323,728. Based solely upon the closing price of the New York Stock Exchange on such date, the aggregate market value of Common Stock held by non-affiliates of the registrant was approximately $608 million. Documents Incorporated by Reference Portions of registrant's Proxy Statement for its 1995 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. ______________ TABLE OF CONTENTS
Page PART I Items 1. and 2. BUSINESS AND PROPERTIES 3-11 Item 3. LEGAL PROCEEDINGS 11-12 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS 12 Item 6. SELECTED FINANCIAL DATA 12-13 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14-24 Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 24-47 Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 48 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 48 Item 11. EXECUTIVE COMPENSATION 49 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 49 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 49 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 49-56 SIGNATURES 57-58
PART I ITEMS 1. AND 2. BUSINESS AND PROPERTIES American President Companies, Ltd. and its subsidiaries (the "company") provide container transportation and related services in North America, Asia and the Middle East through an intermodal system combining ocean, rail and truck transportation. The company's international transportation operations are conducted through American President Lines, Ltd., an ocean common carrier with operations concentrated in the Pacific Basin. Another operating unit, American Consolidation Services, Ltd., provides cargo distribution, warehousing and freight consolidation services. Stevedoring and terminal operations on the U.S. West Coast are conducted through Eagle Marine Services, Ltd. The company's North America transportation operations are conducted through APL Land Transport Services, Inc., which provides intermodal transportation and freight brokerage, and through American President Trucking Company, Ltd., which provides over-the- road truck transportation in North America. The company was engaged in real estate operations through Natomas Real Estate Company until 1994, when its remaining real estate holdings were sold. TRANSPORTATION International The company provides ocean-going containerized cargo transportation services in the trans-Pacific and intra-Asia markets. The company's share of the trans-Pacific market for containerized cargo was approximately 9%, 11%, and 11% in 1994, 1993 and 1992, respectively. The company offers five scheduled trans-Pacific services per week between key ports in Asia and four U.S. ports and one Canadian port. The company and Orient Overseas Container Line ("OOCL"), a Hong Kong shipping company, are parties to agreements enabling them to exchange vessel space and coordinate vessel sailings. The term of these agreements extend through 2005. Two of the company's trans-Pacific services are made possible under its agreements with OOCL which permit both companies to offer faster transit times, more frequent sailings between key markets in Asia and the U.S. West Coast, and sharing of terminals and several feeder operations within Asia. In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers currently expect to commence service under this agreement in late 1995 or early 1996. This agreement is subject to government approvals in the U.S. and Japan. The three carriers and Nedlloyd Lines B.V. ("NLL") signed a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in the Asia-U.S. East Coast trade via Panama for a minimum of three years. The four carriers currently expect to initiate an all-water service under this agreement in March 1995, and weekly service is currently expected to commence by August 1995. Additionally, in September 1994, the four carriers and Malaysian International Shipping Corporation BHD signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001. The carriers currently expect to commence service under the agreement in January 1996. Prior to the commencement of this alliance, the company will enter the Asia-Europe trade by chartering vessel space through MOL beginning in March 1995. The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe alliance agreements are all currently scheduled to be implemented by late 1995 or early 1996. Under the terms of the three agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The following tables show the company's line haul capacity provided to and available from alliance partners under the company's alliance agreements with OOCL since 1991 and other carriers beginning in 1995, as discussed above, in thousands of twenty-foot equivalent units ("TEUs"): Capacity provided by the company
to the alliances: 1992 1993 1994 1995(1) 1996(1) Trans-Pacific Eastbound 463.0 474.8 488.4 523.4 615.2 Westbound 336.8 341.3 331.0 370.5 436.7 Total 799.8 816.1 819.4 893.9 1,051.9 Asia-Europe Eastbound Westbound Asia-U.S. East Coast Eastbound Westbound Total Capacity Provided 799.8 816.1 819.4 893.9 1,051.9 Capacity available to the company from the alliances: 1992 1993 1994 1995(1) 1996(1) Trans-Pacific Eastbound 463.0 474.8 506.3 523.4 539.9 Westbound 336.8 341.3 331.0 370.5 383.4 Total 799.8 816.1 837.3 893.9 923.3 Asia-Europe Eastbound 22.1 41.6 Westbound 27.6 52.0 Total 49.7 93.6 Asia-U.S. East Coast Eastbound 14.1 28.0 Westbound 10.5 22.3 Total 24.6 50.3 Total Capacity Available 799.8 816.1 837.3 968.2 1,067.2
(1)Amounts for 1995 and 1996 are based upon the current schedule for delivery and deployment of newly constructed vessels and implementation of the alliance and assumes no adjustments to currently allocated vessel space. The value of vessel space currently expected to be provided by the company to the alliance is less than the value of the total capacity allocated to it through the alliance, resulting in an annual net cash purchase commitment from the company to its alliance partners currently estimated to be $29 million, beginning in 1996. For 1995, the company currently expects its net purchase commitment to its alliance partners for vessel space in the Asia-U.S. East Coast and Asia-Europe trades to be approximately $35 million. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the company's net cash commitment, if any, to the alliance partners for these services cannot be determined at this time. In April 1994, the company and Transportacion Maritima Mexicana ("TMM"), a Mexican transportation company, entered into an agreement enabling them to reciprocally charter vessel space for a period of three years. Under the agreement, cargo is transported between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. In all, the company provides scheduled service between 58 ports in the Pacific and Indian Oceans and in the Arabian Gulf. In the intra-Asia market, the company provides service between approximately 425 Asian cities and commercial centers. The company's ocean transportation business maintains a total of 183 offices and agents located in the three countries in North America, 31 countries in Asia and the Middle East, 11 countries in Europe, and in Africa and Australia. International container transportation operations are seasonal and subject to economic cycles and the growth of local economies in the markets served, fluctuations in the relative values of the U.S. dollar and various foreign currencies and resulting changes in demand for transportation of import and export products. The second and third quarters generally have been the company's strongest in terms of volume, primarily due to the export of seasonal refrigerated goods from the U.S. in both of these quarters and increased imports of consumer goods to the U.S. in the third quarter for the Christmas buying season. The following table sets forth the amount and source of the company's ocean shipping revenues for the past five years, in millions of dollars. While U.S. import and export amounts are stated net of revenues resulting from the transportation of military cargo for Operation Desert Storm, the intra-Asia amounts for 1991 and 1990 include Desert Storm revenues, which were not segregated from normal operations in this market. 1994 1993 1992 1991 1990 U.S. Import $ 896 $ 880 $ 829 $ 775 $ 761 U.S. Export 494 498 500 498 463 Intra-Asia 352 329 296 280 242 Desert Storm 103 26 Total $ 1,742 $ 1,707 $ 1,625 $ 1,656 $1,492
The company transports imports into North America that include higher value goods such as clothing, electronics, automotive and manufacturing components and other consumer items. Generally, higher value cargo is transported at higher rates due to its value, time sensitivity or need for specialized services. U.S. export cargoes transported by the company include refrigerated goods, military shipments and lower value, semi-processed and raw materials, as well as auto parts, oil field supplies and other higher value finished products. In the intra-Asia market, the industrialized economies import food, raw materials and semi-processed goods from developing Asian nations and export auto parts, electronics and other technological and capital-intensive finished products. The single largest customer of the company's international transportation operations is the U.S. government, which ships military and other cargo and accounted for approximately 3%, 3% and 2% of consolidated revenues in 1994, 1993 and 1992, respectively. Generally, the company bids competitively for contracts to transport military and other cargo for the U.S. government. In recent years, the U.S. military has been closing bases and reducing the number of U.S. military personnel overseas. The extent to which future U.S. military base closures and rollback of personnel may impact shipments of U.S. military cargo by the company cannot be estimated. In 1990 and 1991, the company transported military cargo related to Operation Desert Storm. Export shipments of Desert Storm cargo began in the fourth quarter of 1990 and continued through the first quarter of 1991 during the build-up of U.S. military equipment and supplies. The company also returned military equipment from this region to the U.S. during the second and third quarters of 1991. In addition to military freight revenues, the company collected detention charges from the U.S. government for containers transported for Operation Desert Storm and held beyond an allowed time, which contributed $10 million, $6 million and $41 million to operating income in 1994, 1993 and 1992, respectively. All detention claims were settled during 1994. The following table shows the company's total international transportation volumes in forty-foot equivalent units ("FEU") for the past five years: Year Volumes 1994 558,000 1993 543,000 1992 501,000 1991 513,000 1990 492,000 Since 1989, the company and 12 other shipping companies, representing approximately 85% of total trans-Pacific U.S. import capacity, have been parties to the Trans-Pacific Stabilization Agreement. Among other things, the agreement limits import capacity of participating companies by amounts mutually determined from time to time in an attempt to improve the balance of supply and demand in the U.S. import market. The agreement may be terminated upon the unanimous written consent of the companies. The company believes that the Trans-Pacific Stabilization Agreement has been effective in supporting rates for import shipments. The company's ability to be party to this agreement is based upon certain immunity from the antitrust laws provided by the Shipping Act of 1984 (the "Act"). Recently, proposals have been made to substantially repeal the Act and eliminate the Federal Maritime Commission, which administers the Act. Related hearings have been held before a subcommittee of the U.S. House of Representatives Transportation and Infrastructure Committee. The company is unable to predict whether or to what extent efforts to eliminate or amend the Act may be successful, but the repeal of the Act could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations. The following table shows the company's utilization of its containership capacity during the past five years, which for 1991 and 1990 includes the effects of shipments related to Operation Desert Storm:
1994 1993 1992 1991 1990 _______________________________________________________________________________________ U.S. Import 89% 89% 89% 93% 85% U.S. Export 94% 92% 90% 95% 91%
The company provides cargo distribution and warehousing services on the East Coast of the U.S. and freight consolidation services in Mexico, Asia, the Middle East, Europe and Africa through its subsidiary, American Consolidation Services, Ltd. ("ACS"). ACS also provides freight deconsolidation services in several U.S. locations and acts as a non-vessel operating common carrier in the intra-Asia market and from Asia to Europe and Australia. Freight consolidators combine various shipments from multiple vendors into a single container load for delivery to a single destination. The company also serves shippers of less-than-containerload cargoes by combining their shipments with others bound for the same or proximate geographic locations. The company has port terminal facilities in Oakland and Los Angeles, California, Seattle, Washington and Dutch Harbor, Alaska and major inland terminal facilities at Chicago, Illinois, Atlanta, Georgia and South Kearny, New Jersey. Each port terminal facility is operated under a long-term use agreement providing for preferential, although non-exclusive use of the facility by the company. The company also operates major port terminal facilities in Asia under long-term lease agreements in Kobe and Yokohama, Japan and Kaohsiung, Taiwan. On January 17, 1995, the port terminal in Kobe, Japan was damaged in the earthquake and will require extensive repairs. In 1994, cargo moving through the Kobe terminal accounted for approximately 6% of the company's international revenues. On February 4, 1995, the company and OOCL announced resumption of limited service to Kobe, and the company and OOCL have adjusted their shared trans-Pacific schedule to and from Japan. The company cannot estimate the extent to which its operating results will be affected by the damage caused by the earthquake in future quarters, which will depend upon the timing of port repairs, the recovery of the infrastructure and economy in the region and the company's ability to make alternative arrangements to service the area. In 1993, the company entered into a contract with the Port of Los Angeles to lease a new 226-acre terminal facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon completion of its construction. Additionally, in 1994, the company and the Port of Seattle signed a lease amendment for the improvement and expansion of its existing terminal facility. Under the amended lease, the facility will be expanded from 83 acres to approximately 160 acres. The expansion is expected to be completed during 1997, and the lease term will be 30 years from completion. In addition, the company has the option to expand the terminal by an additional 30 acres. In addition to performing stevedoring and terminal services for the company's own operations, Eagle Marine Services, Ltd., a subsidiary of the company, provides these services to third parties at the company's U.S. port facilities. On December 30, 1994, the company operated 19 U.S.-flag containerships, five of which are chartered under operating lease agreements. The remainder are owned by the company. In addition, the company owns four U.S.-flag vessels that are chartered to another carrier. The following table sets forth the U.S. flag vessels deployed in the company's trans-Pacific and intra-Asia services at December 30, 1994: Maximum Number of Date Placed Capacity Service Speed Type of Vessel Vessels in Service (in TEUs) (in knots) _______________________________________________________________________________________________ C-10 5 1988 4,300 24.0 C-9 3 1982-1983 2,900 23.5 L-9 4 1987 2,800 21.0 J-9 2 1984 2,700 22.5 C-8 4 1979 & 1986 2,000 22.0 Pacesetter 1 1973 1,400 23.5
The company has the authority from the United States Maritime Administration ("MarAd") to operate up to 28 foreign-flag-feeder vessels in its intra-Asia service. At December 30, 1994, the company operated 23 such vessels, which are leased for terms of up to three years. In 1993, the company began a fleet modernization program pursuant to which it has placed orders for the construction of six new C11-class containerships ("C11s") and three new Kl0-class containerships ("K10s") for an aggregate cost of approximately $730 million. OOCL has placed orders to purchase six vessels similar in size and speed to the company's C11s. The company's C11s and OOCL's similar vessels are scheduled to be delivered during 1995 and 1996. The company and OOCL have agreed initially to operate six and five of these vessels, respectively, under their existing trans-Pacific coordinated sailing and slot-sharing agreements, and in late 1995 or early 1996, under their Asia-U.S. West Coast alliance agreement with MOL. The company's deployment under the latter agreement will require U.S. government approval, and no assurances can be given as to whether approval will be granted. The deployment of the 11 new C11-type vessels by the company and OOCL, replacing 14 older vessels, will increase the combined trans-Pacific capacity of the company and OOCL by approximately 15%. The company currently expects growth in demand in the trans-Pacific market and believes that the increase in combined capacity should be sufficient to permit the company and OOCL to maintain their combined relative market share in that market. However, other competing ocean carriers have also placed orders for the construction of new vessels, and no assurances can be given with respect to anticipated growth in demand, utilization of the increased capacity or the potential negative impact of the increased capacity on rates. Additionally, no assurances can be made that the company and OOCL will be able to maintain their combined market share. The company's K10s were ordered to replace four L9-class vessels chartered by the company for use in its West Asia/Middle East service. Delivery of the K10s is scheduled for 1996, which is when the charters of the L9s will expire. The alliance agreements with MOL, NLL and OOCL may impact the deployment and/or the ultimate ownership of the K10s. Deployment of the company's K10s may also be subject to U.S. government approval. No assurances can be given that such approval will be granted. At December 30, 1994, the company operated 117,400 dry containers consisting of 20-, 40-, 45-, 48-, and 53-foot containers, 44,300 of which were owned and 73,100 leased under operating lease agreements. At that date, the company also operated 8,400 refrigerated containers, 3,800 of which were owned and 4,600 leased under operating leases. In addition, the company operated 55,000 chassis for the carriage of containers, 34,100 of which were owned and 20,900 leased under capital and operating leases. North America The company provides intermodal transportation and freight brokerage services to North American and international shippers as well as time-critical cargo transportation and just-in-time delivery (principally to the automotive manufacturing industry). These services are provided through an integrated system of rail and truck transportation, the primary element of which is a train system utilizing double-stack rail cars. The company's double-stack train system principally serves the North American long-haul truck and piggyback rail freight markets, and the international (export-import) intermodal market through more than 30 U.S., Canadian and Mexican inland terminal facilities. The company has agreements with certain railroads under which those railroads serve as the company's rail carriers, providing locomotive power, rail cars, trackage, terminal services and labor to transport the company's containers on individual double-stack rail cars and on dedicated unit trains. The following table shows the company's total North America stacktrain volumes (in FEUs): Year Volumes 1994 594,000 1993 538,000 1992 508,000 1991 509,000 1990 500,000 A stacktrain comprises up to 28 double-stack rail cars and has a capacity of up to 280 FEUs. At December 30, 1994, the company controlled 930 such rail cars, 220 of which are owned and 710 of which are leased. This compares to 1,100 double-stack rail cars controlled in 1993 and in 1992. In addition, as part of agreements with certain railroads, the company utilizes additional rail cars owned or leased and operated by the railroads. These agreements reduced the number of rail cars under direct company control in 1994. In combination with its double-stack rail service, the company also provides local trucking services in North America though a fleet of 420 trucks, 250 of which it leases, and 170 of which are operated by owner-operators. Information Systems The company manages its fleet of containers and chassis using its computer systems and specialized software, linked through a satellite network with the company's ships and offices. The company's cargo and container management system processes cargo bookings, generates bills of lading, expedites U.S. customs clearance and facilitates the management of rail cars, containers and other equipment. The company has also developed computer systems designed to optimize the loading of containers onto ships and to facilitate the planning of ship, rail and truck moves. The company's communications system permits its customers to access information regarding the location and status of their cargo via touch-tone telephone, personal computer or computer-facsimile link. Real Estate In 1994, the company sold its remaining 86 acres of land. COMPETITION AND REGULATION International Transportation The company is a U.S.-flag carrier. It faces vigorous competition, principally on the basis of price and service, on all of its trade routes from approximately 19 major U.S.-flag and foreign-flag operators, some of which are owned by foreign governments. Foreign-flag competitors generally have cost and operating advantages over U.S.-flag carriers. The timing of increases in capacity in the ocean transportation industry can result in imbalances in industry-wide supply and demand, which causes volatility in rates. The carriage of U.S. military cargo is reserved for U.S.-flag shipping companies, and this trade is also subject to vigorous competition among such carriers. The carriage of this cargo is awarded in accordance with competitive bidding procedures under which the low bidder wins the right to carry a substantial portion of such cargo for a period of up to 12 months. A substantial portion of the company's transportation operations is subject to regulation by agencies of the U.S. government that have jurisdiction over shipping practices, maintenance and safety standards and other matters. The company's wholly-owned subsidiary, American President Lines, Ltd. ("APL") and MarAd are parties to a 20-year Operating-Differential Subsidy Agreement ("ODS Agreement") expiring December 31, 1997. This agreement provides for payments by the U.S. government to partially compensate APL for the greater expense of operating vessels under U.S. rather than foreign registry. Under APL's ODS Agreement, APL must be controlled by U.S. citizens and its vessels must be registered and built in the U.S. (except as noted below) and manned by U.S. crews. Under its ODS Agreement, APL also is required, among other things, to operate vessels on designated trade routes in the foreign commerce of the U.S. and to replace the capacity of its existing vessels as they reach the end of their statutory lives (generally 25 years) if construction differential subsidy, provided by the U.S. government, is made available. This subsidy has not been made available since 1981. In addition, APL is required to serve such trade routes within designated minimum and maximum numbers of annual sailings; and, except for over age vessels, APL may not, without prior government approval, remove any of its vessels from operation under its ODS agreement. Since 1981, Congress has twice passed legislation permitting U.S.-flag carriers to acquire a limited number of foreign-built vessels and thereafter to operate such vessels under existing subsidy agreements under U.S. flag. Under such laws, APL had five C10-class vessels constructed in Germany. APL currently operates certain of its vessels under this legislation. In June 1993, MarAd awarded APL contracts to manage 12 Ready Reserve Force vessels for a period of five years. During 1994, one of the contracts covering two vessels was canceled, leaving APL with contracts to manage 10 vessels. APL receives a per diem fee based upon the operating status of each vessel. In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994 was not enacted. The Administration's 1995 budget includes a proposal for a 10-year subsidy program with $100 million in annual payments to be requested and appropriated on a year-to-year basis. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted. While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with MarAd to operate under foreign flag its six C11-class containerships, presently under construction, and to transfer to foreign flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. On November 15, 1994, MarAd issued a waiver that will allow the company to operate its C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted. Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner vessels. The company continues to evaluate its strategic alternatives in light of the pending expiration of its ODS agreement and the uncertainties as to whether a new U.S. government maritime support program acceptable to the company will be enacted, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support. In 1995, lawsuits were filed against the company and the U.S. Department of Transportation by certain of its unions and union members challenging MarAd's November 15, 1994 action granting the company the waiver allowing it to operate its C11-class vessels under foreign flag. While no assurances can be given, management believes these legal challenges will not be successful. On January 5, 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia would provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice. North America Transportation The company's stacktrain operations compete with 11 trans-Pacific containership companies and four West Coast railroads offering double-stack train service. In addition, the company's stacktrain operations, together with its trucking operations, compete with long-haul trucking companies for truckload shipments. The company's brokerage operations compete for available business with over 150 shippers' agents. Competition among shippers' agents is based principally on the types and timeliness of services provided. EMPLOYEES At December 30, 1994, the company and its subsidiaries employed 507 seagoing and 4,927 shoreside personnel. The seagoing personnel and certain shoreside personnel were employed under collective bargaining agreements with several unions. ITEM 3. LEGAL PROCEEDINGS The company is a party to various pending legal proceedings, claims and assessments arising in the course of its business activities, including actions relating to trade practices, personal injury or property damage, alleged breaches of contracts, torts, labor matters, employment practices, tax matters and miscellaneous other matters. Some of these proceedings involve claims for punitive damages, in addition to other specific relief. Among these actions are approximately 1,520 cases pending against the company, together with numerous other ship owners and equipment manufacturers, involving injuries or illnesses allegedly caused by exposure to asbestos or other toxic substances on ships. The company insures its potential liability for bodily injury to seamen through mutual insurance associations. Industry-wide resolution of asbestos- related claims at significantly higher than expected amounts could result in additional contributions to those associations by the company and other association members. In December 1989, the government of Guam filed a complaint with the Federal Maritime Commission ("FMC") alleging that American President Lines, Ltd. and an unrelated company charged excessive rates for carrying cargo between the U.S. and Guam, in violation of the Shipping Act, 1916 and the Intercoastal Shipping Act of 1933, and seeking an undetermined amount of reparations. Three private shippers are also complainants in this proceeding. Evidentiary hearings have been concluded and a decision by the FMC is not expected until 1996. In March 1992, the government of Guam and four private shippers filed a class action complaint in the United States District Court, District of Columbia, based on the same allegations, seeking an undetermined amount of damages on behalf of all shippers of cargo to and from Guam on the company's vessels and the vessels of the other named defendant. In January 1993, the class action complaint was dismissed. In July 1994, the decision of dismissal was affirmed by the U.S. Court of Appeals for the Circuit of the District of Columbia. That dismissal has become final. In April 1994, a lawsuit, Hockert Pressman & Flohr Money Purchase Plan, et. al. vs. American President Companies, Ltd., et. al., was filed against the company and certain of its officers in United States District Court for the Northern District of California. The suit alleges that the company and certain officers made false and misleading statements about the company's operating and financial performance in violation of federal securities laws, and seeks unspecified damages on behalf of a purported class of stockholders who purchased shares of the company's common stock during the period October 7, 1993 through March 30, 1994. The company believes that it has meritorious defenses and intends to defend itself vigorously against this lawsuit. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the company, management does not expect the legal proceedings described, individually or in the aggregate, to have a material adverse impact on the company's consolidated financial position or operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the company's security holders during the fourth quarter of 1994. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The company's Common Stock is listed on the New York and Pacific Stock Exchanges using the symbol APS. The reported high and low closing sales prices per share of the company's Common Stock and cash dividends declared for the preceding eight fiscal quarters are set forth in Note 12 to the consolidated financial statements, Part II, Item 8, on page 46. On March 1, 1995, the company had 3,938 common stockholders of record. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data for the ten years ending December 30, 1994 are derived from the consolidated financial statements of the company, which have been examined and reported upon by the company's independent public accountants as set forth in their report included elsewhere herein. This information should be read in conjunction with the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. TEN-YEAR FINANCIAL REVIEW
(Dollars in millions, except per share amounts) 1994 1993 1992 1991 1990 Results of Operations (1) Revenues Transportation International $ 2,017 $ 1,930 $ 1,878 $ 1,791 $ 1,590 North America 761 660 632 645 669 Real Estate 16 16 6 17 15 Total Revenues 2,794 2,606 2,516 2,453 2,274 Operating Income (Loss) Transportation 114 123 137 131 (64) Real Estate 9 10 3 12 8 Total Operating Income (Loss) 123 133 140 143 (56) Income (Loss) Before Taxes 110 131 122 107 (93) Income (Loss) Before Cumulative Effect of Accounting Changes 74 80 78 66 (62) Net Income (Loss) 74 80 56 56 (62) Earnings (Loss) Per Common Share, Fully Diluted Before Cumulative Effect of Accounting Changes (2) 2.30 2.50 2.34 1.85 (1.78) Earnings (Loss) Per Common Share, Fully Diluted (2) 2.30 2.50 1.69 1.56 (1.78) Cash Dividends Per Common Share (2) 0.40 0.30 0.30 0.30 0.30 Financial Position Cash, Cash Equivalents & Short-Term Investments $ 255 $ 84 $ 132 $ 179 $ 118 Working Capital 206 51 (16) 159 112 Total Assets 1,664 1,454 1,436 1,541 1,608 Net Capital Expenditures 128 156 66 20 39 Long-Term Debt 373 250 222 251 279 Capital Lease Obligations 13 17 20 193 202 Redeemable Preferred Stock 75 75 75 75 75 Stockholders' Equity 541 475 397 426 459 Capitalization 1,007 822 829 955 1,022 Book Value Per Common Share (2) 19.82 17.72 15.25 14.48 12.44 Financial Ratios Return on Equity (3) 12.7% 15.7% 11.6% 10.7% (10.5%) Cash Flow to Average Total Debt (4) 53.3% 53.7% 43.4% 44.0% 21.0% Return on Average Assets 4.8% 5.5% 3.8% 3.5% (3.7%) Total Debt to Equity (3) 63.4% 49.4% 75.5% 90.4% 91.3% Current Ratio 1.5 1.1 1.0 1.5 1.3 TEN-YEAR FINANCIAL REVIEW (Dollars in millions, except per share amounts) 1989 1988 1987 1986 1985 Results of Operations (1) Revenues Transportation International $ 1,579 $ 1,436 $ 1,271 $ 945 $ 859 North America 637 650 540 469 305 Real Estate 21 45 14 26 7 Total Revenues 2,237 2,131 1,825 1,440 1,171 Operating Income (Loss) Transportation 51 129 162 50 69 Real Estate 9 33 7 13 4 Total Operating Income (Loss) 60 162 169 63 73 Income (Loss) Before Taxes 22 136 149 41 52 Income (Loss) Before Cumulative Effect of Accounting Changes 13 81 79 18 39 Net Income (Loss) (16) 81 79 18 39 Earnings (Loss) Per Common Share, Fully Diluted Before Cumulative Effect of Accounting Changes (2) 0.16 1.63 1.62 0.35 0.93 Earnings (Loss) Per Common Share, Fully Diluted (2) (0.57) 1.63 1.62 0.35 0.93 Cash Dividends Per Common Share (2) 0.29 0.25 0.25 0.25 0.19 Financial Position Cash, Cash Equivalents & Short-Term Investments $ 127 $ 186 $ 287 $ 276 $ 67 Working Capital 128 178 261 237 36 Total Assets 1,683 1,711 1,599 1,343 1,060 Net Capital Expenditures 111 379 155 75 128 Long-Term Debt 303 317 138 151 70 Capital Lease Obligations 208 224 234 244 220 Redeemable Preferred Stock 75 75 Stockholders' Equity 567 617 705 641 538 Capitalization 1,169 1,254 1,089 1,049 839 Book Value Per Common Share (2) 14.18 15.26 14.44 12.98 12.94 Financial Ratios Return on Equity (3) (2.4%) 11.6% 11.8% 3.0% 7.4% Cash Flow to Average Total Debt (4) 20.3% 38.6% 50.9% 36.0% 34.2% Return on Average Assets (1.0%) 4.9% 5.4% 1.5% 3.8% Total Debt to Equity (3) 82.2% 81.2% 54.5% 63.8% 56.1% Current Ratio 1.4 1.6 2.0 2.0 1.2
(1) The company's fiscal year ends on the last Friday in December. All years presented above were 52 weeks, except for 1993 and 1988 which were 53- week years. (2) Earnings Per Common Share, Cash Dividends Per Common Share and Book Value Per Common Share have been computed for all periods retroactively reflecting the effect of a 3-for-2 stock split effected on May 30, 1985, and a 2-for-1 stock split effected on December 31, 1993. Earnings Per Common Share also reflect the repurchase of 3.7 million, 7.8 million, 2.9 million, 1.0 million and 8.8 million shares of the company's common stock during 1992, 1991, 1990, 1989 and 1988, respectively, on a post- split basis. In 1989, 2.0 million shares of the company's Series B Preferred Stock were converted into common stock. (3) Redeemable Preferred Stock is included in Equity for the purpose of calculating these ratios. If Redeemable Preferred Stock were a component of Debt instead of Equity, Return on Equity would be 13.3%, 16.8%, 12.1%, 11.0%, (13.3%), (5.2%) and 12.8% in 1994, 1993, 1992, 1991, 1990, 1989 and 1988, respectively, and Total Debt to Equity would be 86.1%, 72.9%, 108.6%, 123.9%, 122.5%, 106.3% and 103.3% in 1994, 1993, 1992, 1991, 1990, 1989, and 1988, respectively. (4) Cash Flow represents Cash Flows from Operating Activities. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS
(In millions) 1994 Change 1993 Change 1992 Revenues International Transportation $ 2,017 4% $ 1,930 3% $ 1,878 North America Transportation 761 15% 660 4% 632 Real Estate 16 1% 16 N/A 6 Operating Income Transportation $ 114 (7%) $ 123 (10%) $ 137 Real Estate 9 (10%) 10 N/A 3 Pretax Income $ 110 (15%) $ 131 7% $ 122
Although pretax income declined in 1994 compared with 1993, and increased in 1993 compared with 1992, included in these amounts are items that are not part of the company's base transportation business. These items are: sales of the company's real estate holdings, which were completed in 1994 and contributed $9 million, $11 million, and $5 million to pretax income in 1994, 1993 and 1992, respectively; Desert Storm per diem collections, which contributed $10 million, $6 million and $41 million to pretax income in 1994, 1993 and 1992, respectively; gains on sales of the company's investment in the common stock of Amtech Corporation, which contributed $9 million and $8 million to pretax income in 1993 and 1992, respectively; and expenses related to the company's corporate initiatives to improve its financial and order cycle processes, which totaled $31 million and $9 million in 1994 and 1993, respectively. Excluding these items, the company's pretax income was $122 million, $114 million and $68 million in 1994, 1993, and 1992, respectively. In 1994, the company benefited from improvements in North America stacktrain volumes and stacktrain revenue per forty-foot equivalent unit ("FEU") compared with 1993. Volumes of the company's U.S. import and intra-Asia cargo also increased in 1994. Gains on sales of a crane and certain containers contributed approximately $6 million to the 1994 results. Transportation operating expenses per FEU rose in 1994 compared with 1993, primarily due to higher stevedoring and fuel costs, and an unfavorable currency exchange rate in Japan. Additionally, the company's 1993 income and volumes were positively impacted by the fact that the 1993 fiscal year was 53 weeks, compared with 52 weeks in 1994 and 1992. The improvements in the company's 1993 results compared with 1992 were due to higher freight volumes in all the company's markets, higher operating margins in the company's North America stacktrain market, and lower net interest expense. Lower rates in the company's U.S. export and intra-Asia markets partially offset these improvements. Also contributing to the increase in earnings in 1993 were gains totaling $9 million from sales of three of the company's older steamships and certain containers.
INTERNATIONAL TRANSPORTATION (1) 1994 Change 1993 Change 1992 (Volumes in thousands of FEUs) Import Volumes 217.8 2% 214.3 4% 206.8 Average Revenue per FEU $ 4,112 0% $ 4,107 2% $ 4,013 Export Volumes 155.5 0% 155.5 5% 147.6 Average Revenue per FEU $ 3,174 (1%) $ 3,200 (5%) $ 3,385 Intra-Asia Volumes 184.6 6% 173.3 19% 146.1 Average Revenue per FEU $ 1,909 1% $ 1,899 (6%) $ 2,030
(1)Volumes and average revenue per FEU data are based upon shipments originating during the period, which differ from the percentage-of-completion method used for financial reporting purposes. The company's U.S. import volumes increased in 1994 compared with 1993 primarily due to service enhancements in the People's Republic of China that resulted in higher volumes from that country in 1994, and higher volumes of refrigerated and military cargo. Volumes of U.S. export cargo were unchanged in 1994 from 1993. Volumes of refrigerated cargo in the company's U.S. export market improved, but were offset by a decline in military dry volumes resulting from the loss of the company's position as preferred carrier of military dry cargo in June 1994. Intra-Asia volumes for 1994 increased compared with 1993 as a result of the company's expanded service to and from China and the growing economies in Southeast and West Asia and the Middle East in 1994. Additionally, volumes of refrigerated cargo in this market have grown substantially since last year. The increase in the company's import volumes in 1993 compared with 1992 resulted primarily from expanded service from the People's Republic of China in 1993. The company's export volumes increased due to higher military volumes from June 1, 1993, when the company became the preferred carrier of U.S. military cargo for a period of 12 months. The increase in export military shipments was partially offset by a decline in the company's commercial refrigerated shipments in this market compared with 1992. The company's intra- Asia volumes increased in 1993 compared with 1992, due to expanded service to the People's Republic of China and the growing trade in Southeast and West Asia. Utilization of the company's containership capacity in 1994 was 89% and 94% for import and export shipments, respectively, compared with 89% and 92% in 1993, and 89% and 90% in 1992. Import capacity was increased in 1994 by the additional vessel space purchased from Orient Overseas Container Line ("OOCL"), a Hong Kong shipping company. Average revenue per FEU for the company's U.S. import shipments was relatively unchanged in 1994, compared with 1993, as competitive pressures in this market have continued to hold import rates down. In 1994, average revenue per FEU in the company's U.S. export market was lower than 1993 due to reduced rates in the first half of the year resulting from weak market conditions and increased competition. Average revenue per FEU in the company's intra-Asia market increased slightly in 1994 compared with 1993, primarily attributable to an increase in higher-rated commercial refrigerated cargo, partially offset by competitive rate pressures in this market. In 1993, average revenue per FEU for the company's U.S. import shipments increased compared with 1992 due to higher rates and a greater proportion of higher-rated commercial cargo carried by the company. Average revenue per FEU for the company's U.S. export shipments decreased in 1993 compared with 1992 due to strong competition in this market and a decrease in the proportion of higher- rated commercial refrigerated cargo carried by the company. In its intra-Asia market, the company's average revenue per FEU declined in 1993 compared with 1992, resulting from competitive pressures in this market and a higher proportion of lower-rated short-haul cargo in the intra-Asia trade during 1993. Other international transportation revenues, which primarily comprises cargo handling, freight consolidation and per diem revenues, were $281 million in 1994 compared with $254 million in 1993. This increase was primarily due to an increase in Asia cargo handling related to the OOCL and TMM contracts, discussed below, and an increase in feeder services in Asia provided to other carriers. Other international transportation revenues declined in 1993 to $254 million from $261 million in 1992, primarily due to a decrease of $35 million in collections of detention charges from the U.S. government for containers used in Operation Desert Storm and held beyond an allowed time. Partially offsetting the 1993 decrease was an increase in cargo handling revenues related to the OOCL contract. As of the end of 1994, all Desert Storm detention claims have been settled with the U.S. government and all payments have been received. The company and OOCL are parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. The agreements permit both companies to offer faster transit times, more frequent sailings between key markets in Asia and the U.S. West Coast, and to share terminals and several feeder operations within Asia. Since December 1993, the company has been required to purchase additional vessel space from OOCL for approximately $7 million annually, accrued ratably over each year. This commitment reduces as the company increases the capacity it can exchange with OOCL, which is expected to begin with the scheduled delivery of the company's C11-class vessels in 1995. In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers currently expect to commence service under this agreement in late 1995 or early 1996. This agreement is subject to government approvals in the U.S. and Japan. The three carriers and Nedlloyd Lines B.V. ("NLL") signed a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-U.S. East Coast trade via Panama for a minimum of three years. The four carriers currently expect to initiate service under this agreement in March 1995, and weekly service is currently expected to commence by August 1995. Additionally, in September 1994, the four carriers and Malaysian International Shipping Corporation BHD signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001. The carriers currently expect to commence service under the agreement in January 1996. Prior to the commencement of this alliance, the company will enter the Asia-Europe trade by chartering vessel space through MOL beginning in March 1995. The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe alliance agreements are all expected to be implemented by late 1995 or early 1996. Under the terms of the three agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The value of vessel space provided by the company to the alliance is less than the value of the total capacity allocated to it through the alliance, resulting in an annual net cash purchase commitment from the company to its alliance partners currently estimated to be $29 million, beginning in 1996. For 1995, the company currently estimates its net purchase commitment to its alliance partners for vessel space in the Asia-U.S. East Coast and Asia-Europe trades to be approximately $35 million. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the company's net cash commitment, if any, to the alliance partners for these services cannot be determined at this time. In April 1994, the company and Transportacion Maritima Mexicana ("TMM"), a Mexican transportation company, entered into an agreement enabling them to reciprocally charter vessel space for a period of three years. Under the agreement, cargo is transported between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. Each party is committed to purchase a minimum amount of vessel space at contract rates and may buy available extra space as needed. The company's minimum space purchase commitment exceeds that of TMM by approximately $5 million per year. Recently, proposals have been made to substantially repeal the Shipping Act of 1984 (the "Act"), which provides the company with certain immunity from antitrust laws, and eliminate the Federal Maritime Commission, which administers the Act. Related hearings have been held before a subcommittee of the U.S. House of Representatives Transportation and Infrastructure Committee. The company is unable to predict whether or to what extent efforts to eliminate or amend the Act may be successful, but the repeal of the Act could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations. The company is party to an Operating-Differential Subsidy ("ODS") agreement with the U.S. government, expiring on December 31, 1997, which provides for payment by the U.S. government to partially compensate the company for the relatively greater expense of vessel operation under U.S. registry. ODS payments to the company were approximately $61 million, $65 million and $70 million in 1994, 1993 and 1992, respectively. In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994 was not enacted. The Administration's 1995 budget includes a proposal for a 10-year subsidy program with $100 million in annual payments to be requested and appropriated on a year-to-year basis. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted. While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with the United States Maritime Administration ("MarAd") to operate under foreign flag its six C11-class containerships, presently under construction, and to transfer to foreign flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. On November 15, 1994, MarAd issued a waiver that will allow the company to operate its C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted. Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner vessels. The company continues to evaluate its strategic alternatives in light of the pending expiration of its ODS agreement and the uncertainties as to whether a new U.S. government maritime support program acceptable to the company will be enacted, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support. In 1995, lawsuits were filed against the company and the U.S. Department of Transportation by certain of its unions and union members challenging MarAd's November 15, 1994 action granting the company the waiver allowing it to operate its C11-class vessels under foreign flag. While no assurances can be given, management believes these legal challenges will not be successful. On January 5, 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia would provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice. The company expects to incur incremental operating expenses and a loss of ocean freight revenues during 1995 resulting from the earthquake in Kobe on January 17, 1995. The ocean terminal leased by the company was damaged and will require extensive repairs. Business interruption insurance is expected to provide coverage for most of the related first quarter revenue shortfall and expenses, but the company expects an impact on pretax income of approximately $2 million for the quarter. In 1994, cargo moving through the Kobe terminal accounted for approximately 6% of the company's international revenues. On February 4, 1995, the company and OOCL announced resumption of limited service to Kobe, and the company and OOCL have adjusted their shared trans-Pacific schedule to and from Japan. The company cannot estimate the extent to which its operating results will be affected by the damage caused by the earthquake in future quarters, which will depend upon the timing of port repairs, the recovery of the infrastructure and economy in the region and the company's ability to make alternative arrangements to service the area. The new C11-class vessels are scheduled to be delivered beginning in May 1995, and the new alliances are scheduled to begin in March 1995. Start-up expenses related to these programs are expected to be incurred in the first half of 1995, with limited related revenues. The company currently expects soft earnings in the first half of 1995, with improvement in the second half based on the company's expectation of utilization of its new capacity. However, utilization depends to a great extent upon the level of demand for transportation services and competition among carriers in the company's markets, and there is no assurance that such utilization will materialize. NORTH AMERICA TRANSPORTATION (1)
(Volumes in thousands of FEUs) 1994 Change 1993 Change 1992 Revenues (2) (In millions) Stacktrain $ 535 18% $ 455 8% $ 420 Non-Stacktrain 226 10% 205 (3%) 212 Stacktrain Volumes North America 398.5 15% 345.6 9% 316.9 International 195.5 2% 192.6 1% 190.9 Stacktrain Average Revenue per FEU (2) $ 1,343 2% $ 1,315 (1%) $ 1,327
(1)Volumes and average revenue per FEU data are based upon shipments originating during the period, which differ from the percentage-of-completion method used for financial reporting purposes. (2)In addition to North America third party business, the transportation of containers for the company's international customers is a significant component of its stacktrain operations. These shipments are represented above as International Stacktrain Volumes and, since they are eliminated in consolidation, are excluded in Revenues and Stacktrain Average Revenue per FEU. Revenues from the company's North America transportation operations increased in 1994 compared with 1993, as a result of higher North America stacktrain volumes and revenue per FEU. The increase in stacktrain volumes in 1994 was due to the improvement in the U.S. economy, increases in Mexican and Canadian shipments, particularly automotive shipments between the U.S. and Mexico, and competitor equipment shortages. The company added 1,800 containers to its fleet during 1994, which enabled it to meet increasing demand. Stacktrain average revenue per FEU increased in 1994 compared with 1993 due to an improvement in cargo mix and increased rates in certain stacktrain markets. The company's North America non-stacktrain revenues also improved in 1994 compared with 1993, primarily due to increased volumes resulting from an improved U.S. economy. In 1993, revenues and volumes from the company's North America stacktrain operations increased from 1992 due to an overall improvement in demand for North America stacktrain services and an increase in stacktrain services to Mexico and Canada. Additionally, key competitors in this market were adversely affected by equipment shortages, which diverted some shipments to the company. Non- stacktrain volumes declined as the company converted its automotive shipments to its stacktrains. Stacktrain average revenue per FEU decreased in 1993 compared with 1992 due to the company's efforts to reduce stacktrain services that were less profitable. For 1995, the company expects growth in demand in the North America stacktrain markets as the U.S. economy continues to improve and more cargo converts from long-haul trucking to stacktrain service. There can be no assurances, however, that such demand will materialize. Additionally, growth in demand for stacktrain services to and from Mexico is dependent upon conditions in the Mexican economy, which have been extremely volatile recently, and the extent to which U.S. automakers continue to operate there, among other factors. TRANSPORTATION OPERATING EXPENSES (In millions, except
Operating Cost per FEU) 1994 Change 1993 Change 1992 Land Transportation $ 1,010 8% $ 934 0% $ 933 Cargo Handling 552 7% 516 10% 470 Vessel, Net 335 9% 308 8% 286 Transportation Equipment 202 9% 184 1% 181 Information Systems 48 (2%) 49 0% 50 Other 332 10% 303 6% 287 Total $ 2,479 8% $ 2,294 4% $ 2,207 Operating Cost Per FEU (1) $ 2,592 0% $2,581 (4%) $ 2,700 Percentage of Transportation Revenues 89% 89% 88%
(1) Operating expenses used in this calculation include costs associated with certain International and North America revenues that are not volume related. Land transportation expenses increased in 1994 from 1993, due to higher North America stacktrain volumes in 1994. The increase in cargo handling expenses in 1994 compared with 1993 is attributable to increased stevedoring costs, which were impacted by higher labor rates in Asia and the U.S. and handling of increased cargo to and from China, West Asia and Southeast Asia. The weakening of the U.S. dollar relative to Asian currencies, particularly the Japanese yen, also resulted in higher cargo handling expenses. These increases were partially offset by a favorable land rent reduction in Taiwan. Vessel expenses increased in 1994 compared with last year due to increased charter hire activity resulting from expanded service to China, an increase in Latin American activity and additional vessel space purchased from OOCL and TMM in 1994. Vessel expenses were also impacted by a 6% increase in fuel cost in 1994 and the collision of one of the company's vessels during 1994, the uninsured cost of which was approximately $2 million. Transportation equipment costs increased in 1994 compared with 1993 due to the addition of 1,800 leased containers during 1994 for use in North America stacktrain operations, and increased repair and maintenance costs. Other operating expenses increased in 1994 compared with 1993 due to an increase of $9 million in the provision for potentially uncollectible accounts receivable, primarily in the People's Republic of China. This provision was made because of the continuing deterioration of currency liquidity in that country, which may, among other factors, impact the ability of shippers to pay. Also contributing to the increase in other operating expenses were higher employee and telecommunications costs, particularly in Asia. Other operating expenses for 1994 are net of gains of $6 million from sales of a crane and certain containers, and for 1993, are net of gains of $9 million from sales of three vessels and certain containers. Land transportation expenses were relatively unchanged in 1993 compared with 1992 despite a 9% increase in North America stacktrain volume, reflecting benefits realized from the renegotiation of rail contracts in 1992. Cargo handling expenses increased in 1993 compared with 1992 due to higher cargo volumes and contract rate increases at certain Asian and U.S. ports. In 1993, vessel expenses increased because of increased charter hire activity resulting from expanded service to China and the Philippines, partially offset by savings from four fewer ships in service during the year. In 1993, transportation equipment costs increased from the prior year primarily due to higher maintenance, repair and lease costs, partially offset by cost savings from changes in the company's rail cost structure. Other operating expenses increased in 1993 from 1992, primarily due to higher salary and fringe costs in North America and Asia operations, partially offset by gains of $9 million from the sale of three vessels and certain containers, and certain fixed cost savings in the North America stacktrain operations. General and administrative expenses increased 21% in 1994 compared with 1993, primarily due to expenditures of $31 million in 1994 on corporate initiatives to improve the company's financial and order cycle processes. Expenditures on corporate initiatives are currently estimated to be $33 million in 1995 and $12 million in 1996. The company currently anticipates that during 1995 and 1996, between 550 and 900 positions will be eliminated as a result of order cycle process changes, and approximately 50 positions will be eliminated as a result of financial process changes. The actual number of position reductions, however, will not be finally determined until design and implementation of the new processes in 1995 and 1996, and costs associated with eliminating these positions cannot yet be estimated. Anticipated cost savings resulting from these initiatives are expected to be realized in future years, but no assurances can be given as to the timing or amount of these savings. The company also expects to eliminate its administrative offices in Hong Kong by the second quarter of 1995, and to combine certain functions with those performed in Oakland. Costs associated with eliminating or relocating these positions are estimated to be between $1 million and $2 million. General and administrative expenses increased 9% in 1993 compared with 1992. In 1993, the company incurred approximately $9 million in costs related to corporate initiatives to improve the company's financial and order cycle processes. Partially offsetting these costs in 1993 were cost savings at the corporate level. Depreciation and amortization expense decreased 3% in 1994 from 1993 as certain assets reached the end of their depreciable lives in 1994. Depreciation and amortization expense increased 2% in 1993 from 1992 due to capital spending activity during the year. Depreciation and amortization expense is expected to increase to approximately $127 million in 1995 due to the increased level of capital spending. Net interest expense increased 13% in 1994 compared with 1993, due to interest expense on two public debt offerings totaling $300 million in November 1993 and January 1994, which was partially offset by increased interest income on higher cash balances and higher interest rates in 1994. Net interest expense declined to $11 million in 1993 from $26 million in 1992, due to the company's restructuring of its long-term liabilities in late 1992 and early 1993, when the company retired certain capital lease obligations and redeemed its 11% Public Notes. The effective tax rates applicable to the company were 33%, 39% and 35% in 1994, 1993 and 1992, respectively. The 1994 effective tax rate includes the effect of revisions of prior years' estimated tax liabilities. The 1993 effective tax rate includes an adjustment of $2.7 million to reflect the effect of an increase in the maximum corporate federal income tax rate to 35%. The effective tax rate for 1995 is expected to be approximately 38%. In 1992, the company changed its method of recognizing revenues and expenses to conform with new transportation industry guidelines established by the Financial Accounting Standards Board's Emerging Issues Task Force. Under the new method, the company recognizes revenues on a percentage-of-completion basis and expenses as incurred. The company previously recorded revenues and variable expenses at the time freight was loaded. In 1992, the company recorded a one-time charge of $22 million, after taxes of $13 million, for the effect of this change in accounting on prior years' results. LIQUIDITY AND CAPITAL RESOURCES
(In millions) 1994 1993 1992 Cash, Cash Equivalents and Short-term Investments $ 255 $ 84 $ 132 Working Capital 206 51 (16) Total Assets 1,664 1,454 1,436 Long-term Debt and Capital Lease Obligations (1) 391 272 357 Cash Provided by Operations 177 169 176 Net Capital Expenditures Ships $ 38 $ 93 $ 18 Containers, Chassis and Rail Cars 57 41 31 Leasehold Improvements and Other 33 22 17 Total $ 128 $ 156 $ 66 Financing Activities Borrowings $ 147 $ 664 Repayment of Debt and Capital Leases (28) (748) $ (97) Common Stock Repurchases (78) Dividend Payments (18) (15) (15)
(1) Includes current and long-term portions. In November 1993, the company issued $150 million of 10-year Senior Notes at an effective interest rate of 7.3%, and in January 1994, issued $150 million of 30-year Senior Debentures at an effective interest rate of 8.2%. A portion of the proceeds from the issuance of this debt was used to repay $72 million of bank borrowings, and the remainder will be used to finance vessel purchases, other capital expenditures and for general corporate purposes. The remaining proceeds have been invested in commercial paper and other cash instruments. In 1992 and early 1993, the company restructured its long-term liabilities to reduce its high-cost debt and eliminate restrictions on the use of subsidiary cash. In January 1993, the company purchased the remaining two vessels previously leased under leveraged leases and retired the related debt guaranteed by MarAd, eliminating MarAd's restrictions on the payment of dividends to the company by its wholly-owned subsidiary, American President Lines, Ltd. The purchase price of these vessels was $131 million, $110 million of which retired the related capital lease obligations. Also in January 1993, the company retired $95 million of 11% Public Notes. In 1993, the company began a fleet modernization program pursuant to which it has placed orders for the construction of six new C11-class containerships ("C11s") and three new Kl0-class containerships ("K10s") for an aggregate cost of approximately $730 million. OOCL has placed orders to purchase six vessels similar in size and speed to the company's C11s. The company's C11s and OOCL's similar vessels are scheduled to be delivered during 1995 and 1996. The company and OOCL have agreed to initially operate six and five of these vessels, respectively, under their existing trans-Pacific coordinated sailing and slot-sharing agreements, and in late 1995 or early 1996, under their Asia-U.S. West Coast alliance agreement with MOL. The company's deployment under the latter agreement will require U.S. government approval, and no assurances can be given as to whether approval will be granted. The deployment of the 11 new C11-type vessels by the company and OOCL, replacing 14 older vessels, will increase the combined trans-Pacific capacity of the company and OOCL by approximately 15%. The company currently expects growth in demand in the trans-Pacific market and believes that the increase in combined capacity should be sufficient to permit the company and OOCL to maintain their combined relative market share in that market. However, other competing ocean carriers have also placed orders for the construction of new vessels, and no assurances can be given with respect to anticipated growth in demand, utilization of the increased capacity or the potential negative impact of the increased capacity on rates. Additionally, no assurances can be made that the company and OOCL will be able to maintain their combined market share. The company's K10s were ordered to replace four L9-class vessels chartered by the company for use in its West Asia/Middle East service. Delivery of the K10s is scheduled for 1996, which is when the charters of the L9s will expire. The alliance agreements with MOL, NLL and OOCL may impact the deployment and/or the ultimate ownership of the K10s. Deployment of the company's K10s may also be subject to U.S. government approval. No assurances can be given that such approval will be granted. The C11-class vessels are being constructed by Howaldtswerke-Deutsche Werft AG, of Germany ("HDW") (three ships) and Daewoo Shipbuilding and Heavy Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated project cost for the construction of these vessels is $535 million. A $52 million progress payment was made in 1993, and progress payments of $31 million were made in 1994. A progress payment of $20 million is due in early 1995, with the remaining 80% of each vessel's purchase price due upon delivery of each vessel scheduled beginning in May 1995. In March 1994, the company entered into a loan agreement with European banks to finance approximately $400 million of the purchase price of the six C11-class vessels. Principal payments on any draw- downs would be due in semiannual installments over a 12-year period commencing six months after the delivery of each vessel. Interest rates would be based upon various margins over LIBOR or the banks' cost of funds as elected by the company. The remaining costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations. The K10s are being constructed by Daewoo. The total estimated project cost for construction of these vessels is $195 million. A progress payment of $18 million was made to Daewoo in 1993. The remaining progress payments are due in two $18 million installments in 1995, with the remaining 70% of each vessel's purchase price due upon delivery of each vessel in 1996. The costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations. Other than vessel progress payments of $31 million, the company's capital expenditures in 1994 totaled $97 million and were primarily for purchases of chassis and terminal and leasehold improvements. In 1993, the company made $70 million in progress payments on the C11s and K10s, and spent $21 million on the purchase of previously leased vessels. In addition to the vessel expenditures in 1993, the company's capital expenditures of $65 million were primarily for purchases of refrigerated containers and terminal and leasehold improvements. Capital expenditures in 1995 are expected to be approximately $555 million, including $477 million of vessel costs. The balance will be spent primarily on terminal equipment in North America and Asia, terminal improvements in North America and chassis and computer systems. The company has outstanding purchase commitments to acquire cranes, facilities, equipment and services totaling $99 million. The company is in the process of expanding its two major West Coast ports' facilities and has extended their lease terms. The company has entered into a contract with the Port of Los Angeles to lease a new 226-acre terminal facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon completion of construction. The minimum annual rent expense under the new lease is estimated to be between $22 million and $26 million, depending upon the final scope of development. The annual rent for the company's current 129-acre terminal in Los Angeles was approximately $19 million in 1994. In June 1994, the company and the Port of Seattle signed a lease amendment for the improvement and expansion of its existing terminal facility. Under the amended lease, the facility would be expanded from 83 acres to approximately 160 acres. The expansion is expected to be completed during 1997, and the lease term would be 30 years from completion. In addition, the company has the option to expand the terminal by an additional 30 acres. The annual rent payment for the company's existing facility was approximately $6 million in 1994. The minimum annual rent payment, for the first full year after completion, under the amended lease is estimated to be $13 million, depending upon the final scope of development and consumer price index increases. The minimum annual rent payment increases in five year increments over the term of the lease, to approximately $40 million in the 29th and 30th years, also depending upon the final scope of development and consumer price index increases. In 1993, the company sold its remaining investment in the common stock of Amtech Corporation ("Amtech"), from which it realized a pretax gain of $9 million. In 1992, the company sold approximately one-half of its investment in Amtech, from which it realized a pretax gain of $8 million. In September 1994, the company made a deposit of $37 million to its Capital Construction Fund ("CCF"). Also in September 1994, the company sold an undivided interest in $40 million of its trade accounts receivable to its CCF for $37 million in cash. In March 1994, the company entered into a credit agreement with a group of banks that provides for an aggregate commitment of up to $200 million through March 1999. The credit agreement contains, among other things, various financial covenants that require the company to meet certain levels of interest coverage, leverage and net worth. The borrowings bear interest at rates based upon various indices as elected by the company. The annual commitment fee is a maximum of one-half of one percent of the available amount. There have been no borrowings under this agreement. As an alternative to borrowing under its credit agreement, the company has an option under that agreement to sell up to $150 million of certain of its accounts receivable to the banks. This alternative is subject to less restrictive financial covenants than the borrowing option. The company borrowed under its previous revolving credit agreement during 1993 to partially finance the purchase of the leased vessels and for general corporate purposes. Also during 1993, the company borrowed under uncommitted lines of credit with certain banks for general corporate purposes. All outstanding bank borrowings were repaid with a portion of the proceeds from the issuance of $150 million 10-year Senior Notes in November 1993. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS Report of Management 25 Report of Independent Public Accountants 26 Consolidated Financial Statements Statement of Income 27 Balance Sheet 28 Statement of Cash Flows 29 Statement of Changes in Stockholders' Equity 30 Notes to Consolidated Financial Statements 31-46 Financial Statement Schedule Schedule II 47 REPORT OF MANAGEMENT To the Stockholders of American President Companies, Ltd.: The financial statements have been prepared by the company, and we are responsible for their content. They are prepared in accordance with generally accepted accounting principles, and in this regard we have undertaken to make informed judgments and estimates, where necessary, of the expected effect of future events and transactions. The other financial information in the annual report is consistent with that in the consolidated financial statements. The company maintains and depends upon a system of internal controls designed to provide reasonable assurance that our assets are safeguarded, that transactions are executed in accordance with management's intent and the law, and that the accounting records fairly and accurately reflect the transactions of the company. The company has an internal audit program which reviews the adequacy of the internal controls and compliance with them. The company engaged Arthur Andersen LLP as independent public accountants to provide an objective, independent audit of our financial statements. There is an Audit Committee of the Board of Directors which is composed solely of outside directors. The committee meets whenever necessary to monitor and review with management, the internal auditors and the independent public accountants, the company's financial statements and accounting controls. Both the independent public accountants and the internal auditors have access to the Audit Committee, without management being present, to discuss internal controls, auditing and financial reporting matters. To help assure that its affairs are properly conducted, management has established policies regarding standards of corporate behavior. The company regularly reminds its key employees of significant policies and requires them to confirm their compliance. /s/ John M. Lillie John M. Lillie Chairman of the Board, President and Chief Executive Officer /s/ Will M. Storey Will M. Storey Executive Vice President and Chief Financial Officer /s/ William J. Stuebgen William J. Stuebgen Vice President, Controller and Chief Accounting Officer Oakland, California February 10, 1995 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of American President Companies, Ltd.: We have audited the accompanying consolidated balance sheet of American President Companies, Ltd. (a Delaware corporation) and subsidiaries as of December 30, 1994 and December 31, 1993, and the related consolidated statements of income, cash flows and changes in stockholders' equity for each of the three years in the period ended December 30, 1994. These consolidated financial statements and the schedule referred to below are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule 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 American President Companies, Ltd. and subsidiaries as of December 30, 1994 and December 31, 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 1994, in conformity with generally accepted accounting principles. As explained in Note 1 to the financial statements, the company has changed its method of recognizing revenues and expenses effective as of December 28, 1991. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP Arthur Andersen LLP San Francisco, California February 10, 1995 CONSOLIDATED STATEMENT OF INCOME
Year Ended December 30 December 31 December 25 (In thousands, except 1994 1993 1992 per share amounts) Revenues $ 2,793,468 $ 2,606,220 $ 2,515,633 Expenses Operating, Net of Operating- Differential Subsidy 2,486,360 2,299,872 2,209,250 General and Administrative 77,686 64,281 59,147 Depreciation and Amortization 106,274 109,127 107,180 Total Expenses 2,670,320 2,473,280 2,375,577 Operating Income 123,148 132,940 140,056 Interest Income 16,150 6,290 12,233 Interest Expense (28,994) (17,663) (38,668) Gain on Sale of Investment 8,934 8,091 Income Before Taxes 110,304 130,501 121,712 Federal, State and Foreign Tax Expense 36,106 50,392 43,696 Income Before Cumulative Effect of Accounting Change 74,198 80,109 78,016 Cumulative Effect on Prior Years of Changing the Accounting for Revenues and Expenses (21,565) Net Income $ 74,198 $ 80,109 $ 56,451 Less Dividends on Preferred Stock 6,750 6,750 6,750 Net Income Applicable to Common Stock $ 67,448 $ 73,359 $ 49,701 Earnings Per Common Share Primary Before Cumulative Effect of Accounting Change $ 2.38 $ 2.65 $ 2.43 Cumulative Effect of Accounting Change (0.74) Primary Earnings Per Common Share $ 2.38 $ 2.65 $ 1.69 Fully Diluted Before Cumulative Effect of Accounting Change $ 2.30 $ 2.50 $ 2.34 Cumulative Effect of Accounting Change (0.65) Fully Diluted Earnings Per Common Share $ 2.30 $ 2.50 $ 1.69 Dividends Per Common Share $ 0.40 $ 0.30 $ 0.30 See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEET
December 30 December 31 (In thousands, except share amounts) 1994 1993 ASSETS Current Assets Cash and Cash Equivalents $ 39,754 $ 84,053 Short-Term Investments 214,898 Trade and Other Receivables, Net 280,736 271,053 Fuel and Operating Supplies 36,549 35,354 Prepaid Expenses and Other 37,135 48,378 Total Current Assets 609,072 438,838 Property and Equipment Ships 678,453 676,854 Containers, Chassis and Rail Cars 781,100 750,557 Leasehold Improvements and Other 260,699 249,636 Construction in Progress 116,845 74,138 1,837,097 1,751,185 Accumulated Depreciation and Amortization (896,802) (825,003) Property and Equipment, Net 940,295 926,182 Investments and Other Assets 114,590 89,357 Total Assets $ 1,663,957 $ 1,454,377 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current Liabilities Current Portion of Long-Term Debt and Capital Leases $ 4,797 $ 4,395 Accounts Payable and Accrued Liabilities 397,969 383,029 Total Current Liabilities 402,766 387,424 Deferred Income Taxes 139,955 130,228 Other Liabilities 118,603 118,966 Long-Term Debt 373,142 250,610 Capital Lease Obligations 13,108 16,696 Total Long-Term Debt and Capital Lease Obligations 386,250 267,306 Commitments and Contingencies Redeemable Preferred Stock, $.01 Par Value, Stated at $50.00, Authorized-2,000,000 Shares Series C, Shares Issued and Outstanding-1,500,000 in 1994 and 1993 75,000 75,000 Stockholders' Equity Common Stock $.01 Par Value, Stated at $1.00 Authorized-60,000,000 Shares Shares Issued and Outstanding-27,318,000 in 1994 and 26,837,000 in 1993 27,318 26,837 Additional Paid-In Capital 70,853 61,656 Retained Earnings 443,212 386,960 Total Stockholders' Equity 541,383 475,453 Total Liabilities, Redeemable Preferred Stock and Stockholders' Equity $ 1,663,957 $ 1,454,377 See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 30 December 31 December 25 (In thousands) 1994 1993 1992 Cash Flows from Operating Activities Net Income $ 74,198 $ 80,109 $ 56,451 Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 106,274 109,127 107,180 Deferred Income Taxes 14,865 6,633 (8,054) Change in Receivables (42,216) (37,915) 7,238 Issuance of Notes Receivable on Sales of Real Estate (7,470) (4,170) (2,067) Change in Fuel and Operating Supplies (1,195) (469) (1,133) Change in Prepaid Expenses and Other Current Assets 8,335 3,055 (9,617) Gain on Sale of Assets (5,583) (17,577) (8,279) Change in Accounts Payable and Accrued Liabilities 18,844 18,543 (23,302) Cumulative Effect on Prior Years of Changes in Accounting 34,783 Other 10,519 11,285 22,611 Net Cash Provided by Operating Activities 176,571 168,621 175,811 Cash Flows from Investing Activities Capital Expenditures (127,757) (156,270) (65,667) Proceeds from Sale of Long-Term Investment 11,310 11,834 Proceeds from Sales of Property and Equipment 9,297 8,955 1,811 Purchase of Short-Term Investments (453,870) (206,849) Proceeds from Sales of Short-Term Investments 238,972 38,846 239,577 Transfer from Capital Construction Fund 8,843 17,508 Deposits to Capital Construction Fund (6,140) (8,000) Other 1,649 5,036 4,621 Net Cash Used in Investing Activities (331,709) (89,420) (5,165) Cash Flows from Financing Activities Repurchase of Common Stock (77,829) Issuance of Debt 147,348 663,571 Repayments of Capital Lease Obligations (3,278) (113,465) (67,351) Repayments of Debt (24,897) (634,932) (29,471) Dividends Paid (17,651) (14,725) (15,271) Other 9,383 12,841 7,551 Net Cash Provided by (Used in) Financing Activities 110,905 (86,710) (182,371) Effect of Exchange Rate Changes on Cash (66) (1,273) (2,547) Net Decrease in Cash and Cash Equivalents (44,299) (8,782) (14,272) Cash and Cash Equivalents at Beginning of Year 84,053 92,835 107,107 Cash and Cash Equivalents at End of Year $ 39,754 $ 84,053 $ 92,835 SUPPLEMENTAL DATA: Cash Paid for: Interest (Net of Capitalized Interest) $ 24,158 $ 26,232 $ 40,793 Income Taxes (Net of Refunds) $ 15,848 $ 32,370 $ 47,967 Noncash Investing Activities: Sale of Trade Receivables to the Capital Construction Fund, Net of Discount $ 37,773 See notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 30 December 31 December 25 (In thousands, except share amounts) 1994 1993 1992 Common Stock Beginning Balance $ 26,837 $ 13,022 $ 14,719 Stock Awards and Options Exercised, Net 481 397 161 Issuance of 13,418,000 shares of common stock to effect a 2-for-1 stock split 13,418 Repurchase and Retirement of Common Stock (1,858) Ending Balance 27,318 26,837 13,022 Additional Paid-In Capital Beginning Balance 61,656 62,023 130,416 Stock Awards and Options Exercised, Net 9,197 13,051 7,578 Issuance of 13,418,000 shares of common stock to effect a 2-for-1 stock split (13,418) Repurchase and Retirement of Common Stock (75,971) Ending Balance 70,853 61,656 62,023 Retained Earnings Beginning Balance 386,960 322,183 281,191 Net Income 74,198 80,109 56,451 Cash Dividends Common (10,901) (7,975) (8,521) Series C Redeemable Preferred (6,750) (6,750) (6,750) Other (295) (607) (188) Ending Balance 443,212 386,960 322,183 Total Stockholders' Equity $ 541,383 $ 475,453 $ 397,228 See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Fiscal Year The consolidated financial statements include the accounts of American President Companies, Ltd. and its majority-owned subsidiaries (the "company"), after eliminating intercompany accounts and transactions. The company's fiscal year ends on the last Friday in December. The company's 1994 and 1992 fiscal years were 52 weeks, compared with 53 weeks for 1993. Revenues and Expenses In 1992, the company changed its method of recognizing revenues and expenses to conform with new transportation industry guidelines established by the Financial Accounting Standards Board's Emerging Issues Task Force. Under the new method, the company recognizes revenues on a percentage-of-completion basis and expenses as incurred. The company previously recorded revenues and variable expenses at the time freight was loaded. At the beginning of fiscal 1992, the company recorded a one-time charge of $21.6 million, after taxes of $13.2 million, for the effect of this change in accounting on prior years. Detention revenue is recognized when cash is received. Foreign Currency Transactions Foreign currency transactions and balances were translated to U.S. dollars. Included in Operating Income on the accompanying Consolidated Statement of Income for 1994, 1993 and 1992 are net gains (losses) on foreign currency transactions and translations of $0.5 million, $(1.1) million and $(2.0) million, respectively. In 1993, the company entered into foreign currency contracts to buy Deutsche marks in the future to lock in the U.S. dollar cost of constructing German-built vessels. These contracts are discussed in Note 10. Cash, Cash Equivalents and Short-Term Investments Cash and Cash Equivalents comprise cash balances and investments with maturities of three months or less at the time of purchase. Short-Term Investments consist of commercial paper and other cash instruments and are carried at cost, which approximates fair value. Allowance for Doubtful Accounts The provision for doubtful accounts, included in Operating Expenses on the accompanying Consolidated Statement of Income, for 1994, 1993 and 1992 was $13.2 million, $4.3 million and $5.9 million, respectively. At December 30, 1994 and December 31, 1993 the allowance for doubtful accounts, included in Trade and Other Receivables on the accompanying Consolidated Balance Sheet, amounted to $21.9 million and $10.4 million, respectively. Property and Equipment Property and Equipment are recorded at historical cost. For assets financed under capital lease arrangements, an amount equal to the present value of the future minimum lease payments is recorded at the date of acquisition as Property and Equipment with a corresponding amount recorded as a capital lease obligation. Depreciation and Amortization are computed using the straight-line method based upon the following estimated useful lives:
Classification Estimated Useful Life Ships 15 to 25 Years Containers, Chassis and Accessories 5 to 15 Years Rail Cars 5 to 10 Years Other Property and Equipment Various Assets Under Capital Lease Arrangements Term of Lease
Maintenance and repair expenditures of $117.3 million, $110.3 million and $101.6 million have been charged to expense in 1994, 1993 and 1992, respectively, as they were incurred. Major periodic dry dockings and rail car overhauls totaling $12.6 million, $18.2 million and $21.2 million at December 30, 1994, December 31, 1993, and December 25, 1992, respectively, have been deferred and are being amortized over two to five years. Long-Term Investments The company has certain investments, long-term deposits and receivables, which are included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. The fair value of these assets approximates their carrying value at December 30, 1994. Software Costs Costs related to purchased and internally developed software are charged to expense as incurred. Capitalized Interest Interest costs of $6.3 million and $1.5 million relating to cash paid for the construction of vessels were capitalized in 1994 and 1993, respectively. No interest costs were capitalized in 1992. Reclassifications Certain 1993 and 1992 amounts have been reclassified to conform to the 1994 presentation. NOTE 2. UNITED STATES MARITIME ADMINISTRATION AGREEMENTS Operating-Differential Subsidy Agreement The company and the United States Maritime Administration ("MarAd") are parties to an Operating-Differential Subsidy ("ODS") agreement expiring December 31, 1997, which provides for payment by the U.S. government to partially compensate the company for the relatively greater expense of vessel operation under United States registry. The ODS amounts for 1994, 1993 and 1992 were $60.8 million, $64.7 million and $69.7 million, respectively, and have been included as a reduction of operating expenses. In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994 was not enacted. The Administration's 1995 budget includes a proposal for a 10-year subsidy program with $100 million in annual payments to be requested and appropriated on a year-to-year basis. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted. While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with MarAd to operate under foreign flag its six C11-class containerships, presently under construction, and to transfer to foreign flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. On November 15, 1994, MarAd issued a waiver that will allow the company to operate its C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted. Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner vessels. The company continues to evaluate its strategic alternatives in light of the pending expiration of its ODS agreement and the uncertainties as to whether a new U.S. government maritime support program acceptable to the company will be enacted, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support. In 1995, lawsuits were filed against the company and the U.S. Department of Transportation by certain of its unions and union members challenging MarAd's November 15, 1994 action granting the company the waiver allowing it to operate its C11-class vessels under foreign flag. While no assurances can be given, management believes these legal challenges will not be successful. Capital Construction Fund The company also has an agreement with MarAd pursuant to which the company has established a Capital Construction Fund ("CCF") to which the company makes contributions to provide funding for certain U.S.-built assets and for the repayment of certain vessel acquisition debt. In 1994, the company made a deposit of $36.9 million to its CCF and sold an undivided interest in $40 million of its trade accounts receivable to its CCF for $36.9 million in cash. At December 30, 1994, the CCF totaled $37.8 million, and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. There was no balance in the CCF at December 31, 1993. The company receives a federal income tax deduction for deposits made to the CCF, subject to certain restrictions. Withdrawals from the CCF for investment in vessels or related assets do not give rise to a tax liability, but reduce the depreciable bases of the assets for income tax purposes. At December 30, 1994, the total tax basis of assets purchased with CCF funds was approximately $58.6 million less than net book value. Deferred income taxes have been provided for CCF amounts on deposit or invested in vessels or related equipment. NOTE 3. INCOME TAXES The company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS 109") in 1992, the effects of which were applied retroactively to the beginning of fiscal 1989. SFAS 109 requires the company to compute deferred taxes based upon the amount of taxes payable in future years, after considering known changes in tax rates and other statutory provisions that will be in effect in those years. The reconciliation of the company's effective tax rate to the federal statutory tax rate is as follows:
1994 1993 1992 U.S. Federal Statutory Rate 35% 35% 34% Increases (Decreases) in Rate Resulting from: State Taxes, Net of Federal Benefit 3% 3% 3% Effect of Federal Tax Rate Change on Prior Years 2% Revisions of Prior Years' Tax Estimates (6%) Permanent Book/Tax Differences and Other 1% (1%) (2%) Net Effective Tax Rate 33% 39% 35%
The following is a summary of the company's provision for income taxes, net of $13.2 million related to the cumulative effect of the accounting change for revenues and expenses in 1992:
(In thousands) 1994 1993 1992 Current Federal $ 20,441 $ 30,164 $ 19,303 State 2,865 3,291 3,848 Foreign 6,746 6,684 5,980 30,052 40,139 29,131 Deferred Federal 5,358 7,664 2,456 State 696 (160) (1,109) Change in Federal Tax Rate 2,749 6,054 10,253 1,347 Total Provision $ 36,106 $ 50,392 $ 30,478
The following table shows the tax effect of the company's cumulative temporary differences and carryforwards included on the company's Consolidated Balance Sheet at December 30, 1994 and December 31, 1993:
(In thousands) 1994 1993 Excess of Tax Over Book Depreciation $ (111,613) $ (114,929) Tax Deductions for CCF Deposits in Excess of Book Depreciation of CCF Assets (48,756) (35,843) Net Tax Deduction for Rent Differential on Capital Leases (26,879) (25,779) Pension and Postretirement Accruals 20,692 18,515 Excess Insurance Reserves Over Claims Paid 20,340 23,470 Accounts Receivable Allowance 8,664 4,311 Accrued Liabilities 6,440 10,692 Other 1,871 5,187 Total Net Deferred Tax Liability $ (129,241) $ (114,376)
The amount of deferred tax assets and liabilities at December 30, 1994 and December 31, 1993 were as follows:
(In thousands) 1994 1993 Deferred Tax Assets $ 67,339 $ 75,749 Deferred Tax Liabilities (196,580) (190,125) Total Net Deferred Tax Liability (129,241) (114,376) Less Net Current Deferred Tax Asset (10,714) (15,852) Deferred Income Taxes $ (139,955) $ (130,228)
The net current deferred tax asset is included in Prepaid Expenses and Other on the accompanying Consolidated Balance Sheet. NOTE 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts Payable and Accrued Liabilities at December 30, 1994 and December 31, 1993 were as follows:
(In thousands) 1994 1993 Accounts Payable $ 54,009 $ 39,101 Accrued Liabilities 259,933 271,477 Current Portion of Accrued Claims 24,468 11,500 Income Taxes 2,883 1,551 Unearned Revenue 56,676 59,400 Total Accounts Payable and Accrued Liabilities $ 397,969 $ 383,029
NOTE 5. LONG-TERM DEBT Long-term debt at December 30, 1994 and December 31, 1993 consisted of the following:
(In thousands) 1994 1993 8% Senior Debentures $150 Million Face Amount, Due on January 15, 2024 (1) $ 147,144 7 1/8% Senior Notes $150 Million Face Amount, Due on November 15, 2003 (1) 148,065 $ 147,915 Series I 8% Vessel Mortgage Bonds, Due Through 1997 (2) 57,176 81,000 8% Refunding Revenue Bonds, Due on November 1, 2009 (3) 12,000 12,000 Refunding Revenue Bonds, at Various Rates Not to Exceed 12%, Due on November 1, 2009 (4) 6,495 6,495 Note Payable at 9%, Due Through 1997 (5) 2,591 3,577 Notes Payable at Prime Plus 1% 572 616 Note Payable at 10%, Due Through 1998 184 Total Debt 374,227 251,603 Current Portion (1,085) (993) Long-Term Debt $ 373,142 $ 250,610
(1) In November 1993, the company filed a shelf registration statement covering the issuance from time to time of up to $400 million of debt securities of varying terms and amounts. Pursuant to this registration statement the company issued 7 1/8% Senior Notes and 8% Senior Debentures in November 1993 and January 1994, respectively. Interest payments are due semiannually. The Senior Notes had an effective interest rate of 7.325%, and an unamortized discount of $1.9 million and $2.1 million at December 30, 1994 and December 31, 1993, respectively. The Senior Debentures had an effective interest rate of 8.172%, and an unamortized discount of $2.9 million at December 30, 1994. Fair value of the Senior Notes and Senior Debentures was approximately $129 million and $123 million, respectively, at December 30, 1994 based on quoted dealer prices for similar issues. (2) Principal payments are due in equal semiannual installments. The company has the option to issue Series II Bonds due sequentially in semiannual payments at the end of the term of the Series I Bonds in lieu of up to five of the remaining cash payments, which it has not yet exercised. The bonds issued under this loan agreement are collateralized by the five C10- class vessels, which had a net book value of $177.6 million at December 30, 1994. Fair value of this debt is approximately $59 million at December 30, 1994 assuming a current interest rate of 8.65%. (3) The Bonds are redeemable on or after November 1, 1999 at a redemption price of 102% of the principal amount, reducing to 100% of the principal amount on or after November 1, 2001. (4) The interest rate at December 30, 1994 was 5.7%. The principal repayment is collateralized by a $6.6 million letter of credit. (5) The Note was used to finance the purchase of certain chassis and is collateralized by the chassis. At December 30, 1994, the net book value of these chassis was $3.7 million. Carrying value of significant issues of long-term debt, other than the Series I Bonds, Senior Notes and Senior Debentures, approximates fair value because the interest rates on outstanding debt approximates current interest rates that would be offered to the company for similar debt. Principal payments scheduled on long-term debt during the next five years, on the basis that the company issues Series II Bonds totaling $23.8 million per year in lieu of up to five of the remaining semiannual cash payments on the Series I Bonds, are as follows: (In thousands) 1995 $ 1,085 1996 1,365 1997 14,696 1998 23,913 1999 19,103 The company has a credit agreement with a group of banks that provides for an aggregate commitment of up to $200 million through March 1999. The credit agreement contains, among other things, various financial covenants that require the company to meet certain levels of interest coverage, leverage and net worth. The borrowings bear interest at rates based upon various indices as elected by the company. The annual commitment fee is a maximum of one-half of one percent of the available amount. There have been no borrowings under this agreement. As an alternative to borrowing under its credit agreement, the company has an option under that agreement to sell up to $150 million of certain of its accounts receivable to the banks. This alternative is subject to less restrictive financial covenants than the borrowing option. NOTE 6. LEASES The company leases equipment under capital leases expiring in two to six years. Assets under capital lease included in Property and Equipment on the accompanying Consolidated Balance Sheet at December 30, 1994 and December 31, 1993 are as follows:
(In thousands) 1994 1993 Containers, Chassis and Rail Cars $ 38,003 $ 38,291 Other Property and Equipment 938 938 38,941 39,229 Accumulated Depreciation (32,955) (29,540) Total $ 5,986 $ 9,689
The following is a schedule of future minimum lease payments required under the company's leases that have initial noncancelable terms in excess of one year at December 30, 1994:
Capital Operating (In thousands) Leases Leases 1995 $ 5,172 $ 230,690 1996 12,543 150,181 1997 414 115,379 1998 414 101,912 1999 414 94,363 Later Years 45 1,495,242 Total Minimum Payments Required $ 19,002 $ 2,187,767 Amount Representing Interest (2,182) Present Value of Minimum Lease Payments 16,820 Current Portion (3,712) Long-Term Portion $ 13,108
In 1993, the company entered into a contract with the Port of Los Angeles to lease a new 226-acre terminal facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon completion of construction. The minimum annual rent expense under the new lease is estimated to be between $22 million and $26 million, depending upon the final scope of development. The annual rent for the company's current 129-acre terminal in Los Angeles was approximately $18.5 million in 1994. In 1994, the company and the Port of Seattle signed a lease amendment for the improvement and expansion of its existing terminal facility. Under the amended lease, the facility would be expanded from 83 acres to approximately 160 acres. The expansion is expected to be completed during 1997, and the lease term would be 30 years from completion. In addition, the company has the option to expand the terminal by an additional 30 acres. The annual rent payment for the company's existing facility was approximately $6.3 million in 1994. The minimum annual rent payment, for the first full year after completion, under the amended lease is estimated to be $13 million, depending upon the final scope of development and consumer price index increases. The minimum annual rent payment increases in five year increments over the term of the lease, to approximately $39.6 million in the 29th and 30th years, also depending upon the final scope of development and consumer price index increases. Total rental expense for operating leases and short-term rentals was $334.3 million, $289.5 million and $260.4 million in 1994, 1993 and 1992, respectively. NOTE 7. EMPLOYEE BENEFIT PLANS Pension Plans The company has defined benefit pension plans covering most of its employees, which generally call for benefits to be paid to eligible employees at retirement based on years of credited service and average monthly compensation during the five years of employment with the highest rate of pay. The company's general policy is to fund pension costs at no less than the statutory requirement. Certain non-qualified plans are secured through a grantor trust. The investment in this trust at December 30, 1994 was $16.1 million and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. The investments in the trust consist of life insurance policies and other cash instruments, which are carried at fair value. The following table sets forth the pension plans' funded status and amounts recognized in the accompanying Consolidated Balance Sheet at December 30, 1994 and December 31, 1993:
1994 1993 Assets in Accumulated Assets in Accumulated Excess of Benefits Excess of Benefits Accumulated in Excess Accumulated in Excess (In thousands) Benefits of Assets Benefits of Assets Actuarial Present Value of: Vested Benefit Obligation $ (94,408) $ (8,082) $ (89,291) $ (7,203) Accumulated Benefit Obligation (103,079) (8,837) (100,054) (8,251) Actuarial Present Value of Projected Benefit Obligation $ (139,993) $ (13,252) $ (142,636) $ (11,834) Plan Assets at Fair Value 131,590 130,587 574 Funded Status (8,403) (13,252) (12,049) (11,260) Unrecognized Net Loss (Gain) 15,422 (1,631) 21,226 1,501 Unrecognized Prior Service (Credit) Cost (16,049) 3,915 (12,930) Unrecognized Transition (Asset) Obligation (9,940) 829 (11,381) 994 Net Pension Liability $ (18,970) $ (10,139) $ (15,134) $ (8,765)
The following assumptions were made in determining the company's net pension liability:
(Weighted Average of All Plans) 1994 1993 1992 Discount Rate 7.9% 7.1% 7.9% Rate of Increase in Compensation Levels 5.2% 5.2% 6.0% Expected Long-Term Rate of Return on Plan Assets 8.2% 8.2% 8.2%
Net pension cost related to the company's pension plans included the following components:
(In thousands) 1994 1993 1992 Service Cost $ 9,144 $ 7,858 $ 10,546 Interest Cost on Projected Benefit Obligation 11,228 10,138 9,225 Actual Return on Plan Assets 414 (14,354) (8,336) Net Amortization and Deferral (12,971) 2,453 (2,172) Net Pension Cost $ 7,815 $ 6,095 $ 9,263
The company also participates in collectively bargained, multi-employer plans that provide pension and other benefits to certain union employees. The company contributed $5.3 million in 1994, $5.2 million in 1993 and $6.5 million in 1992 to such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked and are expensed as incurred. Postretirement Benefits Other than Pensions The company shares the cost of its health care benefits with the majority of its domestic shoreside retired employees and recognizes the cost of providing health care and other benefits to retirees over the term of employee service. Postretirement benefit costs in the accompanying Consolidated Statement of Income for the years ended December 30, 1994 and December 31, 1993 were as follows:
(In thousands) 1994 1993 Interest Cost $ 1,380 $ 1,573 Service Cost 1,117 1,033 Amortization of Gains (117) (117) Total Postretirement Benefit Cost $ 2,380 $ 2,489
The following table sets forth the postretirement benefit obligation recognized in the accompanying Consolidated Balance Sheet at December 30, 1994 and December 31, 1993:
(In thousands) 1994 1993 Accumulated Postretirement Benefit Obligation Retirees $ 6,975 $ 8,445 Active Employees - Fully Eligible 462 2,611 Active Employees - Not Fully Eligible 7,925 8,680 Unrecognized Net Gain 7,671 1,451 Unamortized Prior Service Cost 1,952 2,069 Total $ 24,985 $ 23,256
The expected cost of the company's postretirement benefits is assumed to increase at an annual rate of 10.4% in 1995. This rate is assumed to decline approximately 1% per year to 5% in the year 1999 and remain level thereafter. The health care cost trend rate assumption has a significant impact on the amounts reported. An increase in the rate of 1% in each year would increase the accumulated postretirement benefit obligation at December 30, 1994 by $2.4 million and the aggregate of the service and interest cost for 1994 by $0.4 million. The weighted average discount rate used to determine the accumulated postretirement benefit obligation was 8%. The company has not funded the liability for these benefits. Profit-Sharing Plans The company has defined contribution profit-sharing plans covering certain non- union employees. Under the terms of these plans, the company has agreed to make matching contributions equal to those made by the participating employees up to a maximum of 6% of each employee's base salary. The company's total contributions to the plans for 1994, 1993 and 1992 were $6.3 million, $6.0 million and $5.7 million, respectively. NOTE 8. REDEEMABLE PREFERRED STOCK Shares of 9% Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock") are convertible into shares of the company's common stock at the rate of 2.641 shares of common stock for each share of Series C Preferred Stock, or a conversion price of $18.9325 per share of common stock. Holders of this stock have one vote for each share of common stock into which Series C Preferred Stock is convertible and have agreed to vote in accordance with the recommendations of the company's Board of Directors on certain matters. The holders of the Series C Preferred Stock also have a class vote with respect to mergers, recapitalizations, or other similar transactions which are not approved by a majority of the independent directors of the company. The Series C Preferred Stock is exchangeable at the option of the holder into shares of 9% Series D Convertible Preferred Stock, which have the same economic rights as the Series C Preferred Stock, but no voting rights except as required by law. The holders of the Series C Preferred Stock have agreed to certain transfer restrictions which do not apply to the Series D Preferred Stock. On or after July 31, 1995, the company may redeem shares of the Series C or Series D Preferred Stock outstanding, if any, and must redeem all such shares on January 31, 2001 at their stated value. The Series C Preferred Stock carries liquidation rights equal to the greater of 110% of the stated value per share, plus dividends accrued to the date of payment, or the current market value of the common stock into which the Series C Preferred Stock outstanding is convertible. NOTE 9. STOCKHOLDERS' EQUITY Common Stock On December 3, 1993, the Board of Directors of the company authorized a two-for- one stock split effected in the form of a stock dividend payable January 28, 1994 to stockholders of record on December 31, 1993. On a post-split basis, the company repurchased 3,715,928 of its outstanding common stock in 1992 at an average per share cost of $20.94. The excess of the purchase price of the common stock over its stated value has been reflected as a decrease in Additional Paid-In Capital on the accompanying Consolidated Balance Sheet. Earnings Per Common Share For the periods presented, primary earnings per common share were computed by dividing net income, reduced by the amount of preferred stock dividends, by the weighted average number of common shares and common equivalent shares outstanding during the year. Common equivalent shares consist of stock options granted. Fully diluted earnings per common share were computed based on the assumption that the Series C Preferred Stock was converted. The number of shares used in these computations was as follows: Weighted Average Number of Common and Common Equivalent Shares
(In millions) 1994 1993 1992 Primary 28.3 27.7 29.4 Fully Diluted 32.3 32.1 33.3
Stockholder Rights Plan The company's stockholder rights agreement provides that rights become exercisable when a person acquires 20% or more of the company's common stock or announces a tender offer which would result in the ownership of 20% or more of the company's common stock, or if a person who has been declared "adverse" by the independent directors of the company exceeds a threshold stock ownership established by the Board, which may not be less than 10%. The rights will be attached to all common stock, Series C Preferred Stock and Series D Preferred Stock certificates at the rate of one right per common share and one right for each common share into which Series C and Series D Preferred Stock is convertible. Once exercisable, each right entitles its holder to purchase two one-hundredths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $130 per unit, subject to adjustment. Upon the occurrence of certain other events related to changes in the ownership of the company's outstanding common stock, each holder of a right would be entitled to purchase shares of the company's common stock or an acquiring corporation's common stock having a market value of two times the exercise value of the right. Rights that are, or were, beneficially owned by an acquiring or adverse person will be null and void. In addition, the Board of Directors may, in certain circumstances, require the exchange of each outstanding right for common stock or other consideration with a value equal to the exercise price of the rights. The company has reserved 500,000 shares of preferred stock for issuance pursuant to the exercise of the rights in the future. The rights expire November 29, 1998 and, subject to certain conditions, may be redeemed by the Board of Directors at any time at a price of $0.025 per right. Stock Incentive Plans The Compensation Committee of the Board of Directors approved stock option grants under the company's 1989 Stock Incentive Plan (the "Plan") for shares of the company's common stock beginning in July 1993 to key employees of the company. The options have an exercise price of the greater of the fair market value on the date of grant or $22.38 per share, a term expiring July 26, 2003 and vest between 1995 and 2002 based upon the achievement of stock price appreciation targets. The percentage of the options that vest during specified time periods will depend on the amount of stock price appreciation in those time periods. After five years, the options will vest as to 60% of the covered shares if not otherwise vested, and after nine years, the options will vest as to the remaining 40% if not otherwise vested. Previous stock option grants under the Plan become exercisable in three to four equal annual installments commencing one year after grant. The Plan also provides for awards of restricted shares of common stock and stock units to officers and other key employees. Recipients of restricted shares must pay the par value of $0.01 for each restricted share of common stock received. Restricted shares are not transferable until vested, but the recipient enjoys full voting and dividend rights. Vesting ordinarily occurs in five unequal annual installments increasing from 10 percent in the first year to 30 percent in the fifth year. The liability for these awards is based upon the market value of the shares at the date of award and is included in Stockholders' Equity on the accompanying Consolidated Balance Sheet. The 1992 Directors Stock Option Plan provides for the granting of options to purchase shares of common stock to non-employee members of the company's Board of Directors. The aggregate number of options which may be granted under this plan is 200,000. Options become exercisable in three equal installments on the first three anniversaries of the date of grant. The following is a summary of the transactions in the plans during 1994:
Stock Options Restricted Shares Average Shares Price Outstanding at December 31, 1993 4,176,030 $ 17.80 82,200 Granted 1,358,839 22.51 Exercised (516,614) 12.07 Vested (79,200) Canceled (97,384) 21.59 Outstanding at December 30, 1994 4,920,871 $ 19.63 3,000 Exercisable at December 30, 1994 1,240,719 $ 12.86 Exercised in 1993 833,834 $ 11.54 Exercised in 1992 412,926 $ 11.07
At December 30, 1994, a total of 902,936 shares were available for future grants of stock options, restricted shares and stock units under these plans. NOTE 10. COMMITMENTS AND CONTINGENCIES Commitments Ship Purchases and Related Financing In May 1993, the company entered into contracts for the construction and purchase of six new C11-class containerships from Howaldtswerke-Deutsche Werft AG, of Germany ("HDW") (three ships) and Daewoo Shipbuilding and Heavy Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated project cost for the construction of these vessels is $535 million. A $52 million progress payment was made in 1993, and progress payments of $31 million were made in 1994. A progress payment of $20 million is due in early 1995, with the remaining 80% of each vessel's purchase price due upon delivery of each vessel scheduled beginning in May 1995. In March 1994, the company entered into a loan agreement with European banks to finance approximately $400 million of the purchase price of the six C11-class vessels. Principal payments on any draw- downs would be due in semiannual installments over a 12-year period commencing six months after the delivery of each vessel. Interest rates would be based upon various margins over LIBOR or the banks' cost of funds as elected by the company. The remaining costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations. In connection with the construction and purchase of the ships from HDW, the company entered into foreign currency contracts to buy Deutsche marks in the future to lock in the U.S. dollar cost of the Deutsche-mark denominated price of the vessels. Any gains or losses on these contracts will be deferred and recognized as an adjustment to the cost basis of the ships when the related payments are made. At December 30, 1994, the company had contracts to purchase $218.5 million in Deutsche marks. At December 30, 1994, the carrying value of such contracts was an asset of $6.6 million and the fair value, based on quoted market prices of comparable instruments, was an asset of $33.7 million. The value of the contracts upon ultimate settlement is dependent upon actual currency exchange rates at the various maturity dates in 1995. On January 5, 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia would provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice. In December 1993, the company entered into contracts with Daewoo for the construction and purchase of three diesel-powered K10-class containerships scheduled to be delivered in 1996. The total estimated project cost for construction of these vessels is $195 million. A progress payment of $18 million was made to Daewoo in 1993. The remaining progress payments are due in two $18 million installments in 1995, with the remaining 70% of each vessel's purchase price due upon delivery of each vessel in 1996. The costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations. The alliance agreements with Orient Overseas Container Line ("OOCL"), a Hong Kong shipping company, Mitsui OSK Lines, Ltd. ("MOL") and Nedlloyd Lines B.V. ("NLL") described below may impact the deployment and/or the ultimate ownership of the K10-class vessels. Alliances The company and OOCL are parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. Currently, each party is guaranteed vessel space and buys extra space as needed. Since December 1993, the company has been required to purchase additional vessel space from OOCL and to compensate OOCL for this space at a rate currently calculated at $6.6 million per year, accrued ratably over each year. This commitment reduces as the company increases the capacity it can exchange with OOCL, which is expected to begin with the scheduled delivery of the company's C11-class vessels in 1995. In September 1994, the company, MOL, and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers currently expect to commence service under this agreement in late 1995 or early 1996. This agreement is subject to government approvals in the U.S. and Japan. The three carriers and NLL signed a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-U.S. East Coast trade via Panama for a minimum of three years. The four carriers currently expect to initiate service under this agreement in March 1995, and weekly service is currently expected to commence by August 1995. Additionally, in September 1994, the four carriers and Malaysian International Shipping Corporation BHD signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001. The carriers currently expect to commence service under the agreement in January 1996. Prior to the commencement of this alliance, the company will enter the Asia-Europe trade by chartering vessel space through MOL beginning in March 1995. The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe alliance agreements are all expected to be implemented by late 1995 or early 1996. Under the terms of the three agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The value of vessel space provided by the company to the alliance is less than the value of the total capacity allocated to it through the alliance, resulting in an annual net cash purchase commitment from the company to its alliance partners currently estimated to be $29 million, beginning in 1996. For 1995, the company currently estimates its net purchase commitment to its alliance partners for vessel space in the Asia-U.S. East Coast and Asia-Europe trades to be approximately $35 million. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the company's net cash commitment, if any, to the alliance partners for these services cannot be determined at this time. In April 1994, the company and Transportacion Maritima Mexicana ("TMM"), a Mexican transportation company, entered into an agreement enabling them to reciprocally charter vessel space for a period of three years. Under the agreement, cargo will be transported between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. Each party is committed to purchase a minimum amount of vessel space at contract rates and may buy available extra space as needed. The company's minimum space purchase commitment exceeds that of TMM by approximately $5.3 million per year. Facilities, Equipment and Services The company has outstanding purchase commitments to acquire cranes, facilities, equipment and services totaling $99.4 million. In addition, the company has commitments to purchase terminal services for its major Asian operations. These commitments range from one to ten years, and the amounts of the commitments under these contracts are based upon the actual services performed. At December 30, 1994, the company had outstanding letters of credit totaling $11 million, which guarantee the company's performance under certain of its commitments. Employment Contracts The company has entered into employment agreements with certain of its executive officers. The agreements provide for certain payments to each officer upon termination of employment, other than as a result of death, disability in most cases, or justified cause, as defined. The aggregate estimated commitment under these agreements was $15.9 million at December 30, 1994. Contingencies The company is a party to various legal proceedings, claims and assessments arising in the course of its business activities. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the company, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the company's consolidated financial position or operations. NOTE 11. BUSINESS SEGMENT INFORMATION The company provides container transportation services in North America, Asia and the Middle East through an intermodal system combining ocean, rail and truck transportation. In addition, the company was engaged in real estate operations until 1994, when its remaining real estate holdings were sold.
(In millions) 1994 1993 1992 Revenues Transportation $ 2,777.3 $ 2,590.2 $ 2,509.6 Real Estate 16.2 16.0 6.0 Total $ 2,793.5 $ 2,606.2 $ 2,515.6 Operating Income Transportation $ 114.2 $ 122.9 $ 136.7 Real Estate 9.0 10.0 3.4 Total $ 123.2 $ 132.9 $ 140.1 Identifiable Assets Transportation $ 1,658.0 $ 1,442.0 $ 1,417.4 Real Estate 6.0 12.4 18.2 Total $ 1,664.0 $ 1,454.4 $ 1,435.6
Depreciation expense and capital expenditures were related only to transportation operations in 1994, 1993 and 1992. The following table shows the percentage of ocean transportation revenues by country:
1994 1993 1992 Origin Destination Origin Destination Origin Destination United States 26% 44% 27% 44% 30% 44% Hong Kong 14 4 12 4 12 5 People's Republic of China 10 3 8 1 6 2 Japan 9 11 10 12 11 11 Taiwan 9 3 9 4 10 3 India 5 2 5 3 5 2 Korea 4 3 5 2 4 3 Indonesia 4 1 4 1 3 1 Other 19 29 20 29 19 29
Operating income, net income and identifiable assets cannot be allocated on a geographic basis due to the nature of the company's business. NOTE 12. QUARTERLY RESULTS (Unaudited) (In millions, except per share amounts)
1994 1993 Quarter December September July April December September June April Ended 30 23 1 8 31 17 25 2 Revenues $ 764.7 $672.1 $ 653.6 $ 703.1 $ 765.9 $ 625.4 $ 583.9 $ 631.0 Operating Income Transportation 34.3 37.2 26.1 16.6 26.6 48.3 24.3 23.7 Real Estate 6.4 2.6 5.4 1.0 3.6 Total (1) 34.3 37.2 32.5 19.2 32.0 49.3 27.9 23.7 Income Before Taxes (2) 32.2 34.0 28.8 15.3 31.1 46.4 33.7 19.3 Net Income $ 22.5 $ 22.5 $ 19.0 $ 10.2 $ 21.2 $ 25.5 $ 21.3 $ 12.1 Earnings Per Common Share Primary Earnings Per Common Share $ 0.74 $ 0.74 $ 0.62 $ 0.30 $ 0.69 $ 0.85 $ 0.71 $ 0.39 Fully Diluted Earnings Per Common Share $ 0.69 $ 0.70 $ 0.60 $ 0.30 $ 0.66 $ 0.80 $ 0.67 $ 0.38 Cash Dividends Per Common Share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.075 $ 0.075 $ 0.075 $ 0.075 Market Price Per Common Share High $26 7/8 $27 1/8 $23 1/8 $34 $30 $28 1/2 $27 3/4 $24 3/8 Low 21 1/4 20 7/8 19 22 1/8 23 22 3/8 23 3/8 19
(1) Collections of detention charges related to the company's containers used to transport Operation Desert Storm cargo contributed $0.7 million, $0.5 million, $0.7 million and $8.3 million to Operating Income for the fourth, third, second and first quarters of 1994, respectively, and $3.6 million, $0.6 million and $1.7 million to Operating Income for the fourth, third and second quarters of 1993, respectively. (2) The gain on the sale of the company's remaining investment in the common stock Amtech Corporation contributed $8.9 million to Income Before Taxes in the second quarter of 1993. SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS (In thousands)
Description Balance at Charged To Charged To Deductions- Balance at Beginning Cost and Other Describe (1) End of Year of Year Expense Accounts- Describe (2) Allowance for Doubtful Accounts December 30, 1994 $ 10,359 $ 13,217 $ 2,295 $ (3,963) $ 21,908 December 31, 1993 $ 13,237 $ 4,324 $ (764) $ (6,438) $ 10,359 December 25, 1992 $ 14,611 $ 5,859 $ (7,233) $ 13,237
(1) Uncollectible receivables written off, net of recoveries. (2) Reclassifications from/(to) other Balance Sheet accounts. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information with respect to Directors and certain executive officers of the company appearing under the caption "Election of Directors - Information With Respect to Nominees and Directors" in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995 is hereby incorporated herein by reference. The following sets forth certain information with respect to the remaining executive officers of the company: John G. Burgess, age 50, elected Executive Vice President of American President Lines, Ltd. in December 1992. Prior to that, he served as Executive Vice President and Chief Operating Officer of American President Lines, Ltd. from May 1990 to November 1992. Maryellen B. Cattani, age 51, elected Executive Vice President of the company in March 1995, and has served as Senior Vice President, Secretary and General Counsel of the company since July 1991. Prior to joining the company, she was a partner in the law firm of Morrison & Foerster from 1989 to 1991 and Senior Vice President, General Counsel and Secretary of Transamerica Corporation from 1983 to 1989. L. Dale Crandall, age 53, elected Executive Vice President and Chief Financial Officer of the company, to become effective upon his becoming a full-time employee of the company which is expected to occur in May 1995. Mr. Crandall has been a Partner in the accounting firm of Price Waterhouse since 1974 and has been managing partner of the firm's Los Angeles office since 1990. Michael Diaz, age 46, elected Executive Vice President of American President Lines, Ltd. in December 1992. Prior to that, he served as President, Asia Division of American President Lines, Ltd. from August 1992 to November 1992, and Executive Vice President and Chief Operating Officer of APL Land Transport Services, Inc. from July 1990 to July 1992. James S. Marston, age 61, elected Senior Vice President and Chief Information Officer of the company in September 1987, served as Vice President and then President of AMR Corporation-Technical Training Division from June 1982 to June 1986 and from June 1986 to September 1987, respectively. William J. Stuebgen, age 47, elected Vice President, Controller and Chief Accounting Officer of the company in October 1990. Prior to that, he served as Vice President, Treasurer of the company from October 1988 to September 1990 and Vice President, Controller from April 1987 to March 1989. The executive officers of the company are elected by the Board of Directors. Each officer holds office until his or her successor has been duly elected and qualified, or until the earliest of his or her death, resignation, retirement or removal by the Board. ITEM 11. EXECUTIVE COMPENSATION The information appearing under the caption "Compensation of Executive Officers and Directors" and in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995, is hereby incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information appearing under the captions "Election of Directors- Stock Ownership of Directors and Executive Officers" and "Certain Beneficial Ownership of Securities" in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995, is hereby incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information appearing under the captions "Compensation of Executive Officers and Directors -- Employment Agreements, Termination of Employment and Change-in-Control Arrangements and Certain Transactions" in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995, is hereby incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1. Financial Statements and Schedules The following report of independent public accountants, consolidated financial statements and notes to the consolidated financial statements of American President Companies, Ltd. and subsidiaries are contained in Part II, Item 8: a. Report of Independent Public Accountants b. Consolidated Statement of Income c. Consolidated Balance Sheet d. Consolidated Statement of Cash Flows e. Consolidated Statement of Changes in Stockholders' Equity f. Notes to Consolidated Financial Statements 2. The following schedules are contained in Part II, Item 8: a. Schedule II - Valuation and Qualifying Accounts 3. Exhibits required by Item 601 of Regulation S-K The following documents are exhibits to this Form 10-K Exhibit No. Description of Document ______________________________________________________________________________ 3.1* Certificate of Incorporation, filed as Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated May 14, 1985. 3.2* Certificate of Amendment of Certificate of Incorporation, filed as Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated March 11, 1988. 3.3* By-Laws, as amended, filed as Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated March 27, 1991 and electronically filed as Exhibit 3.1 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993. 3.4* Amendment to the By-laws dated June 25, 1993, filed as Exhibit 3.2 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993. 4.1* Amended and Restated Rights Agreement dated October 22, 1991, between the company and The First National Bank of Boston, as Rights Agent, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated October 22, 1991. 4.2* Trust Indenture between American President Lines, Ltd., Issuer, and Security Pacific National Bank, Trustee, dated as of April 22, 1988, President Truman Issue, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 4.3* Forms of Series I and Series II Bonds, filed as part of Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 4.4* Certificate of Designation, Preferences, and Rights of the 9% Series C Cumulative Convertible Preferred Stock, filed with the Delaware Secretary of State on September 20, 1988, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated September 21, 1988. 4.5* Specimen Certificate of the company's 9% Series C Cumulative Convertible Preferred Stock, par value $.01 per share, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated August 1, 1989. 4.6* Preferred Stock Purchase Agreement among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated as of August 3, 1988, and amendments 1 through 3, dated September, 1988 (without exhibits), filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated February 17, 1989. 4.7* Amendment of Preferred Stock Purchase Agreement among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated March 15, 1989, filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated March 14, 1990. 4.8* Registration Rights Agreement, among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated as of August 3, 1988, as amended (without exhibits), filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated February 17, 1989. 4.9* Certificate of Elimination with Respect to the $3.50 Series B Convertible Exchangeable Preferred Stock of American President Companies, Ltd., dated June 22, 1992, filed as Exhibit 4.1 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993. 4.10* Certificate of Designation, Preferences and Rights of the 9% Series D Convertible Preferred Stock of American President Companies, Ltd., dated June 29, 1992, filed as Exhibit 4.2 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993. 4.11* Indenture, dated as of November 1, 1993, between American President Companies, Ltd. and The First National Bank of Boston as Trustee, filed as Exhibit 4.1 to the company's Form 8K (File No. 1-8544), dated November 29, 1993. 4.12* Form of 7-1/8% Senior Note Due 2003 of American President Companies, Ltd., filed as Exhibit 4.2 to the company's Form 8K (File No. 1-8544) dated November 29, 1993. 4.13* Form of 8% Senior Debentures Due 2024 of American President Companies, Ltd., filed as Exhibit 4.20 to the company's Form 10K (File No. 1- 8544), dated March 9, 1994. 10.1* Operating-Differential Subsidy Agreement (No. MA/MSB-417), effective as of January 1, 1978, between the United States and American President Lines, Ltd., and Addenda Nos. 1 through 79 thereto, excluding Nos. 16, 52, 56, 67, 72, 73, 76 and 77, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated March 17, 1992. 10.2* Addenda Nos. 87 and 89 dated August 16, 1991 and March 19, 1992, respectively to the Operating-Differential Subsidy Agreement (No. MA/MSB-417), effective as of January 1, 1978, between the United States and American President Lines, Ltd., filed as Exhibit 10.72 to the company's Form 10K (File No. 1-8544), dated March 9, 1994. 10.3* Lease Agreement, dated June 1, 1988, between Monsanto Company and American President Intermodal Company, Ltd., filed as Exhibit 10.14 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 10.4* Lease Agreement, dated June 1, 1988, between Consolidated Rail Corporation and American President Intermodal Company, Ltd., filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March 14, 1990. 10.5* Lease and Preferential Assignment Agreement dated January 6, 1971, and First Supplemental Agreement dated February 24, 1971, between the City of Oakland and Seatrain Terminals of California, Inc., filed as Exhibit 10.32 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.6* Second Supplemental Agreement to Lease and Preferential Assignment Agreement, dated May 3, 1988, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 14, 1990. 10.7* Preferential Assignment dated February 23, 1972, between the City of Oakland and Seatrain Terminals of California, Inc., filed as Exhibit 10.33 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.8* Assignment, Designation of Secondary Use and Consent, dated December 11, 1974, among Seatrain Terminals of California, Inc., American President Lines, Ltd., the City of Oakland and Seatrain Lines, Inc., filed as Exhibit 10.34 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.9* Acknowledgment of Termination of Consent to Secondary Use and Sublease and Assumption of Entire Combined Premises and Cranes dated December 18, 1981, between the City of Oakland and American President Lines, Ltd., filed as Exhibit 10.35 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.10* Supplemental Agreement dated July 6, 1982, between the City of Oakland and American President Lines, Ltd., filed as Exhibit 10.36 to the company's Registration Statement on Form S-l, Registration No. 2- 93718, which became effective on November 1, 1984. 10.11* Permit No. 441, dated November 26, 1980, Second Amendment to Permit No. 441, dated February 7, 1983, and Third Amendment to Permit No. 441, dated May 10, 1984, between the City of Los Angeles and American President Lines, Ltd., filed as Exhibit 10.37 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.12* Fourth Amendment to Permit No. 441, dated as of October 29, 1986 between the City of Los Angeles and American President Lines, Ltd., filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 23, 1987. 10.13* Financing and Security Agreement, dated March 27, 1984, between American President Lines, Ltd. and the City of Los Angeles, California, filed as Exhibit 10.38 to the company's Registration Statement on Form S-1, Registration No. 2-93718, which became effective on November 1, 1984. 10.14* Lease, dated July 31, 1972, Lease Agreement, dated September 1, 1980, Memorandum, dated September 1, 1980, and two letters dated July 3, 1981 and July 14, 1981, respectively, between Hanshin Port Development Authority and American President Lines, Ltd., filed as Exhibit 10.39 to the company's Registration Statement on Form S-1, Registration No. 2-93718, which became effective on November 1, 1984. 10.15* Pre-engagement Agreement for Lease dated March 17, 1983, Supplemental Agreement dated March 17, 1983 and form of Wharf Lease Agreement between Yokohama Port Terminal Corporation and American President Lines, Ltd., filed as Exhibit 10.41 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.16* Lease Contract of Wharfs Nos. 68 & 69 of Container Terminal No. 3 Kaohsiung Harbor, Taiwan, Republic of China, dated December 31, 1987 and Equipment Agreement between the Kaohsiung Harbor Bureau and APL, dated December 31, 1987, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 11, 1988. 10.17* Lease dated April 28, 1978, Memorandum of Understanding, Addendum to Lease dated May 9, 1978, Addendum No. 2 to Lease dated July 28, 1978, and Addendum No. 3 to Lease dated March 27, 1984, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.44 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984. 10.18* Addendum No. 4 dated April 19, 1985 to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated December 12, 1985. 10.19* Addendum No. 5 dated July 25, 1986 to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated March 11, 1988. 10.20* Addendum No. 6, dated May 1, 1988, to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.13 to the company's Form SE (File No. 1-8544), dated July 26, 1988. 10.21* Lease Agreement between Port of Seattle and American President Lines, Ltd. at Terminal 5 dated September 26, 1985, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated December 12, 1985. 10.22* Amendment No. 6 to the Lease Agreement between Port of Seattle and American President Lines, Ltd. at Terminal 5, and assignment of the lease from American President Lines, Ltd. to Eagle Marine Services, Ltd. dated June 1, 1994, excluding exhibits and other related agreements, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated August 12, 1994. 10.23* Lease Agreement between the company and Bramalea Pacific, Inc. dated April 18, 1988, and Amendments 1 through 5, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 27, 1991. 10.24* Credit agreements dated as of February 12, 1987, between American President Lines, Ltd. and Kreditanstalt fur Wiederaufbau, filed as Exhibit 10.9 to the company's Form SE (File No. 1-8544), dated March 23, 1987. 10.25* Guarantees dated as of February 12, 1987, by the company in favor of Kreditanstalt fur Wiederaufbau, filed as Exhibit 10.10 to the company's Form SE (File No. 1-8544), dated March 23, 1987. 10.26* Grantor Trust Agreement with U.S. Trust Company of California, N.A., effective April 10, 1989, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated August 1, 1989. 10.27* Trans-Pacific Stabilization Agreement, a Cooperative Working Agreement among Ocean Common Carriers, including American President Lines, Ltd., signed November 22, 1988, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated August 1, 1989. 10.28* Assignment Agreement from United States Lines, Inc. to American President Lines, Ltd. with attached supplements, dated September 16, 1987, filed as Exhibit 10.8 to the company's Form SE (File No. 1- 8544), dated March 14, 1990. 10.29* Contract for the Purchase of Containership Vessels dated May 10, 1993, between Howaldtswerke-Deutsche Werft and Aktungesellschaft and American President Lines, Ltd., filed as Exhibit 10.66 to the company's Form 10K (File No. 1-8544), dated March 9, 1994. 10.30* Contract for the Purchase of Containership Vessels dated May 10, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd., filed as Exhibit 10.67 to the company's Form 10K (File No. 1-8544), dated March 9, 1994. 10.31* Amendment No. 1 to the Contract for the Purchase of Containership Vessels, dated June 3, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd., filed as Exhibit 10.4 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993. 10.32* Permit No. 733, dated September 10, 1993, between the City of Los Angeles and Eagle Marine Services, Ltd., and the Guaranty of Agreement made by American President Lines, Ltd., excluding exhibits, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated November 18, 1993. 10.33* Loan Agreement dated March 14, 1994 by and among Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate); and American President Lines, Ltd. (as Borrower); including Appendices and Schedules thereto, filed as Exhibit 10.4 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994 and as Exhibit 10.4a to the company's Form 10-K/A (file No. 1-8544), dated December 6, 1994. 10.34* Guarantee dated as of March 14, 1994 by American President Companies, Ltd. (as Guarantor); in favor of Kreditanstalt fur Wiederaufbau (as Agent and Lender); and Commerzbank AG Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank- Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate), including Schedule 1 thereto, filed as Exhibit 10.5 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994. 10.35* Credit Agreement, dated March 25, 1994 among American President Companies, Ltd., borrower, and Morgan Guaranty Trust Company of New York, J.P. Morgan Delaware, Bank of America National Trust and Savings Association, The First National Bank of Boston, Barclays Bank PLC, ABN AMRO Bank N.V., The First National Bank of Chicago and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994. 10.36* Deferred Compensation Plan For Directors of the company, filed as Exhibit 10.49 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.** 10.37* Executive Survivors' Benefits Plan, dated November 29, 1988, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 17, 1992.** 10.38* Amendment No. 1 to the Executive Survivors' Benefits Plan, effective December 4, 1992, filed as Exhibit 10.10 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.39* 1988 Deferred Compensation Plan dated November 29, 1988, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated February 17, 1989.** 10.40* Amendment No. 1 to the 1988 Deferred Compensation Plan, effective January 1, 1992, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.41* 1992 Directors' Stock Option Plan, dated March 17, 1992, filed as Exhibit 10.06 to the company's Form SE (File No. 1-8544), dated May 5, 1992.** 10.42* Amended and Restated Retirement Plan for the Directors of American President Companies, Ltd., dated September 15, 1992, filed as Exhibit 10.01 to the company's Form SE (File No. 1-8544), dated October 20, 1992.** 10.43* American President Companies, Ltd. Retirement Plan, amended and restated effective January 1, 1993, filed as Exhibit 10.13 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.44* 1989 Stock Incentive Plan of the company, as amended and restated effective April 28, 1994, filed with the company's Proxy Statement (File No. 1-8544) for the Annual Meeting of Shareholders held on April 28, 1994.** 10.45 American President Companies, Ltd. SMART Plan, second amendment and restatement effective January 1, 1995.** 10.46 Excess-Benefit Plan of the company, amended and restated effective December 31, 1994.** 10.47 1995 Deferred Compensation Plan of the company, effective January 1, 1995.** 10.48 1995 Supplemental Executive Retirement Plan of the company, effective January 1, 1995.** 10.49* Employment Agreement as amended, dated January 29, 1991 between the company and John M. Lillie, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated May 8, 1991.** 10.50* Amendment No. 1 dated July 28, 1992 to the Employment Agreement as amended, between the company and John M. Lillie, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.51* Amendment No. 2 dated January 26, 1992 to the Employment Agreement as amended, between the company and John M. Lillie, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March 24, 1993.** 10.52* Employment Agreement between the company and Maryellen B. Cattani dated April 28, 1994, filed as Exhibit 10.10 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994.** 10.53* Employment Agreement between the company and Will M. Storey dated March 4, 1994, filed as Exhibit 10.11 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994.** 10.54* Employment Agreement between the company and Timothy J. Rhein dated July 28, 1992, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated November 4, 1994.** 10.55* Employment Agreement between the company and Joji Hayashi dated July 28, 1992, filed as Exhibit 10.2 to the company's Form 10Q (File No. 1- 8544), dated November 4, 1994.** 10.56* Employment Agreement between the company and James S. Marston dated July 28, 1992, filed as Exhibit 10.3 to the company's Form 10Q (File No. 1-8544), dated November 4, 1994.** 10.57* Employment Agreement between the company and John G. Burgess dated July 28, 1992, filed as Exhibit 10.4 to the company's Form 10Q (File No. 1-8544), dated November 4, 1994.** 10.58* Employment Agreement between the company and Michael Diaz dated July 28, 1992, filed as Exhibit 10.5 to the company's Form 10Q (File No. 1- 8544), dated November 4, 1994.** 10.59* Form of Indemnity Agreements dated March 11, 1988 between the company and W. B. Seaton, Charles S. Arledge, John H. Barr, Calvin S. Hatch, J. Hayashi, Forrest N. Shumway and Barry L. Williams, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated February 17, 1989.** 10.60* Form of Indemnity Agreements dated April 25, 1991 between the company and F. Warren Hellman, John M. Lillie, Timothy J. Rhein, Will M. Storey, filed as Exhibits 10.3 through 10.6 to the company's Form SE (File No. 1-8544), dated May 8, 1991.** 10.61* Indemnity Agreement dated October 5, 1993 between the company and Toni Rembe, filed as Exhibit 10.74 to the company's Form 10K (File No. 1- 8544), dated March 9, 1994.** 10.62 Form of Indemnity Agreement dated April 28, 1994 between the company and G. Craig Sullivan.** 10.63 Form of Indemnity Agreement dated June 20, 1994 between the company and Tully M. Friedman.** 11.1 Computation of Earnings Per Share. 21.1 Subsidiaries of the company. 23.1 Consent of Independent Public Accountants. 24.1 Powers of Attorney. 27 Financial Data Schedules filed under Article 5 of Regulation S-X for the year ended December 30, 1994. *Incorporated by Reference **Denotes management contract or compensatory plan. Pursuant to Instruction 2 to Item 601 of Regulation S-K, the company has omitted the Contract for the Purchase of Containership Vessels dated December 2, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd. Such document is substantially identical to the Contract for the Purchase of Containership Vessels dated May 10, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd., except with respect to prices and dates of delivery, set forth as Exhibit 10.30. Pursuant to Item 601 (b)(4)(iii)(A) of Regulation S-K, certain instruments defining the rights of holders of the long-term debt of the company and its consolidated subsidiaries have not been filed because the amount of securities authorized under each such instrument does not exceed ten percent of the total assets of the company and its subsidiaries on a consolidated basis. A copy of any such instrument will be furnished to the Commission upon request. (b) Reports on Form 8-K during the fourth quarter: No current report on Form 8-K was filed during the quarter for which this report on Form 10-K is filed. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN PRESIDENT COMPANIES, LTD. (Registrant) By /s/ William J. Stuebgen William J. Stuebgen Vice President, Controller and Chief Accounting Officer March 10, 1995 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ John M. Lillie* March 10, 1995 John M. Lillie Chairman of the Board of Directors, President and Chief Executive Officer /s/ Charles S. Arledge* March 10, 1995 Charles S. Arledge Director /s/ John H. Barr* March 10, 1995 John H. Barr Director /s/ Tully M. Friedman March 10, 1995 Tully M. Friedman Director /s/ Joji Hayashi* March 10, 1995 Joji Hayashi Director /s/ F. Warren Hellman* March 10, 1995 F. Warren Hellman Director /s/ Toni Rembe* March 10, 1995 Toni Rembe Director /s/ Timothy J. Rhein* March 10, 1995 Timothy J. Rhein Director /s/ Forrest N. Shumway* March 10, 1995 Forrest N. Shumway Director /s/ G. Craig Sullivan* March 10, 1995 G. Craig Sullivan Director /s/ Will M. Storey* March 10, 1995 Will M. Storey Executive Vice President, Chief Financial Officer and Director /s/ Barry L. Williams* March 10, 1995 Barry L. Williams Director *By: /s/ Maryellen B. Cattani March 10, 1995 Maryellen B. Cattani Attorney-in-fact EX-10.45 2 EXHIBIT 10.45 TO THE 1994 FORM 10-K FOR APC -- Execution Copy AMERICAN PRESIDENT COMPANIES, LTD. SMART PLAN Second Amendment and Restatement Effective as of January 1, 1993 TABLE OF CONTENTS Page ARTICLE 1. INTRODUCTION 1 ARTICLE 2. ELIGIBILITY AND ENROLLMENT 2 2.1 Eligible Employees 2 2.2 Enrollment 2 2.3 Rehired and Transferred Employees 2 2.4 Suspension of Participation 3 2.5 Termination of Participation 3 ARTICLE 3. EMPLOYEE CONTRIBUTIONS 4 3.1 Amount of Employee Contributions 4 3.2 Designation of Employee Contributions 4 3.3 Payment of Employee Contributions 4 3.4 Elections to Contribute 5 3.5 Amendment of Prior Elections 5 3.6 Voluntary Suspension of Employee Contributions 5 3.7 Make-Up Unmatched After-Tax Contributions 5 3.8 Investment of Contributions 6 ARTICLE 4. COMPANY CONTRIBUTIONS 7 4.1 Amount of Matching Contributions 7 4.2 Allocation of Matching Contributions 7 4.3 Discretionary Contributions ARTICLE 5. ROLLOVER CONTRIBUTIONS 9 5.1 Requirements for Rollover Contributions 9 5.2 Crediting of Rollover Contributions 9 ARTICLE 6. PLAN INVESTMENTS 10 6.1 The Trust Fund; No Reversion 10 6.2 Individual Accounts 10 6.3 Investment Elections 11 6.4 Change in Investment Elections 11 6.5 Account Transfers 11 6.6 Accounts Transferred From AP Plan 12 ARTICLE 7. WITHDRAWALS 13 7.1 Withdrawals From After-Tax Accounts and Rollover Accounts 13 7.2 Withdrawals From Other Accounts 14 7.3 Hardship or Disability Withdrawals 15 7.4 Procedure for Hardship Withdrawals 15 7.5 Representations Necessary for a Hardship Withdrawal 16 7.6 Payment and Source of Withdrawals 17 ARTICLE 8. LOANS 18 8.1 Amount of Loans 18 8.2 Aggregate Loan Limitation 18 8.3 Terms of Loans 18 8.4 Company Consent 19 8.5 Restrictions on Loans 20 8.6 Disbursement and Source of Loans 20 8.7 Loan Payments and Defaults 20 8.8 Loan Fees 21 ARTICLE 9. VESTING AND FORFEITURES 22 9.1 100 Percent Vesting 22 9.2 Vesting Schedules 22 9.3 Vesting After Prior Distributions 23 9.4 Forfeitures 23 9.5 Criminal Acts 24 ARTICLE 10. AMOUNT AND DISTRIBUTION OF PLAN BENEFITS 25 10.1 Amount of Plan Benefits 25 10.2 Time of Distribution: General Rule 25 10.3 Earliest Time of Distribution 25 10.4 Latest Time of Distribution 26 10.5 Special Rules for Employees Over Age 65 26 10.6 Annuity Form of Distribution 26 10.7 Available Forms of Distribution 26 10.8 Small Benefits: Immediate Lump Sum 27 10.9 Waiver of Annuity Form of Distribution 27 10.10 Survivor Annuity 28 10.11 Other Forms of Death Benefit 28 10.12 Information on Distribution Options 29 10.13 Determination of Marital Status 30 10.14 Direct Rollovers 30 (a) The Direct Rollover Option 30 (b) Definition of Eligible Rollover Distribution 30 (c) Definition of Eligible Retirement Plan 30 (d) Definition of Distributee 31 (e) Definition of Direct Rollover 31 ARTICLE 11. CLAIMS PROCEDURE 32 11.1 Filing Claims for Benefits 32 11.2 Denial of Claims 32 ARTICLE 12. REVIEW PROCEDURE 33 12.1 Appointment of Review Panel 33 12.2 Right To Appeal 33 12.3 Form of Request for Review 33 12.4 Time for Review Panel Action 33 12.5 Review Panel Decisions 33 12.6 Rules and Procedures 34 12.7 Exhaustion of Remedies Required 34 ARTICLE 13. MANAGEMENT OF ASSETS 35 13.1 Control and Management of Plan Assets 35 13.2 Investment Authority 35 13.3 Independent Qualified Public Accountant 35 13.4 Expenses 35 13.5 Benefit Payments 36 13.6 Valuation of Accounts 36 13.7 Statements 36 ARTICLE 14. ADMINISTRATION OF THE PLAN 37 14.1 Plan Administration 37 14.2 Employment of Advisers 37 14.3 Service in Several Fiduciary Capacities 37 ARTICLE 15. AMENDMENT AND TERMINATION 38 15.1 Right To Amend or Terminate 38 15.2 Effect of Termination 38 15.3 Allocation of Assets Upon Termination 38 ARTICLE 16. GENERAL PROVISIONS 39 16.1 No Assignment of Property Rights; Qualified Domestic Relations Orders 39 16.2 Incompetence 39 16.3 Unclaimed Plan Benefits 39 16.4 No Employment Rights 40 16.5 Beneficiary 40 16.6 Merger, Consolidation and Transfer of Assets or Liabilities 41 16.7 Voting Rights 41 16.8 Other Instructions by Participants 41 16.9 Spousal Consents 41 16.10 Forms for Plan Communications 42 16.11 Choice of Law 42 ARTICLE 17. SPECIAL TOP-HEAVINESS RULES 43 17.1 Determination of Top-Heavy Status 43 17.2 Minimum Allocations 43 17.3 Impact on Contribution Limitations 43 17.4 Special Definitions 43 (a) "Aggregation Group" 43 (b) "Determination Date" 43 (c) "Key Employee" 43 (d) "Permissive Aggregation Group" 43 (e) "Required Aggregation Group" 44 (f) "Section 415 Compensation" 44 (g) "Top-Heavy Ratio" 44 ARTICLE 18. PERIOD OF SERVICE 45 18.1 Period of Employment Relationship 45 18.2 Interval Between Periods of Employment 45 18.3 Other Periods 46 18.4 Aggregation of Periods 46 18.5 Exclusions 46 ARTICLE 19. DEFINITIONS 47 19.1 "Accounts" 47 19.2 "Affiliated Group" 47 19.3 "After-Tax Accounts" 47 19.4 "After-Tax Contribution" 48 19.5 "Annuity Starting Date" 48 19.6 "APC Stock" 48 19.7 "APC Stock Fund" 48 19.8 "AP Plan" 48 19.9 "Basic Company Accounts" 48 19.10 "Beneficiary" 48 19.11 "Code" 48 19.12 "Company" 48 19.13 "Company Accounts" 48 19.14 "Company Contribution" 48 19.15 "Compensation" 48 19.16 "Disability" 49 19.17 "Discretionary Contribution" 49 19.18 "Eligible Employee" 49 19.19 "Employee" 49 19.20 "Employee Accounts" 50 19.21 "Employee Contribution" 50 19.22 "ERISA" 50 19.23 "Forfeiture" 50 19.24 "Highly Compensated Employee" 50 19.25 "Investment Funds" 50 19.26 "Investment Manager" 50 19.27 "Matched After-Tax Contribution" 50 19.28 "Matched Contribution" 50 19.29 "Matched Salary Deferral" 50 19.30 "Matching Contribution" 50 19.31 "NPSI Plan" 51 19.32 "Participant" 51 19.33 "Participating Company" 51 19.34 "Pension Accounts" 51 19.35 "Period of Service" 51 19.36 "Period of Severance" 51 19.37 "Permanent Service Break" 51 19.38 "Plan" 52 19.39 "Plan Benefit" 52 19.40 "Plan Year" 52 19.41 "Profit-Sharing Accounts" 52 19.42 "Qualified Joint and Survivor Annuity" 52 19.43 "Qualified Preretirement Survivor Annuity" 52 19.44 "Review Panel" 52 19.45 "Rollover Accounts" 52 19.46 "Rollover Contribution" 52 19.47 "Salary Deferral" 52 19.48 "Salary Deferral Accounts" 52 19.49 "Special Absence" 53 19.50 "Transferred Company Accounts" 53 19.51 "Trust Agreement" 53 19.52 "Trustee" 53 19.53 "Trust Fund" 53 19.54 "United States" 53 19.55 "Unmatched After-Tax Contribution" 53 19.56 "Unmatched Contribution" 53 19.57 "Unmatched Salary Deferral" 54 19.58 "Years of Service" 54 ARTICLE 20. EXECUTION 55 APPENDIX I LIMITATIONS ON CONTRIBUTIONS 56 ARTICLE 1. DEFINITIONS 56 1.1 "Aggregate 401(k) Contributions" 56 1.2 "Aggregate 401(m) Contributions" 56 1.3 "Annual Additions 56 1.4 "Excess Aggregate Contributions" 57 1.5 "Excess Contributions" 57 1.6 "Excess Deferrals" 57 1.7 "Family Member" 57 1.8 "Highly Compensated Employee" 57 1.9 "Highly Compensated Former Employee" 59 1.10 "Nonhighly Compensated Employee" 59 1.11 "Section 415 Compensation" 59 1.12 "Section 415 Employer Group 59 1.13 "Section 414(s) Compensation" 60 1.14 "Top-Paid Group" 61 1.15 "Total Compensation" 61 ARTICLE 2. DEFERRAL AND AVERAGE DEFERRAL PERCENTAGE LIMITATIONS 63 2.1 Return of Excess Deferrals 63 2.2 Average Deferral Percentage Limitation 63 2.3 Allocation of Excess Contributions to Highly Compensated Employees 64 2.4 Distribution of Excess Contributions 64 2.5 Qualified Matching Contributions 65 2.6 Corrective Qualified Nonelective Contributions 65 2.7 Special Rules 66 2.8 Prospective Limitations on Salary Deferrals 68 ARTICLE 3. AVERAGE CONTRIBUTION PERCENTAGE LIMITATIONS 69 3.1 Average Contribution Percentage Limitation 69 3.2 Allocation of Excess Aggregate Contributions to Highly Compensated Employees 69 3.3 Distribution of Excess Aggregate Contributions 70 3.4 Use of Salary Deferrals 70 3.5 Corrective Qualified Nonelective Contributions 70 3.6 Special Rules 70 ARTICLE 4. MULTIPLE-USE LIMITATIONS 73 4.1 Applicability of the Multiple-Use Limitation 73 4.2 Multiple-Use Limitation 73 4.3 Correction of Multiple-Use Limitation 74 ARTICLE 5. ALLOCATION LIMITATIONS 75 5.1 Limitation on Contributions 75 5.2 Effect on Future Contributions 75 5.3 Return of Prior Employee Contributions 75 5.4 Other Excess Amounts 76 5.5 Combined Limitation on Benefits and Contributions 76 AMERICAN PRESIDENT COMPANIES, LTD. SMART PLAN ARTICLE 1. INTRODUCTION. The Plan was most recently amended and restated as of January 1, 1993, to read as set forth herein. The Plan is intended to qualify as a profit-sharing plan under section 401(a) of the Code and contains a salary deferral arrangement intended to qualify under section 401(k) of the Code. The Plan may be amended or terminated at any time and for any reason pursuant to Article 15. The rights of a Participant who ceases to be an Employee shall be determined solely in accordance with the provisions of the Plan then in effect and shall not be affected by plan amendments taking effect as of a subsequent date, except as otherwise expressly provided in the Plan. Effective as of September 1, 1990, certain participants in the AP Plan became Participants in this Plan and the accounts maintained for them under the AP Plan were transferred to this Plan. The Plan includes certain transition provisions that pertain only to Participants who transferred from the AP Plan effective as of September 1, 1990. ARTICLE 2. ELIGIBILITY AND ENROLLMENT. 2.1 Eligible Employees The term "Eligible Employee" shall mean any Employee who is employed by a Participating Company, except an Employee who is: (a) Employed outside the United States and not on the U.S. payroll; (b) A "leased employee" (within the meaning of section 414(n) of the Code) with respect to the Participating Company; (c) Classified by the Company as a driver, driver-trainer or temporary employee; (d) Included in a unit of employees covered by a collective- bargaining agreement which does not provide that the Employee is eligible to participate in the Plan; or (e) Designated by the Company in writing as an individual who is not eligible to participate in the Plan. An individual's status as an Eligible Employee shall be determined by the Company, and such determination shall be conclusive and binding on all persons. 2.2 Enrollment An Employee shall become entitled to participate in the Plan on the date when he or she becomes an Eligible Employee. The foregoing notwithstanding, July 1, 1993 is the first date on which an Employee who is compensated by a Participating Company on a nonsalaried basis shall become eligible to participate in the Plan. Eligible Employees who wish to participate shall make Employee Contributions and shall make the appropriate elections pursuant to Sections 3.4 and 6.3. Upon becoming a Participant, each Eligible Employee shall designate a Beneficiary pursuant to Section 16.5. 2.3 Rehired and Transferred Employees A former Employee who is rehired as an Eligible Employee may commence or resume participation in the Plan on the date of reemployment. An Employee who is transferred to the status of an Eligible Employee may commence participation in the Plan on the date of the transfer. 2.4 Suspension of Participation A Participant's participation in the Plan shall be suspended for any period of time during which the Participant: (a) Is subject to Section 3.6; (b) Neither receives nor is entitled to receive any Compensation, including (without limitation) any leave of absence without pay; or (c) Does not qualify as an Eligible Employee but remains a Participant. A suspended Participant shall not be entitled to make Employee Contributions and shall not receive any allocation of Company Contributions or Forfeitures with respect to a period of suspended participation. A suspended Participant's Accounts shall remain invested as a part of the Trust Fund and shall continue to share in the gains, income, losses and expenses of the Trust Fund. 2.5 Termination of Participation. A Participant's participation in the Plan shall terminate when his or her entire Plan Benefit has been distributed or on the date of his or her death, whichever occurs first. In the case of a Participant who is not entitled to a Plan Benefit, participation in the Plan shall terminate when the Participant ceases to be an Employee. ARTICLE 3. EMPLOYEE CONTRIBUTIONS. 3.1 Amount of Employee Contributions A Participant who is not suspended may elect to make Matched Contributions to the Plan. The amount of such Matched Contributions for any period of participation may be equal to any whole percentage of the Participant's Compensation for such period, up to six percent of the Participant's Compensation for such period. In addition, a Participant who is not suspended may elect to make Unmatched Contributions to the Plan. The amount of such Unmatched Contributions for any period of participation may be equal to any whole percentage of the Participant's Compensation for such period, up to 10% of the Participant's Compensation for such period. Contributions under this Section 3.1 are also subject to the limitations set forth in Section 3.2, Section 10.5 and Appendix I. 3.2 Designation of Employee Contributions Each Participant who elects to make Employee Contributions to the Plan shall designate the percentage (in increments of one percent) of the Participant's Compensation which shall be contributed as Salary Deferrals and the percentage which shall be contributed as After-Tax Contributions. Salary Deferrals shall not exceed 12% of the Participant's Compensation for the applicable period. After-Tax Contributions shall not exceed 16% of the Participant's Compensation for the applicable period, reduced by the amount of Salary Deferrals for such period. 3.3 Payment of Employee Contributions For federal income tax purposes (and, wherever permitted, for other federal and state and local tax purposes), Salary Deferrals shall be deemed to be employer contributions to the Plan, and a Participant's election to make Salary Deferrals shall constitute an election to have the Participant's taxable compensation reduced by the amount of the Salary Deferrals. After-Tax Contributions shall constitute after-tax employee contributions to the Plan. Salary Deferrals shall be made through periodic payroll deductions from the Participant's Compensation or through such other method as may be determined by the Company. Employee Contributions shall be withheld from Compensation through periodic payroll deductions, except as provided in Section 3.7. 3.4 Elections to Contribute In accordance with procedures prescribed by the Company, a Participant who wishes to make Employee Contributions pursuant to Section 3.1 shall specify the rate at which he or she wishes to contribute to the Plan and shall designate such Employee Contributions as Salary Deferrals and/or After-Tax Contributions, as provided in Section 3.2. An initial election to make Employee Contributions may be made as of the enrollment date described in Section 2.2 or 2.3 by providing the prescribed election on or before such enrollment date (or such later date as the Company may specify). A subsequent election to make Employee Contributions shall be effective as of the first day of the payroll period that commences at least 14 calendar days after receipt of such election. 3.5 Amendment of Prior Elections In accordance with procedures prescribed by the Company, a Participant who is making Employee Contributions may change the rate of such contributions to any other rate permitted under Sections 3.1 and 3.2. An election to change the rate of Employee Contributions shall be effective as of the first day of the payroll period that commences at least 14 days after receipt of such election. 3.6 Voluntary Suspension of Employee Contributions In accordance with procedures prescribed by the Company, a Participant may elect to suspend all Employee Contributions. Any such election shall be effective as of the first day of the payroll period that commences at least 14 calendar days after receipt of such election. A Participant who has suspended all Employee Contributions may elect to resume such contributions by following the procedure prescribed by Section 3.4. However, an election to resume Employee Contributions shall in no event take effect prior to the first day of the payroll period that commences at least six months after the date on which such contributions were suspended. 3.7 Make-Up Unmatched After-Tax Contributions A Participant who is not suspended may deposit in the Plan one or more Unmatched After-Tax Contributions on account of any prior periods of participation for which he or she contributed any Matched Contributions under Section 3.1 (if Matched Contributions were then permissible) but did not contribute the maximum Unmatched After-Tax Contributions permitted by Sections 3.1 and 3.2. The amount of any such Unmatched After-Tax Contribution shall not exceed (a) the maximum Unmatched After-Tax Contributions that would have been permissible under Sections 3.1 and 3.2 while he or she participated in the Plan plus (b) the amount of any Unmatched After-Tax Contributions (excluding investment increments) previously withdrawn by the Participant under Section 7.1 plus (c) in the case of a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, the maximum "Unmatched After-Tax Contribution" that he or she could have made under the AP Plan as of August 31, 1990, minus (d) the amount of the aggregate Unmatched After-Tax Contributions previously made by the Participant. An Unmatched After-Tax Contribution under this Section 3.7 shall be paid to the Company in a lump sum in cash. A Participant making an Unmatched After-Tax Contribution under this Section 3.7 shall make a special investment election, applicable solely to such contribution, under Section 6.3. 3.8 Investment of Contributions All Employee Contributions shall be transferred to the Trustee, for investment in the Trust Fund as provided in Article 6, as soon as reasonably practicable after they were withheld or otherwise paid to the Company. Salary Deferrals shall be credited to the Participant's Salary Deferral Accounts, and After-Tax Contributions shall be credited to the Participant's After-Tax Accounts. ARTICLE 4. COMPANY CONTRIBUTIONS. 4.1 Amount of Matching Contributions For each Plan Year, the Participating Companies shall make one or more Matching Contributions to the Plan. The aggregate amount of the Matching Contributions for a Plan Year shall be equal to the sum of the amounts allocated for such Plan Year to Participants pursuant to Section 4.2, reduced by Forfeitures which arose during such Plan Year. 4.2 Allocation of Matching Contributions Subject to the limitations set forth in Appendix I, each eligible Participant's allocation of Matching Contributions and Forfeitures for a payroll period shall be equal to 100% of the aggregate Matched Contributions made by the Participant since the close of the preceding payroll period. As soon as reasonably practicable after the amount of the required allocation is determined, the Matching Contribution shall be paid to the Trustee and shall be allocated, along with Forfeitures, among eligible Participants who made Matched Contributions during the payroll period. A Participant who made Matched Contributions pursuant to Article 3 shall be eligible for an allocation of Matching Contributions and Forfeitures for a payroll period, unless Matching Contributions are suspended pursuant to Section 7.1 due to a withdrawal of Matched After-Tax Contributions. The preceding sentence notwithstanding, an individual who first became an Employee on or after April 1, 1989 (and who did not transfer to this Plan from the AP Plan as of September 1, 1990), shall in no event be eligible for an allocation of Matching Contributions or Forfeitures for any period prior to the first day of the payroll period which commences on or after the date on which he or she completed a six-month Period of Service. A Participant's share of Matching Contributions and Forfeitures shall be credited to his or her Company Accounts. 4.3 Discretionary Contributions Each Participating Company may make Discretionary Contributions to the Plan in such amounts as it may from time to time determine. Discretionary Contributions for a Plan Year shall be paid to the Trustee not later than the last date prescribed by law for filing the Company's federal income tax return for the taxable year with or within which such Plan Year ends (including extensions of such date). Subject to the limitations set forth in Appendix I, Discretionary Contributions made for a Plan Year by a Participating Company shall be allocated among the eligible Participants employed by such Participating Company in the proportion that the Compensation of each of such eligible Participants for the Plan Year bears to the total Compensation of all of such eligible Participants for such Plan Year. For this purpose, an eligible Participant is a Participant who was an Employee on the last day of the Plan Year. The preceding sentence notwithstanding, an individual who first became an Employee on or after April 1, 1989, shall in no event be eligible for an allocation of Discretionary Contributions for any Plan Year unless he or she completed a six-month Period of Service on or before the October 1 of such Plan Year. A Participant's share of Discretionary Contributions shall be credited to his or her Company Accounts. ARTICLE 5. ROLLOVER CONTRIBUTIONS. 5.1 Requirements for Rollover Contributions With the Company's prior written consent, any Participant may make one or more Rollover Contributions to the Plan. A Rollover Contribution shall be permitted only if it meets both of the following conditions: (a) The contribution must be made entirely in the form of U.S. dollars; and (b) The Participant must demonstrate to the Company's satisfaction that the contribution qualifies as a rollover contribution under section 402(c)(4), 403(a)(4) or 408(d)(3) of the Code. 5.2 Crediting of Rollover Contributions A Rollover Contribution shall be paid to the Company in a lump sum. A Participant making a Rollover Contribution shall make a special investment election, applicable solely to such contribution, under Section 6.3, except that no portion of a Rollover Contribution shall be invested in the APC Stock Fund. Each approved Rollover Contribution shall be transferred to the Trustee as soon as reasonably practicable after it is paid to the Company. The Rollover Contribution shall be credited to the Participant's Rollover Accounts. ARTICLE 6. PLAN INVESTMENTS. 6.1 The Trust Fund; No Reversion The Trust Fund shall be comprised of one or more Investment Funds, as determined from time to time by the Company, including (without limitation) the APC Stock Fund. Except as provided in Subsections (a) and (b) below, the assets of the Plan shall never inure to the benefit of any Participating Company and shall be held for the exclusive purpose of providing benefits to Participants or their Beneficiaries and of defraying the reasonable expenses of administering the Plan. (a) In the case of a Company Contribution or Salary Deferral that was made by virtue of a mistake of fact, this Section 6.1 shall not prohibit the return of such Company Contribution or Salary Deferral to the appropriate Participating Company within 12 months after the payment thereof. (b) All Company Contributions and Salary Deferrals are conditioned upon the deductibility thereof under section 404 of the Code. To the extent that a deduction is disallowed for a Company Contribution or Salary Deferral, this Section 6.1 shall not prohibit the return of such Company Contribution or Salary Deferral (to the extent disallowed) to the appropriate Participating Company within 12 months after the disallowance of the deduction. 6.2 Individual Accounts To the extent required by a Participant's selection of one or more Investment Funds, the following Accounts shall be maintained for such Participant: (a) One or more After-Tax Accounts; (b) One or more Company Accounts; (c) One or more Rollover Accounts; (d) One or more Salary Deferral Accounts; (e) In the case of a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, one or more Basic Company Accounts and one or more Transferred Company Accounts; (f) In the case of a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, and who previously participated in the profit-sharing component of the NPSI Plan, one or more Profit-Sharing Accounts; and (g) In the case of a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, and who previously participated in the pension component of the NPSI Plan, one or more Pension Accounts. 6.3 Investment Elections Each Participant's share of new Company Contributions and reallocated Forfeitures and his or her new Employee Contributions and Rollover Contributions shall be invested entirely in any one Investment Fund or in any combination of the available Investment Funds, except that no Rollover Contributions and not more than 50% of all other contributions shall be invested in the APC Stock Fund. The portion of a Participant's contributions to be invested in any one Investment Fund shall be designated in increments of one percentage point. Each Participant shall make an investment allocation election in accordance with procedures prescribed by the Company before participation commences, except that a special election shall be made with respect to make-up Unmatched After- Tax Contributions under Section 3.7 and Rollover Contributions under Section 5.2. In the case of a Participant who transferred to this Plan from the AP Plan as of September 1, 1990, the investment allocation that he or she elected most recently under the AP Plan shall continue to apply under this Plan, unless a change is made pursuant to Section 6.4. If a Participant fails to direct the manner in which Rollover Contributions, Employee Contributions, Company Contributions and reallocated Forfeitures are to be invested, then he or she shall be deemed to have elected to have all such amounts invested entirely in the Investment Fund(s) selected by the Company for this purpose. 6.4 Change in Investment Elections On any business day, a Participant (including a Participant whose participation is suspended pursuant to Section 2.4) may change his or her investment directions with respect to Employee Contributions, Rollover Contributions, Company Contributions and Forfeitures to be allocated thereafter. Any such change shall be made in accordance with procedures established by the Company and communicated to Participants. 6.5 Account Transfers Subject to such restrictions as the Company may establish, including (without limitation) any restrictions required by a guaranteed investment contract held by the Plan, a Participant may transfer all or any portion of the value of his or her existing Accounts invested in one Investment Fund to any other Investment Fund, except that no amounts shall be transferred into the APC Stock Fund. The transfer may be made on any business day, in accordance with procedures established by the Company and communicated to Participants. 6.6 Accounts Transferred From AP Plan In the case of a Participant who transferred to this Plan from the AP Plan as of September 1, 1990, the accounts maintained for him or her under the AP Plan were transferred to this Plan. Such accounts were combined with, or added to, his or her Accounts under this Plan as follows: AP Plan Accounts Accounts Under This Plan After-Tax Accounts . . . . . After-Tax Accounts Basic Company Accounts . . . Basic Company Accounts Discretionary Accounts . . . Transferred Company Accounts Matching Accounts . . . . . Transferred Company Accounts Pension Accounts . . . . . . Pension Accounts Profit-Sharing Accounts . . Profit-Sharing Accounts Rollover Accounts . . . . . Rollover Accounts Salary Deferral Accounts . . Salary Deferral Accounts The transfers did not affect a Participant's investment allocation. Outstanding loans were transferred without change. ARTICLE 7. WITHDRAWALS. 7.1 Withdrawals From After-Tax Accounts and Rollover Accounts A Participant who has After-Tax Accounts or Rollover Accounts may make withdrawals from such Accounts, as provided by this Section 7.1. (a) A Participant may withdraw all or any portion of his or her After-Tax Contributions (not including investment increments) which are credited to his or her Pre-1987 After-Tax Accounts and which were not previously withdrawn by or distributed to the Participant. Any such withdrawal shall be treated as a withdrawal of Unmatched After-Tax Contributions, to the extent that previously unwithdrawn Unmatched After-Tax Contributions remain credited to the Participant's Pre-1987 After-Tax Accounts. Any additional withdrawal of After-Tax Contributions shall be treated as a withdrawal of Matched After-Tax Contributions. If Matched After-Tax Contributions are deemed withdrawn, no Matching Contributions or Forfeitures shall be allocated to the Participant's Company Accounts with respect to a period of six months, commencing as of the first day of the second payroll period following the date on which the withdrawal request was made; provided, however, that no such suspension of Matching Contributions or Forfeitures shall apply to a Participant who is at the same time withdrawing an amount on account of hardship pursuant to Section 7.3. (b) A Participant who has withdrawn or is withdrawing the entire amount of his or her After-Tax Contributions credited to his or her Pre-1987 After-Tax Accounts pursuant to Subsection (a) above may withdraw all or any part of the remaining balance credited to his or her Pre- 1987 After-Tax Accounts. (c) A Participant who has withdrawn or is withdrawing the entire amount of his or her After-Tax Contributions credited to his or her Pre-1987 After-Tax Accounts pursuant to Subsection (a) above may withdraw all or any part of the balance credited to his or her Post-1986 After-Tax Accounts. The portion of the amount withdrawn which is taxable to the Participant under section 72(e) of the Code, as determined by the Company, shall be treated as a withdrawal of investment increments. The portion of the amount withdrawn which is not so taxable to the Participant shall be treated as a withdrawal of his or her After-Tax Contributions. A withdrawal of After-Tax Contributions under this Subsection (c) shall be treated as a withdrawal of Unmatched After-Tax Contributions, to the extent that previously unwithdrawn Unmatched After-Tax Contributions remain credited to the Participant's Post-1986 After-Tax Accounts. After all Unmatched After-Tax Contributions are withdrawn, any additional withdrawal of After-Tax Contributions shall be treated as a withdrawal of Matched After-Tax Contributions. If Matched After-Tax Contributions are deemed withdrawn, no Matching Contributions or Forfeitures shall be allocated to the Participant's Company Accounts with respect to a period of six months, commencing as of the first day of the second payroll period following the date on which the withdrawal request was made; provided, however, that no such suspension of Matching Contributions or Forfeitures shall apply to a Participant who is at the same time withdrawing an amount on account of hardship pursuant to Section 7.3. (d) A Participant who has Rollover Accounts may make withdrawals from such Accounts. The amount that may be withdrawn under this Subsection (d) shall not exceed the balance credited to his or her Rollover Accounts. (e) A Participant who wishes to make a withdrawal under this Section 7.1 shall file an election with the Company in accordance with the prescribed procedures. A Participant shall not be permitted to make more than one withdrawal under this Section 7.1, Section 7.2 or the AP Plan in any period of six consecutive months; provided, however, that withdrawals made at the same time shall be considered a single withdrawal. 7.2 Withdrawals From Other Accounts A Participant who is withdrawing the maximum amount permissible under Section 7.1 may at the same time withdraw any amount which is not less than $500 and which does not exceed the lesser of: (a) The value of the Participant's Company Accounts, Transferred Company Accounts and Profit-Sharing Accounts, reduced by the Participant's share of those Company Contributions which were actually paid to the Trustee less than 24 months prior to the date of withdrawal; or (b) The vested portion of the Participant's Company Accounts, Transferred Company Accounts and Profit-Sharing Accounts. A Participant shall not be permitted to make more than one withdrawal under Section 7.1, this Section 7.2 or the AP Plan in any period of six consecutive months; provided, however, that withdrawals made at the same time shall be considered a single withdrawal. 7.3 Hardship or Disability Withdrawals This Section 7.3 shall apply only to a Participant who is subject to a Disability or who satisfies the requirements of Section 7.4. If such a Participant is withdrawing the maximum amount permissible under Sections 7.1 and 7.2 (and under all other plans of the Affiliated Group), then he or she may at the same time withdraw from his or her Salary Deferral Accounts, Company Accounts, Transferred Company Accounts and Profit- Sharing Accounts any additional amount which is not less than $500 and which does not exceed the following limitations: (a) The maximum amount that may be withdrawn from a Participant's Salary Deferral Accounts is the sum of (i) the amount of his or her previously unwithdrawn Salary Deferrals which remain credited to such Accounts plus (ii) the amount of the net unwithdrawn investment income which was credited to such Accounts or to the corresponding accounts under the AP Plan as of December 31, 1988. (b) The maximum amount that may be withdrawn from a Participant's Company Accounts is the vested portion of such Company Accounts. 7.4 Procedure for Hardship Withdrawals A hardship withdrawal under Section 7.3 shall be permitted only if the distribution is necessary to satisfy an immediate and heavy financial need of the Participant. A Participant who wishes to make a hardship withdrawal under Section 7.3 shall file a request with the Company in accordance with the prescribed procedures, and such request shall specify the reason or reasons why such withdrawal is required. The Company shall authorize a hardship withdrawal under Section 7.3 only to the extent that the Participant has demonstrated that the after-tax proceeds of the requested funds are required for one or more of the following reasons: (a) To pay expenses (i) for medical care described in section 213(d) of the Code that were incurred by the Participant, the Participant's spouse or any dependents of the Participant (as defined in section 152 of the Code) or (ii) necessary for such persons to obtain medical care described in section 213(d) of the Code; (b) To pay tuition for the next 12 months of post-secondary education for the Participant or his or her spouse, children or dependents; (c) To purchase (excluding mortgage payments) a principal residence of the Participant; (d) To prevent the eviction of the Participant from his or her principal residence or the foreclosure of the mortgage on the Participant's principal residence; or (e) Any other reason described by the Commissioner of Internal Revenue in a revenue ruling, notice or other document of general application. The Company, based on the foregoing criteria, may authorize no hardship withdrawal or a hardship withdrawal in an amount which is smaller than the amount requested by the Participant. This Section 7.4 shall not apply to a Participant who is subject to a Disability. 7.5 Representations Necessary for a Hardship Withdrawal No Participant shall be eligible to receive a hardship withdrawal under Section 7.3 unless: (a) The Participant represents to the Company, in the manner specified by the Company, that the withdrawal does not exceed the Participant's immediate and heavy financial need; (b) The Participant represents to the Company, in the manner specified by the Company, that the Participant's immediate and heavy financial need cannot be relieved: (i) Through reimbursement or compensation by insurance or otherwise; (ii) By reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need; (iii) By cessation of Salary Deferrals or After-Tax Contributions; or (iv) By other distributions or nontaxable (at the time of the loan) loans from this Plan or any other plans maintained by a member of the Affiliated Group, or by borrowing from commercial sources on reasonable commercial terms. This Section 7.5 shall not apply to a Participant who is subject to a Disability. 7.6 Payment and Source of Withdrawal. A withdrawal shall be paid as soon as reasonably practicable after the request for such withdrawal is received by the Company in the form prescribed by the Company. The value of a Participant's Accounts and the vested percentage of a Participant's Company Accounts shall be determined on the date when the Trustee effects the withdrawal transaction. Withdrawals shall be paid only in the form of a single lump sum in cash. In the case of a married Participant who participated in the NPSI Plan, a requested withdrawal shall not be paid unless the Participant's spouse has consented in writing to the payment of such withdrawal in the form of a lump sum (instead of a Qualified Joint and Survivor Annuity). The spouse's consent shall comply with Section 16.9 and shall be given within the 90-day period preceding payment of the withdrawal. If more than one Account is available to pay the withdrawal because the Participant elected to invest in more than one Investment Fund, the withdrawal shall be made proportionately from each available Account, subject to such other ordering rules as the Company may adopt. ARTICLE 8. LOANS. 8.1 Amount of Loans With the Company's prior written consent, a Participant who is an Employee may obtain a cash loan from the Participant's Accounts other than Pension Accounts. The minimum amount of the loan shall be $1,000. Subject to Section 8.2, the maximum amount of the loan shall be 50% of the value of the vested portion of the Participant's Accounts other than Pension Accounts. 8.2 Aggregate Loan Limitation No loan shall be granted under the Plan if it would cause the aggregate balance of all loans which a Participant thereafter has outstanding under this Plan or under any other qualified plan maintained by any member of the Affiliated Group to exceed $50,000, less the amount by which such aggregate balance has been reduced through repayments during the period of 12 consecutive months ending on the day before a new loan is made. 8.3 Terms of Loans. A loan to a Participant shall be made on such terms and conditions as the Company may determine, provided that the loan shall: (a) Be evidenced by a promissory note signed by the Participant and secured by 50% of the value of the vested portion of all of his or her Accounts (regardless of the amount of the loan or the source of the loan funds); (b) Bear interest at a fixed rate equal to the prime interest rate in effect at the New York main office of The Chase Manhattan Bank, N.A., on the last business day of the month immediately preceding the date on which the Company receives the prescribed loan request form; (c) Provide for level amortization over its term with payments at quarterly or more frequent intervals, as determined by the Company; (d) Provide for loan payments of not less than $50 per payment; (e) Provide for loan payments (i) to be withheld whenever possible through periodic payroll deductions from the Participant's compensa- tion from any member of the Affiliated Group or (ii) to be paid by check or money order whenever payroll withholding is not possible; (f) Provide for repayment in full on or before the earlier of (i) the date when the Participant ceases to receive periodic cash compensation from an Affiliated Group member or (ii) the date five years after the loan is made (or the date 15 years after the loan is made if the loan is used to acquire a dwelling which, within a reasonable period of time, is to be used as the principal residence of the Participant); and (g) Provide that a Participant's Accounts shall not be applied to the satisfaction of the Participant's loan obligations before the Accounts become distributable under Article 10, unless the Company determines that the loan obligations are in default and takes such actions as the Company deems necessary or appropriate to cause the Plan to realize on its security for the loan. Such actions may include (without limitation) an involuntary withdrawal from the Participant's vested Accounts, whether or not the withdrawal would be permitted under Article 7 on a voluntary basis; provided (i) that no involuntary withdrawals from Basic Company Accounts and Pension Accounts shall be made and (ii) that an involuntary withdrawal from Company Contributions paid to the Trustee within the most recent 24 months or from Salary Deferrals shall be subject to the limitations of Section 8.3. The Company may take such action as it deems necessary to recover the balance of a loan secured by such Company Contributions or by Basic Company Accounts, Pension Accounts or Salary Deferral Accounts. If any involuntary withdrawal occurs, the Participant shall not be permitted to obtain a new loan under the Plan for a period of 12 months, commencing as of the last day of the payroll period in which the involuntary withdrawal occurs. The consent of the Participant's spouse shall not be required at the time of any action taken by the Company under this Subsection (g). 8.4 Company Consent The Company, based on the borrower's creditworthiness and the criteria set forth in this Article 8, may withhold its consent to any loan or may consent only to the borrowing of a part of the amount requested by the Participant. The Company shall act upon requests for loans in a uniform and nondiscriminatory manner, consistent with the requirements of section 401(a), section 401(k) and related provisions of the Code and section 408(b)(1) of ERISA and the regulations thereunder. 8.5 Restrictions on Loan No Participant shall have more than two loans outstanding under this Article 8 or the AP Plan at the same time. A Participant shall not be permitted to obtain more than one loan under this Article 8 or the AP Plan in any period of 12 consecutive months. A married Participant shall not be permitted to obtain any loan under this Article 8 unless his or her spouse, in compliance with Section 16.9 and within the 90-day period before the loan is made, has consented in writing to the assignment of his or her Accounts as security and to any actions that the Company subsequently may take under Section 8.3(g). 8.6 Disbursement and Source of Loans A Participant may request a loan by filing the prescribed loan request form with the Company. A loan shall be disbursed as soon as reasonably practicable after the date on which the Company receives the prescribed loan request form (subject to the Company's consent). For purposes of this Article 8, the value and vested percentage of a Participant's Accounts shall be determined on the date when the Trustee effects the loan transaction. If a Participant requests and is granted a loan, the amount of the loan shall be transferred from the Participant's Accounts other than Pension Accounts. If more than one Account is available to make a transfer, the transfer shall be made proportionately from each Account, subject to such other ordering rules as the Company may adopt. The promissory note executed by the Participant shall be held by the Trustee or its agent as part of the Trust Fund. 8.7 Loan Payments and Defaults Principal and interest payments on a Participant's loan shall be credited as soon as reasonably practicable to the Participant's Accounts in the ratio specified by the Participant under Section 6.3. Any loss caused by nonpayment or other default on a Participant's loan obligations shall be borne solely by that Participant's Accounts. 8.8 Loan Fees A Participant who obtains a loan under this Article 8 shall be required to pay such fees and loan transaction charges as the Trustee or its agent may impose in order to defray the cost of administering loans from the Plan. ARTICLE 9. VESTING AND FORFEITURES. 9.1 100 Percent Vesting A Participant's interest in all of his or her Accounts other than Company Accounts shall be 100% vested at all times. A Participant's interest in his or her Company Accounts shall become 100% vested when the earliest of the following events occurs: (a) The Participant ceases to be an Employee by reason of Disability; (b) The Participant, before ceasing to be an Employee, attains the age of 65 years; (c) The Participant dies while employed as an Employee; (d) The Plan is terminated, or the Plan undergoes a partial termination which affects the Participant, before the Participant ceases to be an Employee; or (e) Company Contributions and Salary Deferrals are completely discontinued before the Participant ceases to be an Employee. In addition, a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, and who has completed three Years of Service on or before November 1, 1990, shall be 100% vested in all of his or her Company Accounts. 9.2 Vesting Schedules Before a Participant becomes 100% vested under Section 9.1, the Participant shall be vested in a percentage of his or her Company Accounts determined from the following schedule: Participant's Years of Service Vested Percentage Less than 1 year . . . . . . . . . . 0% 1 year . . . . . . . . . . . . . . . 33-1/3% 2 years . . . . . . . . . . . . . . . 66-2/3% 3 years or more . . . . . . . . . . . 100% The foregoing notwithstanding, in the case of an individual who first became an Employee on or after April 1, 1989, and who is not yet 100% vested under Section 9.1, he or she shall be vested in a percentage of his or her Company Accounts determined from the following schedule: Participant's Years of Service Vested Percentage Less than 1 year . . . . . . . . . . 0% 1 year . . . . . . . . . . . . . . . 20% 2 years . . . . . . . . . . . . . . . 40% 3 years . . . . . . . . . . . . . . . 60% 4 years . . . . . . . . . . . . . . . 80% 5 years or more . . . . . . . . . . . 100% 9.3 Vesting After Prior Distributions Section 9.2 shall be applied as set forth in this Section 9.3 in the case of any Participant who received one or more prior withdrawals or distributions from his or her Company Accounts, who thereafter has not incurred a Permanent Service Break, and who is not yet 100% vested in his or her Company Accounts. The vested portion of such Participant's Company Accounts shall be determined in two steps. First, the Participant's vested percentage under Section 9.2 shall be applied to the sum of (a) the value of each Company Account plus (b) the aggregate amount of the Participant's prior withdrawals or distributions from such Account. Then, the aggregate amount of the Participant's prior withdrawals or distributions from such Account shall be subtracted. For purposes of this Section 9.3 only, a transfer from a Company Account to fund a loan under Article 8 shall be treated as a withdrawal from such Company Account, but the amount thereof shall be reduced by repayments of principal. 9.4 Forfeitures If a Participant ceases to be an Employee at a time when he or she is less than 100% vested in his or her Company Accounts, then the nonvested portion of each Company Account shall be removed from such Company Account when employment terminates and shall constitute a Forfeiture for the Plan Year in which employment terminated. Forfeitures shall be applied to reduce the Matching Contributions for such Plan Year. If the Participant is rehired as an Employee before incurring a Permanent Service Break, then the portion of his or her Company Accounts which constituted a Forfeiture shall be reinstated to such Company Accounts as of the close of the Plan Year in which the rehire occurs. The appropriate Participating Company shall make a special contribution in the amount required to reinstate the Forfeiture. Thereafter, Section 9.3 may be applicable to the determination of the vested portion of the Participant's Company Accounts. In no event shall a Participant's Forfeitures be reinstated if he or she is rehired as an Employee after incurring a Permanent Service Break. 9.5 Criminal Acts Any other provision of the Plan notwithstanding, if a Participant who has neither attained age 65 nor completed five Years of Service severs from all employment as an Employee after admitting to, being convicted of, or pleading "no contest" with respect to any criminal act against any Affiliated Group member, then his or her vested percentage shall be zero percent, unless the Plan is terminated or Company Contributions and Salary Deferrals are completely discontinued prior to the date when he or she admits to, is convicted of, or pleads "no contest" with respect to such criminal act. ARTICLE 10. AMOUNT AND DISTRIBUTION OF PLAN BENEFITS. 10.1 Amount of Plan Benefits A Participant's Plan Benefit shall include such Participant's entire interest in his or her Accounts other than Company Accounts. To the extent that a Participant is vested under Article 9 in his or her Company Accounts, such Participant's Plan Benefit shall also include the vested percentage of his or her Company Accounts. The amount of a Participant's Plan Benefit shall be reduced by the amount of any loan balance that remains outstanding under Article 8 at the time when such Plan Benefit is paid or at the time of such Participant's death, whichever is earlier. The value of a Plan Benefit shall be determined on the distribution date for such Plan Benefit. Subject to Section 9.5, a Participant's vested interest in the Plan shall not be divested for cause or otherwise forfeited (but the market value of such interest may decline). 10.2 Time of Distribution: General Rule Subject to Sections 10.3, 10.4 and 10.5, the distribution of a Participant's Plan Benefit shall occur or commence on or about the date that he or she has elected. Within the 60-day period commencing 90 days before the Annuity Starting Date, the Company shall provide to each Participant the written explanation of his or her distribution options (including his or her right to defer receipt of the distribution) prescribed by the applicable regulations. The distribution election shall be made in writing on the prescribed form, which shall be signed by the Participant and filed with the Company after he or she has received such explanation. Where applicable, the distribution election form shall include the written consent of the Participant to the distribution of all or part of his or her Plan Benefit before he or she attains age 65. 10.3 Earliest Time of Distribution Except as required by Section 10.4, the distribution of a Participant's Plan Benefit shall not occur or commence prior to the later of: (a) The date when the Participant ceases to be an Employee; or (b) The date when the Company receives a completed distribution election form (as described in Section 10.2). 10.4 Latest Time of Distribution In no event shall the distribution of a Participant's Plan Benefit occur or commence after the April 1 next following the close of the calendar year in which the Participant attains age 70-1/2 (whether or not the Participant ceased to be an Employee). If the Participant fails to file a timely distribution election form, Section 16.3 (relating to unclaimed Plan Benefits) may apply. 10.5 Special Rules for Employees Over Age 65 Section 10.3(a) notwithstanding, a Participant whose employment continues past age 65 may elect to have the distribution of his or her Plan Benefit occur or commence before he or she retires, as if he or she had retired as of the date of the election. If a Participant makes such an election, his or her employment shall be deemed to have terminated (for purposes of the Plan) as of the date of such election. Any other provision of the Plan to the contrary notwithstanding, the Participant shall not thereafter be permitted to make any Employee Contributions or to receive any allocation of Company Contributions or Forfeitures. All distributions under the Plan shall be made in accordance with the Income Tax Regulations under section 401(a)(9) of the Code, including Income Tax Regulations section 1.401(a)(9)-2 or its successor. Such regulations are incorporated in the Plan by reference and shall override any inconsistent provisions of the Plan. 10.6 Annuity Form of Distribution In the case of a Participant who participated in the NPSI Plan, his or her Plan Benefit shall be distributed in the form of a nontransferable annuity contract purchased from an insurance company selected by the Company, unless such Participant elects one of the forms of distribution described in Section 10.7. The sole form of annuity contract available under the Plan shall be a Qualified Joint and Survivor Annuity. 10.7 Available Forms of Distribution A Participant who participated in the NPSI Plan may waive the annuity form of distribution and elect to have his or her Plan Benefit distributed in one of the forms available under this Section 10.7 by following the special procedures described in Section 10.9. The Plan Benefit of each other Participant shall automatically be distributed under this Section 10.7. The forms of Plan Benefit available under this Section 10.7 shall be as follows: (a) A lump sum in cash; provided that the Participant may elect to receive all whole shares of APC Stock attributable to his or her share of the APC Stock Fund (to the extent vested) in the form of one or more certificates for APC Stock; or (b) Monthly, quarterly, semi-annual or annual cash installments payable over a period not exceeding the Participant's life expectancy at the time when he or she commences receiving such installments. During the installment period, the remaining account balances shall be credited with a share of gains, losses, income and expenses of the Trust Fund in accordance with Section 13.6, and the investment election procedure described in Section 6.3 shall remain available to Participants receiving an installment distribution. The amount of each installment shall be determined by dividing the remaining account balances by the number of remaining installments. The distribution of all or part of the remaining account balances may be accelerated at the Participant's request. A Participant who did not participate in the NPSI Plan shall elect a form of benefit on the distribution election form filed under Section 10.2. If a form of benefit has not been elected, such Participant shall be deemed to have elected a lump sum in cash. 10.8 Small Benefits: Immediate Lump Sum Any other provision of this Article 10 notwithstanding, if the value of any Participant's vested Plan Benefit equals $3,500 or less, then the Plan Benefit shall be paid immediately to such Participant (or, in the case of his or her death, to the Beneficiary) in a single lump sum in cash. 10.9 Waiver of Annuity Form of Distribution A Participant who participated in the NPSI Plan may waive the Qualified Joint and Survivor Annuity and elect a lump sum or installments by filing the prescribed form with the Company. Such election may be made only during an election period consisting of the 90 consecutive days ending on the Participant's Annuity Starting Date. A Participant may revoke an election of a lump sum or installments at any time prior to the end of such election period by filing the prescribed form with the Company. If the Participant, having revoked a prior election, does not make another election within such election period, then his or her Plan Benefit shall be distributed in the form of a Qualified Joint and Survivor Annuity. In the case of a married Participant, any election of a lump sum or installments shall not take effect unless the Participant's spouse, in compliance with Section 16.9, consents in writing to the election during such election period. 10.10 Survivor Annuity. In the case of any Participant who participated in the NPSI Plan and who dies before his or her Annuity Starting Date and has a surviving spouse who is the sole primary Beneficiary, such surviving spouse shall be entitled to receive the Plan Benefit in the form of a Qualified Preretirement Survivor Annuity. The Qualified Preretirement Survivor Annuity shall be paid pursuant to a nontransferable annuity contract purchased from an insurance company selected by the Company. Such contract shall be purchased at a cost equal to the value of the Participant's Plan Benefit and shall provide for equal monthly payments for the life of his or her surviving spouse. Alternatively, the surviving spouse may elect to receive the Plan Benefit in one of the forms available under Section 10.11 in lieu of the Qualified Preretirement Survivor Annuity. The payment of the Plan Benefit ordinarily shall occur or commence on or about the date when the Participant would have attained age 65 or the date of the Participant's death, whichever is later. However, the surviving spouse may elect any earlier commencement or payment date after the Participant's death. Any election of an alternate form of distribution or an earlier commencement or payment date may be made only in writing during the 90-day period preceding the Annuity Starting Date. 10.11 Other Forms of Death Benefit If a Participant dies before receiving his or her entire Plan Benefit and Section 10.10 is not applicable, then such Participant's Beneficiary shall be entitled to receive such Plan Benefit (or the undistributed portion thereof) after filing the prescribed claim form with the Company. The Beneficiary's distribution shall be made as follows: (a) This Subsection (a) shall apply only in the event that a Participant elected to receive his or her Plan Benefit in installments under Section 10.7(b) and then dies after installment payments have commenced but before such payments are completed. The remaining installments of such Participant's Plan Benefit ordinarily shall be paid to his or her Beneficiary in accordance with the predetermined distribution schedule originally established for him or her by the Company. However, a Beneficiary may make a written request to accelerate the distribution of any or all unpaid installments to which such Beneficiary is entitled. (b) This Subsection (b) shall apply in the event that a Participant dies before his or her Plan Benefit is distributed and Subsection (a) above does not apply. Such Participant's Plan Benefit ordinarily shall be paid to his or her Beneficiary in the form of a single lump sum in cash, and the distribution ordinarily shall be made as soon as reasonably practicable after the Participant's death. A Beneficiary may make a written request to defer the distribution of the Plan Benefit to which such Beneficiary is entitled. However, the distribution shall in no event be made later than five years after the Participant's death. In addition, a Beneficiary may make a written request to receive the Plan Benefit to which such Beneficiary is entitled in the form of APC Stock to the extent permitted by Section 10.7(a). 10.12 Information on Distribution Options Within the 60-day period commencing 90 days before the Annuity Starting Date, the Company shall provide to each Participant who participated in the NPSI Plan (whether or not married) the written explanation of the Qualified Joint and Survivor Annuity prescribed by the applicable regulations. Within the three-year period commencing with the first day of the Plan Year in which the Participant attains age 32 or within the one-year period commencing when he or she becomes a Participant (whichever ends later), the Company shall provide to each Participant who participated in the NPSI Plan the written explanation of the Qualified Preretirement Survivor Annuity prescribed by the applicable regulations. In the case of a Participant who participated in the NPSI Plan but who ceases to be an Employee before attaining age 35, the written explanation of the Qualified Preretirement Survivor Annuity shall be provided not later than one year after the termination of employment. 10.13 Determination of Marital Status Whether a Participant is married and the identity of his or her spouse (if any) shall be determined by the Company as of the earlier of (i) his or her Annuity Starting Date or (ii) the date of his or her death. 10.14 Direct Rollovers (a) The Direct Rollover Option. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. (b) Definition of Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and 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). (c) Definition of Eligible Retirement Plan. An Eligible Retirement Plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (d) Definition of Distributee. A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order defined in section 414(p) of the Code are Distributees with regard to the interest of the spouse or former spouse. (e) Definition of Direct Rollover. A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. ARTICLE 11. CLAIMS PROCEDURE. 11.1 Filing Claims for Benefits Claims for benefits under the Plan shall be made in writing on the prescribed form and shall be signed by the Participant or by his or her Beneficiary, as the case may be. All claims for or inquiries concerning benefits under the Plan shall be submitted to the Company at its U.S. headquarters. 11.2 Denial of Claims In the event that any claim for benefits is denied in whole or in part, the Company shall notify the applicant in writing of such denial and shall advise the applicant of the right to a review thereof. Such written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the Plan provisions on which the denial is based, a description of any information or material necessary for the applicant to perfect the application, an explanation of why such material is necessary and an explanation of the Plan's review procedure. Such written notice shall be given to the applicant within 90 days after the Company received the claim in proper form, except that such 90-day period may be extended for an additional 90 days if special circumstances exist. The Company shall advise the applicant of such circumstances in writing within the first 90-day period. If the Company does not provide the applicant with written notice of its decision within the applicable time period, the applicant's claim shall be deemed to have been denied as of the last day of the applicable time period. ARTICLE 12. REVIEW PROCEDURE. 12.1 Appointment of Review Panel The Company from time to time shall appoint a Review Panel consisting of three or more individuals, who may (but need not) be employees of the Company. The Review Panel shall be the named fiduciary which has the authority to act with respect to appeals from denials of claims under the Plan. 12.2 Right To Appeal Any applicant whose claim for benefits was denied in whole or in part (or such applicant's authorized representative) may appeal from the denial by submitting to the Review Panel a written request for a review of the claim within three months after receiving written notice of the denial, or within three months after the date when a claim may be deemed to have been denied. The Company shall give the applicant (or the applicant's authorized representative) an opportunity to review pertinent materials, other than legally privileged documents, in preparing such request for review. 12.3 Form of Request for Review; The request for review shall be made in writing and shall be addressed to the Review Panel in care of the Company at its U.S. headquarters. The request for review shall set forth all of the grounds on which it is based, all facts in support thereof and any other matters which the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents or other material as the Review Panel may deem necessary or appropriate in making its review. 12.4 Time for Review Panel Action The Review Panel shall act upon each request for review within 60 days after receipt thereof, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the decision on review be rendered more than 120 days after the Review Panel received the request for review in proper form. 12.5 Review Panel Decisions The Review Panel shall give prompt written notice of its decision to the applicant and to the Company. In the event that the Review Panel confirms the denial of the claim for benefits in whole or in part, such notice shall set forth, in a manner calculated to be understood by the applicant, the specific reasons for such denial and specific references to the Plan provisions on which the decision was based. In the event that the Review Panel determines that the claim for benefits should not have been denied in whole or in part, the Company shall take appropriate remedial action as soon as reasonably practicable after receiving notice of the Review Panel's decision. 12.6 Rules and Procedures The Review Panel shall establish such rules, procedures and interpretations, consistent with the Plan and ERISA, as it may deem necessary or appropriate in carrying out its responsibilities under this Article 12. The Review Panel may require an applicant who wishes to submit additional information in connection with an appeal from a denial of benefits to do so at his or her own expense. 12.7 Exhaustion of Remedies Required No legal or equitable action for benefits under the Plan shall be brought unless and until the applicant (a) has submitted a written claim for benefits in accordance with Article 11, (b) has been notified that the claim is denied, (c) has filed a written request for a review of the claim in accordance with this Article 12 and (d) has been notified in writing that the Review Panel has affirmed the denial of the claim; provided, however, that such an action may be brought after the Company or the Review Panel has failed to act on the claim within the time prescribed in Sections 11.2 and 12.4, respectively. ARTICLE 13. MANAGEMENT OF ASSETS. 13.1 Control and Management of Plan Assets The Company is a named fiduciary with respect to control over and management of the assets of the Plan, but only to the extent of (a) having the duty to appoint one or more trustees to hold all assets of the Plan in trust, (b) having the authority to remove any trustee so appointed and to appoint one or more successor trustees, (c) having the duty to enter into a trust agreement with each trustee or successor trustee so appointed, (d) having the authority to appoint one or more Investment Managers for any Plan assets, to enter into an investment management agreement with each Investment Manager so appointed and to remove such Investment Manager and (e) having the authority to direct the investment of any Plan assets not assigned to an Investment Manager. Each Investment Manager appointed by the Company shall acknowledge in writing that such Investment Manager is a fiduciary with respect to the Plan. 13.2 Investment Authority The Trustee shall have the exclusive authority and discretion to invest, manage and control the assets of the Plan, except to the extent that the Company has allocated the authority to manage such assets to one or more Investment Managers or has retained such authority. Any Investment Manager appointed under Section 13.1 shall have the exclusive authority to manage, including the power to direct the acquisition and disposition of, the Plan assets assigned to it by the Company. 13.3 Independent Qualified Public Accountant The Company shall 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 ERISA. The Company in its discretion may remove and discharge the person so engaged, in which event it shall appoint a successor independent qualified public accountant to perform such examinations and express such opinions. 13.4 Expenses All expenses of the Plan and the Trust Fund shall be paid by the Trustee out of the Trust Fund pursuant to the terms of the Trust Agreement, except such expenses as are paid by the Company. 13.5 Benefit Payments All benefits, withdrawals and loans payable pursuant to the Plan shall be paid by the Trustee out of the Trust Fund pursuant to the directions of the Company and the terms of the Trust Agreement. 13.6 Valuation of Accounts Each Account shall be revalued on each business day to allocate to it a pro rata share of any increase or decrease in the fair market value of the applicable Investment Fund. By the revaluation, the balance in each Participant's Accounts will be increased or decreased by such Participant's share of the realized and unrealized income, gains, expenses and losses of the Trust Fund since the preceding valuation. 13.7 Statements A statement shall be prepared and distributed to each Participant at least annually. Such statement shall reflect the status of the Participant's Accounts (including the fair market value thereof) and shall contain such other information as the Company may prescribe. ARTICLE 14. ADMINISTRATION OF THE PLAN. 14.1 Plan Administration The Company is the named fiduciary with respect to the operation and administration of the Plan, and the Company is the "administrator" and "plan sponsor" of the Plan (as such terms are used in ERISA). The Company shall make such rules and computations and shall take such other actions to administer the Plan as it may deem appropriate. The Company shall have the sole discretion to interpret the terms of the Plan and to determine eligibility for loans, withdrawals and benefits pursuant to the objective criteria set forth in the Plan. The Company's rules, interpretations, computations and actions shall be conclusive and binding on all persons. In administering the Plan, the Company (a) shall act in a nondiscriminatory manner to the extent required by section 401(a) and related sections of the Code and (b) shall at all times discharge its duties in accordance with the standards set forth in section 404(a)(1) of ERISA. 14.2 Employment of Advisers The Company may retain such attorneys, actuaries, accountants, consultants or other persons to render advice or to perform services with regard to its responsibilities under the Plan as it shall determine to be necessary or desirable. The Company may designate by written instrument (signed by both parties) one or more persons to carry out, where appropriate, fiduciary responsibilities under the Plan. The Company's duties and responsibilities under the Plan which have not been delegated to other fiduciaries pursuant to the preceding sentence shall be carried out by its directors, officers and employees, acting on behalf and in the name of the Company in their capacities as directors, officers and employees, and not as individual fiduciaries. 14.3 Service in Several Fiduciary Capacities Nothing herein shall prohibit any person or group of persons from serving in more than one fiduciary capacity with respect to the Plan (including service both as the administrator and as a trustee of the Plan). ARTICLE 15. AMENDMENT AND TERMINATION. 15.1 Right To Amend or Terminate The Company reserves the right to amend or terminate the Plan or to discontinue Company Contributions at any time and for any reason, by action of its board of directors or by a committee or individual(s) acting under a written delegation of authority. No amendment of the Plan, however, shall (a) reduce the benefit of any Participant accrued under the Plan prior to the date when such amendment is adopted or (b) divert any part of the Plan's assets to purposes other than the exclusive purpose of providing benefits to the Participants and Beneficiaries who have an interest in the Plan and of defraying the reasonable expenses of administering the Plan. 15.2 Effect of Termination Upon termination of the Plan, no assets of the Plan shall revert to the Participating Companies or be used for or diverted to purposes other than the exclusive purpose of providing benefits to Participants and Beneficiaries and of defraying the reasonable expenses of termination (except as otherwise provided in Section 6.1). Upon termination of the Plan, the Trust Fund shall continue in existence until it has been distributed entirely, as provided in Section 15.3. 15.3 Allocation of Assets Upon Termination Upon termination of the Plan, the Trust Fund shall continue in existence until the Accounts of each Participant have been distributed to such Participant (or to such Participant's Beneficiary) as provided in Article 10; provided, however, that the assets of the Plan shall be allocated in accordance with the requirements of section 403(d)(l) of ERISA. ARTICLE 16. GENERAL PROVISIONS. 16.1 No Assignment of Property Rights; Qualified Domestic Relations Orders Except as provided in Section 8.3 with respect to loans from the Plan, the interest or property rights of any person in the Plan, in any Account or in any payment to be made under the Plan shall not be optioned, anticipated, assigned (either at law or in equity), alienated or made subject to attachment, garnishment, execution, levy, other legal or equitable process, or bankruptcy. Any act in violation of this Section 16.1, whether voluntary or involuntary, shall be void. This Section 16.1 shall not apply with respect to qualified domestic relations orders described in section 414(p) of the Code. The Company shall establish reasonable procedures to determine the qualified status of domestic relations orders and to administer distributions under qualified domestic relations orders. Pursuant to a qualified domestic relations order, any benefit payable to an alternate payee may be distributed in the form of a single lump sum payment prior to the earliest date upon which the Participant could receive his or her Plan Benefit. 16.2 Incompetence If, in the opinion of the Company, any individual becomes unable to handle properly any amount payable to such individual under the Plan, then the Company may make such arrangements for payment on such individual's behalf as it determines will be beneficial to such individual, including (without limitation) payment to such individual's guardian, conservator, spouse or dependent. 16.3 Unclaimed Plan Benefits If any Plan Benefit, or a portion thereof, would be distributable under the Plan but the Company is unable to locate the Participant or Beneficiary to whom the distribution is payable for three consecutive Plan Years, then the Participant's Accounts may be closed after the third consecutive Plan Year during which such distribution is payable but the Participant or Beneficiary cannot be found. The amount of the unpaid Plan Benefit shall be applied as a Forfeiture, unless mandatory provisions of applicable escheat laws require another application, in which case such Plan Benefit shall be applied as such laws require. If, however, the Participant or Beneficiary subsequently makes a proper claim to the Company for any Plan Benefit which was applied as a Forfeiture and which was not lost by reason of escheat, then such Plan Benefit (without income, gains or other adjustment) shall be restored to the Participant's Accounts from a special contribution made by the appropriate Participating Company for this purpose. The Plan Benefit shall thereafter be distributable in accordance with the terms of the Plan. 16.4 No Employment Rights Nothing in the Plan shall be deemed to give any individual any right to remain in the employ of any Participating Company or to affect the right of such Participating Company to terminate such individual's employment at any time, with or without cause. 16.5 Beneficiary; Upon commencement of participation, each Participant shall, by following the procedures prescribed by the Company, name a person or persons as the Beneficiary who will receive any distribution payable under the Plan in the event of the Participant's death. If the Participant has not named a Beneficiary or if none of the named Beneficiaries is living when any payment is to be made, then (a) the spouse of the deceased Participant shall be the Beneficiary or (b) if the Participant has no spouse living at the time of such payment, the then living children of the deceased Participant shall be the Beneficiaries in equal shares or (c) if the Participant has neither spouse nor children living at the time of such payment, the estate of the Participant shall be the Beneficiary. The Participant may change the designation of a Beneficiary from time to time in accordance with procedures established by the Company. Any designation of a Beneficiary (or an amendment or revocation thereof) shall be effective only if it is made in writing on the prescribed form and is received by the Company prior to the Participant's death. Any other provision of this Section 16.5 notwithstanding, in the case of any married Participant, any designation of a person other than his or her spouse as the sole primary Beneficiary shall be valid only if the spouse consented to such designation in writing in compliance with Section 16.9. In the case of a married Participant who participated in the NPSI Plan, any designation of a person other than his or her spouse as the sole primary Beneficiary, if made before the first day of the Plan Year in which the Participant attains age 35, shall become invalid on such day. The Participant may make a new designation (with spousal con sent) on or after such day. If the Participant dies on or after such day without having made a new designation, his or her spouse shall be the Beneficiary. 16.6 Merger, Consolidation and Transfer of Assets or Liabilities The Plan shall not be merged or consolidated with any other plan, and no assets or liabilities of the Plan shall be transferred to any other plan, unless each Participant would receive a Plan Benefit immediately after the merger, consolidation or transfer (if the Plan were then terminated) which is equal to or greater than the Plan Benefit which such Participant would have been entitled to receive immediately before such merger, consolidation or transfer (if the Plan had then been terminated). 16.7 Voting Rights Participants may, to the extent provided in the Trust Agreement, issue directions to the Trustee with respect to the voting of the shares of APC Stock held by the Plan. Such directions shall be given and followed only pursuant to the Trust Agreement. 16.8 Other Instructions by Participants In the event that an offer to purchase the APC Stock held by the Plan is made, Participants may, to the extent provided in the Trust Agreement, issue directions to the Trustee with respect to the acceptance or rejection of such offer. Such directions shall be given and followed only pursuant to the Trust Agreement. 16.9 Spousal Consents This Section 16.9 shall apply whenever the consent of a Participant's spouse is required for an election, waiver or designation made by such Participant under the Plan. Any spousal consent shall be in writing and shall be witnessed by a plan representative (if permitted by the Company) or by a notary public. The spousal consent shall acknowledge the effect of the Participant's action and shall, if applicable, specify the particular optional form of benefit being elected or the particular non-spouse Beneficiary being designated (including any class of Beneficiaries or any contingent Beneficiaries). The spousal consent shall be irrevocable. Any other provision of the Plan notwithstanding, no spousal consent shall be required if (a) it is established to the satisfaction of the Company that there is no spouse or that the spouse cannot be located or (b) the Participant is legally separated or has been abandoned (within the meaning of local law) and has an appropriate court order, unless a qualified domestic relations order provides otherwise. If the spouse is legally incompetent to give consent, the spouse's legal guardian (including the Participant) may give consent. 16.10 Forms for Plan Communications All communications from a Participant or Beneficiary with regard to the Plan shall become effective only when made in accordance with the procedures prescribed by the Company. If the Company has adopted prescribed forms for any communications, such communications shall be effective only if filed on such forms. 16.11 Choice of Law The Plan and all rights thereunder shall be interpreted and construed in accordance with ERISA and, to the extent that state law is not preempted by ERISA, the law of the State of California. ARTICLE 17. SPECIAL TOP-HEAVINESS RULES. 17.1 Determination of Top-Heavy Status Any other provision of the Plan notwithstanding, this Article 17 shall apply to any Plan Year in which the Plan is a Top-Heavy Plan. The Plan shall be considered a "Top-Heavy Plan" for a Plan Year if, as of the Determination Date for such Plan Year, the Top-Heavy Ratio for the Aggregation Group exceeds 60%. 17.2 Minimum Allocations For any Plan Year during which the Plan is a Top-Heavy Plan, the Salary Deferrals, Company Contributions and Forfeitures allocated to each Participant who is not a Key Employee, but who is an Employee on the last day of such Plan Year, shall not be less than the lesser of (a) three percent of his or her Section 415 Compensation or (b) the greatest allocation, expressed as a percentage of Compensation, made to any Participant who is a Key Employee. 17.3 Impact on Contribution Limitations For any Plan Year during which the Plan is a Top-Heavy Plan, the number "1.0" shall be substituted for the number "1.25" wherever it appears in section 415(e)(2) and (3) of the Code. 17.4 Special Definitions17.4Special Definitions For purposes of this Article 17 only, the following definitions shall apply: (a) "Aggregation Group" means either the Required Aggregation Group or any Permissive Aggregation Group, as the Company may elect. (b) "Determination Date" means the last day of the Plan Year prior to the applicable Plan Year. (c) "Key Employee" means a key employee, as defined in section 416(i) of the Code. (d) "Permissive Aggregation Group" means a group of qualified plans which includes (i) the Required Aggregation Group and (ii) one or more plans of a member of the Affiliated Group which are not part of the Required Aggregation Group. A Permissive Aggregation Group, when viewed as a single plan, must satisfy the requirements of sections 401(a)(4) and 410 of the Code. (e) "Required Aggregation Group" means a group of qualified plans which includes (i) each plan of a member of the Affiliated Group in which a Key Employee participates and (ii) each other plan of a member of the Affiliated Group which enables any plan in which a Key Employee participates to meet the requirements of section 401(a)(4) or 410 of the Code. (f) "Section 415 Compensation" shall have the meaning set forth in Appendix I. (g) "Top-Heavy Ratio" means a percentage determined pursuant to section 416(g) of the Code. ARTICLE 18. PERIOD OF SERVICE. 18.1 Period of Employment Relationship An individual's Period of Service shall include any period during which he or she maintains an employment relationship with any Affiliated Group member, determined as follows: (a) An individual's employment relationship shall begin as of the date on which he or she first performs duties as an Employee for which he or she receives (or is entitled to receive) compensation and shall end as of the date on which he or she retires, dies, quits, is discharged or otherwise severs from all employment with all Affiliated Group members. (b) If an individual is absent (with or without pay) with the approval of an Affiliated Group member and if the absence does not exceed 12 months, then the absence shall not be considered a quit. If the absence exceeds 12 months but the individual complies with all terms and conditions imposed from time to time by the Affiliated Group member (which may include a requirement of reemployment), then the absence also shall not be considered a quit. If the absence exceeds 12 months and if the individual fails to comply with such terms and conditions, then the absence shall be considered a quit as of the expiration of the first 12 months. (c) If an individual enters into military service with the United States, then his or her entry into military service shall not be considered a quit; provided, however, that the entry into military service shall be considered a quit as of the time when it occurs if the individual fails to return to employment with an Affiliated Group member within the period during which his or her reemployment rights are protected by law. 18.2 Interval Between Periods of Employment The Period of Service of an individual who is rehired by an Affiliated Group member within 365 days after the end of his or her previous employment relationship with an Affiliated Group member, as determined pursuant to Section 18.1, shall include the period between the end of the previous employment relationship and the commencement of the new employment relationship. 18.3 Other Periods An individual's Period of Service shall include any other period which constitutes a Period of Service under such written, uniform and nondiscriminatory rules as the Company may adopt from time to time. 18.4 Aggregation of Periods All Periods of Service determined pursuant to this Article 18 shall be aggregated, whether or not such Periods of Service are consecutive. When partial months are aggregated, 30 days shall be deemed to equal one full month. 18.5 Exclusions Any other provision of this Article 18 notwithstanding, an individual's Period of Service shall not include any period prior to February 1, 1983, during which he or she (a) declined to make Matched After-Tax Contributions, although eligible to do so, or (b) declined to make mandatory employee contributions required under any qualified thrift or profit-sharing plan maintained by a predecessor of a Participating Company, although eligible to do so. ARTICLE 19. DEFINITIONS. 19.1 "Accounts" means, to the extent applicable to a Participant, one or more of the Accounts listed in Section 6.2. 19.2 "Affiliated Group" means a group of one or more chains of corporations connected through stock ownership with the Company, if: (a) Stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of each of the corporations, except the Company, is owned by one or more of the other corporations; and (b) The Company owns stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of at least one of the other corporations excluding, in computing such voting power or value, stock owned directly by such other corporations. In addition, the term "Affiliated Group" includes any other entity which the Company has designated in writing as a member of the Affiliated Group for purposes of the Plan. An entity shall be considered a member of the Affiliated Group only with respect to periods for which such designation is in effect or during which the relationship described in Subsections (a) and (b) above exists. 19.3 "After-Tax Accounts" means, to the extent applicable to a Participant, one or more of the accounts maintained under the Plan to which After-Tax Contributions are credited. After-Tax Accounts shall include transferred amounts described in Section 6.6. For purposes of Article 8, "After-Tax Accounts" also means one or more of the Pre-1987 After-Tax Accounts and the Post-1986 After-Tax Accounts, to the extent applicable to the Participant. The "Pre-1987 After-Tax Accounts" shall consist of the portion of the After-Tax Accounts attributable to After- Tax Contributions made by the Participant before January 1, 1987. The "Post-1986 After-Tax Accounts" shall consist of the portion of the After-Tax Accounts attributable to After-Tax Contributions made by the Participant after December 31, 1986. "After-Tax Accounts" transferred from the AP Plan to this Plan under Section 6.6 shall be apportioned between the Pre-1987 After-Tax Accounts and the Post-1986 After-Tax Accounts in a manner consistent with the preceding two sentences. 19.4 "After-Tax Contribution" means a Matched After-Tax Contribution or an Unmatched After-Tax Contribution. 19.5 "Annuity Starting Date" means the first day of the first period for which an amount is paid (or is to be paid) under the Plan. 19.6 "APC Stock" means the common stock, $.01 par value, of the Company. 19.7 "APC Stock Fund" means a part of the Trust Fund, as described in Section 6.1. The APC Stock Fund shall be invested and reinvested exclusively in APC Stock. 19.8 "AP Plan" means the American President Profit-Sharing Plan, a plan maintained by the Company which is intended to qualify as a profit -sharing plan under section 401(a) of the Code and which contains a salary deferral arrangement intended to qualify under section 401(k) of the Code. 19.9 "Basic Company Accounts" means, to the extent applicable to a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, one or more of the accounts maintained under the Plan to which "Basic Company Contributions" made under the AP Plan were transferred. 19.10 "Beneficiary" means one or more persons designated by the Participant (or by the Plan) pursuant to Section 16.5. 19.11 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 19.12 "Company" means American President Companies, Ltd., a Delaware corporation. 19.13 "Company Accounts" means, to the extent applicable to a Participant, one or more of the accounts maintained under the Plan to which Company Contributions are credited. 19.14 "Company Contribution" means a Matching Contribution or a Discretionary Contribution. 19.15 "Compensation" means the base salary or wages paid to the Participant by a Participating Company for personal services performed while an Eligible Employee, including commissions and amounts contributed at the Participant's election to a plan described in sections 125 or 401(k) of the Code, but excluding overtime pay, bonuses, expatriate premiums, any other forms of additional compensation, Company Contributions, and contributions by the Participating Company under any other benefit plan, all as determined by the Company. Compensation taken into account under this Section 19.15 shall not include an amount paid to a Participant for 1993 in excess of $235,840, which is the limitation in effect for such year under Code section 401(a)(17), or any compensation paid to a Participant for any Plan Year beginning after December 31, 1993 in excess of $150,000 (or such other amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living adjustment under Code section 401(a)(17). For purposes of applying the Code section 401(a)(17) dollar limitation on Compensation, the Compensation of any of the 10 most highly compensated Highly Compensated Employees or any five-percent owner shall be determined by combining the Compensation of such top-10 Highly Compensated Employee or five-percent owner with the Compensation of any Employees who are family members of such top-10 Highly Compensated Employee or five-percent owner. (For purposes of this Section 19.15, "family members" means an individual's spouse and any lineal descendants who have not attained age 19 prior to the end of the Plan Year.) If, as a result of the application of such family-aggregation rules, the Code section 401(a)(17) dollar limitation is exceeded, then the limitation shall be prorated among the individuals in each family- aggregation group in proportion to each such individual's Compensation, determined without regard to the application of the family-aggregation rules or the Code section 401(a)(17) dollar limitation. 19.16 "Disability" means the condition of a Participant who is permanently unable, by reason of a physical or mental incapacity, to perform the normal duties of his or her occupation for a Participating Company, as certified by a physician selected by such Participating Company. 19.17 "Discretionary Contribution" means a contribution made by a Participating Company pursuant to Section 4.3. 19.18 "Eligible Employee" is defined in Section 2.1. 19.19 "Employee" means an individual who (a) is a common-law employee of a member of the Affiliated Group or (b) is a "leased employee" (within the meaning of section 414(n) of the Code) with respect to a member of the Affiliated Group. 19.20 "Employee Accounts" means, to the extent applicable to a Participant, one or more of the accounts maintained under the Plan to which Employee Contributions are credited. 19.21 "Employee Contribution" means an After-Tax Contribution or a Salary Deferral. 19.22 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 19.23 "Forfeiture" means that part of the Participant's Company Accounts which has not become vested pursuant to Article 9 when he or she ceases to be an Employee. 19.24 "Highly Compensated Employee" is defined in Appendix I. 19.25 "Investment Funds" means, to the extent applicable, one or more of the APC Stock Fund and the other investment funds offered under the Plan. 19.26 "Investment Manager" means any person who is: (a) Registered as an investment adviser under the Investment Advisers Act of 1940; (b) A "bank," as defined in such Act; or (c) An insurance company qualified to perform investment management services under the laws of more than one state. 19.27 "Matched After-Tax Contribution" means an after-tax contribution that (a) was made by a Participant under Article 3 and (b) did not exceed six percent of his or her Compensation for the period for which it was made. 19.28 "Matched Contribution" means a Matched After-Tax Contribution or a Matched Salary Deferral. 19.29 "Matched Salary Deferral" means a pre-tax contribution that (a) was made by a Participating Company on a Participant's behalf under Article 3 and (b) did not exceed six percent of his or her Compensation for the period for which it was made. 19.30 "Matching Contribution" means a contribution made by a Participating Company pursuant to Section 4.1. 19.31 "NPSI Plan" means the National Piggyback Services, Inc. Profit-Sharing and Pension Plan, as in effect until April 30, 1988. The NPSI Plan was a predecessor of the AP Plan. As of April 1, 1985, the NPSI Plan was set forth in a single document but was treated as two separate plans for purposes of the Code; one component was a profit-sharing plan and the other component was a pension plan. The AP Plan, as adopted as of May 1, 1988, constituted an amendment to the profit- sharing portion of the NPSI Plan and a merger of the pension portion of the NPSI Plan into the AP Plan. 19.32"Participant" means an individual whose participation in the Plan (a) has commenced pursuant to Section 2.2 or 2.3 and (b) has not yet terminated pursuant to Section 2.5. 19.33 "Participating Company" means each member of the Affiliated Group which has been designated in writing as a Participating Company by the Company. The Company, in writing, may designate a member of the Affiliated Group as a Participating Company with respect to certain Employees, to the exclusion of the other Employees of such Affiliated Group member. 19.34 "Pension Accounts" means, to the extent applicable to a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, and who previously participated in the pension component of the NPSI Plan, one or more of the accounts maintained under the Plan to which "Pension Contributions" made under the NPSI Plan were transferred. 19.35 "Period of Service" means an Employee's period of employment with any Affiliated Group member, as determined under Article 18. 19.36 "Period of Severance" means a period of time which commences when the Employee retires, quits, is discharged or otherwise severs from all employment with any member of the Affiliated Group and ends on the date (if any) on which he or she is rehired by a member of the Affiliated Group. In no event, however, shall a Period of Severance commence during any period of Special Absence (not to exceed 12 consecutive months). 19.37 "Permanent Service Break" means either (a) a Period of Severance of at least 12 consecutive months ending prior to January 1, 1985, or (b) a Period of Severance of at least 60 consecutive months ending on or after January 1, 1985. 19.38 "Plan" means this American President Companies, Ltd. SMART Plan, as amended from time to time. 19.39 "Plan Benefit" means the benefit payable to the Participant or to his or her Beneficiary pursuant to Article 10. 19.40 "Plan Year" means a calendar year. 19.41 "Profit-Sharing Accounts" means, to the extent applicable to a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, and who previously participated in the profit-sharing component of the NPSI Plan, one or more of the accounts maintained under the Plan to which "Profit-Sharing Contributions" made under the NPSI Plan were transferred. 19.42 "Qualified Joint and Survivor Annuity" means a monthly annuity which is actuarially equivalent to the Participant's Plan Benefit and which is payable (a) in the case of a married Participant, for the joint lives of the Participant and his or her spouse, with 100% of such annuity continued for the life of the survivor, and (b) in the case of a single Participant, for the life of the Participant. 19.43 "Qualified Preretirement Survivor Annuity" means a monthly annuity in the form described in Section 10.10. 19.44 "Review Panel" means the fiduciary described in Section 12.1. 19.45 "Rollover Accounts" means, to the extent applicable to a Participant, one or more of the accounts maintained under the Plan to which Rollover Contributions are credited. Rollover Accounts shall also include transferred amounts described in Section 6.6. 19.46 "Rollover Contribution" means a contribution made by the Participant pursuant to Article 5. 19.47 "Salary Deferral" means a Matched Salary Deferral or an Unmatched Salary Deferral. 19.48 "Salary Deferral Accounts" means, to the extent applicable to the Participant, one or more of the accounts maintained under the Plan to which Salary Deferrals are credited. Salary Deferral Accounts shall also include transferred amounts described in Section 6.6. 19.49 "Special Absence" means an absence from work which commences on or after January 1, 1985, and which is due to: (a) The Employee's pregnancy; (b) The birth of the Employee's child; (c) The placement of a child with the Employee in connection with the adoption of such child by the Employee; or (d) Caring for the child for a period immediately after the birth or placement described in Subsections (b) and (c) above, respectively. An absence shall not be treated as a Special Absence unless the Employee furnishes to the Company such timely information as the Company may reasonably require in order to establish that such absence is caused by one of the reasons set forth in this Section 19.49 and to determine the number of days for which such absence is continuing. 19.50 "Transferred Company Accounts" means, to the extent applicable to a Participant who transfers to this Plan from the AP Plan as of September 1, 1990, one or more of the accounts maintained under the Plan to which "Discretionary Contributions" and "Matching Contributions" made under the AP Plan were transferred. 19.51 "Trust Agreement" means the trust agreement(s) between the Company and the Trustee, as amended from time to time. 19.52 "Trustee" means the trustee(s) appointed by the Company pursuant to Section 13.1. 19.53 "Trust Fund" means the trust fund(s) established pursuant to the Trust Agreement. 19.54 "United States" means the 50 states of the United States, the District of Columbia, Guam and Puerto Rico. 19.55 "Unmatched After-Tax Contribution" means an after-tax contribution that (a) was made by a Participant under Article 3 and (b) exceeded six percent of his or her Compensation for the period for which it was made. 19.56 "Unmatched Contribution" means an Unmatched After-Tax Contribution or an Unmatched Salary Deferral. 19.57 "Unmatched Salary Deferral" means a pre-tax contribution that (a) was made by a Participating Company on a Participant's behalf under Article 3 and (b) exceeded six percent of his or her Compensation for the period for which it was made. 19.58 "Years of Service" means the number of months in an Employee's Period of Service divided by 12. In no event, however, shall the Years of Service of an Employee who transfers to this Plan from the AP Plan as of September 1, 1990, be less than the number of his or her Years of Service under the AP Plan as of August 31, 1990. ARTICLE 20. EXECUTION. To record the second amendment and restatement of the Plan to read as set forth herein, effective as of January 1, 1993, the Company has caused its authorized officer to execute this document on this 21st day of November, 1994. AMERICAN PRESIDENT COMPANIES, LTD. By Timothy J. Windle Assistant Secretary APPENDIX I LIMITATIONS ON CONTRIBUTIONS; ARTICLE 1. DEFINITIONS. 1.1 "Aggregate 401(k) Contributions" means, for any Plan Year, the sum of the following: (a) the Participant's Salary Deferrals for the Plan Year; (b) the Matching Contributions allocated to the Participant's Accounts as of a date within the Plan Year, to the extent that such Matching Contributions are aggregated with Salary Deferrals pursuant to Section 2.5 of this Appendix I; and (c) the Qualified Nonelective Contributions allocated to the Participant's Accounts as of a date within the Plan Year, to the extent that such Qualified Nonelective Contributions are aggregated with Salary Deferrals pursuant to Section 2.6 of this Appendix I. 1.2 "Aggregate 401(m) Contributions" means, for any Plan Year, the sum of the following: (a) the Matching Contributions allocated to the Participant's Accounts as of a date within the Plan Year; (b) the After-Tax Contributions allocated to the Participant's Accounts as of a date within the Plan Year; (c) the Participant's Salary Deferrals for the Plan Year, to the extent that such Salary Deferrals are aggregated with Matching Contributions pursuant to Section 3.4 of this Appendix I; and (d) the Qualified Nonelective Contributions allocated to the Participant's Accounts as of a date within the Plan Year, to the extent that such Qualified Nonelective Contributions are aggregated with Matching Contributions pursuant to Section 3.5 of this Appendix I. 1.3 "Annual Additions" means, for any calendar year, the sum of the following: (a) The aggregate after-tax employee contributions that the Participant contributes during such year to all qualified retirement plans maintained by the Employer Group; (b) The amount of employer contributions and forfeitures allocated to the Participant under any qualified defined- contribution plan that may be maintained by the Section 415 Employer Group, other than this Plan, as of any date within such year; (c) The amount of Unmatched Contributions allocated to the Participant's Accounts under this Plan as of any date within such year; (d) The amount of Matched Contributions allocated to the Participant's Accounts under this Plan as of any date within such year and Matching Contributions and Forfeitures attributable to such Matched Contributions; (e) The amount of Discretionary Contributions allocated to the Participant's Accounts under this Plan as of any date within such year; and (f) The amount of Qualified Nonelective Contributions allocated to the Participant's Accounts under this Plan as of any date within such year. A Participant's Annual Additions shall not include Rollover Contributions or any payments of principal or interest on a loan that he or she has obtained from the Plan. 1.4 "Excess Aggregate Contributions" means the amount by which the Aggregate 401(m) Contributions of Highly Compensated Employees are reduced pursuant to Section 3.3 of this Appendix I. 1.5 "Excess Contributions" means the amount by which the Aggregate 401(k) Contributions of Highly Compensated Employees are reduced pursuant to Section 2.4 of this Appendix I. 1.6 "Excess Deferrals" means the amount of a Participant's Salary Deferrals and elective deferrals (within the meaning of section 402(g)(3) of the Code) that exceed the limits set forth in Section 2.1 of this Appendix I. 1.7 "Family Member" for purposes of this Appendix I, means an individual's spouse, lineal ascendants and descendants, and the spouses of such lineal ascendants and descendants. 1.8 "Highly Compensated Employee" for any Plan Year means any active Employee who, during the look-back year: (a) Received Total Compensation of more than $75,000 (or such larger amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living adjustment); (b) Received Total Compensation of more than $50,000 (or such larger amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living adjustment) and was a member of the Top-Paid Group; or (c) Was an officer of a member of the Affiliated Group and received Total Compensation of more than 50% of the dollar limitation in effect under section 415(b)(1)(A) of the Code. The term "Highly Compensated Employee" also includes: (1) Employees who are both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year" and the Employee is one of the 100 Employees who received the most Total Compensation from members of the Affiliated Group during the determination year; and (2) Employees who are five-percent owners at any time during the look-back year or determination year. If no officer has satisfied the Total Compensation requirement of (c) above during either a determination year or look-back year, the highest paid officer for such year shall be treated as a Highly Compensated Employee. If an Employee is, during a determination year or look-back year, a Family Member of either a five-percent owner who is an active or former Employee or a Highly Compensated Employee who is one of the 10 most Highly Compensated Employees ranked on the basis of Total Compensation paid during such year, then the Family Member and the five-percent owner or top-ten Highly Compensated Employee shall be aggregated. In such case, the Family Member and the five-percent owner or top-ten Highly Compensated Employee shall be treated as a single Employee receiving Earnings, compensation and Plan contributions and benefits of the Family Member and five-percent owner or top-ten Highly Compensated Employee. For purposes of this Section 1.8, the determination year shall be the Plan Year. The look-back year shall be the 12-month period immediately preceding the determination year. The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the Top- Paid Group, the top 100 Employees, the number of Employees treated as officers and the Total Compensation that is considered, will be made in accordance with section 414(q) of the Code and regulations thereunder. 1.9 "Highly Compensated Former Employee" means a former Employee who separated from service (or is deemed to have separated) prior to the determination year, performs no service for any member of the Affiliated Group during the determination year, and was a Highly Compensated Employee as an active Employee for either the separation year or any determination year ending on or after the Employee's 55th birthday. The determination of who is a Highly Compensated Former Employee will be made in accordance with section 414(q) of the Code and regulations thereunder. 1.10 "Nonhighly Compensated Employee" for any Plan Year means any active Employee who is not a Highly Compensated Employee. 1.11 "Section 415 Compensation" means any one of the definitions of compensation described in Subsections (a), (b), (c) or (d) of Section 1.13 of this Appendix I received by an Employee from members of the Section 415 Employer Group. Any definition of Section 415 Compensation shall be used consistently to define the compensation of all Employees taken into account in satisfying the requirements of an applicable provision of this Appendix I for the relevant determination period. 1.12 "Section 415 Employer Group" means any group of one or more chains of corporations connected through stock ownership with the Company, if: (a) Stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote or more than 50% of the total value of shares of all classes of stock of each of the corporations, except the Company, is owned by one or more of the other corporations; and (b) The Company owns stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote or more than 50% of the total value of shares of all classes of stock of at least one of the other corporations excluding, in computing such voting power or value, stock owned directly by such other corporations. 1.13 "Section 414(s) Compensation" means any one of the following definitions of compensation received by an Employee from members of the Affiliated Group: (a) Compensation as defined in Treasury Regulation section 1.415-2(d) or any successor thereto; (b) "Wages" as defined in section 3401(a) of the Code for purposes of income tax withholding at the source, but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(23) of the Code); (c) "Wages" as defined in section 3401(a) of the Code for purposes of income tax withholding at the source, plus all other payments of compensation reportable under Code sections 6041(d) and 6051(a)(3) and the regulations thereunder, determined without regard to any rules that limit such Wages or reportable compensation based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(23) of the Code), and modified, at the election of the Company, to exclude amounts paid or reimbursed for the Employee's moving expenses, to the extent it is reasonable to believe that these amounts are deductible by the Employee under section 217 of the Code; (d) Any of the definitions of Section 414(s) Compensation set forth in Subsections (a), (b) and (c) above, reduced by all of the following items (even if includible in gross income): reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation and welfare benefits; (e) Any of the definitions of Section 414(s) Compensation set forth in Subsections (a), (b), (c) and (d) above, modified to include any elective contributions made by a member of the Affiliated Group on behalf of the Employee that are not includible in gross income under section 125, 402(a)(8), 402(h) or 403(b) of the Code; or (f) Any reasonable definition of compensation that does not by design favor Highly Compensated Employees and that satisfies the nondiscrimination requirement set forth in Treasury Regulation section 1.414(s)-1T(d)(2) or the successor thereto. Any definition of Section 414(s) Compensation shall be used consistently to define the compensation of all Employees taken into account in satisfying the requirements of an applicable provision of this Appendix I for the relevant determination period. For purposes of applying the limitations set forth in Articles 2, 3 and 4 of this Appendix I, Section 414(s) Compensation shall not include compensation paid to an Employee for 1993 in excess of $235,840, which is the limitation in effect for such year under Code section 401(a)(17), or any compensation paid to an Employee for any Plan Year beginning after December 31, 1993 in excess of $150,000 (or such other amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of- living adjustment under Code section 401(a)(17). 1.14 "Top-Paid Group" for any Plan Year means the top 20% (in terms of Total Compensation) of all Employees of the Affiliated Group, excluding the following: (a) Any Employee covered by a collective bargaining agreement who is not an Eligible Employee; (b) Any Employee who is a nonresident alien with respect to the United States who receives no income with a source within the United States from a member of the Affiliated Group; (c) Any Employee who has not completed at least 500 Hours of Service during any six-month period at the end of the Plan Year; (d) Any Employee who normally works less than 17 hours per week; (e) Any Employee who normally works no more than six months during any year; and (f) Any Employee who has not attained the age of 21 at the end of the Plan Year." 1.15 "Total Compensation" means "wages," as defined in section 3401(a) of the Code for purposes of income tax withholding at the source, but determined: (a) Without regard to any rules that limit the remuneration included in "wages" based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2) of the Code); and (b) By including amounts deferred but not refunded under a cafeteria plan, as such term is defined in section 125(c) of the Code and under a plan, including this Plan, qualified under section 401(k) of the Code. ARTICLE 2. DEFERRAL AND AVERAGE DEFERRAL PERCENTAGE LIMITATIONS. 2.1 Return of Excess Deferrals The aggregate Salary Deferrals of any Participant for any calendar year, together with his or her elective deferrals under any other plan or arrangement to which section 402(g) of the Code applies and that is maintained by any Affiliated Group member shall not exceed $7,000 (or such larger amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living adjustment). In the event that such aggregate Salary Deferrals and elective deferrals of any Participant for any calendar year exceed $7,000 (or such larger amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living adjustment), then the Participant may designate all or a portion of such Excess Deferrals as attributable to this Plan and may request a refund of such portion by notifying the Company in writing on or before the March 1 next following the close of such calendar year. If timely notice is received by the Company, then such portion of the Excess Deferrals, and any income or loss allocable to such portion, shall be refunded to the Participant not later than the April 15 next following the close of such calendar year. If timely notice is not received, then such a Participant's Excess Deferrals, and any income or loss allocable thereto, shall be refunded to the Participant from this Plan no later than the April 15 next following the close of such calendar year. In the event that a Participant's elective deferrals (within the meaning of section 402(g)(3) of the Code) for a calendar year exceed $7,000 (or such larger amount as may be adopted by the Commissioner of Internal Revenue to reflect a cost-of-living adjustment) solely because such Participant participated in this Plan and a plan or arrangement maintained by an employer other than the Company or any member of the Affiliated Group, then such Participant may designate all or a portion of such Excess Deferrals as attributable to this Plan and may request a refund of such portion by notifying the Company in writing on or before the March 1 next following the close of such calendar year; provided, however, that no refund shall be made from the Plan in these circumstances unless the Participant is an Employee on the earlier of such March 1 or the date such refund is to be made. 2.2 Average Deferral Percentage Limitation The Plan shall satisfy the average deferral percentage test, as provided in section 401(k)(3) of the Code and section 1.401(k)-1 of the regulations issued thereunder. Subject to the special rules described in Section 2.7 of this Appendix I, the Aggregate 401(k) Contributions of Highly Compensated Employees shall not exceed the limits described below: (a) An Actual Deferral Percentage shall be determined for each individual who, at any time during the Plan Year, is a Participant (including a suspended Participant) or is eligible to participate in the Plan, which Actual Deferral Percentage shall be the ratio, computed to the nearest one-hundredth of one percent, of the individual's Aggregate 401(k) Contributions for the Plan Year to the individual's Section 414(s) Compensation for the Plan Year; (b) The Actual Deferral Percentages (including zero percentages) of Highly Compensated Employees and Nonhighly Compensated Employees shall be separately averaged to determine each group's Average Deferral Percentage; and (c) The Aggregate 401(k) Contributions of Highly Compensated Employees shall constitute Excess Contributions and shall be reduced, pursuant to Sections 2.3 and 2.4 of this Appendix I, to the extent that the Average Deferral Percentage of Highly Compensated Employees exceeds the greater of (1) 125% of the Average Deferral Percentage of Nonhighly Compensated Employees or (2) the lesser of (a) 200% of the Average Deferral Percentage of Nonhighly Compensated Employees or (B) the Average Deferral Percentage of Nonhighly Compensated Employees plus two percentage points. 2.3 Allocation of Excess Contributions to Highly Compensated Employees Any Excess Contributions for a Plan Year shall be allocated to Highly Compensated Employees by use of a leveling process, whereby the Actual Deferral Percentage of the Highly Compensated Employee with the highest Actual Deferral Percentage is reduced to the extent required to (a) eliminate all Excess Contributions or (b) cause such Highly Compensated Employee's Actual Deferral Percentage to equal the Actual Deferral Percentage of the Highly Compensated Employee with the next-highest Actual Deferral Percentage. Such leveling process shall be repeated until all Excess Contributions for such Plan Year are allocated to Highly Compensated Employees. 2.4 Distribution of Excess Contributions; Excess Contributions allocated to Highly Compensated Employees for the Plan Year pursuant to Section 2.3 of this Appendix I, together with any income or loss allocable to such Excess Contributions, shall be distributed to such Highly Compensated Employees not later than the March 15 next following the close of such Plan Year, if possible, and in any event no later than the December 31 next following the close of such Plan Year. Any Employee Contributions distributed pursuant to this Section 2.4 shall not be treated as Matched Contributions. 2.5 Qualified Matching Contributions; The Company, in its sole discretion, may include all or a portion of the Matching Contributions for a Plan Year in Aggregate 401(k) Contributions taken into account in applying the Average Deferral Percentage limitation described in Section 2.2 of this Appendix I for such Plan Year, provided that the requirements of Treasury Regulation section 1.401(k)-1(b)(5) are satisfied. 2.6 Corrective Qualified Nonelective Contributions; In order to satisfy (or partially satisfy) the Average Deferral Percentage limitation described in Section 2.2 of this Appendix I, the Average Contribution Percentage limitation described in Section 3.1 of this Appendix I or the multiple-use limitation described in Section 4.2 of this Appendix I (or more than one of such limitations), the Company, in its sole discretion, may make a Qualified Nonelective Contribution to the Plan. Any such Qualified Nonelective Contribution shall be allocated to the Accounts of those Participants who are eligible to receive an allocation of Matching Contributions under Section 4.2 of the Plan and who are Nonhighly Compensated Employees for the Plan Year with respect to which such Qualified Nonelective Contribution is made, beginning with the Participant with the lowest Section 414(s) Compensation for such Plan Year and allocating the maximum amount permissible under Section 5.1 of this Appendix I before allocating any portion of such Qualified Nonelective Contribution to the Participant with the next lowest Section 414(s) Compensation. Such allocations shall continue until the Plan satisfies the Average Deferral Percentage limitation described in Section 2.2 of this Appendix I, the Average Contribution Percentage limitation described in Section 3.1 of this Appendix I or the multiple-use limitation described in Section 4.2 of this Appendix I (or more than one of such limitations), or until the amount of such Qualified Nonelective Contribution is exhausted. The Company, in its sole discretion, may include all or a portion of the Qualified Nonelective Contributions for a Plan Year in Aggregate 401(k) Contributions taken into account in applying the Average Deferral Percentage limitation described in Section 2.2 of this Appendix I for such Plan Year, provided that the requirements of Treasury Regulation section 1.401(k)-1(b)(5) are satisfied. Qualified Nonelective Contributions shall be paid to the Trustee as soon as reasonably practicable following the close of the Plan Year and shall be allocated to the Accounts of Nonhighly Compensated Employees as of the last day of such Plan Year. In all other respects, the contribution, allocation, investment, vesting and distribution of Qualified Nonelective Contributions shall be governed by the provisions of the Plan concerning Matching Contributions. 2.7 Special Rules The following special rules shall apply for purposes of this Article 2: (a) The amount of Excess Deferrals to be distributed to a Participant for a calendar year pursuant to Section 2.1 of this Appendix I shall be reduced by the amount of any Excess Contributions previously distributed to such Participant for the Plan Year ending within such calendar year; (b) The amount of Excess Contributions to be distributed to a Participant for a Plan Year pursuant to Section 2.2 of this Appendix I shall be reduced by the amount of any Excess Deferrals previously distributed to such Participant for the calendar year ending with such Plan Year; (c) For purposes of applying the limitation described in Section 2.2 of this Appendix I, the Actual Deferral Percentage of any Highly Compensated Employee who is eligible to make Salary Deferrals and to make elective deferrals (within the meaning of section 402(g)(3) of the Code) under any other plans, contracts or arrangements of the Affiliated Group shall be determined as if all such Salary Deferrals and elective deferrals were made under a single arrangement; provided, however, that plans, contracts and arrangements shall not be treated as a single arrangement to the extent that Treasury Regulation section 1.401(k)-1(b)(3)(ii)(B) prohibits aggregation; (d) In the event that this Plan is aggregated with one or more other plans in order to satisfy the requirements of Code section 401(a)(4), 401(k) or 410(b), then all such aggregated plans, including the Plan, shall be treated as a single plan for all purposes under all such Code sections (except for purposes of the average benefit percentage provisions of Code section 410(b)(2)(A)(ii)); (e) In the event that the mandatory disaggregation rules of Treasury Regulation section 1.401(k)-1(b)(3)(ii)(B) apply to the Plan, or to the Plan and other plans with which it is aggregated as described in Subsection (d) above, then the limitation described in Section 2.2 of this Appendix I shall be applied as if each mandatorily disaggregated portion of the Plan (or aggregated plans) were a single arrangement; (f) The Actual Deferral Percentage of any of the 10 most highly compensated Highly Compensated Employees or any five-percent owner shall be determined by combining the Aggregate 401(k) Contributions and Section 414(s) Compensation of such top-10 Highly Compensated Employee or five-percent owner with the Aggregate 401(k) Contributions and Section 414(s) Compensation of any Employees who are Family Members of such top-10 Highly Compensated Employee or five-percent owner; (g) Any Excess Contributions of any of the 10 most highly compensated Highly Compensated Employees or five-percent owner affected by the family-aggregation rules described in Subsection (f) of this Section 2.5 shall be allocated among the individuals in each family aggregation group in proportion to the Aggregate 401(k) Contributions of each such individual; and (h) Income (and loss) allocable to Excess Contributions for the Plan Year shall be determined pursuant to the provisions for allocating income (and loss) to a Participant's Accounts under Section 5.7 of the Plan. 2.8 Prospective Limitations on Salary Deferrals At any time, the Company (at its sole discretion) may reduce the maximum rate at which any Participant may make Salary Deferrals or After-Tax Contributions (or both) to the Plan, or the Company may require that any Participant discontinue any or all Employee Contributions, in order to ensure that the limitations described in this Article 2 are met. Any reduction or discontinuance of Employee Contributions may be applied selectively to individual Participants or to particular classes of Participants, as the Company may determine. Upon such date as the Company may determine, this Section 2.8 shall automatically cease to apply until the Company again determines that a reduction or discontinuance of Employee Contributions is required for any Participant. ARTICLE 3. AVERAGE CONTRIBUTION PERCENTAGE LIMITATIONS. 3.1 Average Contribution Percentage Limitation The Plan shall satisfy the average contribution percentage test, as provided in section 401(m)(2) of the Code and section 1.401(m)-1 of the regulations issued thereunder. Subject to the special rules described in Section 3.6 of this Appendix I, the Aggregate 401(m) Contributions of Highly Compensated Employees shall not exceed the limits described below: (a) An Actual Contribution Percentage shall be determined for each individual who, at any time during the Plan Year, is a Participant (including a suspended Participant) or is eligible to participate in the Plan, which Actual Contribution Percentage shall be the ratio, computed to the nearest one-hundredth of one percent, of the individual's Aggregate 401(m) Contributions for the Plan Year to the individual's Section 414(s) Compensation for the Plan Year; (b) The Actual Contribution Percentages (including zero percentages) of Highly Compensated Employees and Nonhighly Compensated Employees shall be separately averaged to determine each group's Average Contribution Percentage; and (c) The Aggregate 401(m) Contributions of Highly Compensated Employees shall constitute Excess Aggregate Contributions and shall be reduced, pursuant to Sections 3.2 and 3.3 of this Appendix I, to the extent that the Average Contribution Percentage of Highly Compensated Employees exceeds the greater of (1) 125% of the Average Contribution Percentage of Nonhighly Compensated Employees or (2) the lesser of (A) 200% of the Average Contribution Percentage of Nonhighly Compensated Employees or (B) the Average Contribution Percentage of Nonhighly Compensated Employees plus two percentage points. 3.2 Allocation of Excess Aggregate Contributions to Highly Compensated Employees Any Excess Aggregate Contributions for a Plan Year shall be allocated to Highly Compensated Employees by use of a leveling process, whereby the Actual Contribution Percentage of the Highly Compensated Employee with the highest Actual Contribution Percentage is reduced to the extent required to (a) eliminate all Excess Aggregate Contributions or (b) cause such Highly Compensated Employee's Actual Contribution Percentage to equal the Actual Contribution Percentage of the Highly Compensated Employee with the next-highest Actual Contribution Percentage. Such leveling process shall be repeated until all Excess Aggregate Contributions for such Plan Year are allocated to Highly Compensated Employees. 3.3 Distribution of Excess Aggregate Contributions Excess Aggregate Contributions allocated to Highly Compensated Employees for the Plan Year pursuant to Section 3.2 of this Appendix I, together with any income or loss allocable to such Excess Aggregate Contributions, shall be distributed to such Highly Compensated Employees not later than the March 15 next following the close of such Plan Year, if possible, and in any event no later than the December 31 next following the close of such Plan Year. Any Employee Contributions distributed pursuant to this Section 3.3 shall not be treated as Matched Contributions. 3.4 Use of Salary Deferrals The Company, in its sole discretion, may include all or a portion of the Salary Deferrals for a Plan Year in Aggregate 401(m) Contributions taken into account in applying the Average Contribution Percentage limitation described in Section 3.1 of this Appendix I for such Plan Year, provided that the requirements of Treasury Regulation section 1.401(m)-1(b)(5) are satisfied. 3.5 Corrective Qualified Nonelective Contributions The Company, in its sole discretion, may include all or a portion of the Qualified Nonelective Contributions made pursuant to Section 2.6 of this Appendix I for a Plan Year in Aggregate 401(m) Contributions taken into account in applying the Average Contribution Percentage limitation described in Section 3.1 of this Appendix I for such Plan Year, provided that the requirements of Treasury Regulation section 1.401(m)- 1(b)(5) are satisfied. 3.6 Special Rules The following special rules shall apply for purposes of this Article 3: (a) For purposes of applying the limitation described in Section 3.1 of this Appendix I, the Actual Contribution Percentage of any Highly Compensated Employee who is eligible to participate in the Plan and to make employee contributions or receive an allocation of matching contributions (within the meaning of section 401(m)(4)(A) of the Code) under any other plans, contracts or arrangements of the Affiliated Group shall be determined as if Matching Contributions allocated to such Highly Compensated Employee's Accounts and all such employee contributions and matching contributions were made under a single arrangement; (b) In the event that this Plan is aggregated with one or more other plans in order to satisfy the requirements of Code section 401(a)(4), 401(m) or 410(b), then all such aggregated plans, including the Plan, shall be treated as a single plan for all purposes under all such Code sections (except for purposes of the average benefit percentage provisions of Code section 410(b)(2)(A)(ii)); (c) In the event that the mandatory disaggregation rules of Treasury Regulation section 1.401(m)-1(b)(3)(ii) apply to the Plan, or to the Plan and other plans with which it is aggregated as described in Subsection (b) above, then the limitation described in Section 3.1 of this Appendix I shall be applied as if each mandatorily disaggregated portion of the Plan (or aggregated plans) were a single arrangement; (d) The Actual Contribution Percentage of any of the 10 most highly compensated Highly Compensated Employees or any five-percent owner shall be determined by combining the Aggregate 401(m) Contributions and Section 414(s) Compensation of such top-10 Highly Compensated Employee or five-percent owner with the Aggregate 401(m) Contributions and Section 414(s) Compensation of any Employees who are Family Members of such top-10 Highly Compensated Employee or five-percent owner; (e) Any Excess Aggregate Contributions of any of the 10 most highly compensated Highly Compensated Employees or five- percent owner affected by the family-aggregation rules described in Subsection (d) of this Section 3.6 shall be allocated among the individuals in each family aggregation group in proportion to the Aggregate 401(m) Contributions of each such individual; and (f) Income (and loss) allocable to Excess Aggregate Contributions for the Plan Year shall be determined pursuant to the provisions for allocating income (and loss) to a Participant's Accounts under Section 5.7 of the Plan. ARTICLE 4. MULTIPLE-USE LIMITATIONS. 4.1 Applicability of the Multiple-Use Limitation; The limitation described in this Article 4 shall apply only if, for a Plan Year, after the limitations of Articles 2 and 3 of this Appendix I are applied: (a) The Average Deferral Percentage of Highly Compensated Employees (1) exceeds 125% of the Average Deferral Percentage of Nonhighly Compensated Employees, but (2) does not exceed the lesser of (A) 200% of the Average Deferral Percentage of Nonhighly Compensated Employees or (B) the Average Deferral Percentage of Nonhighly Compensated Employees plus two percentage points; and (b) The Average Contribution Percentage of Highly Compensated Employees (1) exceeds 125% of the Average Contribution Percentage of Nonhighly Compensated Employees, but (2) does not exceed the lesser of (A) 200% of the Average Contribution Percentage of Nonhighly Compensated Employees or (B) the Average Contribution Percentage of Nonhighly Compensated Employees plus two percentage points. 4.2 Multiple-Use Limitation The sum of the Average Deferral Percentage and Average Compensation Percentage of Highly Compensated Employees shall not exceed the greater of (a) or (b) below. (a) This limit equals the sum of: (1) 1.25 times the greater of the Average Deferral Percentage or Average Contribution Percentage of Nonhighly Compensated Employees; and (2) The lesser of (A) 200% of the lesser of the Average Deferral Percentage or Average Contribution Percentage of Nonhighly Compensated Employees, or (B) the lesser of the Average Deferral Percentage or Average Contribution Percentage of Nonhighly Compensated Employees plus two percentage points. (b) This limit equals the sum of: (1) 1.25 times the lesser of the Average Deferral Percentage or Average Contribution Percentage of Nonhighly Compensated Employees; and (2) The lesser of (A) 200% of the greater of the Average Deferral Percentage or Average Contribution Percentage of Nonhighly Compensated Employees, or (B) the greater of the Average Deferral Percentage or Average Contribution Percentage of Nonhighly Compensated Employees plus two percentage points. 4.3 Correction of Multiple-Use Limitation To the extent necessary, the limitation of Section 4.2 of this Appendix I shall be satisfied by one or more of the following methods: (a) the allocation of corrective Qualified Nonelective Contributions in the manner set forth in Sections 2.6 or 3.5 of this Appendix I, or (b) the distribution of Aggregate 401(m) Contributions (and income or loss allocable thereto) to Highly Compensated Employees in the manner set forth in Sections 3.2 and 3.3 of this Appendix I, followed by the distribution of Aggregate 401(k) Contributions (and income or loss allocable thereto) to Highly Compensated Employees in the manner set forth in Sections 2.3 and 2.4 of this Appendix I. ARTICLE 5. ALLOCATION LIMITATIONS. 5.1 Limitation on Contributions The Annual Additions allocated or attributed to a Participant for any calendar year shall not exceed the lesser of the following: (a) $30,000 (or, if greater, 25% of the dollar limitation in effect under Code section 415(b)(1)(A)); or (b) 25% of the Participant's Section 415 Compensation for such year. If a Participant's Annual Additions would exceed the foregoing limitation, then such Annual Additions shall be reduced by reducing the components thereof as necessary in the order in which they are listed in Section 1.3 of this Appendix I. Such reduction shall be made in accordance with this Article 5. Any amounts so reduced shall not be included in a Participant's Aggregate 401(k) Contributions or Aggregate 401(m) Contributions. 5.2 Effect on Future Contributions Articles 3 and 4 of the Plan notwithstanding, the Employee Contributions that a Participant is permitted to make and his or her share of Company Contributions and reallocated Forfeitures shall be reduced prospectively to the extent required by Section 5.1 of this Appendix I. The aggregate amount of the Company Contributions that otherwise would be made under Article 4 of the Plan shall be reduced accordingly. Any Forfeitures that cannot be reallocated to any Participant by reason of this Article 5 shall be credited to the suspense account described in Section 5.4 of this Appendix I. No Participant shall be affected by this Article 5 in any manner unless a reduction of his or her Employee Contributions and his or her share of Company Contributions and reallocated Forfeitures is required in order to prevent his or her Annual Addition from exceeding the limitation set forth in Section 5.1 of this Appendix I. 5.3 Return of Prior Employee Contributions If the amount of any prior Employee Contribution is determined to have been excessive by reason of this Article 5, then the amount of the excess (adjusted to reflect any earnings, appreciation or losses attributable to such excess) shall be refunded by the Trustee in cash to the Participant who made such Employee Contribution. Any Matched Employee Contributions that are refunded under this Section 5.3 shall not be included in the Matched Employee Contributions that attract a Matching Contribution. 5.4 Other Excess Amounts If, as a result of the reallocation of Forfeitures or a reasonable error in estimating a Participant's compensation, the Participant's Annual Addition (other than Employee Contributions) exceeds his or her Contribution Limitation, then the excess shall be transferred to a suspense account. Any earnings, appreciation or losses attributable to the suspense account shall be allocated to such account. All amounts credited to the suspense account shall be applied to reduce Company Contributions for the next Plan Year, and for succeeding Plan Years if necessary. Such amounts shall be allocated among Participants pursuant to Article 4 of the Plan until the suspense account is exhausted (subject to this Article 5). The suspense account shall be invested as the Company shall direct. 5.5 Combined Limitation on Benefits and Contributions Except as otherwise provided in ERISA, the Tax Equity and Fiscal Responsibility Act of 1982 or the Tax Reform Act of 1986, the sum of a Participant's defined-benefit plan fraction and his or her defined- contribution plan fraction shall not exceed 1.0 with respect to any Plan Year. For purposes of this Section 5.5, the terms "defined- benefit plan fraction" and "defined-contribution plan fraction" shall have the meaning given to such terms by section 415(e) of the Code and the regulations thereunder. If a Participant would exceed the foregoing limitation, then such Participant's benefits under any qualified defined-benefit plan that may be maintained by the Section 415 Employer Group shall be reduced as necessary to allow his or her Annual Additions to equal the maximum permitted by Section 5.1 of this Appendix I. EX-10.46 3 EXHIBIT 10.46 TO THE 1994 FORM 10-K FOR APC -- EXCESS-BENEFIT PLAN OF AMERICAN PRESIDENT COMPANIES, LTD. SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN. The Plan was established by the Company effective September 1, 1983. The Plan was most recently amended and restated effective December 31, 1994. The purpose of the Plan is to supplement certain benefits under the SMART Plan and the Retirement Plan. SECTION 2. ELIGIBILITY AND PARTICIPATION. Participation in this Plan shall be limited to the following: (a) Any participant in the SMART Plan who participated in this Plan for periods prior to 1989; (b) Any participant in the Retirement Plan whose benefits under the Retirement Plan are affected by the limitations imposed under section 401(a)(17) or 415 of the Code; (c) Any participant in the Retirement Plan whose benefits under the Retirement Plan are affected by the Code's requirement that salaries or bonuses deferred under the Deferred Compensation Plan cannot be taken into account in computing such benefits; and (d) Any participant in the Retirement Plan: (i) Whose actual benefits under the Retirement Plan, at retirement, are lower than the benefits that he or she would have received absent the modification of the Retirement Plan's benefit formula that was adopted effective June 1, 1989, had he or she terminated employment with the Affiliated Group as of December 31, 1992, or, if earlier, the actual date of such termination of employment; and (ii) Whose "average annual compensation" under the Retirement Plan equals or exceeds $125,000 at any time after May 31, 1989. On June 1 of each year, starting with June 1, 1990, the $125,000 amount set forth in the preceding sentence shall be adjusted for inflation by multiplying it by a fraction. The numerator of such fraction shall be the CPI-W for U.S. Cities on the immediately preceding February 1, and the denominator of such fraction shall be the CPI-W for U.S. Cities on February 1, 1989. Any other provision of the Plan notwithstanding, an individual who was not a Participant on May 31, 1994, shall in no event become a Participant thereafter. SECTION 3. PLAN BENEFITS. (a) SMART Plan Reserve Account. The Company shall maintain on its books each Reserve Account established under the Plan for periods prior to 1989. As of the last day of each calendar month, the Company shall credit interest on the balance in each Reserve Account. The rate of interest for each valuation period prior to April 1, 1990, shall be equal to the average yield for such valuation period on the "fixed-income fund" then maintained under the SMART Plan, or such higher rate as the Committee may determine. The rate of interest for each valuation period after March 31, 1990, shall be equal to the average yield for such valuation period on the Fidelity Retirement Money Market Portfolio, or such higher rate as the Committee may determine. (b) Distribution of Reserve Account. Following the termination of a Participant's employment with the Affiliated Group (and in no event earlier), the Company shall pay to the Participant the nonforfeitable percentage of the balance credited to his or her Reserve Account. Such nonforfeitable percentage shall be determined under the SMART Plan, in the case of balances attributable to amounts credited in lieu of "matching con tributions" under the SMART Plan, and shall be 100%, in the case of balances attributable to amounts credited in lieu of "salary deferrals" under the SMART Plan. Payments from the Reserve Account shall be made in cash, at such time(s) and in such form (including a lump sum or periodic installments) as the Committee shall determine in its sole discretion. The amount of any installment shall be equal to the balance remaining in the Reserve Account divided by the number of installments then remaining to be paid. Any unpaid balance remaining in a Reserve Account shall continue to be credited with interest at the rate specified in Subsection (a) above. In the event of a Participant's death before the entire Reserve Account has been distributed to him or her, the unpaid balance remaining in the Participant's Reserve Account shall be paid to the "beneficiary" designated or determined under the SMART Plan, at such time(s) and in such form as the Committee shall determine in its sole discretion. (c) Amount of Retirement Plan Supplement. Each Participant whose pension benefits under the Retirement Plan are reduced by section 401(a)(17) or 415 of the Code, by the exclusion of salaries and bonuses deferred under the Deferred Compensation Plan from pension calculations or by the modification of the formula for calculating his or her "retirement income" (not including cost-of-living adjustments) that was adopted on July 10, 1990, effective as of June 1, 1989, shall be entitled to receive a monthly benefit under this Plan. The amount of such benefit shall be equal to: (i) The monthly benefit that would have been payable to the Participant under the Retirement Plan as of December 31, 1994, if the limitations of sections 401(a)(17) and 415 of the Code, such exclusion and such modification (to the extent that such modification results in a benefit reduction) did not apply; minus (ii) The actual monthly benefit payable to the Participant under the Retirement Plan as of December 31, 1994, giving effect to such exclusion, such modification and the limitations of sections 401(a)(17) and 415 of the Code (as in effect when the benefit under this Plan is calculated). For purposes of this Subsection (c), the modification of the Retirement Plan formula that was adopted on July 10, 1990, effective as of June 1, 1989, shall be deemed to have resulted in a benefit reduction only to the extent that a Participant's actual monthly benefit payment under the Retirement Plan is less than the monthly benefit payment that such Participant would have received if such modification had not been adopted and the Participant had separated from employment with all members of the Affiliated Group as of the earlier of December 31, 1992, or the Participant's actual employment termination date. The Retirement Plan's Actuarial Equivalency factors shall be used to make this comparison. (d) Transition Rules. Any other provision of the Plan notwithstanding: (i) The amount of a Participant's benefit under Subsection (c) above shall in no event be greater than the benefit to which the Participant would have been entitled under Subsection (c) above if his or her employment in the Affiliated Group had terminated on December 31, 1994; and (ii) The amendment of this Plan adopted effective December 31, 1994, shall in no event cause the amount of a Participant's benefit under Subsection (c) above to be smaller than the benefit to which the Participant would have been entitled under Subsection (c) above if his or her employment in the Affiliated Group had ter minated on December 31, 1994, but the amount of such benefit may decline for reasons unrelated to such amendment. (e) Payment of Retirement Plan Supplement. A Participant's benefit under Subsection (c) above shall be payable to the Participant or to any other person (including, without limitation, a surviving spouse) who is receiving benefits under the Retirement Plan which are derived from the Participant. Any benefit under Subsection (c) above shall be payable in the same form and at the same times as the Participant's benefit under the Retirement Plan (and in no event earlier), unless the Participant's benefit under the Retirement Plan is paid in the form of a single lump sum. In that event, the benefit under Subsection (c) above shall be payable in the normal form of benefit provided under the Retirement Plan, computed as if the benefit actually paid to the Participant under the Retirement Plan were also payable in the normal form, unless: (i) The Participant requests in writing to receive the benefit under Subsection (c) above in a single lump sum; and (ii) The Committee expressly approves the Participant's request. In the case of a Participant who is entitled to a "COLA-Adjusted Retirement Income" under the Retirement Plan, the amount of any periodic benefit under Subsection (c) above shall be recalculated each year in accordance with the provisions of the Retirement Plan relating to the adjustment of pension benefits to reflect changes in the cost of living. SECTION 4. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee shall make such rules, interpretations and computations as it may deem appropriate. Any decision of the Committee with respect to the Plan, including (without limitation) any determination of eligibility to participate in the Plan and any calculation of benefits hereunder, shall be conclusive and binding on all persons. SECTION 5. CLAIMS AND INQUIRIES. (a) Application for Benefits. Applications for benefits and inquiries concerning the Plan (or concerning present or future rights to benefits under the Plan) shall be submitted to the Company in writing and addressed to the Chair of the Committee. An application for benefits shall be submitted on the prescribed form and shall be signed by the Participant or, in the case of a benefit payable after his or her death, by the beneficiary. (b) Denial of Application. In the event that an application for benefits is denied in whole or in part, the Chair of the Committee shall notify the applicant in writing of the denial and of the right to a review of the denial. The written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the provisions of the Plan on which the denial is based, a description of any information or material necessary for the applicant to perfect the application, an explanation of why the material is necessary, and an explanation of the review procedure under the Plan. The written notice shall be given to the applicant within a reasonable period of time (not more than 90 days) after the Chair of the Committee received the applica tion, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the notice be given more than 180 days after the Chair of the Committee received the application. (c) Review Panel. The Committee shall serve as the "Review Panel" under the Plan. The Review Panel shall have the authority to act with respect to any appeal from a denial of benefits or a determination of benefit rights. (d) Request for Review. An applicant whose application for benefits was denied in whole or in part, or the applicant's duly authorized representative, may appeal from the denial by submitting to the Review Panel a request for a review of the application within 90 days after receiving written notice of the denial from the Chair of the Committee. The Chair of the Committee shall give the applicant or his or her representative an opportunity to review pertinent materials, other than legally privileged documents, in preparing the request for a review. The request for a review shall be in writing and addressed to the Committee. The request for a review shall set forth all of the grounds on which it is based, all facts in support of the request, and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. (e) Decision on Review. The Review Panel shall act on each request for a review within 60 days after receipt, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the decision on review be rendered more than 120 days after the Review Panel received the request for a review. The Review Panel shall give prompt written notice of its decision to the applicant. In the event that the Review Panel confirms the denial of the application for benefits in whole or in part, the notice shall set forth, in a manner calculated to be understood by the applicant, the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based. (f) Rules and Interpretations. The Review Panel shall adopt such rules, procedures and interpretations of the Plan as it deems necessary or appropriate in carrying out its responsibilities under this Section 5. (g) Exhaustion of Remedies. No legal action for benefits under the Plan shall be brought unless and until the claimant (i) has submitted a written application for benefits in accordance with Subsection (a) above, (ii) has been notified by the Chair of the Committee that the application is denied, (iii) has filed a written request for a review of the application in accordance with Subsection (d) above and (iv) has been notified in writing that the Review Panel has affirmed the denial of the application; provided, however, that legal action may be brought after the Chair of the Committee or the Review Panel has failed to take any action on the claim within the time prescribed by Subsections (b) and (e) above, respectively. SECTION 6. AMENDMENT AND TERMINATION. The Company expects to continue the Plan indefinitely. Future conditions, however, cannot be foreseen, and the Company shall have the authority to amend or terminate the Plan at any time. In the event of an amendment or termination of the Plan, a Participant's benefits hereunder shall not be less than the benefits to which the Participant would have been entitled if his or her employment in the Affiliated Group had terminated immediately prior to such amendment or termination. SECTION 7. EMPLOYMENT RIGHTS. Nothing in the Plan shall be deemed to give any person a right to remain in the employ of any Affiliated Group member or affect the right of the Affiliated Group members to terminate such person's employment with or without cause. SECTION 8. NO ASSIGNMENT. The rights of any person to payments or benefits under the Plan shall not be made subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors. Any act in violation of this Section 8, whether voluntary or involuntary, shall be void. SECTION 9. PLAN UNFUNDED. Participants shall have the status of general unsecured creditors of the Company. The Plan constitutes a mere promise by the Company to make benefit payments in the future. It is the Company's intent that the Plan be considered unfunded for tax purposes and for purposes of Title I of ERISA. SECTION 10. CHOICE OF LAW. The validity, interpretation, construction and performance of the Plan shall be governed by ERISA and, to the extent they are not preempted, by the laws of the State of California. SECTION 11. DEFINITIONS. (a) "Affiliated Group" means a group of one or more chains of corporations connected through stock ownership with the Company, if: (i) Stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of each of the corporations, except the Company, is owned by one or more of the other corporations; and (ii) The Company owns stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of at least one of the other corporations excluding, in computing such voting power or value, stock owned directly by such other corporations. In addition, the term "Affiliated Group" includes any other entity which the Company has designated in writing as a member of the Affiliated Group for purposes of this Plan, the SMART Plan or the Retirement Plan. An entity shall be considered a member of the Affiliated Group only with respect to periods for which such designation is in effect or during which the relationship described in Paragraphs (i) and (ii) above exists. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Committee" means the Benefits Committee appointed by the Company's Board of Directors. (d) "Company" means American President Companies, Ltd., a Delaware corporation. (e) "Deferred Compensation Plan" means the Deferred Compensation Plan of American President Companies, Ltd., as amended, and the 1988 Deferred Compensation Plan of American President Companies, Ltd., as amended. (f) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (g) "Participant" means a participant in the SMART Plan or in the Retirement Plan who participates in this Plan under Section 2. (h) "Plan" means this Excess-Benefit Plan of American President Companies, Ltd. (i) "Reserve Account" means a special bookkeeping account established under the Plan prior to 1989 to supplement allocations under the SMART Plan. (j) "Retirement Plan" means the American President Companies, Ltd. Retirement Plan, as amended, or its successor. (k) "SMART Plan" means the American President Companies, Ltd. SMART Plan, as amended, or its successor. SECTION 12. EXECUTION. To record this amendment and restatement of the Plan, the Company has caused its duly authorized officer to affix the corporate name hereto. AMERICAN PRESIDENT COMPANIES, LTD. By Timothy J. Windle Assistant Secretary EX-10.47 4 EXHIBIT 10.47 TO THE 1994 FORM 10-K FOR APC -- 1995 DEFERRED COMPENSATION PLAN OF AMERICAN PRESIDENT COMPANIES, LTD. SECTION 1. ESTABLISHMENT AND PURPOSE. The Plan was adopted by the Board on December 9, 1994, effective as of January 1, 1995. The Plan is intended to provide Executives with an opportunity to defer a portion of their salaries or their bonus awards under the Company's year-end bonus plan for executives and key employees. The Plan is also intended to provide High-Paid Employees with an opportunity to defer a portion of their salaries in excess of the Compensation Limit imposed by the Code on the SMART Plan. The Plan provides for matching contributions by the Company. It is expected that the Plan will assist the Company in attracting and retaining employees of outstanding achievement and ability. SECTION 2. DEFINITIONS. (a) "Base Salary" means the Eligible Employee's annual base salary (as adjusted from time to time) plus commissions, before reduction for deferrals pursuant to this Plan, the SMART Plan, the American President Companies, Ltd. FlexPlan or any other arrangement for deferral established by the Company. (b) "Beneficiary" means the person or persons designated by the Eligible Employee in writing to receive payment of any Deferral Account of the Eligible Employee in the event of his or her death. If no designated Beneficiary survives the Eligible Employee, the Eligible Employee's estate shall be the Beneficiary. If a designated Beneficiary survives the Eligible Employee but dies before receiving payment of all amounts due him or her, the remaining amounts shall be paid to such Beneficiary's estate. An Eligible Employee may at any time elect to change his or her Beneficiary designation. Any such change shall be in writing and shall be effective upon receipt by the Company prior to the death of the Eligible Employee. (c) "Board" means the Board of Directors of the Company, as constituted from time to time. (d) "Bonus Award" means the amount of compensation paid by the Company to an Executive as a bonus award under the Company's year-end bonus plan for executives and key employees. (e) "Change in Control" means the occurrence of any of the following events: (i) A change in control required to be reported pursuant to Item 6(e) of Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934, as amended; (ii) A change in the composition of the Board, as a result of which fewer than two-thirds of the incumbent directors are directors who either (i) had been directors of the Company 24 months prior to such change or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors who had been directors of the Company 24 months prior to such change and who were still in office at the time of the election or nomination; or (iii) Any "person" (as such term is used in sections 13(d) and 14(d) of such Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote at elections of directors (the "Base Capital Stock"); provided, however, that any change in the relative beneficial ownership of securities of any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person's ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person's beneficial ownership of any securities of the Company. (f) "Committee" means the Compensation Committee of the Board. (g) "Compensation Limit" means the $150,000 compensation limit described in section 401(a)(17) of the Code, as it may be revised or adjusted from time to time. (h) "Code" means the Internal Revenue Code of 1986, as amended. (i) "Company" means American President Companies, Ltd., a Delaware corporation. (j) "Deferral Account" means an account maintained on the books of account of the Company for an Eligible Employee under the Plan. (k) "Election Form" means an Eligible Employee's written election to defer compensation under the Plan. In the case of a High-Paid Employee, such election may include a written election filed under the SMART Plan. (l) "Eligible Employee" means an Executive or a High-Paid Employee. (m) "Executive" means an executive or key employee of the Company, or a subsidiary of the Company, who is eligible to participate in the Plan under Section 3(a), other than an executive or key employee who has received a distribution under Section 8(c). (n) "Financial Hardship" means an unanticipated emergency caused by an event which is beyond the Eligible Employee's control and which would result in severe financial hardship to the Eligible Employee if an early withdrawal were not permitted. (o) "High-Paid Employee" means an employee of the Company, or a subsidiary of the Company, whose Base Salary since the beginning of the Year has exceeded the Compensation Limit, other than an employee who has received a distribution under Section 8(c). (p) "In-Service Distribution" means a distribution that occurs while the Eligible Employee remains in employment with the Company or a subsidiary of the Company, including (without limitation) a distribution that occurs by reason of a Change in Control. (q) "Interest Rate" means the 120-month rolling average yield for 10-year United States Treasury Notes, determined for each Year as of the December 1 that precedes such Year. (r) "Plan" means this 1995 Deferred Compensation Plan of American President Companies, Ltd., as amended from time to time. (s) "Post-Termination Distribution" means a distribution that occurs after the Eligible Employee has separated from employment with the Company or a subsidiary of the Company for any reason. (t) "Retirement" means a termination of employment on or after the earlier of: (i) The date when the Eligible Employee attains age 65; or (ii) The earliest date when the Eligible Employee has both (A) attained age 55 and (B) completed five years of service with the Company and its subsidiaries, as determined by the Committee. (u) "SMART Plan" means the American President Companies, Ltd. SMART Plan, as amended from time to time. (v) "Total and Permanent Disability" means that the Eligible Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than 12 months. (w) "Year" means a calendar year. SECTION 3. ELIGIBILITY. (a) Executives. The Committee, acting upon the advice of the Chief Executive Officer of the Company or upon its own motion, shall determine which executives and key employees will be eligible to participate in the Plan as Executives. The Committee shall notify an individual in writing when he or she is first designated as an Executive for purposes of the Plan. (b) High-Paid Employees. High-Paid Employees automatically become eligible to participate in the Plan when their Base Salary for the Year exceeds the Compensation Limit for the Year. SECTION 4. ELECTION TO PARTICIPATE IN PLAN. (a) Deferral of Bonus Awards by Executives. An Executive may elect to participate in the Plan by filing an Election Form for Bonus Awards with the Company on or before December 20 of any Year. Such Election Form shall apply solely to the Bonus Award, if any, to be paid during the next following Year. The Election Form shall specify the percentage or amount of the Executive's Bonus Award, if any, to be deferred as well as the time or times for payment of Post-Termination Distributions and In-Service Distributions. (b) Deferral of Base Salary by Executives. An Executive may also elect to participate in the Plan by filing an Election Form for Base Salary with the Company on or before December 20 of any Year. Such Election Form shall apply to Base Salaries paid during subsequent Years. The Election Form shall specify the percentage or amount of the Executive's Base Salary to be deferred as well as the time or times for payment of Post-Termination Distributions and In-Service Distributions. In no event, however, shall an Executive defer more than 88 percent of his or her Base Salary up to the Compensation Limit and 100 percent of his or her Base Salary above the Compensation Limit. An Executive may change his or her deferral percentage (or reduce it to zero) or specify a different time or times for payment of Post-Termination Distributions and In-Service Distributions by filing a new Election Form for Base Salary with the Company on or before December 20 of any Year. The new Election Form shall apply to Base Salaries paid during subsequent Years. (c) New Executives. In the case of an individual who is newly designated as an Executive under Section 3(a), the Election Forms described in Subsections (a) and (b) above may be filed not later than 30 days after the Committee's written notice of eligibility was given. The Election Forms shall apply solely to the Bonus Award and Base Salaries paid after such Election Forms are filed. (d) High-Paid Employees. A High-Paid Employee who is not an Executive shall only be eligible to make deferrals from his or her Base Salary (and not from Bonus Awards). A High-Paid Employee who is not already participating as an Executive shall automatically commence participating in the Plan when his or her Base Salary for the Year equals the Compensation Limit for the Year, but only if he or she has filed with the Company an Elec-tion Form under the SMART Plan that provides for participation in this Plan. The High-Paid Employee's initial deferral percentage under this Plan shall be equal to the deferral percentage elected under the SMART Plan, but in no event more than six percent of Base Salary. A High-Paid Employee may change his or her deferral percentage (or reduce it to zero) by filing a new Election Form with the Company. The new Election Form shall take effect as soon as reasonably practicable after it has been filed. In addition, a High-Paid Employee who is not already participating as an Executive shall file with the Company, not more than 30 days after participation commences, an Election Form that specifies the time or times for payment of Post-Termination Distributions and In-Service Distributions. A High-Paid Employee may specify a different time or times for payment of Post-Termination Distributions and In-Service Distributions by filing a new Election Form with the Company on or before December 20 of any Year. The new Election Form shall apply to Base Salaries paid during subsequent Years. (e) Elections Irrevocable. Except as otherwise expressly provided in the Plan, all elections shall be irrevocable upon filing with the Company on Election Forms. SECTION 5. MATCHING CONTRIBUTIONS. (a) Amount of Matching Contributions. As of the close of each calendar month, the Company shall credit the Deferral Account of each Eligible Employee who is eligible to receive matching contributions under the SMART Plan with a matching contribution under this Plan. The amount of the matching contribution under this Plan shall be equal to: (i) The sum of (A) the "salary deferrals" and "after-tax contributions" made by the Eligible Employee under the SMART Plan for the calendar month plus (B) the amount of Base Salary deferred by the Eligible Employee under Section 4 of this Plan for the calendar month, but only to the extent that such sum does not exceed six percent of the Eligible Employee's Base Salary for the calendar month; minus (ii) The aggregate amount of the "matching contributions" allocated to the Eligible Employee under the SMART Plan for the calendar month. (b) Vesting. Subsection (a) above notwithstanding, matching contributions credited in lieu of contributions under the SMART Plan (and the interest credited thereon) shall be distributed to the Eligible Employee only to the extent that such matching contributions (and interest) would be vested under the SMART Plan. The balance, if any, of such matching contributions (and interest) shall be forfeited upon the termination of the Eligible Employee's employment. (c) Interest. Interest credits on any matching contribution shall commence as of the day next following the close of the calendar month to which such contribution relates. SECTION 6. DEFERRAL ACCOUNTS. (a) Establishment of Deferral Accounts. The Company shall establish on its books one or more Deferral Accounts for each Eligible Employee. (b) Crediting of Bonus Awards. The appropriate Deferral Account of an Executive shall be credited with an amount equal to that portion of each Bonus Award which would have been payable to such Executive but for the terms of his or her deferral election. A Bonus Award shall be credited to the Deferral Account as of the first day of the month next following the date of such Bonus Award, and interest credits on such Bonus Award shall commence as of such day. (c) Crediting of Base Salaries. The appropriate Deferral Account of an Eligible Employee shall be credited with an amount equal to that portion of each Base Salary payment which would have been payable to such Eligible Employee but for the terms of his or her deferral election. Deferred Base Salary shall be credited to the Deferral Account as of the pay date for the deferred Base Salary. Interest credits on deferred Base Salary shall commence as of the day next following the close of the month in which such deferred Base Salary was credited to the Deferral Account. SECTION 7. INTEREST CREDITS AND DISTRIBUTION EVENTS. (a) Interest Rate. Interest shall be credited each month to all Deferral Accounts, commencing at the times specified in Section 6, at the rate of 1/12th of the Interest Rate. Interest shall be compounded at the end of each Year. (b) Distributions Before Retirement. If an Eligible Employee separates from employment with the Company and its subsidiaries for reasons other than death or Retirement, then his or her Deferral Accounts shall be paid in a lump sum on the first day of the calendar quarter next following the date of termination (without regard to the Eligible Employee's elections). (c) Distributions After Retirement. If an Eligible Employee separates from employment with the Company and its subsidiaries by reason of Retirement, then his or her Deferral Accounts shall be paid in the manner specified in his or her Election Forms. (d) Death Before Retirement Eligibility. If an Eligible Employee dies before becoming eligible for Retirement, then his or her Deferral Accounts shall be paid to his or her Beneficiary in a lump sum on the first day of the calendar quarter next following the date of death. (e) Death After Retirement Eligibility. If an Eligible Employee dies after becoming eligible for Retirement, then his or her Deferral Accounts shall be paid to his or her Beneficiary in the manner elected by the Eligible Employee in his or her Election Forms. The Committee, however, may determine in its sole discretion that payments from one or more of the Eligible Employee's Deferral Accounts shall be made at an earlier date than the time or times specified in the Eligible Employee's Election Forms. (f) In-Service Distributions. If an Eligible Employee elected to receive an In-Service Distribution on an Election Form, then the distribution shall be made in accordance with such Election Form, except that no distribution shall be made less than one year after the election became effective. SECTION 8. FORM AND TIME OF PAYMENT OF ACCOUNTS. (a) Form of Distributions. Subject to Section 7, payments from each Deferral Account shall be made only in cash and shall consist of lump sums or annual or quarterly installments, or a combination of lump sums and annual or quarterly installments, as elected by the Eligible Employee on the applicable Election Form. Installments of Post-Termination Distributions shall be paid on the first day of each calendar year or quarter. Installments of Post-Termination Distributions shall not be paid over a period exceeding 15 years. The amount of the installments shall be redetermined each Year by assuming that interest will be credited on the unpaid balance at the Interest Rate for the Year in question for the remainder of all installment payments. (b) Emergency Interim Distributions. In the event of an Eligible Employee's Total and Permanent Disability or Financial Hardship, the Committee may determine in its sole discretion that payments from one or more of the Eligible Employee's Deferral Accounts shall be made at an earlier date than the time or times specified on the Eligible Employee's Election Forms. Any amount distributed by reason of Financial Hardship shall be limited to the amount necessary to relieve such Financial Hardship. (c) Other Interim Distributions. Upon application of an Eligible Employee, the Committee may determine in its sole discretion that payments from one or more of the Eligible Employee's Deferral Accounts shall be made at an earlier date than the time or times specified on the Eligible Employee's Election Forms (even in the absence of a Total and Permanent Disability or Financial Hardship). All distributions under this Subsection (c) shall be reduced by a penalty equal to six percent of the amount otherwise distributable, which penalty shall be forfeited to the Company. An Eligible Employee who has received a distribution under this Subsection (c) thereafter shall not make additional deferrals under the Plan. SECTION 9. NONASSIGNABILITY OF INTERESTS. The interest and property rights of any Eligible Employee under the Plan shall not be subject to option nor be assignable either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any act in violation of this Section 9 shall be void. SECTION 10. LIMITATION OF RIGHTS. (a) General Creditor. Eligible Employees shall have the status of general unsecured creditors of the Company. The Plan constitutes a mere promise by the Company to make payments in the future. It is the Company's intention that the Plan be considered unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. (b) Bonus Awards. Nothing in the Plan shall be construed to give any Eligible Employee any right to be granted a Bonus Award. (c) Employment Agreement. Neither the Plan nor the deferral of any Base Salary or Bonus Award, nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company or a subsidiary will employ an Eligible Employee for any period of time, in any position or at any particular rate of compensation. SECTION 11. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Committee. The Committee shall have full power and authority to administer and interpret the Plan, to establish procedures for administering the Plan and to take any and all necessary actions in connection therewith. The Committee's interpretation and construction of the Plan shall be conclusive and binding on all persons. SECTION 12. CLAIMS AND INQUIRIES. (a) Application for Benefits. Applications for benefits and inquiries concerning the Plan (or concerning present or future rights to benefits under the Plan) shall be submitted to the Company in writing and addressed to the Chair of the Committee. An application for benefits shall be submitted on the prescribed form and shall be signed by the Eligible Employee or, in the case of a benefit payable after his or her death, by the Beneficiary. (b) Denial of Application. In the event that an application for benefits is denied in whole or in part, the Chair of the Committee shall notify the applicant in writing of the denial and of the right to a review of the denial. The written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the provisions of the Plan on which the denial is based, a description of any information or material necessary for the applicant to perfect the application, an explanation of why the material is necessary, and an explanation of the review procedure under the Plan. The written notice shall be given to the applicant within a reasonable period of time (not more than 90 days) after the Chair of the Committee received the application, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the notice be given more than 180 days after the Chair of the Committee received the application. (c) Review Panel. The Committee shall serve as the "Review Panel" under the Plan. The Review Panel shall have the authority to act with respect to any appeal from a denial of benefits or a determination of benefit rights. (d) Request for Review. An applicant whose application for benefits was denied in whole or in part, or the applicant's duly authorized representative, may appeal from the denial by submitting to the Review Panel a request for a review of the application within 90 days after receiving written notice of the denial from the Chair of the Committee. The Chair of the Committee shall give the applicant or his or her representative an opportunity to review pertinent materials, other than legally privileged documents, in preparing the request for a review. The request for a review shall be in writing and addressed to the Committee. The request for a review shall set forth all of the grounds on which it is based, all facts in support of the request, and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. (e) Decision on Review. The Review Panel shall act on each request for a review within 60 days after receipt, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the decision on review be rendered more than 120 days after the Review Panel received the request for a review. The Review Panel shall give prompt written notice of its decision to the applicant. In the event that the Review Panel confirms the denial of the application for benefits in whole or in part, the notice shall set forth, in a manner calculated to be understood by the applicant, the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based. (f) Rules and Interpretations. The Review Panel shall adopt such rules, procedures and interpretations of the Plan as it deems necessary or appropriate in carrying out its responsibilities under this Section 12. (g) Exhaustion of Remedies. No legal action for benefits under the Plan shall be brought unless and until the claimant (i) has submitted a written application for benefits in accordance with Subsection (a) above, (ii) has been notified by the Chair of the Committee that the application is denied, (iii) has filed a written request for a review of the application in accordance with Subsection (d) above and (iv) has been notified in writing that the Review Panel has affirmed the denial of the application; provided, however, that legal action may be brought after the Chair of the Committee or the Review Panel has failed to take any action on the claim within the time prescribed by Subsections (b) and (e) above, respectively. SECTION 13. AMENDMENT OR TERMINATION OF THE PLAN. The Board may amend, suspend or terminate the Plan at any time, except that no amendment shall retroactively change the Interest Rate for the period prior to the date of the amendment. SECTION 14. CHOICE OF LAW. The validity, interpretation, construction and performance of the Plan shall be governed by the Employee Retirement Income Security Act of 1974, as amended, and, to the extent they are not preempted, by the laws of the State of California (other than their choice-of-law provisions). SECTION 15. EXECUTION. To record the adoption of the Plan, the Company has caused its duly authorized officer to affix the corporate name hereto. AMERICAN PRESIDENT COMPANIES, LTD. By Timothy J. Windle Assistant Secretary EX-10.48 5 EXHIBIT 10.48 TO THE 1994 FORM 10-K FOR APC -- 1995 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN OF AMERICAN PRESIDENT COMPANIES, LTD. SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN. The Plan was established by the Company effective January 1, 1995. The purpose of the Plan is to supplement certain benefits under the Retirement Plan. SECTION 2. ELIGIBILITY AND PARTICIPATION. Participation in this Plan shall be limited to participants in the Retirement Plan who are employed by a member of the Affiliated Group on or after January 1, 1995, and who meet one of the following criteria: (a) Their benefits under the Retirement Plan are affected by the limitations imposed under section 401(a)(17) or 415 of the Code; (b) Their benefits under the Retirement Plan are affected by the Code's requirement that salaries or bonuses deferred under the Deferred Compensation Plan cannot be taken into account in computing such benefits; or (c) Both: (i) Their actual benefits under the Retirement Plan, at retirement, are lower than the benefits that they would have received had they separated from employment with the Affiliated Group as of December 31, 1992, absent the modification of the Retirement Plan's benefit formula that was adopted effective June 1, 1989; and (ii) Their "average annual compensation" under the Retirement Plan equals or exceeds $125,000 at any time after May 31, 1989. On June 1 of each year, starting with June 1, 1990, the $125,000 amount set forth in the preceding sentence shall be adjusted for inflation by multiplying it by a fraction. The numerator of such fraction shall be the CPI-W for U.S. Cities on the immediately preceding February 1, and the denominator of such fraction shall be the CPI-W for U.S. Cities on February 1, 1989. SECTION 3. PLAN BENEFITS. (a) Amount of Retirement Plan Supplement. Each Participant whose pension benefits under the Retirement Plan are reduced by section 401(a)(17) or 415 of the Code, by the exclu- sion of salaries and bonuses deferred under the Deferred Compensation Plan from pension calculations or by the modification of the formula for calculating his or her "retirement income" (not including cost-of-living adjustments) that was adopted on July 10, 1990, effective as of June 1, 1989, shall be entitled to receive a monthly benefit under this Plan. The amount of such benefit shall be equal to: (i) The monthly benefit payment which would be payable to the Participant under the Retirement Plan if the limitations of sections 401(a)(17) and 415 of the Code, such exclusion and such modification (to the extent that such modification results in a benefit reduction) did not apply; minus (ii) The Participant's actual monthly benefit payment under the Retirement Plan; minus (iii) The Participant's actual monthly benefit payment under the Excess-Benefit Plan of American President Companies, Ltd., as amended. For purposes of this Subsection (a), the modification of the Retirement Plan formula that was adopted on July 10, 1990, effective as of June 1, 1989, shall be deemed to have resulted in a benefit reduction only to the extent that a Participant's actual monthly benefit payment under the Retirement Plan is less than the monthly benefit payment that such Participant would have received if such modification had not been adopted and the Participant had separated from employment with all members of the Affiliated Group as of December 31, 1992. The Retirement Plan's Actuarial Equivalency factors shall be used to make this comparison. (b) Payment of Retirement Plan Supplement. A Participant's benefit under Subsection (a) above shall be payable to the Participant or to any other person (including, without limitation, a surviving spouse) who is receiving benefits under the Retirement Plan which are derived from the Participant. Any benefit under Subsection (a) above shall be payable in the same form and at the same times as the Participant's benefit under the Retirement Plan (and in no event earlier), unless the Participant's benefit under the Retirement Plan is paid in the form of a single lump sum. In that event, the benefit under Subsection (a) above shall be payable in the normal form of benefit provided under the Retirement Plan, computed as if the benefit actually paid to the Participant under the Retirement Plan were also payable in the normal form, unless: (i) The Participant requests in writing to receive the benefit under Subsection (a) above in a single lump sum; and (ii) The Committee expressly approves the Participant's request. In the case of a Participant who is entitled to a "COLA-Adjusted Retirement Income" under the Retirement Plan, the amount of any periodic benefit under Subsection (a) above shall be recalculated each year in accordance with the provisions of the Retirement Plan relating to the adjustment of pension benefits to reflect changes in the cost of living. SECTION 4. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee shall make such rules, interpretations and computations as it may deem appropriate. Any decision of the Committee with respect to the Plan, including (without limitation) any determination of eligibility to participate in the Plan and any calculation of benefits hereunder, shall be conclusive and binding on all persons. SECTION 5. CLAIMS AND INQUIRIES. (a) Application for Benefits. Applications for benefits and inquiries concerning the Plan (or concerning present or future rights to benefits under the Plan) shall be submitted to the Company in writing and addressed to the Chair of the Committee. An application for benefits shall be submitted on the prescribed form and shall be signed by the Participant or, in the case of a benefit payable after his or her death, by the beneficiary. (b) Denial of Application. In the event that an application for benefits is denied in whole or in part, the Chair of the Committee shall notify the applicant in writing of the denial and of the right to a review of the denial. The written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the provisions of the Plan on which the denial is based, a description of any information or material necessary for the applicant to perfect the application, an explanation of why the material is necessary, and an explanation of the review procedure under the Plan. The written notice shall be given to the applicant within a reasonable period of time (not more than 90 days) after the Chair of the Committee received the application, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the notice be given more than 180 days after the Chair of the Committee received the application. (c) Review Panel. The Committee shall serve as the "Review Panel" under the Plan. The Review Panel shall have the authority to act with respect to any appeal from a denial of benefits or a determination of benefit rights. (d) Request for Review. An applicant whose application for benefits was denied in whole or in part, or the applicant's duly authorized representative, may appeal from the denial by submitting to the Review Panel a request for a review of the application within 90 days after receiing written notice of the denial from the Chair of the Committee. The Chair of the Committee shall give the applicant or his or her representative an opportunity to review pertinent materials, other than legally privileged documents, in preparing the request for a review. The request for a review shall be in writing and addressed to the Committee. The request for a review shall set forth all of the grounds on which it is based, all facts in support of the request, and any other matters that the applicant deems pertinent. The Review Panel may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review. (e) Decision on Review. The Review Panel shall act on each request for a review within 60 days after receipt, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the decision on review be rendered more than 120 days after the Review Panel received the request for a review. The Review Panel shall give prompt written notice of its decision to the applicant. In the event that the Review Panel confirms the denial of the application for benefits in whole or in part, the notice shall set forth, in a manner calculated to be understood by the applicant, the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based. (f) Rules and Interpretations. The Review Panel shall adopt such rules, procedures and interpretations of the Plan as it deems necessary or appropriate in carrying out its responsibilities under this Section 5. (g) Exhaustion of Remedies. No legal action for benefits under the Plan shall be brought unless and until the claimant (i) has submitted a written application for benefits in accordance with Subsection (a) above, (ii) has been notified by the Chair of the Committee that the application is denied, (iii) has filed a written request for a review of the application in accordance with Subsection (d) above and (iv) has been notified in writing that the Review Panel has affirmed the denial of the application; provided, however, that legal action may be brought after the Chair of the Committee or the Review Panel has failed to take any action on the claim within the time prescribed by Subsections (b) and (e) above, respectively. SECTION 6. AMENDMENT AND TERMINATION. The Company expects to continue the Plan indefinitely. Future conditions, however, cannot be foreseen, and the Company shall have the authority to amend or terminate the Plan at any time. In the event of an amendment or termination of the Plan, a Participant's benefits hereunder shall not be less than the benefits to which the Participant would have been entitled if his or her employment in the Affiliated Group had terminated immediately prior to such amendment or termination. SECTION 7. EMPLOYMENT RIGHTS. Nothing in the Plan shall be deemed to give any person a right to remain in the employ of any Affiliated Group member or affect the right of the Affiliated Group members to terminate such person's employment with or without cause. SECTION 8. NO ASSIGNMENT. The rights of any person to payments or benefits under the Plan shall not be made subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors. Any act in violation of this Section 8, whether voluntary or involuntary, shall be void. SECTION 9. PLAN UNFUNDED. Participants shall have the status of general unsecured creditors of the Company. The Plan constitutes a mere promise by the Company to make benefit payments in the future. It is the Company's intent that the Plan be considered unfunded for tax purposes and for purposes of Title I of ERISA. SECTION 10. CHOICE OF LAW. The validity, interpretation, construction and performance of the Plan shall be governed by ERISA and, to the extent they are not preempted, by the laws of the State of California. SECTION 11. DEFINITIONS. (a) "Affiliated Group" means a group of one or more chains of corporations connected through stock ownership with the Company, if: (i) Stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of each of the corporations, except the Company, is owned by one or more of the other corporations; and (ii) The Company owns stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote or at least 80% of the total value of shares of all classes of stock of at least one of the other corporations excluding, in computing such voting power or value, stock owned directly by such other corporations. In addition, the term "Affiliated Group" includes any other entity which the Company has designated in writing as a member of the Affiliated Group for purposes of this Plan or the Retirement Plan. An entity shall be considered a member of the Affiliated Group only with respect to periods for which such designation is in effect or during which the relationship described in Paragraphs (i) and (ii) above exists. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Committee" means the Benefits Committee appointed by the Company's Board of Directors. (d) "Company" means American President Companies, Ltd., a Delaware corporation. (e) "Deferred Compensation Plan" means the Deferred Compensation Plan of American President Companies, Ltd., as amended, the 1988 Deferred Compensation Plan of American President Companies, Ltd., as amended, and the 1995 Deferred Compensation Plan of American President Companies, Ltd., as amended. (f) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (g) "Participant" means a participant in the Retirement Plan who participates in this Plan under Section 2. (h) "Plan" means this 1995 Supplemental Executive Retirement Plan of American President Companies, Ltd. (i) "Retirement Plan" means the American President Companies, Ltd. Retirement Plan, as amended, or its successor. SECTION 12. EXECUTION. To record the adoption of the Plan, the Company has caused its duly authorized officer to affix the corporate name hereto. AMERICAN PRESIDENT COMPANIES, LTD. By Timothy J. Windle Assistant Secretary EX-10.62 6 EXHIBIT 10.62 TO THE 1994 FORM 10-K FOR APC -- DIRECTORS' INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT, made and entered into this 28th day of April, 1994, ("Agreement"), by and between AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation ("Company"), and G. Craig Sullivan ("Director"). In consideration of the mutual promises in this Agreement, and intending to be legally bound, the Company and Director do hereby covenant and agree as follows: Section 1. Services by Director. Director agrees to serve as a director so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Certificate of Incorporation and By-laws of the Company or any subsidiary of the Company and until such time as he resigns or fails to stand for election. Director may at any time and for any reason resign from such position (subject to any other contractual obligation or other obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Director in any such position. Section 2. Indemnification. The Company shall indemnify Director to the fullest extent permitted by applicable law in effect on the date hereof or as such law may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Company to provide broader indemnification rights than the law permitted the Company to provide before such amend- ment). Without in any way diminishing the scope of the indemnification provided by this Section 2, the Company will indemnify Director if and whenever he is or was involved in any manner (including, without limitation, as a party or as a witness) in any threatened, pending or completed Pro- ceeding, including without limitation any such Proceeding brought by or in the right of the Company, by reason of the fact that he is or was an Agent or by reason of anything done or not done by him in such capacity, against Expenses and Liabilities actually and reasonably incurred by Director or on his behalf in connection with the investigation, defense, settlement or appeal of any such Proceeding. No initial finding by the Board, its counsel, Independent Counsel, arbitrators or the stockholders shall be effective to deprive Director of the protection of this indemnity, nor shall a court to which Director may apply for enforcement of this indemnity give any weight to any such adverse finding in deciding any issue before it, as it is intended that Director shall be paid promptly by the Company all amounts necessary to effectuate the foregoing indemnity in full. In addition to, and not as a limitation of, the foregoing, the rights of indemnification of Director provided under this Agreement shall include those rights set forth in Sec- tions 3, 6 and 7 below. Section 3. Advancement of Expenses. All reason- able Expenses incurred by or on behalf of Director shall be advanced by the Company to Director within 20 days after the receipt by the Company of a written request for an advance or advances of Expenses from time to time, whether prior to or after final disposition of a Proceeding (unless there has been a final determination that Director is not entitled to be indemnified for such Expenses), including without limita- tion any Proceeding brought by or in the right of the Com-pany. Director's entitlement to advancement of Expenses shall include those incurred in connection with any Pro-ceeding by Director seeking an adjudication or award in arbitration pursuant to this Agreement. The requests shall reasonably evidence the Expenses incurred by Director in connection therewith. If required by law at the time of such advance, Director hereby undertakes to repay the amounts advanced if it shall ultimately be determined that Director is not entitled to be indemnified pursuant to the terms of this Agreement. Section 4. Procedure for Determination of Enti- tlement to Indemnification. (a) Whenever Director believes that he is enti-tled to indemnification pursuant to this Agreement, Director shall submit a written request for indemnification to the Company to the attention of the Chairman of the Board with a copy to the Secretary. This request shall include documen- tation or information which is necessary for the determina- tion of entitlement to indemnification and which is reason- ably available to Director. Determination of Director's entitlement to indemnification shall be made not later than 60 days after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or other disposition or partial disposition of any Proceeding or any other event which could enable the Company to determine Director's entitlement to indemnification. The Chairman of the Board or the Secretary shall, promptly upon receipt of Director's request for indemnification, advise the Board in writing that Director has made such request for indemnification. (b) The Company shall be entitled to select the forum in which Director's entitlement to indemnification will be heard unless a Triggering Event has occurred, in which case Director shall be entitled to select the forum. The Company or Director, as the case may be, shall notify the other party in writing as to the forum selected, which selection shall be from among the following: ( i) The stockholders of the Company; (ii) A quorum of the Board consisting of Disinterested Directors; (iii) Independent Counsel, which counsel shall make the determination in a written opinion; or (iv) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by Director and the last of whom is selected by the first two arbitrators so selected; or if for any reason three arbitrators are not selected within 30 days after the appointment of the first arbitrator, then selection of addi- tional arbitrators to complete the three person panel shall be made by the American Arbitration Association under its commercial arbitration rules now in effect. Section 5. Presumptions and Effect of Certain Proceedings. Upon making a request for indemnification, Director shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to show that such indemnification is expressly prohibited by applicable law in order to overcome that presumption in reaching any contrary determination. If the person or persons so empowered to make the determination shall have failed to make the requested indemnification within 60 days after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or other disposi-tion or partial disposition of any Proceeding or any other event which could enable the Company to determine Director's entitlement to indemnification, the requisite determination of entitlement to indemnification shall be deemed to have been made and Director shall be absolutely entitled to indemnification under this Agreement, absent (i) misrepre- sentation or omission by Director of a material fact in the request for indemnification or (ii) a specific finding that all or any part of such indemnification is expressly prohib- ited by law. The termination of any Proceeding by judgment, order, settlement, arbitration award or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself (a) adversely affect the rights of Director to indem- nification except as may be provided herein, (b) create a presumption that Director did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, or (c) with respect to any criminal action or proceeding, create a presumption that Director had reasonable cause to believe that his conduct was unlawful. Section 6. Remedies of Director in Cases of Determination not to Indemnify or to Advance Expenses. (a) In the event that (i) an initial determina-tion is made that Director is not entitled to indemnifica-tion, (ii) advances are not made pursuant to this Agreement, (iii) payment has not been timely made following a deter-mination of entitlement to indemnification pursuant to this Agreement or (iv) Director otherwise seeks enforcement of this Agreement, Director shall be entitled to a final adjudication in an appropriate court of the State of Dela- ware of his entitlement to such indemnification or advance. Alternatively, Director at his option may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial arbitration rules of the American Arbitra-tion Association now in effect, which award is to be made within 90 days following the filing of the demand for arbitration. The Company shall not oppose Director's right to seek any such adjudication or arbitration award. In any such proceeding or arbitration Director shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption. (b) In the event an initial determination has been made, in whole or in part, that Director is not enti-tled to indemnification, the decision in the judicial proceeding or arbitration provided in paragraph (a) of this Section 6 shall be made de novo and Director shall not be prejudiced by reason of a determination that he is not entitled to indemnification. (c) If an initial determination is made or deemed to have been made pursuant to the terms of this Agreement that indemnification of Director is not expressly prohibited by law, Director shall be entitled to indemnification and the Company shall be bound by such determination in the absence of (i) a misrepresentation or omission of a material fact by Director or (ii) a specific finding (which has become final) that all or any part of such indemnification is expressly prohibited by law. (d) The Company shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding and enforceable. The Company shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement and is precluded from making any assertion to the contrary. (e) Expenses incurred by Director in connection with his request for indemnification under, seeking enforce-ment of, or to recover damages for breach of, this Agreement shall be borne by the Company. Section 7. Other Rights to Indemnification. Director's rights of indemnification and advancement of expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Director may now or in the future be entitled under applicable law, the Certifi-cate of Incorporation, By-laws, agreement, vote of stock-holders, resolution of directors, or otherwise. Section 8. Limitations on Indemnity. The Company shall not be liable under this Agreement to make any payment to Director to the extent that Director has already been reimbursed pursuant to such D & O Insurance as the Company may maintain for Director's benefit. Notwithstanding the availability of such insurance, Director also may claim indemnification from the Company pursuant to this Agreement by assigning to the Company any claims under such insurance to the extent Director is paid by the Company. Section 9. Duration and Scope of Agreement; Binding Effect. This Agreement shall continue so long as Director shall be subject to any possible Proceeding by reason of the fact that he is or was an Agent and shall be applicable to Proceedings commenced or continued after execution of this Agreement, whether arising from acts or omissions occurring before or after such execution. This Agreement shall be binding upon the Company and its succes-sors and assigns and shall inure to the benefit of Director and his spouse, assigns, heirs, devisees, executors, admin-istrators and other legal representatives. Section 10. Severability. If any provision or provisions of this Agreement (or any portion thereof) shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforce - -ability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agree-ment shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unen-forceable. Section 11. Identical Counterparts. This Agree- ment may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 12. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Director to the fullest extent now or hereafter permitted by law. Section 13. Headings. The headings of the Sec- tions and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 14. Definitions. For purposes of this Agreement: (a) "Agent" shall mean any person who (i) is or was a director, officer or employee of the Company or a subsidiary of the Company whether serving in such capacity or as a director, officer, employee, agent, fiduciary or other official of another entity at the request, for the convenience, or to represent the interests of the Company or a subsidiary of the Company or (ii) was a director, officer or employee of a corporation which was a predecessor corpo-ration of the Company or a subsidiary of the Company whether serving in such capacity or as a director, officer, employee, agent, fiduciary or other official of another entity at the request, for the convenience, or to represent the interests of such predecessor corporation. (b) "Disinterested Director" shall mean a direc-tor of the Company who is not or was not a party to the Proceeding in respect of which indemnification is being sought by Director. (c) "Expenses" shall include all direct and indirect costs (including, without limitation, attorneys' fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or out-of-pocket expenses and reasonable compensation for time spent by Director for which he is otherwise not compensated by the Company or any third party) actually and reasonably incurred in connection with either the investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise; provided, however, that "Expenses" shall not include any judgments, fines or Employee Retirement Income Security Act of 1974 ("ERISA") excise taxes or penalties. (d) "Independent Counsel" shall mean a law firm or a member of a law firm that neither is presently nor in the past five years has been retained to represent: (i) the Company or Director in any matter material to either party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of profes-sional conduct then prevailing, would have a conflict of interest in representing either the Company or Director in an action to determine Director's right to indemnification under this Agreement. (e) "Liabilities shall mean liabilities of any type whatsoever, including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement. (f) "Proceeding" shall mean any action, suit, arbitration, alternate dispute resolution mechanism, inves-tigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative. (g) "Triggering Event" shall mean the acquisition by any person (other than the Company) of 30% or more of the outstanding shares of common stock of the Company unless a majority of the entire Board, which shall include the affirmative vote of at least one director from each class of the Board, shall have earlier approved such acquisition. Section 15. Pronouns. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. Section 16. Modification and Waiver. No supple- ment, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties to this Agreement. No waiver of any provision of this Agree-ment shall be deemed to constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 17. Notice by Director and Defense of Claims. Director agrees promptly to notify the Company in writing upon being served with any summons, citation, sub-poena, complaint, indictment, information or other document relating to any matter which may be subject to indemnifica- tion hereunder, whether civil, criminal, administrative or investigative; but the omission so to notify the Company will not relieve it from any liability which it may have to Director if such omission does not prejudice the Company's rights and if such omission does prejudice the Company's rights, it will relieve the Company from liability only to the extent of such prejudice; nor will such omission relieve the Company from any liability which it may have to Director otherwise than under this Agreement. With respect to any Proceeding as to which Director notifies the Company of the commencement thereof: (a) The Company will be entitled to participate therein at its own expense; and (b) Except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satis-factory to Director. After notice from the Company to Director of its election so to assume the defense thereof, the Company will not be liable to Director under this Agree-ment for any Expenses subsequently incurred by Director in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Director shall have the right to employ his counsel in such Proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Director unless (i) the employment of counsel by Director has been authorized by the Company, (ii) Director shall have reason- ably concluded that there may be a conflict of interest between the Company and Director in the conduct of the defense of such action or that counsel may not be adequately representing Director, (iii) a Triggering Event shall have occurred or (iv) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding as to which Director shall have made the conclusion provided for in (ii) above or if an event specified in (iii) above shall have occurred. (c) The Company shall not be liable to indemnify Director under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Director without Director's written consent. Neither the Company nor Director will unreasonably withhold their consent to any proposed settlement. Section 18. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Director, to: G. Craig Sullivan The Clorox Company 1221 Broadway Oakland, CA 94612 (b) If to the Company, to: American President Companies, Ltd. 1111 Broadway Oakland, CA 94607 Attn: Chairman of the Board With a copy to: Secretary or to such other address as may have been furnished to Director by the Company or to the Company by Director, as the case may be. Section 19. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. Section 20. Consent to Jurisdiction. The Company and Director each hereby irrevocably consent to the juris-diction of the courts of the State of Delaware for all purposes in connection with any 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 the state courts of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. AMERICAN PRESIDENT COMPANIES, LTD. By: /s/ Maryellen B. Cattani Maryellen B. Cattani Senior Vice President, Secretary, and General Counsel DIRECTOR /s/G. Craig Sullivan G. Craig Sullivan EX-10.63 7 EXHIBIT 10.63 TO THE 1994 FORM 10-K FOR APC -- DIRECTORS' INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT, made and entered into this 28th day of April, 1994, ("Agreement"), by and between AMERICAN PRESIDENT COMPANIES, LTD., a Delaware corporation ("Company"), and Tully M. Friedman ("Director"). In consideration of the mutual promises in this Agreement, and intending to be legally bound, the Company and Director do hereby covenant and agree as follows: Section 1. Services by Director. Director agrees to serve as a director so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Certificate of Incorporation and By-laws of the Company or any subsidiary of the Company and until such time as he resigns or fails to stand for election. Director may at any time and for any reason resign from such position (subject to any other contractual obligation or other obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Director in any such position. Section 2. Indemnification. The Company shall indemnify Director to the fullest extent permitted by applicable law in effect on the date hereof or as such law may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Company to provide broader indemnification rights than the law permitted the Company to provide before such amend- ment). Without in any way diminishing the scope of the indemnification provided by this Section 2, the Company will indemnify Director if and whenever he is or was involved in any manner (including, without limitation, as a party or as a witness) in any threatened, pending or completed Pro- ceeding, including without limitation any such Proceeding brought by or in the right of the Company, by reason of the fact that he is or was an Agent or by reason of anything done or not done by him in such capacity, against Expenses and Liabilities actually and reasonably incurred by Director or on his behalf in connection with the investigation, defense, settlement or appeal of any such Proceeding. No initial finding by the Board, its counsel, Independent Counsel, arbitrators or the stockholders shall be effective to deprive Director of the protection of this indemnity, nor shall a court to which Director may apply for enforcement of this indemnity give any weight to any such adverse finding in deciding any issue before it, as it is intended that Director shall be paid promptly by the Company all amounts necessary to effectuate the foregoing indemnity in full. In addition to, and not as a limitation of, the foregoing, the rights of indemnification of Director provided under this Agreement shall include those rights set forth in Sec- tions 3, 6 and 7 below. Section 3. Advancement of Expenses. All reason- able Expenses incurred by or on behalf of Director shall be advanced by the Company to Director within 20 days after the receipt by the Company of a written request for an advance or advances of Expenses from time to time, whether prior to or after final disposition of a Proceeding (unless there has been a final determination that Director is not entitled to be indemnified for such Expenses), including without limita- tion any Proceeding brought by or in the right of the Com-pany. Director's entitlement to advancement of Expenses shall include those incurred in connection with any Pro-ceeding by Director seeking an adjudication or award in arbitration pursuant to this Agreement. The requests shall reasonably evidence the Expenses incurred by Director in connection therewith. If required by law at the time of such advance, Director hereby undertakes to repay the amounts advanced if it shall ultimately be determined that Director is not entitled to be indemnified pursuant to the terms of this Agreement. Section 4. Procedure for Determination of Enti- tlement to Indemnification. (a) Whenever Director believes that he is enti-tled to indemnification pursuant to this Agreement, Director shall submit a written request for indemnification to the Company to the attention of the Chairman of the Board with a copy to the Secretary. This request shall include documen- tation or information which is necessary for the determina- tion of entitlement to indemnification and which is reason- ably available to Director. Determination of Director's entitlement to indemnification shall be made not later than 60 days after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or other disposition or partial disposition of any Proceeding or any other event which could enable the Company to determine Director's entitlement to indemnification. The Chairman of the Board or the Secretary shall, promptly upon receipt of Director's request for indemnification, advise the Board in writing that Director has made such request for indemnification. (b) The Company shall be entitled to select the forum in which Director's entitlement to indemnification will be heard unless a Triggering Event has occurred, in which case Director shall be entitled to select the forum. The Company or Director, as the case may be, shall notify the other party in writing as to the forum selected, which selection shall be from among the following: ( i) The stockholders of the Company; (ii) A quorum of the Board consisting of Disinterested Directors; (iii) Independent Counsel, which counsel shall make the determination in a written opinion; or (iv) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by Director and the last of whom is selected by the first two arbitrators so selected; or if for any reason three arbitrators are not selected within 30 days after the appointment of the first arbitrator, then selection of addi- tional arbitrators to complete the three person panel shall be made by the American Arbitration Association under its commercial arbitration rules now in effect. Section 5. Presumptions and Effect of Certain Proceedings. Upon making a request for indemnification, Director shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to show that such indemnification is expressly prohibited by applicable law in order to overcome that presumption in reaching any contrary determination. If the person or persons so empowered to make the determination shall have failed to make the requested indemnification within 60 days after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or other disposi-tion or partial disposition of any Proceeding or any other event which could enable the Company to determine Director's entitlement to indemnification, the requisite determination of entitlement to indemnification shall be deemed to have been made and Director shall be absolutely entitled to indemnification under this Agreement, absent (i) misrepre- sentation or omission by Director of a material fact in the request for indemnification or (ii) a specific finding that all or any part of such indemnification is expressly prohib- ited by law. The termination of any Proceeding by judgment, order, settlement, arbitration award or conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself (a) adversely affect the rights of Director to indem- nification except as may be provided herein, (b) create a presumption that Director did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, or (c) with respect to any criminal action or proceeding, create a presumption that Director had reasonable cause to believe that his conduct was unlawful. Section 6. Remedies of Director in Cases of Determination not to Indemnify or to Advance Expenses. (a) In the event that (i) an initial determina-tion is made that Director is not entitled to indemnifica-tion, (ii) advances are not made pursuant to this Agreement, (iii) payment has not been timely made following a deter-mination of entitlement to indemnification pursuant to this Agreement or (iv) Director otherwise seeks enforcement of this Agreement, Director shall be entitled to a final adjudication in an appropriate court of the State of Dela- ware of his entitlement to such indemnification or advance. Alternatively, Director at his option may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial arbitration rules of the American Arbitra-tion Association now in effect, which award is to be made within 90 days following the filing of the demand for arbitration. The Company shall not oppose Director's right to seek any such adjudication or arbitration award. In any such proceeding or arbitration Director shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption. (b) In the event an initial determination has been made, in whole or in part, that Director is not enti-tled to indemnification, the decision in the judicial proceeding or arbitration provided in paragraph (a) of this Section 6 shall be made de novo and Director shall not be prejudiced by reason of a determination that he is not entitled to indemnification. (c) If an initial determination is made or deemed to have been made pursuant to the terms of this Agreement that indemnification of Director is not expressly prohibited by law, Director shall be entitled to indemnification and the Company shall be bound by such determination in the absence of (i) a misrepresentation or omission of a material fact by Director or (ii) a specific finding (which has become final) that all or any part of such indemnification is expressly prohibited by law. (d) The Company shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding and enforceable. The Company shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement and is precluded from making any assertion to the contrary. (e) Expenses incurred by Director in connection with his request for indemnification under, seeking enforce-ment of, or to recover damages for breach of, this Agreement shall be borne by the Company. Section 7. Other Rights to Indemnification. Director's rights of indemnification and advancement of expenses provided by this Agreement shall not be deemed exclusive of any other rights to which Director may now or in the future be entitled under applicable law, the Certifi-cate of Incorporation, By-laws, agreement, vote of stock-holders, resolution of directors, or otherwise. Section 8. Limitations on Indemnity. The Company shall not be liable under this Agreement to make any payment to Director to the extent that Director has already been reimbursed pursuant to such D & O Insurance as the Company may maintain for Director's benefit. Notwithstanding the availability of such insurance, Director also may claim indemnification from the Company pursuant to this Agreement by assigning to the Company any claims under such insurance to the extent Director is paid by the Company. Section 9. Duration and Scope of Agreement; Binding Effect. This Agreement shall continue so long as Director shall be subject to any possible Proceeding by reason of the fact that he is or was an Agent and shall be applicable to Proceedings commenced or continued after execution of this Agreement, whether arising from acts or omissions occurring before or after such execution. This Agreement shall be binding upon the Company and its succes-sors and assigns and shall inure to the benefit of Director and his spouse, assigns, heirs, devisees, executors, admin-istrators and other legal representatives. Section 10. Severability. If any provision or provisions of this Agreement (or any portion thereof) shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforce - -ability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agree-ment shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unen-forceable. Section 11. Identical Counterparts. This Agree- ment may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 12. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Director to the fullest extent now or hereafter permitted by law. Section 13. Headings. The headings of the Sec- tions and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 14. Definitions. For purposes of this Agreement: (a) "Agent" shall mean any person who (i) is or was a director, officer or employee of the Company or a subsidiary of the Company whether serving in such capacity or as a director, officer, employee, agent, fiduciary or other official of another entity at the request, for the convenience, or to represent the interests of the Company or a subsidiary of the Company or (ii) was a director, officer or employee of a corporation which was a predecessor corpo-ration of the Company or a subsidiary of the Company whether serving in such capacity or as a director, officer, employee, agent, fiduciary or other official of another entity at the request, for the convenience, or to represent the interests of such predecessor corporation. (b) "Disinterested Director" shall mean a direc-tor of the Company who is not or was not a party to the Proceeding in respect of which indemnification is being sought by Director. (c) "Expenses" shall include all direct and indirect costs (including, without limitation, attorneys' fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or out-of-pocket expenses and reasonable compensation for time spent by Director for which he is otherwise not compensated by the Company or any third party) actually and reasonably incurred in connection with either the investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise; provided, however, that "Expenses" shall not include any judgments, fines or Employee Retirement Income Security Act of 1974 ("ERISA") excise taxes or penalties. (d) "Independent Counsel" shall mean a law firm or a member of a law firm that neither is presently nor in the past five years has been retained to represent: (i) the Company or Director in any matter material to either party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of profes-sional conduct then prevailing, would have a conflict of interest in representing either the Company or Director in an action to determine Director's right to indemnification under this Agreement. (e) "Liabilities shall mean liabilities of any type whatsoever, including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement. (f) "Proceeding" shall mean any action, suit, arbitration, alternate dispute resolution mechanism, inves-tigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative. (g) "Triggering Event" shall mean the acquisition by any person (other than the Company) of 30% or more of the outstanding shares of common stock of the Company unless a majority of the entire Board, which shall include the affirmative vote of at least one director from each class of the Board, shall have earlier approved such acquisition. Section 15. Pronouns. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. Section 16. Modification and Waiver. No supple- ment, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties to this Agreement. No waiver of any provision of this Agree-ment shall be deemed to constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 17. Notice by Director and Defense of Claims. Director agrees promptly to notify the Company in writing upon being served with any summons, citation, sub-poena, complaint, indictment, information or other document relating to any matter which may be subject to indemnifica- tion hereunder, whether civil, criminal, administrative or investigative; but the omission so to notify the Company will not relieve it from any liability which it may have to Director if such omission does not prejudice the Company's rights and if such omission does prejudice the Company's rights, it will relieve the Company from liability only to the extent of such prejudice; nor will such omission relieve the Company from any liability which it may have to Director otherwise than under this Agreement. With respect to any Proceeding as to which Director notifies the Company of the commencement thereof: (a) The Company will be entitled to participate therein at its own expense; and (b) Except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satis-factory to Director. After notice from the Company to Director of its election so to assume the defense thereof, the Company will not be liable to Director under this Agree-ment for any Expenses subsequently incurred by Director in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. Director shall have the right to employ his counsel in such Proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Director unless (i) the employment of counsel by Director has been authorized by the Company, (ii) Director shall have reason- ably concluded that there may be a conflict of interest between the Company and Director in the conduct of the defense of such action or that counsel may not be adequately representing Director, (iii) a Triggering Event shall have occurred or (iv) the Company shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding as to which Director shall have made the conclusion provided for in (ii) above or if an event specified in (iii) above shall have occurred. (c) The Company shall not be liable to indemnify Director under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Director without Director's written consent. Neither the Company nor Director will unreasonably withhold their consent to any proposed settlement. Section 18. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Director, to: Tully M. Friedman Hellman & Friedman One Maritime Plaza, 12th Floor San Francisco, CA 94111 (b) If to the Company, to: American President Companies, Ltd. 1111 Broadway Oakland, CA 94607 Attn: Chairman of the Board With a copy to: Secretary or to such other address as may have been furnished to Director by the Company or to the Company by Director, as the case may be. Section 19. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. Section 20. Consent to Jurisdiction. The Company and Director each hereby irrevocably consent to the juris-diction of the courts of the State of Delaware for all purposes in connection with any 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 the state courts of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. AMERICAN PRESIDENT COMPANIES, LTD. By: /s/ Maryellen B. Cattani Maryellen B. Cattani Senior Vice President, Secretary, and General Counsel DIRECTOR /s/ Tully M. Friedman Tully M. Friedman EX-11.1 8 EXHIBIT 11.1 TO THE 1994 FORM 10-K FOR APC EXHIBIT 11.1 AMERICAN PRESIDENT COMPANIES, LTD. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE
_________________________________________________________________________________________________ Year Ended December 30 December 31 December 25 1994 1993 1992 _________________________________________________________________________________________________ (In thousands, except per share amounts) _________________________________________________________________________________________________ PRIMARY EARNINGS PER COMMON SHARE Income Before Cumulative Effect of Accounting Change $ 74,198 $ 80,109 $ 78,016 Cumulative Effect on Prior Years of Changing the Accounting for Revenues and Expenses (21,565) _________________________________________________________________________________________________ Net Income $ 74,198 $ 80,109 $ 56,451 Preferred Dividends Series C (6,750) (6,750) (6,750) _________________________________________________________________________________________________ Earnings Available $ 67,448 $ 73,359 $ 49,701 _________________________________________________________________________________________________ Weighted Average: Common Stock 27,231 26,559 28,332 Common Stock Equivalents(1) 1,071 1,147 1,019 _________________________________________________________________________________________________ Total Shares 28,302 27,706 29,351 _________________________________________________________________________________________________ Primary Earnings Per Common Share Before Cumulative Effect of Accounting Change $ 2.38 $ 2.65 $ 2.43 Cumulative Effect of Accounting Change (0.74) _________________________________________________________________________________________________ Primary Earnings Per Common Share $ 2.38 $ 2.65 $ 1.69 _________________________________________________________________________________________________ FULLY DILUTED EARNINGS PER COMMON SHARE Income Before Cumulative Effect of Accounting Change $ 74,198 $ 80,109 $ 78,016 Cumulative Effect on Prior Years of Changing the Accounting for Revenues and Expenses (21,565) _________________________________________________________________________________________________ Net Income $ 74,198 $ 80,109 $ 56,451 _________________________________________________________________________________________________ Weighted Average: Common Stock 27,231 26,559 28,331 Common Stock Equivalents(1) 1,100 1,579 1,019 Preferred Stock Series C 3,962 3,962 3,962 _________________________________________________________________________________________________ Total Shares 32,293 32,100 33,312 _________________________________________________________________________________________________ Fully Diluted Earnings Per Common Share Before Cumulative Effect of Accounting Change $ 2.30 $ 2.50 $ 2.34 Cumulative Effect of Accounting Change (0.65) _________________________________________________________________________________________________ Fully Diluted Earnings Per Common Share $ 2.30 $ 2.50 $ 1.69 _________________________________________________________________________________________________ (1) Assumes conversion of outstanding stock options as determined by application of the treasury stock method.
EX-21.1 9 EXHIBIT 21.1 TO THE 1994 FORM 10-K FOR APC EXHIBIT 21.1 AMERICAN PRESIDENT COMPANIES, LTD. SUBSIDIARIES OF THE COMPANY
SUBSIDIARY JURISDICTION OF INCORP. ______________________________________________________________________________________________ ACS CANADA, LTD. CANADA AMERICAN CONSOLIDATION SERVICES OF NORTH AMERICA, LTD. DELAWARE AMERICAN CONSOLIDATION SERVICES, LTD. HONG KONG AMERICAN CONSOLIDATION SERVICES, LTD. TAIWAN AMERICAN CONSOLIDATION SERVICES (AUSTRALIA), PTY. LTD. AUSTRALIA AMERICAN CONSOLIDATION SERVICES (PHILIPPINES), INC. PHILIPPINES AMERICAN PRESIDENT BUSINESS LOGISTICS SERVICES, LTD. DELAWARE AMERICAN PRESIDENT COMPANIES FOUNDATION CALIFORNIA AMERICAN PRESIDENT LINES CANADA, LTD. CANADA AMERICAN PRESIDENT LINES, LTD. DELAWARE AMERICAN PRESIDENT LINES (CHINA) COMPANY LIMITED PEOPLES REPUBLIC OF CHINA AMERICAN PRESIDENT LINES (LANKA) AGENCIES LIMITED SRI LANKA AMERICAN PRESIDENT TRUCKING COMPANY, LTD. DELAWARE APC DE MEXICO, S.A. DE C.V. MEXICO APL AGENCIES INDIA PRIVATE LIMITED INDIA APL (BANGLADESH) AGENCIES LIMITED BANGLADESH APL CORPORATION DELAWARE APL EXPRESS LTD. DELAWARE APL EXPRESS TRANSPORTATION, LTD. DELAWARE APL INFORMATION SERVICES, LTD. DELAWARE APL INTERNATIONAL CORPORATION DELAWARE APL LAND TRANSPORT SERVICES, INC. TENNESSEE APL NEWBUILDINGS, LTD. NEVADA ASIAN-AMERICAN CONSOLIDATION SERVICES, LTD. CALIFORNIA CBD CONTAINERS (PVT) LIMITED SRI LANKA CONTROLADORA APC MEXICANA, S.A. DE C.V. MEXICO EAGLE INTERMODAL, LTD. DELAWARE EAGLE MARINE SERVICES, LTD. DELAWARE EAGLE MARINE SERVICES (INDIA), LTD. DELAWARE EMS DE MEXICO, S.A. DE C.V. MEXICO MULTI MODAL TRANSPORT INTERNATIONAL (PVT) LTD. PAKISTAN NATOMAS REAL ESTATE COMPANY CALIFORNIA PIONEER INTERMODAL CONTAINER SERVICES CO., LTD THAILAND SIAM INTERMODAL SERVICES LTD. THAILAND SONG-DOR HOLDINGS LIMITED HONG KONG TRADE U.S.A., LTD. DELAWARE VASCOR, LTD. DELAWARE
EX-23.1 10 EXHIBIT 23.1 TO THE 1994 FORM 10-K FOR APC EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 10, 1995 included in this Form 10-K, into the company's previously filed Registration Statements on Form S-3 No. 33- 60893, and Form S-8 Nos. 2-89096, 2-89094, 33-17499, 33-28640, 33-24847, 33- 36030, 33-47492 and 33-56163. /s/ Arthur Andersen LLP San Francisco, California March 10, 1995 EX-24.1 11 EXHIBT 24.1 TO THE 1994 FORM 10-K FOR APC POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Charles S. Arledge Charles S. Arledge Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ John H. Barr John H. Barr Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 9th day of March, 1995. /s/ Tully M. Friedman Tully M. Friedman Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Joji Hayashi Joji Hayashi Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ F. Warren Hellman F. Warren Hellman Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ John M. Lillie John M. Lillie Chairman of the Board, President, Chief Executive Officer and Director (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Toni Rembe Toni Rembe Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Timothy J. Rhein Timothy J. Rhein Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Forrest N. Shumway Forrest N. Shumway Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Will M. Storey Will M. Storey Executive Vice President, Chief Financial Officer, Treasurer and Director (Principal Financial Officer) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ G. Craig Sullivan G. Craig Sullivan Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Maryellen B. Cattani, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 7th day of March, 1995. /s/ Barry L. Williams Barry L. Williams Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: The undersigned does hereby make, constitute and appoint Will M. Storey, Timothy J. Windle and Peter A. V. Huegel, jointly and severally, my true and lawful attorneys-in-fact, with full power of substitution in each, for me and in my name, place and stead to execute for me and on my behalf in each or any one of my offices and capacities with American President Companies, Ltd. (the "Company"), as shown below, the Company's Annual Report on Form 10-K for the year ended December 30, 1994, with exhibits thereto and other documents in connection therewith, which the Company contemplates filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and any and all amendments to said Form 10-K, hereby ratifying, approving and confirming all that any such attorney-in-fact may do by virtue of these presents. IN WITNESS WHEREOF, I have executed these presents this 9th day of March, 1995. /s/ Maryellen B. Cattani Maryellen B. Cattani Executive Vice President, General Counsel and Secretary EX-27 12 EXHIBIT 27 TO THE 1994 FORM 10-K FOR APC
5 This Schedule contains summary information extracted from the 10-K of American President Companies, Ltd. for the year ended December 30, 1994 and is qualified in its entirely by reference to such financial statements. 1,000 12-MOS DEC-30-1994 JAN-1-1994 DEC-30-1994 39,754 214,898 280,736 0 36,549 609,072 1,837,097 896,802 1,663,957 402,766 386,250 27,318 75,000 0 514,065 1,663,957 0 2,793,468 0 2,592,634 0 0 28,994 110,304 36,106 0 0 0 0 74,198 2.38 2.30 The allowance for Doubtful Accounts, included in Reveivables, amounted to $21,908. The provision for doubtful accounts, included in Total-Costs, was $13,217.
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