-----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, r4JcwjJE1g6EuTbhjHOlzYYU7UdBNZemq9YNeXIldxStD4in7GZXZUFVEKBid5xl Az7qDnAur2/ndrBqk39Sxw== 0000778977-94-000011.txt : 19941012 0000778977-94-000011.hdr.sgml : 19941012 ACCESSION NUMBER: 0000778977-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940828 FILED AS OF DATE: 19941011 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRAUSS LEVI ASSOCIATES INC CENTRAL INDEX KEY: 0000778977 STANDARD INDUSTRIAL CLASSIFICATION: 2300 IRS NUMBER: 942973849 STATE OF INCORPORATION: DE FISCAL YEAR END: 1128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-00762 FILM NUMBER: 94552294 BUSINESS ADDRESS: STREET 1: 1155 BATTERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4155446000 10-Q 1 LEVI STRAUSS ASSOCIATES INC. 3Q94 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 28, 1994. ---------------- Commission file number 33-762 ------ LEVI STRAUSS ASSOCIATES INC. (Exact name of registrant as specified in its charter) Delaware 94-2973849 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 1155 Battery Street, San Francisco, California 94111 (Address of principal executive offices) Registrant's telephone number, including area code: (415) 544-6000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class of Common Stock October 1, 1994 --------------------- ---------------- Class E Common, $.10 par value 1,360,995 shares Class L Common, $.10 par value 51,327,001 shares FORM 10-Q TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income . . . . . . . . . . . . . . 3 Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements. . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 19 SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 - ---------------------------------------------------------------------------- The following financial statements have been prepared by Levi Strauss Associates Inc. (the "Company"), without audit, and reflect all adjustments which are, in the opinion of the Company, necessary for a fair statement of the results for the interim periods. The statements omit certain information and footnote disclosures necessary to present the statements in accordance with generally accepted accounting principles. The following financial statements should be read in conjunction with the financial statements and notes included in the Company's Form 10-K for the year ended November 28, 1993. The Company believes that along with the following information, the disclosures are adequate to make the information presented herein not misleading. All percentage changes in this report are based on unrounded amounts. LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except Per Share Data) (Unaudited)
Third Quarter Third Quarter Nine Months Nine Months Ended Ended Ended Ended August 28, August 29, August 28, August 29, 1994 1993 1994 1993 -------------- -------------- ------------ -------------- Net sales $ 1,588,116 $ 1,565,429 $ 4,308,080 $ 4,298,606 Cost of goods sold 957,119 964,456 2,615,218 2,640,221 -------------- -------------- ------------ -------------- Gross profit 630,997 600,973 1,692,862 1,658,385 Marketing, general and administrative expenses 365,956 354,414 1,039,437 1,027,219 Management compensation charge -- -- 3,755 -- Other operating (income) expense, net (3,056) 5,047 (6,456) (4,942) -------------- -------------- ------------ -------------- Operating income 268,097 241,512 656,126 636,108 Interest expense 4,740 9,931 15,472 28,895 Other (income) expense, net 28,466 6,199 35,509 (3,845) -------------- -------------- ------------ -------------- Income before taxes and cumulative effect of changes in accounting principles 234,891 225,382 605,145 611,058 Provision for taxes 93,956 97,716 242,058 259,700 -------------- -------------- ------------ -------------- Income before cumulative effect of changes in accounting principles 140,935 127,666 363,087 351,358 Cumulative effect of changes in accounting principles: Postretirement benefits other than pensions (SFAS 106), net of applicable income tax benefits of $153,885 -- -- (248,429) -- Income taxes (SFAS 109) -- -- 11,912 -- -------------- -------------- ------------ -------------- Net income $ 140,935 $ 127,666 $ 126,570 $ 351,358 ============== ============== ============ ============== Income (loss) per common share: Income before cumulative effect of changes in accounting principles $ 2.68 $ 2.43 $ 6.90 $ 6.69 Postretirement benefits other than pensions (SFAS 106) -- -- (4.72) -- Income taxes (SFAS 109) -- -- 0.23 -- -------------- -------------- ------------ -------------- Net income $ 2.68 $ 2.43 $ 2.41 $ 6.69 ============== ============== ============ ============== Average common shares outstanding 52,642,544 52,527,126 52,623,153 52,482,660 ============== ============== ============ ==============
The accompanying notes are an integral part of these financial statements. Page 1 of 2 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
August 28, November 28, 1994 1993 ------------ -------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 661,558 $ 252,673 Trade receivables (less allowance for doubtful accounts: 1994 - $32,742; 1993 - $28,551) 816,504 858,117 Inventories: Raw materials 118,248 109,289 Work-in-process 169,889 135,797 Finished goods 566,842 546,754 ------------ -------------- Total inventories 854,979 791,840 Deferred tax assets 103,338 70,979 Other current assets 126,813 116,815 ------------ -------------- Total current assets 2,563,192 2,090,424 Property, plant and equipment (less accumulated depreciation: 1994 - $441,538; 1993 - $364,830) 639,047 594,592 Goodwill and other intangibles (less accumulated amortization: 1994 - $191,247; 1993 - $175,538) 347,869 361,936 Noncurrent deferred tax assets 170,146 20,466 Other assets 33,664 41,242 ------------ -------------- $ 3,753,918 $ 3,108,660 ============ ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt and capital lease obligations $ 28,263 $ 42,695 Short-term borrowings 36,564 10,094 Accounts payable 227,837 259,747 Accrued liabilities 437,095 370,094 Salaries, wages and employee benefits 274,361 250,291 Taxes payable 167,515 139,641 Dividends payable 1,313 688 ------------ -------------- Total current liabilities 1,172,948 1,073,250 ------------ --------------
The accompanying notes are an integral part of these financial statements. Page 2 of 2 LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
August 28, November 28, 1994 1993 ----------- ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY (continued) Long-term debt and capital lease obligations - less current maturities 17,410 93,050 ------------ ------------- Employee related benefits 726,173 293,147 ------------ ------------- Long-term tax liability 348,254 334,627 ------------ ------------- Minority interest 35,449 30,047 ------------ -------------- Common Stock - Employee Stock Purchase and Award Plan: Class E common stock - $.10 par value; issued: 1994 - 431,123 shares; 1993 - 300,848 shares (Redemption value $55,615) 43 30 Additional paid-in capital, common 49,612 33,475 ------------ -------------- Total common stock - employee stock purchase and award plan 49,655 33,505 ------------ -------------- Stockholders' Equity: Class E common stock - $.10 par value; authorized 100,000,000 shares; issued and outstanding: 1994 - 939,747 shares; 1993 - 894,172 shares 94 89 Class L common stock - $.10 par value; authorized 170,000,000 shares; issued: 1994 - 51,826,750 shares; 1993 - 51,910,699 shares 5,183 5,191 Additional paid-in capital, common 251,595 242,572 Retained earnings 1,106,461 990,130 Translation adjustment 76,824 48,322 Pension liability (16,574) (16,574) Treasury stock, at cost - Class E: 1994 - 8,126 shares; 1993 - 1,379 shares; Class L: 1994 and 1993 - 499,749 shares (19,554) (18,696) ------------ -------------- Total stockholders' equity 1,404,029 1,251,034 ------------ -------------- $ 3,753,918 $ 3,108,660 ============ ==============
The accompanying notes are an integral part of these financial statements. LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Nine Months Nine Months Ended Ended August 28, August 29, 1994 1993 ------------ -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by operating activities $ 542,751 $ 279,008 ------------ -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (97,493) (89,783) Increase (decrease) in net investment hedge (138) 32,651 Other, net 1,118 3,912 ------------ -------------- Net cash used for investing activities (96,513) (53,220) ------------ -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long-term debt (89,647) (357,145) Net increase (decrease) in short-term borrowings 27,109 (72,155) Proceeds from sale of common stock to employee plans 21,622 29,512 Purchase of management Class L common stock (5,815) -- Dividends paid (2,289) (82,202) Proceeds from issuance of long-term debt 16 175,205 Other, net (1,178) (4,452) ------------ -------------- Net cash used for financing activities (50,182) (311,237) ------------ -------------- Effect of exchange rate changes on cash 12,829 9,445 ------------ -------------- Net increase (decrease) in cash and cash equivalents 408,885 (76,004) Beginning cash and cash equivalents 252,673 237,702 ------------ -------------- Ending cash and cash equivalents $ 661,558 $ 161,698 ============ ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 12,281 $ 23,412 Income taxes 219,466 284,559 Non-cash financing activity: Notes issued for payment of dividends -- 77,116
The accompanying notes are an integral part of these financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 RECLASSIFICATIONS A new line item, other operating (income) expense, net was created for the year-end 1993 Consolidated Statements of Income. This new line includes certain operations-related items that were classified as other (income) expense, net or marketing, general and administrative expenses prior to year-end 1993. The other operating (income) expense, net line represents operating income or expense items that are not related to marketing, general and administrative expenses. Consolidated Statements of Income for the third quarter and year-to-date 1993 have been reclassified to conform to this presentation format. The 1994 employee related benefits line item on the Consolidated Balance Sheets includes postretirement medical benefits of $429.1 million, workers' compensation liabilities of $158.5 million and other deferred employment benefits of $138.6 million. The 1993 other liabilities amounts have been reclassified to conform to this presentation format. Note 2 POSTRETIREMENT BENEFITS Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" requires the Company to accrue postretirement benefits (other than pensions), including health care and life insurance benefits for retired employees over the period that an employee becomes fully eligible for benefits. The Company adopted SFAS No. 106 effective November 29, 1993. Previously, the Company used a "pay-as-you-go" method whereby expenses were recorded as claims were incurred. SFAS No. 106 requires the Company to recognize an expense to establish a "transition obligation", representing the actuarially determined value at November 29, 1993 of the postretirement benefit obligation earned by employees and retirees in prior periods. The weighted average discount rate used to determine the present value of the transition obligation was 6.5 percent. A 12.4 percent annual rate of increase in the per capita claims cost reducing to 5.0 percent after 14 years was also used to determine the present value of the transition obligation. The transition obligation was recorded as a one-time, non-cash charge against earnings of $402.3 million before taxes and $248.4 million after taxes. The transition obligation is shown as a cumulative effect of a change in accounting principles, net of income tax effects, on the Consolidated Statements of Income. The $153.9 million noncurrent deferred tax benefit related to the adoption of SFAS No. 106 was recorded in accordance with SFAS No. 109 on the Consolidated Balance Sheets (see Note 3 to Consolidated Financial Statements relating to the adoption of SFAS No. 109 "Accounting for Income Taxes"). The adoption of SFAS No. 106 also results in additional ongoing expenses for service and interest costs related to postretirement benefits, which were $10.8 million and $32.2 million, respectively, for the 1994 third quarter and year-to-date. The 1994 full year expense for these ongoing costs is estimated to be $43.0 million. The Company is evaluating the weighted average discount rate used to determine the actuarial present value of postretirement benefits for year-end 1994 due to the recent rise in market rates of interest. It is expected that the assumed discount rate will increase, which will result in a decrease in the obligation for the present value of postretirement benefits. Note 3 INCOME TAXES SFAS No. 109 "Accounting for Income Taxes" requires an asset and liability approach for financial accounting and reporting of income taxes. Under SFAS No. 109, deferred tax assets and liabilities are established at the balance sheet date in amounts that are expected to be recoverable or payable when the difference in the tax bases and financial statement carrying amounts of assets and liabilities ("temporary differences") reverse. The Company complied with the provisions of SFAS No. 109 as of November 29, 1993. The adoption resulted in an $11.9 million credit to income, which was recorded as a cumulative effect of changes in accounting principles on the Consolidated Statements of Income. Upon adoption, deferred tax assets and deferred tax liabilities were adjusted accordingly. Temporary differences which gave rise to deferred tax assets and liabilities at August 28, 1994 were as follows:
Deferred Tax Deferred Tax Assets Liabilities -------------- ------------ (000's) Employee compensation and benefit plans $ 156,493 $ -- Postretirement benefits 153,885 -- Inventory 27,799 -- Restructuring charges 20,611 -- Depreciation and amortization 23,836 33,946 State income tax 20,949 -- Foreign exchange gains/losses 14,106 48,761 Tax on unremitted non-U.S. earnings -- 88,939 Other 54,919 27,467 ----------- ---------- $ 472,598 $ 199,113 =========== ==========
The net deferred tax assets at August 28, 1994 were $273.5 million. The consolidated U.S. income tax returns of the Company for 1983 through 1985 are under examination by the Internal Revenue Service (IRS). The examination includes the review of certain transactions relating to the 1985 leveraged buyout by the Company of Levi Strauss & Co. The IRS has not yet concluded its examination and a settlement has not been negotiated. The Company believes it has made adequate provision for income taxes and interest, which may become payable upon settlement. Note 4 COMMITMENTS AND CONTINGENCIES The Company has forward currency contracts to buy the aggregate equivalent of $188.2 million of the following foreign currencies: Netherlands Guilders, British Pounds, Finnish Markkaa, French Francs, German Marks, Swiss Francs and Belgian Francs, principally as a result of intercompany financing transactions. In addition, the Company has Belgian Franc forward currency contracts to buy the aggregate equivalent of $14.7 million of the following currencies: Swedish Kroner, Spanish Pesetas, Netherlands Guilders, Italian Lire, British Pounds, French Francs and German Marks. These contracts hedge currency exposures resulting from intercompany receivables and payables. The Company has forward currency contracts to sell the aggregate equivalent of $846.9 million of the following foreign currencies: Japanese Yen, Swedish Kroner, Spanish Pesetas, Norwegian Kroner, Netherlands Guilders, Italian Lire, British Pounds, Finnish Markkaa, French Francs, Danish Kroner, German Marks, Swiss Francs and Belgian Francs. These contracts hedge currency exposures resulting from sourcing operations as well as net investment positions, intercompany royalties and dividend payments. In addition, the Company has Belgian Franc forward currency contracts to sell the aggregate equivalent of $223.2 million of the following foreign currencies: Swedish Kroner, Spanish Pesetas, Netherlands Guilders, Italian Lire, Greek Drachma, British Pounds, French Francs and German Marks. These contracts hedge currency exposures resulting from intercompany receivables and payables. All of these contracts are at various exchange rates. The majority of these contracts expire at various dates during the fourth quarter of 1994. The remaining contracts expire at various dates through 1996. In addition, the Company has the right to sell Japanese Yen for $10.0 million. This contract expires March 1995 and hedges the Company's net investment in its Japanese affiliate. Realized and unrealized transaction losses on these contracts for the third quarter of 1994 were $12.7 million and $23.3 million, respectively. Year-to-date realized and unrealized losses on these contracts were $14.2 million and $30.4 million, respectively. The Company's market risk is directly related to fluctuations in the currency exchange rates. The Company's credit risk is limited to the currency rate differential for each agreement, if a counterparty failed to meet the terms of the contract. These instruments are executed with credit worthy financial institutions and the Company does not anticipate nonperformance by the counterparties. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Summary Record third quarter 1994 net income of $140.9 million increased 10 percent from the comparable quarter of 1993. The increase in net income was primarily due to record third quarter dollar sales, higher other operating income, net, a lower effective tax rate and lower interest expense. This increase was partially offset by higher other expense, net. Year-to-date net income was $126.6 million, a decrease of 64 percent from the prior year period. The decrease was mostly due to the effects of adopting Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1994 (see Note 2 to Consolidated Financial Statements) and higher other expense, net. Despite the effects of adopting SFAS No. 106, contributing to 1994 year- to-date net income were a lower effective tax rate, lower interest expense and the positive effect of adopting SFAS No. 109 "Accounting for Income Taxes" (see Note 3 to Consolidated Financial Statements). Without the effects of adopting both SFAS Nos. 106 and 109, year-to-date net income would have been 3 percent higher than the prior year period. Full year 1994 net income is expected to be significantly lower than 1993 mostly due to the net impact of adopting SFAS Nos. 106 and 109. Additionally, the Company expects net income to be negatively impacted by non-cash expenses associated with the Company's stock liquidity program for management holders of Class L common stock (see Management Compensation Charge caption). Net Sales Record dollar sales for the 1994 third quarter increased 1 percent over the comparable quarter of 1993, despite a 3 percent decrease in unit sales. The dollar sales increase was mostly due to a 5 percent increase in average unit selling prices. The 1994 third quarter results were attributable to record dollar and unit sales performances by the Europe division and the U.S. Levi's(R) brand product line. Dollar sales, on a year-to-date basis, increased less than 1 percent from the prior year period and was also a record. U.S. dollar sales for the 1994 third quarter of $1.0 billion were flat compared to the prior year period, mostly due to an increase in average unit selling prices that was offset by a decrease in unit sales. On a year- to-date basis, U.S. dollar sales were $2.6 billion, a decrease of 3 percent from the prior year period, primarily due to lower unit sales. Contributing to these results were record overall dollar sales in the Levi's(R) product line that were more than offset by lower dollar and unit sales in the Dockers(R) product line. The U.S. women and youth Levi's(R) product lines each posted record 1994 third quarter and year-to-date dollar sales, with Levi's(R) jeans for women also achieving record unit sales. However, current quarter and year-to-date dollar and unit sales for U.S. men's Levi's(R) product line decreased from the 1993 periods primarily due to a discontinuance of certain higher-margin silverTab(TM) products. During 1994, the men's Dockers(R) product line focused its efforts on producing and selling wrinkle-resistant products. Finishing capacity limitations for wrinkle-resistant bottoms and the inability to meet full demand contributed to a third quarter and year-to-date dollar and unit sales decrease of men's Dockers(R) products from the prior year periods. The women's Dockers(R) brand has decreased production while in the process of repositioning its line. This was reflected in the 1994 third quarter Dockers(R) for women brand dollar and unit sales decreases of 45 percent and 50 percent, respectively, as compared to the third quarter of 1993. (See Inventories caption for additional information.) Outside the U.S., record 1994 third quarter and year-to-date dollar sales of $557.3 million and $1.7 billion, respectively, both increased 5 percent over the comparable periods of 1993 mostly on the strength of the Europe division, principally in Germany and Italy. Additionally, on a quarter-to-date basis, the Europe division experienced increased sales growth due to favorable translation of certain European currencies to U.S. dollars. During 1994, the Europe division generated new business related to the 1994 introduction of the Dockers(R) brand of products in Europe. The record results in Europe were partially offset by declines of 5 percent and 10 percent in third quarter dollar and unit sales, respectively, for the Asia Pacific division, compared to the third quarter of 1993. Contributing to these declines was the slow economic recovery, increased product competition (particularly private label products), lower average unit selling prices and a market shift to lower margin products, all occurring in Japan. On a year-to-date basis, dollar sales decreased 1 percent due to lower sales in Japan that were mostly offset by increased sales for the Company's affiliates in Korea and the Philippines. (See Gross Profit and Inventories captions for additional information.) Total Company dollar sales for full year 1994 are expected to be slightly higher than the dollar sales records of 1993 mostly due to the Europe division and the U.S. Levi's(R) brand. However, overall unit sales are expected to decrease mostly due to lower sales for the U.S. Dockers(R) brand products. Gross Profit As a percent of sales, 1994 third quarter and year-to-date gross profit increased slightly compared to the prior year periods. In dollars, current quarter and year-to-date gross profit increased 5 percent and 2 percent, respectively, over the comparable 1993 periods mostly due to lower U.S. production costs and higher overall average unit selling prices. Included in cost of goods sold were lower U.S. production costs that primarily reflected prior year workers' health and safety costs accrual reversals of $25.2 million and $33.7 million, respectively, for the current quarter and year-to-date compared to the prior year periods. New state workers' compensation legislation in Texas and the Company's safety programs and alternative manufacturing systems implementation all had a positive effect on lowering workers' health and safety costs. These adjustments were partially offset by third quarter 1994 and year-to-date charges of $8.4 million and $25.2 million, respectively, for ongoing benefit expenses related to SFAS 106 (see Postretirement Benefits caption). (See Inventories caption for additional information.) The businesses outside the U.S. continue to record higher gross profit as a percent of sales than businesses in the U.S., mostly due to higher overall average unit selling prices. Additionally, compared to the U.S., the non-U.S. businesses sell a greater proportion of higher margin denim bottoms (predominately 501(R) and Red Tab(TM) products). The current quarter gross margin percentage for the businesses outside the U.S. was slightly lower compared to the prior year period primarily due to inventory markdowns for basic denim products in Japan, which resulted from a change in consumers' preferences from higher margin basic denim products to more lower margin light-weight denim/rayon blend products. (See Net Sales and Inventories captions for additional information.) The businesses outside the U.S. represented 41 percent of the Company's 1994 third quarter profit contribution before corporate expenses and taxes, compared to 45 percent in 1993. The lower third quarter 1994 percentage was primarily due to favorable revised estimates for U.S. workers' health and safety costs in the third quarter of 1994 compared to the 1993 third quarter. On a year-to-date basis, both 1994 and 1993 non-U.S. percentages were 54 percent. The 1994 non-U.S. year-to-date percentage is higher than the third quarter 1994 percentage due to lower U.S. sales volume in the first quarter of 1994. Marketing, General and Administrative Expenses As a percentage of sales, marketing, general and administrative expenses for the current quarter and year-to-date of 23 percent and 24 percent, respectively, were unchanged from the prior year periods. In dollars, marketing, general and administrative expenses for the current quarter and year-to-date increased 3 percent and 1 percent, respectively, over the comparable 1993 periods. The current quarter increase was mostly due to higher selling and administrative expenses. On a year-to-date basis, marketing, general and administrative expenses increased for the same reasons, but were partially offset by lower advertising expense. Selling expense for the current quarter and year-to-date increased 16 percent and 17 percent, respectively, primarily due to increased sales volume outside the U.S. Third quarter and year-to-date administrative expense increased 5 percent and 2 percent, respectively, from the comparable 1993 periods primarily due to expenses in connection with customer service initiatives in the U.S., Europe and Asia Pacific. Year-to-date advertising expense decreased 5 percent from the prior year mostly due to planned reductions in media production expenditures and local cooperative advertising in the U.S. This decrease was partially offset by increased advertising expense for the Company's affiliates in Germany and Korea. Information resource expense for the current periods increased slightly compared to the prior year periods. The majority of systems and software costs related to the Company's initiative to improve customer service are not expected to occur until 1995. Management Compensation Charge During the 1994 first quarter, the Company purchased 83,949 shares of Class L common stock, for a total of $9.6 million, held by certain management stockholders that have left the employment of the Company. The purchase price of $114 per share was the appraised value as determined by a valuation obtained in November 1993 from an independent investment banking firm for the Company's employee stock plans. The selling stockholders acquired the shares through exercises of stock options. As a result of the purchase transaction, compensation expense of $3.8 million was recorded to recognize the difference between the original compensation amount recorded for the related stock options and the current appraised value of the stock. Additionally, stockholders' equity decreased by a total of $5.8 million due to the purchase and retirement of these shares of stock. Separately, during the first quarter of 1994, the Board of Directors approved a stock liquidity program (the "Liquidity Program") for management holders of Class L common stock. This program received stockholder approval at the April 1994 annual meeting of stockholders. The Liquidity Program allows the Company to enter into contracts with management holders of Class L common stock relating to in-service, employment separation-related and post- separation stock purchases. Currently, holders of 1,297,526 shares of Class L common stock (including outstanding options) are eligible to participate in this program. This program would allow participating management stockholders to annually sell a specified amount of their stock to the Company, subject to certain limitations and conditions. The program also entitles the Company to purchase all of the shares held by a management holder at the time of separation from employment. The Liquidity Program offering is expected to be completed during the fourth quarter of 1994. Once individual contracts for the Liquidity Program are completed, shares held by participants must under accounting rules be reflected on the balance sheet "outside" of stockholders' equity due to the liquidity feature. If all eligible management stockholders participated in the Liquidity Program, the Company would incur an initial pre-tax compensation expense increase of approximately $57.0 million (based on the current appraised stock value of $129 per share), the addition of common stock outside of stockholders' equity of approximately $167.0 million and a reduction in stockholders' equity of approximately $121.0 million. Future changes in the stock valuation would result in periodic adjustments to compensation expense. Stock related compensation expense would generally result in a permanent tax difference and will not be deductible for tax purposes. Actual purchases of stock by the Company under the Liquidity Program would result in cash outflows. Other Operating (Income) Expense, Net Third quarter 1994 other operating income, net increased $8.1 million from the prior year period primarily due to reserves recognized in 1993 for potential losses on existing capital assets as a result of the Company's initiative to improve customer service and 1993 expenses for new business development in Europe and Asia Pacific. This increase was partially offset by 1994 costs associated with the Company's data center relocation. The data center was relocated outside of California during and subsequent to the third quarter of 1994 in accordance with the Company's disaster recovery plan. On a year-to-date basis, other operating income, net increased $1.5 million from the comparable period of 1993 for the same reasons noted above, as well as for additional reserves recognized in 1993 for costs associated with pre-LBO idle facilities. This increase was partially offset by the recognition in 1994 of current and future costs associated with environmental-related soil remediation of a facility previously owned by the Company and income recognized in 1993 from joint ventures. (See Note 1 to Consolidated Financial Statements regarding the reclassification of certain 1993 quarterly amounts to Other Operating (Income), Net.) Interest Expense Interest expense for the current quarter and year-to-date decreased 52 percent and 46 percent, respectively, from the comparable periods of 1993 primarily due to lower average debt balances. Debt reductions after the third quarter of 1993 included net repayments of debt on the Company's working capital facility and repayment and cancellation of the second and third series of dividend notes payable to Class L stockholders. The debt was repaid using cash flows from operations. During the second quarter of 1994, the Company renegotiated and amended its primary credit agreement which, among other items, provides for lower commitment fees and interest rate basis points (see Liquidity and Capital Resources caption). Full year 1994 interest expense related to borrowings is expected to be lower than 1993 due to anticipated lower 1994 average debt levels. The Company anticipates that it will not need to borrow funds during the remainder of 1994 for costs relating to its global initiatives to improve customer service. These costs are expected to be funded by cash flows from operations during 1994. Other (Income) Expense, Net Other expense, net for the current quarter and year-to-date increased $22.3 million and $39.4 million, respectively, from the prior year periods mostly due to greater 1994 net foreign currency transaction losses. These net foreign currency transaction losses were mostly due to the weakening of the U.S. dollar compared to European currencies during the nine months of 1994 coupled with a higher volume of hedging transactions compared to 1993. The majority of contracts generating the foreign currency transaction losses mature by the end of fiscal 1994. Additionally, contributing to the other expense, net increase were translation losses recorded by a Company affiliate located in a high inflationary environment, higher net costs for foreign currency exchange contracts and interest rate swap termination costs. (See Note 1 to Consolidated Financial Statements regarding the reclassification of certain Other (Income) Expense, Net amounts and Note 4 to Consolidated Financial Statements regarding foreign currency exchange contracts.) Provision for Taxes The decrease in the 1994 third quarter and year-to-date provision for taxes compared to the prior year periods was primarily due to a 3 percentage point decrease in the Company's effective tax rate. The effective tax rate for both the current quarter and year-to-date was 40 percent compared to the rate for both 1993 periods of 43 percent. The lower 1994 rates were primarily due to a change in the mix of U.S. and non-U.S. earnings, lower state taxes and a reassessment of the Company's tax settlement strategies. (See Note 3 to Consolidated Financial Statements for information relating to the adoption of SFAS No. 109 "Accounting for Income Taxes".) Postretirement Benefits The Company recorded a one-time, non-cash charge against earnings of $402.3 million before taxes and $248.4 million after taxes due to the adoption of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective November 29, 1993. This charge was recorded as a cumulative effect of a change in accounting principles, net of income tax effects, on the Consolidated Statements of Income. The adoption of SFAS No. 106 also results in additional ongoing expenses for service and interest costs related to postretirement benefits, which were $10.8 million and $32.2 million, respectively, for the current quarter and year-to-date. The 1994 full year expense for these ongoing costs is estimated to be $43.0 million (see Note 2 to Consolidated Financial Statements). FINANCIAL CONDITION AND LIQUIDITY Trade Receivables Trade receivables of $816.5 million decreased 5 percent from year-end 1993. This decrease was primarily due to improved U.S. collection efforts coupled with a reduction (by collection) in U.S. past-due receivables. Partially offsetting this decrease were higher non-U.S. trade receivables as a result of increased sales in the Company's affiliates in Germany and Italy. As a percent of sales, trade receivables for the 1994 third quarter decreased 5 percent from year-end for the same reasons. The allowance for doubtful accounts, as a percentage of accounts receivable, increased to 4.01 percent from the 1993 year-end percentage of 3.33 percent mostly due to concerns related to retail industry bankruptcies in the current U.S. economic environment. The current percentage is expected to be lower by year-end 1994. Inventories Inventories at third quarter 1994 were $855.0 million, 8 percent higher than the year-end 1993 level. The inventories increase reflected a 26 percent increase in non-U.S. inventories that was partially offset by a 2 percent decrease in U.S. inventories. U.S. inventories decreased 41 percent and 4 percent, respectively, in the Brittania(R) and Levi's(R) product lines. The lower Brittania(R) brand inventories at third quarter 1994 reflect a reduction from high year-end 1993 levels and are currently in line with projected sales. The decrease in the Levi's(R) brand inventories was a result of strong Back-to-School sales for Levi's(R) jeans for women and Levi's(R) youth products during the third quarter of 1994. In response to consumer demand for lower priced products, during 1994 the U.S. men's Levi's(R) brand marketing division is carrying a higher percentage of lower margin Orange Tab(TM) products and a lower percentage of certain higher margin silverTab(TM) and Red Tab(TM) products, including 501(R) products. In addition, inventory levels for the women's Dockers(R) product line decreased 30 percent from year-end 1993 as the line is being repositioned in the market primarily due to a shift in consumer preferences away from certain casual sportswear products (i.e., skirts, dresses and coordinated products) and consumer price sensitivity. The new line is expected to be fully repositioned by the Spring of 1995 and will focus on the Dockers(R) brand image of casual core bottoms supported by casual tops as opposed to carrying predominately seasonal products. The U.S. inventories decrease was partially offset by a 38 percent increase in the men's Dockers(R) product line. The effects of the finishing capacity limitations for wrinkle-resistant products caused the men's Dockers(R) brand work-in-process inventories to increase from year-end 1993. Due to recent increases in finishing capacity and efficiency, units of wrinkle-resistant bottoms are expected to move from the work-in-process inventories to the finished goods inventories at an improved rate. The increase in inventories outside the U.S. was mostly due to higher inventories (consisting primarily of denim bottoms) in the Company's Italian and German affiliates to meet projected sales demand. In addition, inventories in the Europe division grew in 1994 due to the consolidation of entities that were previously accounted for by the equity method of accounting. The Asia Pacific division is shifting some of its product mix to lower margin products in response to a change in consumers' preferences from higher margin basic denim products to lower margin light-weight products. The Company anticipates that current inventory levels will be lower at year-end due to shipments in the fourth quarter of 1994 to meet the remainder of the 1994 Back-to-School demand and Holiday demand. Property, Plant and Equipment Property, plant and equipment, net of $639.0 million increased 7 percent from year-end 1993. The increase in property, plant and equipment was primarily due to capital expenditures and the consolidation of entities in Europe that were previously accounted for by the equity method of accounting. These increases were partially offset by depreciation expense during the period. Capital expenditures in the U.S. were primarily for purchase of land and customer service center design and engineering costs, related to the Company's initiative on customer service, and equipment and leasehold improvements in connection with the Company's data center relocation. The data center was relocated outside of California during and subsequent to the third quarter of 1994 in accordance with the Company's disaster recovery plan. Outside the U.S., the Company continued to build a distribution and administrative office facility in Germany. Actual spending on projects during 1994 is expected to be $120.0 million, not including spending related to the Company's U.S. initiative on customer service. The Company expects to spend over $400.0 million during the next several years in connection with this initiative including $85 million previously recognized or currently committed in 1994. During the third quarter of 1994, the Company negotiated and signed a design, engineering, procurement and construction services agreement with Fluor Daniel, Inc. relating to the design and construction of the Company's customer service centers. (See Subsequent Events - Strategic Initiative on Customer Service caption.) Working Capital Working capital at the end of the 1994 third quarter increased $373.1 million from year-end 1993 to $1.4 billion. In addition, the current ratio increased to 2.2 from 1.9. The increase in working capital was mostly due to higher cash and cash equivalents from operations and higher inventories. This was partially offset by higher accrued liabilities, which included increased professional fee accruals relating to advertising expense and the Company's initiative on customer service, and lower accounts receivable. Liquidity and Capital Resources The increase of $408.9 million in cash and cash equivalents from year-end 1993 was mostly due to cash provided by operations. Cash provided by operations was partially used for the net repayment of debt and purchases of property, plant and equipment. Most of the remaining cash was invested in short-term investments. The Company is continuing to explore short-term fixed-income portfolio investment possibilities for its cash and cash equivalents balance. Additionally, the Company anticipates utilizing a portion of this cash in 1995 to fund costs relating to its global initiatives on customer service. During the second quarter of 1994, the Company renegotiated and amended its primary credit agreement to reduce its $500.0 million unsecured working capital facility to a $200.0 million 364 day revolving line of credit, which is convertible at the option of the Company into a three-year term loan. This amendment reflects the current financing needs and cash position of the Company. Under the new revolving line of credit, commitment fees and interest rate basis points are lower than under the working capital facility. During 1994, the Company repaid $50.0 million on its working capital loan and repaid its second and third series of dividend notes payable to Class L stockholders totaling $38.6 million, plus accrued interest of $2.0 million. At August 28, 1994, the Company's total outstanding debt balance was $82.2 million, 44 percent lower than year-end 1993. The Company expects total debt at year-end 1994 to be lower than the level at year-end 1993 due to the continued repayment of debt using cash generated from operations. The Company does not anticipate that it will need to borrow funds during the remainder of 1994 for costs related to the Company's global initiatives on customer service. In 1994, due to lower debt levels, the Company terminated its remaining $200.0 million of interest rate swap agreements that hedged floating-rate liabilities for fixed rates. The termination will become effective during the fourth quarter of 1994 and resulted in a loss of $2.6 million that was included in other (income) expense, net. Sale of Class E Common Stock to Employee Investment Plans In July 1994, the employee investment plans, collectively, purchased 54,695 shares of Class E common stock from the Company at $129 per share as determined by the valuation of an independent investment banking firm. In addition, the Company contributed 52,863 matching shares to these plans. SUBSEQUENT EVENTS Payment of Dividends on Class E Common Stock In June 1994, the Board of Directors declared a dividend of $.65 per share (totaling $.9 million), which was paid on August 31, 1994 to Class E stockholders of record on July 29, 1994. There were no dividends declared on Class L common stock. Employee Investment Plan Trustee Effective September 1994, certain assets of the Employee Investment Plan of Levi Strauss Associates Inc. (the "Plan") will be held by and under the control of a new trustee, Fidelity Management Trust Company. Plan participants may direct investments among a series of mutual funds offered under the Plan and managed by the new trustee. These mutual funds will provide participants investment alternatives similar to those previously available under the Plan as well as certain additional options. Investments in the Company's Class E common stock will continue to be held by Boston Safe Deposit and Trust Company. Strategic Initiative on Customer Service During September 1994, the Board of Directors endorsed the Company's U.S. customer service initiative. The Company will focus its efforts on certain parts of the initiative to be completed within the original time frame of November 1996. The Company will focus on other areas of the initiative after these initial areas are completed to mitigate disruption to the Company's ongoing business and strain on the Company and its employees. The Company expects to make capital expenditures of over $400.0 million during the next few years to support the new U.S. distribution network, expanded systems plans, organization and manufacturing changes. Additionally, the Company expects to spend approximately $450.0 million for transitional expenses, including software costs, costs for redesign of existing facilities, training and education costs and other related expenses. These costs include previously recognized or currently committed capital expenditures and expenses of $85.0 million and $55.0 million, respectively. All these costs may be recognized ratably throughout the implementation period and/or as expenditures occur, depending on the nature of the cost and the decisions made related to this initiative. The Company is assuming substantial risks in undertaking this initiative. This initiative involves fundamental changes in the way the Company operates its U.S. business. There are numerous commercial, operating, financial, legal and other risks and uncertainties presented by the design and implementation of such a program. Although there can be no assurance that the Company will successfully design and implement these new business processes, or that the costs of this initiative will not exceed estimates, the Company believes that the re-engineering initiative is essential to maintain its competitive position. Additionally, the Company believes it is important to implement this initiative at a time when the Company's market and financial performance is strong. Company-owned Retail and Outlet Stores Consistent with the Company's business vision of enhancing brand image through dedicated retail distribution, the Board of Directors, in September 1994, endorsed the ownership and operation by the Company of retail and outlet stores in the U.S. These stores would include Original Levi's(R) Stores, Dockers(R) Shops and separate outlet stores in all cases selling only Levi's(R) or Dockers(R) products. The Company expects to open approximately 190 of these stores. Implementation of this dedicated distribution program is dependent upon approval from the Federal Trade Commission (FTC). This program is in addition to the plans the Company has with Designs, Inc. to establish a joint venture that will own and operate, in the northeastern U.S., Original Levi's(R) Stores selling only Levi's(R) jeans and jeans-related products. Venture establishment is subject to FTC approval. PART II. OTHER INFORMATION LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits 10a Master Trust Agreement between Levi Strauss Associates Inc. and Fidelity Management Trust Company. 10b Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (as amended and restated through August 22, 1994) (b) There were no reports on Form 8-K filed with the Commission during the third quarter of 1994. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LEVI STRAUSS ASSOCIATES INC. ---------------------------- (Registrant) Date: October 11, 1994 By /s/Richard D. Murphy --------------------------------------- (Richard D. Murphy) Vice President and Corporate Controller EX-99 2 EXHIBIT INDEX FOR LSAI 3Q94 FORM 10-Q EXHIBIT INDEX 10a Master Trust Agreement between Levi Strauss Associates Inc. and Fidelity Management Trust Company. 22 10b Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (as amended and restated through August 22, 1994) 56 EX-10 3 EXHIBIT 10A - MASTER TRUST AGREEMENT Exhibit 10a ----------- Master Trust Agreement Between Levi Strauss Associates Inc. And Fidelity Management Trust Company LEVI STRAUSS ASSOCIATES INC. MASTER INVESTMENT PLAN TRUST Dated as of September 1, 1994 TABLE OF CONTENTS ----------------- Section Page - ------- ---- Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2. Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 3. Exclusive Benefit and Reversion of Sponsor Contributions . . . . . . . . . . . . . . . . . . . . . . 7 Section 4. Disbursements . . . . . . . . . . . . . . . . . . . . . . . 7 (a) Directions from Applicable Fiduciary. . . . . . . . . . . . 7 (b) Limitations . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5. Investment of Trust . . . . . . . . . . . . . . . . . . . . 8 (a) Selection of Investment Options . . . . . . . . . . . . . . 8 (b) Available Investment Options. . . . . . . . . . . . . . . . 8 (c) Participant Direction . . . . . . . . . . . . . . . . . . . 9 (d) Mutual Funds. . . . . . . . . . . . . . . . . . . . . . . . 10 (e) Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (f) Reliance of Trustee on Directions . . . . . . . . . . . . . 12 (g) Trustee Powers. . . . . . . . . . . . . . . . . . . . . . . 13 Section 6. Recordkeeping and Administrative Services to Be Performed . 15 (a) General . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (b) Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 16 (c) Inspection and Audit. . . . . . . . . . . . . . . . . . . . 16 (d) Effect of Plan Amendment. . . . . . . . . . . . . . . . . . 17 (e) Returns, Reports and Information. . . . . . . . . . . . . . 17 (f) Allocation of Plan Interests. . . . . . . . . . . . . . . . 18 (g) Provision of Information Relating to Mutual Funds . . . . . 19 Section 7. Compensation and Expenses . . . . . . . . . . . . . . . . . 19 Section 8. Directions and Indemnification. . . . . . . . . . . . . . . 20 (a) Identity of Administrator and Named Fiduciary . . . . . . . 20 (b) Directions from Sponsor or Administrator. . . . . . . . . . 20 (c) Directions from Applicable Fiduciaries. . . . . . . . . . . 21 (d) Co-Fiduciary Liability. . . . . . . . . . . . . . . . . . . 21 (e) Indemnification . . . . . . . . . . . . . . . . . . . . . . 22 (f) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 9. Resignation or Removal of Trustee . . . . . . . . . . . . . 23 (a) Resignation . . . . . . . . . . . . . . . . . . . . . . . . 23 (b) Removal . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (c) Transition. . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 10. Successor Trustee . . . . . . . . . . . . . . . . . . . . . 24 (a) Appointment . . . . . . . . . . . . . . . . . . . . . . . . 24 (b) Acceptance. . . . . . . . . . . . . . . . . . . . . . . . . 24 (c) Corporate Action. . . . . . . . . . . . . . . . . . . . . . 24 Section 11. Termination . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 12. Resignation, Removal, and Termination Notices . . . . . . . 25 Section 13. Duration. . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 14. Amendment or Modification . . . . . . . . . . . . . . . . . 26 Section 15. General . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (a) Performance by Trustee, its Agents or Affiliates. . . . . . 26 (b) Delegation by Employer. . . . . . . . . . . . . . . . . . . 27 (c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 28 (d) Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (e) Successors and Assigns. . . . . . . . . . . . . . . . . . . 28 (f) Partial Invalidity. . . . . . . . . . . . . . . . . . . . . 28 (g) Section Headings. . . . . . . . . . . . . . . . . . . . . . 28 Section 16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 29 (a) Massachusetts Law Controls. . . . . . . . . . . . . . . . . 29 (b) Trust Agreement Controls. . . . . . . . . . . . . . . . . . 29 Section 17. Plan Qualification. . . . . . . . . . . . . . . . . . . . . 29 Schedules - --------- A - Recordkeeping & Administrative Services B - Fee Schedule C - Investment Options D - Sponsor's Authorization Letter E - Named Fiduciaries' Authorization Letters F - Opinion of Counsel G - Telephone Exchange Procedures H - Plan Designation Form I - Sponsor Stock Operating Procedures TRUST AGREEMENT, dated as of the first day of September, 1994, between LEVI STRAUSS ASSOCIATES INC., a Delaware corporation, having an office at 1155 Battery Street, San Francisco, CA 94111 (the "Sponsor"), and FIDELITY MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an office at 82 Devonshire Street, Boston, Massachusetts 02109 (the "Trustee"). WITNESSETH: WHEREAS, the Sponsor is the sponsor of the Employee Investment Plan of Levi Strauss Associates Inc. and the Levi Strauss Associates Inc. Employee Long Term Investment and Savings Plan (collectively and individually, the "Plan"); and WHEREAS, certain affiliates and subsidiaries of the Sponsor maintain, or may in the future maintain, qualified defined contribution plans for the benefit of their eligible employees; and WHEREAS, the Sponsor has appointed Boston Safe Deposit and Trust Company to serve as trustee of the Plan assets attributable to Sponsor Stock (as such term is defined below); and WHEREAS, the Sponsor desires to establish a trust to hold other assets of the Plan and of such other tax-qualified defined contribution plans maintained by the Sponsor, or any of its subsidiaries or affiliates, as are designated by the Sponsor as being eligible to participate therein; and WHEREAS, the Trustee is willing to hold and invest the aforesaid plan assets in trust pursuant to the provisions of this Trust Agreement, which trust shall constitute a continuation, by means of an amendment and restatement, of each of the prior trusts from which plan assets are transferred to the Trustee; and WHEREAS, the Trustee is willing to hold and invest the aforesaid plan assets in trust among several investment options selected by the Applicable Fiduciary (as such term is defined below); and WHEREAS, the Trustee is willing to perform recordkeeping and administrative services for the Plan pursuant to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth below, the Sponsor and the Trustee agree as follows: Section 1. Definitions. The following terms as used in this Trust Agreement have the meaning indicated unless the context clearly requires otherwise: (a) "Administrator" shall mean, with respect to each Plan, the person or entity which is the "administrator" or such Plan within the meaning of Section 3(16)(A) of ERISA. (b) "Agreement" shall mean this Trust Agreement, as the same may be amended and in effect from time to time. (c) "Applicable Fiduciary" shall mean, with respect to the application of any provision of this Agreement to any Plan, the person or entity which is the relevant fiduciary under such Plan with respect to such matter. (d) "Code" shall mean the Internal Revenue Code of 1986, as it has been or may be amended from time to time. (e) "Employer" shall mean the Sponsor and each subsidiary or affiliate of the Sponsor having employees who are Participants in a Plan. (f) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it has been or may be amended from time to time. (g) "Mutual Fund" shall mean any investment company advised by Fidelity Management & Research Company or any of its affiliates. (h) "Participant" shall mean, with respect to a Plan, any employee (or former employee or alternate payee under a qualified domestic relations order) with an account under such Plan, which has not yet been fully distributed and/or forfeited, and shall include the designated beneficiary(ies) with respect to the account of any deceased employee (or deceased former employee) until such account has been fully distributed and/or forfeited. (i) "Participant Recordkeeping Reconciliation Period" shall mean, with respect to any Plan, the "Blackout Period" as such term is defined in such Plan. In the event that a Plan does not provide for a Blackout Period, "Participant Recordkeeping Reconciliation Period" shall mean a period of reasonable duration during which the Trustee installs on its system the Plan and participant information. (j) "PIN" shall mean, with respect to any participant in the Plan, a personal identification number. (k) "Plan" shall mean the Employee Investment Plan of Levi Strauss Associates Inc., the Levi Strauss Associates Inc. Employee Long Term Investment and Savings Plan and such other tax-qualified, defined contribution plans which are maintained by the Sponsor or any of its subsidiaries or affiliates for the benefit of their eligible employees as may be designated by the Sponsor in writing to the Trustee as a Plan hereunder, such writing to be in the form of the Plan Designation Form attached hereto as Schedule "H". Each reference to "a Plan" or "the Plan" in this Agreement shall mean and include the Plan or Plans to which the particular provision of this Agreement is being applied or all Plans, as the context may require. (l) "Reporting Date" shall mean the last day of each calendar quarter, the last day of the Plan's plan year, the date as of which the Trustee resigns or is removed pursuant to Section 9 hereof and the date as of which this Agreement terminates pursuant to Section 11 hereof. (m) "Sponsor" shall mean Levi Strauss Associates Inc., a Delaware corporation, or any successor to all or substantially all of its businesses which, by agreement, operation of law or otherwise, assumes the responsibility of the Sponsor under this Agreement. (n) "Sponsor Stock" shall mean the Class E Common Stock, par value $.10 per share, of the Sponsor. (o) "Trust" shall mean the Levi Strauss Associates Inc. Master Investment Plan Trust, being the trust established by the Sponsor and the Trustee pursuant to the provisions of this Agreement. (p) "Trustee" shall mean Fidelity Management Trust Company, a Massachusetts trust company and any successor to all or substantially all of its trust business, as described in Section 10(c). The term Trustee shall also include any successor trustee appointed pursuant to Section 10 to the extent such successor agrees to serve as Trustee under this Agreement. Section 2. Trust. The Sponsor hereby establishes the Trust with the Trustee. The Trust shall consist of an initial contribution of money or other property (as agreed to by the Sponsor and the Trustee) made by the Sponsor or transferred from a previous trustee under the Plan, such additional sums of money as shall from time to time be delivered to the Trustee under a Plan, all investments made therewith and proceeds thereof, and all earnings and profits thereon, less the payments that are made by the Trustee as provided herein, without distinction between principal and income. The Trustee hereby accepts the Trust on the terms and conditions set forth in this Agreement. In accepting this Trust, the Trustee shall be accountable for the assets received by it, subject to the terms and conditions of this Agreement. Section 3. Exclusive Benefit and Reversion of Sponsor Contributions. -------------------------------------------------------- Except as provided under applicable law, no part of the Trust allocable to a Plan may be used for, or diverted to, purposes other than the exclusive benefit of the participants in the Plan or their beneficiaries prior to the satisfaction of all liabilities with respect to the participants and their beneficiaries. Section 4. Disbursements. ------------- (a) Directions from Applicable Fiduciary. The Trustee shall make disbursements in the amounts and in the manner that the Applicable Fiduciary directs from time to time in writing. The Sponsor hereby directs that, pursuant to the Plan, a participant withdrawal request may be made by telephone and the Trustee shall process such request only after the identity of the participant is verified by use of a PIN and social security number. The Trustee shall have no responsibility to see to the application of any disbursement. (b) Limitations. The Trustee shall not be required to make any disbursement under a Plan in excess of the net realizable value of the assets of the Trust allocable to such Plan at the time of the disbursement. Any disbursement in cash shall be pursuant to a written direction from the Applicable Fiduciary identifying the source of such cash including, to the extent provided in such direction, the non-cash assets to be converted to cash for the purpose of making the disbursement. Section 5. Investment of Trust. ------------------- (a) Selection of Investment Options. The Trustee shall have no responsibility for the selection of investment options under the Trust and shall not render investment advice to any person in connection with the selection of such options. (b) Available Investment Options. (i) The Applicable Fiduciary with respect to a Plan shall direct the Trustee as to what investment options: (A) the Trust shall be invested in during the Participant Recordkeeping Reconciliation Period, and (B) the investment options in which Plan Participants may invest, subject to the limitations set forth in subparagraphs (ii) and (iii) below. (ii) The Applicable Fiduciary may determine to offer as investment options only (A) Mutual Funds, (B) a fund which invests in Sponsor Stock (which is held pursuant to a trust agreement other than this Trust Agreement), (C) notes evidencing loans to Participants in accordance with the terms of the Plan, (D) other investments designated by the Applicable Fiduciary but held pursuant to one or more trust agreements other than this Trust Agreement, and (E) collective investment funds maintained by the Trustee for qualified plans; provided, however, that the Trustee shall be considered a fiduciary with investment discretion only with respect to Plan assets that are invested in collective investment funds maintained by the Trustee for qualified plans. (iii) The investment options initially selected by the Applicable Fiduciary are identified on Schedules "A" and "C" attached hereto. The Applicable Fiduciary may add additional investment options consistent with this Trust Agreement upon mutual amendment of this Trust Agreement and the Schedules thereto as necessary to reflect such additions. (c) Participant Direction. Each Participant shall direct the Trustee in which investment option(s) to invest the assets in the Participant's individual accounts under the Plan. Such directions shall be made in accordance with the procedures set forth therefor in the Plan and communicated to and accepted by the Trustee, including by use of the telephone exchange system maintained for such purposes by the Trustee or its agent in accordance with written Telephone Exchange Guidelines attached hereto as Schedule "G". Any directions made by a Participant using the telephone exchange system shall be treated as a direction made in writing by the Applicable Fiduciary for purposes of Section 8 hereof. The Trustee shall invest the Plan assets pursuant to proper directions received from Participants. In the event that the Trustee fails to receive a proper direction, the assets shall be invested in the securities of the Mutual Fund set forth for such purpose on Schedule "C", until the Trustee receives a proper direction. (d) Mutual Funds. Trust investments in Mutual Funds shall be subject to the following limitations: (i) Execution of Purchases and Sales. Purchases and sales of Mutual Funds (other than transfers from one Mutual Fund to another Mutual Fund ("Exchanges")) shall be made on the date on which the Trustee receives from the Sponsor in good order all information and documentation necessary to accurately effect such purchases and sales (or in the case of a purchase, the subsequent date on which the Trustee has received a wire transfer of funds necessary to make such purchase). Exchanges of Mutual Funds shall be made in accordance with the Telephone Exchange Guidelines attached hereto as Schedule "G". (ii) Voting. At the time of mailing of notice of each annual or special stockholders' meeting of any Mutual Fund, the Trustee shall send a copy of the notice and all proxy solicitation materials to each Participant who has shares of the Mutual Fund credited to the Participant's accounts, together with a voting direction form for return to the Trustee or its designee. The Participant shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares' credited to the Participant's accounts (both vested and unvested). The Trustee shall vote the shares as directed by the Participant. The Trustee shall not vote shares for which it has received no directions from the Participant. During the Participant Recordkeeping Reconciliation Period, the Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares of the Mutual Funds in the Trust. The Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the Mutual Fund shares held in any short-term investment fund or liquidity reserve. With respect to all rights other than the right to vote, the Trustee shall follow the directions of the Participant and if no such directions are received, the directions of the Applicable Fiduciary. Other than as stated in the first sentence of this Section 5(d)(ii), the Trustee shall have no duty to solicit directions from Participants or the Sponsor. With regard to voting rights with respect to the assets of the Plan held in the Sponsor Stock fund, the Trustee shall comply with the relevant terms of Schedule "I" and the instructions of the Applicable Fiduciary. However, it is understood that the Trustee is not responsible for exercising any voting rights with respect to the assets of the Plan held in the Sponsor Stock fund. (e) Notes. The Administrator shall act as the Trustee's agent for the purpose of holding all trust investments in Participant loan notes and related documentation and as such shall (i) hold physical custody of and keep safe the notes and other loan documents, (ii) collect and remit all principal and interest payments to the Trustee, and (iii) cancel and surrender the notes and other loan documentation when a loan has been paid in full. To originate a Participant loan, the Participant shall direct the Trustee as to the type of loan to be made from the Participant's individual account. Such directions shall be made by Participants by use of the telephone exchange system maintained for such purpose by the Trustee or its agent. The Trustee shall determine, based on the current value of the Participant's account, the amount available for the loan. Based on the monthly interest rate supplied by the Sponsor in accordance with the terms of the Plan, the Trustee shall advise the Participant of such interest rate, as well as the installment payment amounts. The Trustee shall forward the loan documents to the Participant for execution and submission for approval to the Administrator. The Administrator shall have the responsibility for approving the loan and instructing the Trustee to send the loan proceeds to the Participant unless otherwise directed by the Administrator. In all cases, such instruction by the Administrator shall be made within thirty (30) days of the Participant's initial request (the origination date). (f) Reliance of Trustee on Directions. (i) The Trustee shall not be liable for any loss, or by reason of any breach, which arises from any Participant's exercise or non-exercise of rights under this Agreement over the assets in the Participant's accounts to the extent that the Trustee acts in conformity with such exercise or non-exercise of rights and the applicable provisions of this Trust Agreement. (ii) The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the Applicable Fiduciary's exercise or non-exercise of rights under this Section 5, unless the Trustee knew or should have known that the actions to be taken under the Applicable Fiduciary's directions were prohibited by the fiduciary duty rules of Section 404(a) of ERISA or were contrary to the terms of the Plan, as communicated to the Trustee, or this Agreement. (g) Trustee Powers. The Trustee shall have the following powers and authority: (i) Subject to paragraphs (b), (c), (d) and (e) of this Section 5, to sell, exchange, convey, transfer, or otherwise dispose of any property held in the Trust, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or other property delivered to the Trustee or to inquire into the validity, expediency, or propriety of any such sale or other disposition. (ii) Subject to paragraphs (b) and (c) of this Section 5, to invest in investment contracts and short term investments (including interest bearing accounts with the Trustee or money market mutual funds advised by affiliates of the Trustee) and in collective investment funds maintained by the Trustee for qualified plans, in which case the provisions of each collective investment fund in which the Trust is invested shall be deemed adopted by the Sponsor and the provisions thereof incorporated as a part of this Trust as long as the fund remains exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended. (iii) To cause any securities or other property held as part of the Trust to be registered in the Trustee's own name, in the name of one or more of its nominees, or in the Trustee's account with the Depository Trust Company of New York and to hold any investments in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust. (iv) To keep that portion of the Trust in cash or cash balances as the Applicable Fiduciary or Sponsor may, from time to time, deem to be in the best interest of the Trust. (v) To make, execute, acknowledge, and deliver any and all documents of transfer or conveyance and to carry out the powers herein granted. (vi) Subject to the second and third sentences of this subparagraph (vi), to settle, compromise, or submit to arbitration any claims, debts, or damages due to or arising from the Trust; to commence or defend suits or legal or administrative proceedings to which the Trust is a party or the Trustee is a party by reason of serving as Trustee of the Trust; to represent the Trust in all suits and legal and administrative hearings; and to pay all reasonable expenses arising from any such action, from the Trust if not paid by the Sponsor. The Trustee agrees to notify the Administrator promptly of any matter referenced in the preceding sentence and to consult with the Administrator (or the Administrator's designee) as appropriate during the pendency of such matter, including, but not limited to, prior to the settlement, compromise or other termination of such a matter. Further, the Administrator, in its sole discretion, may assume responsibility for the defense, prosecution or other participation in such matter. (vii) To do all other acts although not specifically mentioned herein, as the Trustee may deem necessary to carry out any of the foregoing powers and the purposes of the Trust. Section 6. Recordkeeping and Administrative Services to Be Performed. --------------------------------------------------------- (a) General. The Trustee shall perform those recordkeeping and administrative functions described in this Section 6 and in Schedule "A" attached hereto. These recordkeeping and administrative functions shall be performed in conformity with the Applicable Fiduciary's written directions regarding the Plan's provisions, guidelines and interpretations. Investments in Sponsor Stock shall be recordkept in accordance with operating procedures attached hereto as Schedule "I". (b) Accounts. The Trustee shall keep accurate accounts of all investments, receipts, disbursements, and other transactions hereunder, and shall report the value of the assets held in the Trust as of each Reporting Date. Within thirty (30) days following each Reporting Date or within sixty (60) days in the case of a Reporting Date caused by the resignation or removal of the Trustee, or the termination of this Agreement, the Trustee shall file with the Sponsor a written account setting forth all investments, receipts, disbursements, and other transactions effected by the Trustee between the Reporting Date and the prior Reporting Date, and setting forth the value of the Trust as of the Reporting Date. Except as otherwise required under ERISA, upon the expiration of six (6) months from the date of filing such account with the Sponsor, the Trustee shall have no liability or further accountability to anyone with respect to the propriety of its acts or transactions shown in such account, except with respect to such acts or transactions as to which the Sponsor shall within such six (6) month period file with the Trustee written objections. (c) Inspection and Audit. All records generated by the Trustee in accordance with paragraphs (a) and (b) shall be open to inspection and audit, during the Trustee's regular business hours prior to the termination of this Agreement and for 90 days after such termination, by the Sponsor or any person designated by the Sponsor. Upon the resignation or removal of the Trustee or the termination of this Agreement, the Trustee shall provide to the Sponsor, at no expense to the Sponsor, in the format regularly provided to the Sponsor, a statement of each Participant's accounts as of the date of such resignation, removal, or termination, and the Trustee shall provide to the Sponsor or the Plan's new recordkeeper such further records as are reasonable, at the Sponsor's expense. (d) Effect of Plan Amendment. Material regarding the current qualified status of each Plan is attached hereto as Schedule "F". The Trustee's provision of the recordkeeping and administrative services set forth in this Section 6 shall be conditioned on the Sponsor delivering to the Trustee a copy of any amendment to the Plan as soon as administratively feasible following the amendment's adoption, with, if reasonably requested, an IRS determination letter or an opinion of counsel substantially in the form of Schedule "F" covering such amendment, and on the Sponsor providing the Trustee with such other information as the Trustee may reasonably request in connection with the performance of the recordkeeping and administrative services. (e) Returns, Reports and Information. The Sponsor shall be responsible for the preparation and filing of all returns, reports, and information required of the Trust or Plan by law. The Trustee shall provide the Sponsor with such information as the Sponsor may reasonably request to make these filings, including completed Schedule P to Form 5500. The Trustee shall timely make all filings with respect to any mutual fund or collective investment fund which may be required by regulations promulgated under ERISA for the Plan or Trust to avail itself of simplified or alternative methods of annual reporting under ERISA. Subject to Section 6(g) below, the Sponsor also shall be responsible for making any disclosures to Participants required by law including, without limitation, such disclosures as may be required under federal or state truth-in-lending laws with regard to Participant loans. (f) Allocation of Plan Interests. All transfers to, withdrawals from, or other transactions regarding the Trust shall be conducted in such a way that the proportionate interest in the Trust of each Plan and the fair market value of that interest may be determined at any time. Whenever the assets of more than one Plan are commingled in the Trust or in any investment option, the undivided interest therein of each such Plan shall be debited or credited (as the case may be) (i) for the entire amount of every contribution received on behalf of such Plan, every benefit payment, or other expense attributable solely to such Plan, and every other transaction relating only to such Plan; and (ii) for its proportionate share of every item of collected or accrued income, gain or loss, and general expense, and of any other transactions attributable to the Trust or that investment option as a whole. (g) Provision of Information Relating to Mutual Funds. The Sponsor hereby acknowledges that it has received from the Trustee a copy of the prospectus for each Mutual Fund selected by the Applicable Fiduciary as a Plan investment option. The Trustee shall provide to each Participant who requests such information regarding a Mutual Fund, a prospectus for the Mutual Fund and such other information as the Sponsor reasonably determines (and communicates to the Trustee) must be made available to the Participant in order to satisfy the conditions for relief from fiduciary liability provided in the regulations published under Section 404(c) of ERISA. Section 7. Compensation and Expenses. Within thirty (30) days of receipt of the Trustee's bill, which shall be computed and billed in accordance with Schedule "B" attached hereto and made a part hereof, as amended from time to time, the Sponsor shall either (a) send to the Trustee a payment in such amount or (b) direct the Trustee to charge all or specified portions of such bills to the Trust. All expenses of the Trustee relating directly to the acquisition and disposition of investments constituting part of the Trust, and all taxes of any kind whatsoever that may be levied or assessed under existing or future laws upon or in respect of the Trust or the income thereof, shall be a charge against and paid from the appropriate Participants' accounts. Section 8. Directions and Indemnification. ------------------------------ (a) Identity of Administrator and Named Fiduciary. The Trustee shall be fully protected in relying on the fact that the Sponsor and the Applicable Fiduciaries under a Plan are the individuals or persons named as such on the Authorization Letters in the form of Schedules "D" and "E" attached hereto or on a Plan Designation Form in accordance with Schedule "H" attached hereto or such other individuals or persons as the Sponsor may notify the Trustee in writing. (b) Directions from Sponsor or Administrator. Whenever the Sponsor or Administrator provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from actions of the Trustee which are consistent with the direction if the direction is contained in a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee by the Sponsor in the form attached hereto as Schedule "D", provided the Trustee reasonably believes the signature of the individual to be genuine. Such direction may also be made via electronic data transmission ("EDT") in accordance with procedures agreed to by the Sponsor and the Trustee; provided, however, that the Trustee shall be fully protected in relying on such direction as if it were a direction made in writing by the Sponsor. The Trustee shall have no responsibility to ascertain any direction's (i) accuracy (providing the direction is comprehensible on its face), (ii) compliance with the terms of any applicable law, or (iii) effect for tax purposes or otherwise. (c) Directions from Applicable Fiduciaries. Whenever an Applicable Fiduciary provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from actions of the Trustee which are consistent with the direction (i) if the direction is contained in a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee by the Applicable Fiduciary in the form attached hereto as Schedule "E" and (ii) if the Trustee reasonably believes the signature of the individual to be genuine, unless it is clear on the direction's face that the actions to be taken under the direction would be prohibited by the fiduciary duty rules of Section 404(a) of ERISA or would be contrary to the terms of the Plan or this Agreement. (d) Co-Fiduciary Liability. In any other case, the Trustee shall not be liable for any loss, or by reason of any breach, arising from any act or omission of another fiduciary under the Plan except as provided in Section 405(a) of ERISA. Without limiting the foregoing, the Trustee shall have no liability for the acts or omissions of any predecessor or successor trustee. (e) Indemnification. The Sponsor shall indemnify the Trustee against, and hold the Trustee harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorneys' fees and disbursements ("Loss"), that may be incurred by, imposed upon, or asserted against the Trustee by reason of any claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or Trust, excepting only any and all Loss arising from the Trustee's breach of contract or agreement, negligence or bad faith. The Trustee agrees to notify the Sponsor promptly of any matter referenced in the preceding sentence and to consult with the Sponsor (or the Sponsor's designee) as appropriate during the pendency of such matter, including, but not limited to, prior to the settlement, compromise or other termination of such matter. Further, the Trustee shall permit the Sponsor to participate in the defense, prosecution or other involvement in such matter. The Trustee shall indemnify Sponsor against, and hold the Sponsor harmless from, any Loss that may be incurred by, imposed upon, or asserted against the Sponsor by reason of any claim, regulatory proceeding, or litigation arising from the Trustee's breach of contract or agreement, negligence or bad faith. The Sponsor agrees to notify the Trustee promptly of any matter referenced in the preceding sentence and to consult with the Trustee (or the Trustee's designee) as appropriate during the pendency of such matter, including, but not limited to, prior to the settlement, compromise or other termination of such matter. Further, the Sponsor shall permit the Trustee to participate in the defense, prosecution or other involvement in any matter referenced in the preceding two sentences. (f) Survival. The provisions of this Section 8 shall survive the termination of this Agreement. Section 9. Resignation or Removal of Trustee. --------------------------------- (a) Resignation. The Trustee may resign at any time upon sixty (60) days' notice in writing to the Sponsor, unless a shorter period of notice is agreed upon by the Sponsor. (b) Removal. The Sponsor may remove the Trustee at any time upon sixty (60) days' notice in writing to the Trustee, unless a shorter period of notice is agreed upon by the Trustee. (c) Transition. Trustee shall provide assistance in transferring Plan data and Plan assets to the successor trustee, and the Sponsor shall reasonably reimburse the Trustee for reasonable fees and expenses incurred in connection with such transaction. Section 10. Successor Trustee. ----------------- (a) Appointment. If the office of Trustee becomes vacant for any reason, the Sponsor may in writing appoint a successor trustee under this Agreement. The successor trustee shall have all of the rights, powers, privileges, obligations, duties, liabilities, and immunities granted to the Trustee under this Agreement. The successor trustee and predecessor trustee shall not be liable for the acts or omissions of the other with respect to the Trust. (b) Acceptance. When the successor trustee accepts its appointment under this Agreement, title to and possession of the Trust assets shall immediately vest in the successor trustee without any further action on the part of the predecessor trustee. The predecessor trustee shall execute all instruments and do all acts that reasonably may be necessary or reasonably may be requested in writing by the Sponsor or the successor trustee to vest title to all Trust assets in the successor trustee or to deliver all Trust assets to the successor trustee. (c) Corporate Action. Any successor of the Trustee or successor trustee, through sale or transfer of the business or trust department of the Trustee or successor trustee, or through reorganization, consolidation, or merger, or any similar transaction, shall, upon consummation of the transaction and provisions of sixty (60) days written notice to the Sponsor, become the successor trustee under this Agreement. Section 11. Termination. This Agreement may be terminated at any time by the Sponsor, with or without cause, upon sixty (60) days' notice in writing to the Trustee. On the date of the termination of this Agreement, the Trustee shall forthwith transfer and deliver to such individual(s) or entity(ies) as the Sponsor shall designate, all cash and assets then constituting the Trust and all Plan data. If, by the termination date, the Sponsor has not notified the Trustee in writing as to whom the assets and cash are to be transferred and delivered, the Trustee may bring an appropriate action or proceeding for leave to deposit the assets and cash in a court of competent jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and expenses of the action or proceeding including, without limitation, reasonable attorneys' fees and disbursements. Section 12. Resignation, Removal, and Termination Notices. All notices of resignation, removal, or termination under this Agreement must be in writing and mailed to the party to which the notice is being given by certified or registered mail, return receipt requested, to the Sponsor, c/o the Corporate Treasurer (or equivalent successor position), Levi Strauss Associates, Inc., 1155 Battery Street, San Francisco, CA 94111, and to the Trustee c/o John M. Kimpel, Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109, or to such other addresses as the parties have notified each other of in the foregoing manner. Section 13. Duration. This Trust shall continue in effect without limit as to time, subject, however, to the provisions of this Agreement relating to amendment, modification, and termination thereof. Section 14. Amendment or Modification. This Agreement may be amended or modified at any time and from time to time only by an instrument which is (a) executed by both the Sponsor and the Trustee, (b) refers to this Trust Agreement, and (c) affirmatively states that it is an amendment to this Trust Agreement. Notwithstanding the foregoing, (i) to reflect increased operating costs the Trustee may once each calendar year prospectively amend Schedule "B" without the Sponsor's consent upon seventy-five (75) days written notice to the Sponsor; however, no such fee increase shall be made prior to September 1, 1997; and (ii) Schedule C may be amended by the Sponsor, in its sole discretion, by delivery of a revised, executed Schedule C to the Trustee. Section 15. General. (a) Performance by Trustee, its Agents or Affiliates. The Sponsor acknowledges and authorizes that the services to be provided under this Agreement shall be provided by the Trustee, its agents or affiliates, including Fidelity Investments Institutional Operations Company or its successor, and that certain of such services may be provided pursuant to one or more other contractual agreements or relationships; provided, however, that services to be provided hereunder may be provided by an entity which is not an affiliate of the Trustee only upon consent of the Sponsor. Trustee acknowledges that it is fully responsible for the services performed by its agents or affiliates under this Agreement, as if such services were performed by the Trustee. (b) Delegation by Employer. By authorizing the assets of any Plan as to which it is an Employer to be deposited in the Trust, each Employer, other than the Sponsor, hereby irrevocably delegates and grants to the Sponsor full and exclusive power and authority to exercise all of the powers conferred upon the Sponsor and each Employer by the terms of this Agreement, and to take or refrain from taking any and all action which such Employer might otherwise take or refrain from taking with respect to this Agreement, including the sole and exclusive power to exercise, enforce or waive any rights whatsoever which such Employer might otherwise have with respect to the Trust, and irrevocably appoints the Sponsor as its agent for all purposes under this Agreement. The Trustee shall have no obligation to account to any such Employer or to follow the instructions of or otherwise deal with any such Employer, the intention being that the Trustee shall deal solely with the Sponsor. (c) Entire Agreement. This Agreement, including exhibits hereto, contains all of the terms agreed upon between the parties with respect to the subject matter hereof. (d) Waiver. No waiver by either party of any failure or refusal to comply with an obligation hereunder shall be deemed a waiver of any other or subsequent failure or refusal to so comply. (e) Successors and Assigns. The stipulations in this Agreement shall inure to the benefit of, and shall bind, the successors and assigns of the respective parties. (f) Partial Invalidity. If any term or provision of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. (g) Section Headings. The headings of the various sections and subsections of this Agreement have been inserted only for the purposes of convenience and are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. Section 16. Governing Law. ------------- (a) Massachusetts Law Controls. This Agreement is being made in the Commonwealth of Massachusetts, and the Trust shall be administered as a Massachusetts trust. The validity, construction, effect, and administration of this Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, except to the extent those laws are superseded under Section 514 of ERISA. (b) Trust Agreement Controls. The Trustee is not a party to the Plan, and in the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of this Agreement shall control. Section 17. Plan Qualification. The Sponsor shall be responsible for verifying that while any assets of a particular Plan are held in the Trust, the Plan (i) is qualified within the meaning of section 401(a) of the Code; (ii) is permitted by existing or future rulings of the United States Treasury Department to pool its funds in a group trust; and (iii) permits its assets to be commingled for investment purposes with the assets of other such plans by investing such assets in this Trust. If any Plan ceases to be qualified within the meaning of section 401(a) of such notice, the Trustee shall promptly segregate and withdraw from the Trust, the assets which are allocable to such disqualified Plan, and shall dispose of such assets in the manner directed by the Sponsor. The Trustee shall be responsible for maintaining any group trust or commingled fund which is represented as an investment suitable for tax-qualified plans in a manner which is consistent with maintaining such suitability. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. LEVI STRAUSS ASSOCIATES INC. Attest: /s/Jay A. Mitchell By /s/George B. James ------------------------------- ------------------------------ Assistant Secretary George B. James, Senior Vice President FIDELITY MANAGEMENT TRUST COMPANY Attest: By ------------------------------- ------------------------------ Assistant Clerk Senior Vice President EX-10 4 EXHIBIT 10B - LSAI DEFERRED COMP PLAN FOR EXEC Exhibit 10b ----------- LEVI STRAUSS ASSOCIATES INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES (As amended and restated through April 1, 1994) ARTICLE 1 - EFFECTIVE DATE - -------------------------- The Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (hereinafter the "Plan") is maintained by Levi Strauss Associates Inc. (the "Company") for the benefit of employees who are eligible pursuant to the terms of the Plan. The Plan became effective upon approval by the Executive Committee of the Board of Directors of Levi Strauss & Co. in 1971. The Plan has been amended or restated from time to time thereafter. ARTICLE 2 - ELIGIBILITY - ----------------------- (1) General Rule. Any employee of the Company or a participating domestic subsidiary (including a wholly-owned subsidiary of a wholly-owned subsidiary of the Company and Battery Street Enterprises, Inc. or any subsidiary thereof) (a "Participating Subsidiary"), who (i) is customarily employed 30 or more hours per week by the Company or such subsidiary, (ii) is employed within the United States or is a designated participant in the Revised Home Office Pension Plan of Levi Strauss Associates Inc., and (iii) is compensated on a salary basis (hereinafter, the "Eligible Employee") shall be eligible to participate in the Plan during a calendar year; provided that, either (i) the grade for the employee is equivalent to Home Office grade 9 or above, or (ii) (except for purposes of current deferrals) the employee has an undistributed balance of Deferred Compensation (within the meaning of Articles 4 and 5). Notwithstanding the aforesaid, no employee shall be eligible to participate in the Plan if said employee has entered into an employment agreement with the Company or a subsidiary thereof which precludes the employee from participating in a deferred compensation plan offered by the Company. (2) Exclusions. Notwithstanding the foregoing, an individual employed on a commission basis shall not be eligible to participate in the Plan. ARTICLE 3 - DEFINITION OF COMPENSATION - -------------------------------------- For all purposes under the Plan: (a) "total compensation" shall mean base salary, but shall not include any payments under or contributions to the Company's Long Term Disability Plan or other group insurance or any employee benefit plan maintained by the Company; (b) "total bonuses" shall mean payments made under the Company's Management Incentive Plan (hereinafter "MIP") or under any regularly paid bonus program other than the Long Term Performance Plan, and any non-recurring special bonus which is designated as being part of "total bonuses" in writing by the Administrator (identified as set forth in Article 9 below); and (c) for individuals on expatriate assignment, "total compensation" shall be defined as base salary adjusted by appropriate expatriate-related deductions and allowances as determined by the Administrator. ARTICLE 4 - DEFERRED COMPENSATION - --------------------------------- (a) Total Compensation Eligible for Deferral. ---------------------------------------- Election to Defer Compensation. (i) Any Eligible Employee may elect that a portion not to exceed one-third (1/3) of his or her total compensation shall be payable only as Deferred Compensation under this Plan. Amounts of total compensation deferred by an Eligible Employee shall not be less than five percent (5%) of his or her total base salary. (ii) Total Bonuses Eligible for Deferral. Any Eligible Employee may elect that a portion or all of his or her total bonuses shall be payable only as Deferred Compensation under this Plan. Amounts of total bonuses deferred by an Eligible Employee shall not be less than the greater of (i) $5,000 or (ii) five percent (5%) of his or her total bonuses. (iii) Time for Filing Elections. Except as provided in paragraph (iv) below, a deferral election shall be made in writing to the Administrator (A) in the case of base salary or non-recurring special bonuses or a regularly paid bonus program other than MIP at least two weeks prior to the commencement of the first payroll period ending in the calendar year in which payment otherwise would have been made; or (B) in the case of amounts payable under MIP prior to May 15. All elections are irrevocable once the final date for elections has passed. (iv) First Year of Employment. (A) An Eligible Employee may also make an election during the first year of employment with respect to his base salary for services performed after the effective day of the election. Such election shall be made in writing to the Administrator within 30 days after commencement of employment with the Company or a Participating Subsidiary and at least two weeks prior to commencement of the first payroll period with respect to which the election is to be effective, but no such election shall be permitted after November 15 of any calendar year. (B) Newly Eligible Employee. An employee of the Company or subsidiary thereof who becomes an Eligible Employee during any calendar year may make an election with respect to his or her base salary for services performed after the effective day of the election. Such election shall be made in writing to the Administrator within 30 days after the date as of which such employee becomes an Eligible Employee (or if the employee becomes an Eligible Employee in 1991 but before the effective date of this Section 5(d)(ii), within 30 days after such effective date) and at least two weeks prior to commencement of the first payroll period with respect to which the election is to be effective, but no such election shall be permitted after November 15 of any calendar year. (b) Additional Deferred Compensation. When an Eligible Employee elects that a portion of his or her total compensation or total bonus for a calendar year shall be payable as Deferred Compensation under the Plan, there shall also be credited as Additional Deferred Compensation for such calendar year an amount equal to the difference between (a) the aggregate amount of contributions by the Company which would have been allocated in respect of such Eligible Employee under the Employee Investment Plan ("EIP") if such Eligible Employee has not made such election under this Plan, and (b) the actual aggregate amount of contributions by the Company so allocated in respect of such Eligible Employees for the EIP for such calendar year. The Additional Deferred Compensation determined pursuant to the preceding sentence shall be credited during the next following calendar year and shall coincide with the time that profit sharing allocations are made to participants in the EIP. (c) Pension Make-Up Deferred Compensation. Further, there shall be payable to or in respect of an Eligible Employee the difference between (i) the amount of benefits which would have been payable to or in respect of the Eligible Employee under the Revised Home Office Pension Plan of Levi Strauss Associates Inc., or any successor defined benefit plan (the "HOPP"), the Levi Strauss Associates Inc. Excess Benefit Restoration Plan (the "Excess BRP") and the Levi Strauss Associates Inc. Supplemental Benefits Restoration Plan (the "Supplemental BRP") if not for the deferral of compensation under this Plan, and (ii) the amount actually payable to or in respect of the Eligible Employee under the HOPP, the Excess BRP and the Supplemental BRP, such difference being referred to herein as "Pension Make-Up Deferred Compensation"; provided; however, that the Pension Make-Up Deferred Compensation shall be vested only to the extent that such amounts would be vested under the HOPP, the Excess BRP and the Supplemental BRP, as applicable. (d) The Deferred Compensation of an Eligible Employee at any time shall include Deferred Compensation arising under prior provisions of the Plan. (e) Effect on Other Plans. Compensation deferred under this Plan shall not be included in "covered compensation" for crediting benefits or contributions to any qualified retirement, profit-sharing, stock purchase plan, employee saving plan or employee stock ownership plan. Other benefit plans shall not be affected by deferral of compensation under this Plan. ARTICLE 5 - CREDITING DEFERRED COMPENSATION - ------------------------------------------- (a) In General. The Deferred Compensation of an Eligible Employee will be credited with increases and, as appropriate, decreases to reflect the performance of the measurement standard offered by the Administrator pursuant to this Article 5 and selected by the Eligible Employee. If, with respect to all or a portion of his or her Deferred Compensation, an Eligible Employee fails to elect a measurement standard or if a measurement standard becomes unavailable under the Plan without an effective successor election by the eligible employee, such Deferred Compensation thereof shall be credited pursuant to Article 5(b)(1). (b) (1) Interest Measurement Standard. Interest shall be computed monthly as of the last day of each calendar month on the undistributed balance of each Eligible Employee's Deferred Compensation at the end of such calendar month. For amounts deferred pursuant to an election prior to January 1, 1983, interest shall be computed at a monthly interest rate equal to the sum of (i) one-twelfth (1/12) of the annual reference rate charged for commercial loans, as most recently announced by Bank of America in San Francisco, California, effective as of the last day of the calendar month on which such interest is computed, plus (ii) one-twelfth (1/12) of two percent (2%) per annum; except that for any calendar year beginning prior to January 1, 1980, interest shall be credited in accordance with the procedures specified in the Plan as then in effect. Except as provided below, for amounts deferred pursuant to an election after January 1, 1983, interest shall be computed at a monthly interest rate equal to one-twelfth (1/12) of the annual reference rate charged for commercial loans, as most recently announced by Bank of America in San Francisco, California, effective as of the last day of the calendar month on which such interest is computed. For amounts deferred by an Eligible Employee whose grade is equivalent to Home Office grade 9 or above representing a 1985 bonus payable under the MIP or his or her total base salary for calendar year 1986, interest shall be computed at a monthly interest rate equal to one-twelfth (1/12) of (i) the annual rate charged for commercial loans to most credit-worthy customers, as most recently announced by Bank of America in San Francisco, California, effective as of the last day of the calendar month in which such interest is computed, plus (ii) two percent (2%) for the period through December 31, 1990, and thereafter such amount, if any, as the Board of Directors of the Company or its delegatee shall determine in its sole discretion. Such interest shall be credited to the account of each participating Eligible Employee on the books of the Company or Participating Subsidiary as of December 31 of such calendar year. (2) Alternative Measurement Standards. The Administrator may from time to time offer one or more measurement standards in addition to the standard prescribed in Article 5(b)(1) above. Such alternative measurement standards offered by the Administrator may include standards which have different potential for risk and return, and could result in reductions in value of the Deferred Compensation of an Eligible Employee who elects such standards. The availability of any such alternative measurement standard and the terms applicable to such standard (including, but not limited to, the method and frequency with which increases or decreases are reflected in the amount of Deferred Compensation are solely in the discretion of the Administrator. (3) Election of Standard. The Administrator, in its discretion, shall prescribe procedures participating Eligible Employees to elect and change measurement standards applicable to Deferred Compensation Accounts. (c) An Eligible Employee's Pension Make-Up Deferred Compensation shall not be credited with interest or otherwise available for additions or deletions pursuant to any measurement standard offered pursuant to Article 5(b). ARTICLE 6 - PAYMENT OF DEFERRED COMPENSATION - -------------------------------------------- All Deferred Compensation under the Plan shall be payable as follows: (a) Termination for Any Reason Other Than Death or Involuntary Discharge. In the event that the Eligible Employee's employment shall be terminated by reason of disability, retirement, voluntary termination, layoff due to job elimination or job relocation or for any other reason other than his death or other involuntary discharge, the amount of his Deferred Compensation Plan shall be paid to him over a ten (10) year period in one hundred twenty (120) ratable monthly installments commencing on the first day of the calendar month following the later of the Eligible Employee's attainment of age seventy and one-half (70-1/2) or the date of the Eligible Employee's termination of employment. An Eligible Employee may, however, at the time he notifies the Administrator of his election to have a portion of his total compensation for a given calendar year payable as Deferred Compensation under the Plan: (i) Specify a date for either a lump sum payment of his or her Deferred Compensation or commencement of payment of his or her Deferred Compensation in ratable annual installments over a period longer than five (5) years, but not to exceed ten (10) years; and/or (ii) Specify that such monthly installments commence on other than the date of retirement but not later than his or her attainment of age seventy and one-half (70-1/2). (b) Termination of Employment by Death. In the event that the Eligible Employee's employment is terminated by death, or in the event of an Eligible Employee's death after termination of employment, and payments have not commenced, the unpaid balance of his or her Deferred Compensation shall be paid to his or her Beneficiary over a ten (10) year period in one hundred and twenty (120) ratable month installments commencing on the first day of the calendar month following the later of (i) the month in which the Eligible Employee died, or (ii) the month in which the Eligible Employee would have attained age seventy and one-half (70-1/2); except that at the time an Eligible Employee notifies the Administrator of his or her election to have a portion of his total compensation for a given calendar year payable as Deferred Compensation under the Plan, such Eligible Employee may elect that such unpaid balance be paid in a lump sum at a designated time within the five (5) year period following his or her death or in ratable monthly installments over a five (5) year period or a specified longer period not to exceed ten (10) years. (c) Termination of Employment by Involuntary Discharge. In the event that an Eligible Employee's employment is terminated by involuntary termination other than death, disability or layoff due to job elimination or job relocation, the amount of his or her Deferred Compensation shall be paid in a lump sum within thirty (30) days after his or her termination of employment. (d) Change in Timing or Manner of Payment. With respect to Deferred Compensation for which no effective election as to time and method of payment has been filed, (i) the Eligible Employee or, in the case of the death of the Eligible Employee prior to the commencement of payment of Deferred Compensation for any year, the Eligible Employee's Beneficiary, may file a request to accelerate payment of such Deferred Compensation. Such petition shall specify a date for lump sum payment or a period for payment which commences not later than the Eligible Employee's attainment of age seventy and one-half (70-1/2) or actual retirement, whichever is later, and ends no later than one hundred and twenty (120) months after the Eligible Employee would attain age seventy and one-half (70-l/2). (ii) The Eligible Employee or, in the case of the death of the Eligible Employee prior to the commencement of payment of Deferred Compensation for any year, the Eligible Employee's surviving spouse if such spouse is the Eligible Employee's Beneficiary, may file a request to have the Deferred Compensation applied towards the purchase of an annuity contract which satisfies the criteria set forth herein; provided that the amount of Deferred Compensation available for such purchase equals or exceeds $50,000. Such annuity contract shall be purchased with a single premium, owned by the Company, have an annuity starting date within one (1) year from the date of purchase and provide for substantially equal periodic payments during the annuity period. The petition for purchase of an annuity shall specify whether the annuity period is to be over the life of the Eligible Employee, the joint lives of the Eligible Employee and the Eligible Employee's spouse, or over the life of the Eligible Employee's spouse. The petition also shall specify an annuity starting date, which shall not be later than the later of the Eligible Employee's retirement date or the Eligible Employee's attainment of age seventy and one-half (70-1/2). (e) In-Service Payments. In the case of an Eligible Employee whose grade is equivalent to Home Office grade 9 or above, at the time he or she notifies the Administrator of his or her election to have amounts deferred representing a bonus payable under MIP for calendar year 1987 or later, in lieu of the provisions for payment of deferred compensation set forth Subsections (a), (b), (c) and (d) above, he or she may elect payment to be made as follows: Twenty percent (20%) of the MIP bonus to be paid as soon as practical after the amounts have been determined by the awarding company; thereafter in ratable annual installments in January of each of the following four years. (f) Hardship. Upon a showing of financial hardship, the Administrative Committee for the Retirement Plans of Levi Strauss Associates Inc., in its sole discretion, may direct the Company or Participating Subsidiary to pay to an Eligible Employee (or, in the event of death, to an Eligible Employee's Beneficiary) in one lump sum a portion or all of the unpaid balance of such Eligible Employee's Deferred Compensation to the extent necessary to alleviate the hardship. For purposes of the Plan, a hardship shall include any need, circumstance or event which is considered a hardship under the then current provisions of the Employee Investment Plan of Levi Strauss Associates Inc. (whether or not the Eligible Employee participates in such plan) and such other needs, circumstances or events which the Administration, in its sole discretion, determines are consistent with the goals of the Company for the Plan and the requirements of administration of the Plan. (g) Minimum Balance. Notwithstanding the foregoing, in the event that an Eligible Employee's employment is terminated for any reason and his or her aggregate undistributed balance of all Deferred Compensation Accounts under the Plan is $50,000 or less, without regard to any balance to which in-service payment has been elected, on the last day of the full payroll period immediately prior to such termination of employment, the amount of his or her Deferred Compensation Accounts, without regard to any balance to which in-service payment has been elected, shall be paid in a lump sum within thirty (30) days after his or her termination of employment. Nothing herein shall require the payment of Deferred Compensation for which an election was made prior to January 1, 1983, and reaffirmed prior to June 15, 1985. (h) Elections. An Eligible Employee who was employed by the Company or a Participating Subsidiary on October 1, 1985, and who prior to October 1, 1985, filed with the Administrator a confirmation of each prior election, shall have his or her Deferred Compensation paid pursuant to such elections. Any Deferred Compensation with respect to any other participant in the Plan will be paid according to the participant's election or, if no election was made, according to the provisions of the Plan in effect at the time of deferral. (i) Notwithstanding any other provision of this Plan to the contrary and subject to the following sentence, the vested Pension Make-Up Deferred Compensation shall be paid to the Eligible Employee, his or her surviving spouse or his beneficiary at the same time or times, in the same form and subject to the same form and subject to the same adjustments as his or her benefit under the HOPP, the Excess BRP and the Supplemental BRP, as applicable; provided, that if the Pension Make-Up Deferred Compensation is attributable to two or more of such plans, then the time and form shall be determined separately for each of such components. The foregoing notwithstanding, if the Eligible Employee is not a participant in the Excess BRP or the Supplemental BRP and the present value of his or her vested Pension Make-Up Deferred Compensation is $50,000 or less, such present value shall be paid to the Eligible Employee or the Eligible Employee's Beneficiary in a lump sum, and such payment shall extinguish such Eligible Employee's or Beneficiary's right to Pension Make-Up Deferred Compensation with respect to employment prior to the date of such payment. For the purposes of the preceding sentence, the present value of the Pension Make-Up Deferred Compensation shall be determined by the Administrator in a uniform and nondiscriminatory manner. (i) For purposes of this Plan: (i) the term "disability"shall have the same meaning as the term "Total and Permanent Disability" (or any successor term) under the Revised Home Office Pension Plan of the Company,or any successor thereto (the "HOPP"); (ii) the term "retirement" shall mean the termination of employment with the Company or any subsidiary thereof with the right to an immediate benefit under (the "HOPP"), providing that an Eligible Employee who is not a participant in the HOPP at the time of his or her termination of employment shall be deemed to have incurred a retirement if the Eligible Employee would have been eligible for an immediate benefit under the HOPP if he or she had been participating in the HOPP at such time. ARTICLE 7 - SOURCE OF PAYMENT - ----------------------------- All payments of Deferred Compensation hereunder shall be paid in cash from the general funds of the Company or the Participating Subsidiary, whichever was the employer at the time of the deferral, and no special or separate fund shall, trust or account be established in the name of any Eligible Employee or beneficiary or other segregation of assets made to assure such payments; provided, however, that the Company or the Participating Subsidiary, as the case may be, may establish a bookkeeping reserve to meet its obligation hereunder. No sponsor of any financial entity which is utilized as a measurement standard, such as a designated mutual fund sponsor or bank, shall have any responsibility for payment of Deferred Compensation hereunder, and no Eligible Employee shall have an account with such a sponsor in connection with the Eligible Employee's participation in the Plan. Any account which the Company may, from time to time, establish with any financial entity which is utilized as a measurement standard under the Plan, and any increases to or distributions from such account, shall remain the property of the Company. Nothing contained in the Plan and no action taken pursuant to the provisions of the Plan shall create or be construed to create a trust of any kind or a fiduciary relationship between the Company or the Participating Subsidiary or the Administrator and any employee or other person. To the extent that any person acquires a right to receive payments from the Company or the Participating Subsidiary under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company or the Participating Subsidiary. ARTICLE 8 - DESIGNATION OF BENEFICIARIES - ---------------------------------------- (a) Designation by Eligible Employee. Each Eligible Employee shall file with the Administrator a written designation of one or more persons as the "Beneficiary" who shall be entitled to receive the amount, if any, payable under the Plan upon his or her death. An Eligible Employee may from time to time revoke or change his or her beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Administrator. The last such designation received by the Administrator shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Administrator prior to the Eligible Employee's death, and in no event shall it be effective as of a date prior to such receipt. (b) Lack of Designation. If no beneficiary designation is in effect at the time of an Eligible Employee's death, if no designated Beneficiary survives the Eligible Employee or if such designation conflicts with law, then the Eligible Employee's estate shall be the Beneficiary entitled to receive the amount. The Administrator may direct the Company or Participating Subsidiary to retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Administrator may direct the Company or Participating Subsidiary to pay such amount into any court of appropriate jurisdiction, and such payment shall completely discharge the liability of the Plan, the Company and Participating Subsidiary therefor. ARTICLE 9 - ADMINISTRATION OF PLAN - ---------------------------------- For the purposes of this Plan, the "Administrator" shall be the Director of Employee Benefits or such other person as the Chief Executive Officer of the Company may designate from time to time. The Plan, except for Sections 6(d) and 6(f), shall be administrated by the Administrator, who shall have full power, discretion and authority to interpret, construe and administer the Plan and any part thereof. The Administrator's interpretations and constructions of the Plan and actions thereunder shall, except as otherwise determined by the Board of Directors of the Company or the Personnel Committee thereof, be binding and conclusive on all persons for all purposes. ARTICLE 10 - AMENDMENT - ---------------------- The Plan may be amended, suspended or terminated, in whole or in part, by the Board of Directors of the Company or the Personnel Committee thereof, or the delegate of either, but no such action shall retroactively impair or otherwise adversely affect the rights of any person to payment of Deferred Compensation under the Plan which has accrued prior to the date of such action, as determined by the Administrator. ARTICLE 11 - GENERAL PROVISIONS - ------------------------------- (a) No Assignment. The right of any Eligible Employee or other person to the payment of Deferred Compensation under the Plan shall not be assigned, transferred, pledged or encumbered, either voluntarily or by operation of law, except as provided in Section 8 with respect to designations of Beneficiaries hereunder or as may otherwise be required by law. If any person shall attempt to, or shall assign, transfer, pledge or encumber any amount payable hereunder, or if by reason of his or her bankruptcy or other event happening at any time any such payment would be made subject to his or her debts or liabilities or would otherwise devolve upon anyone else and not be enjoyed by him or her or his or her Beneficiary, the Administrator may, in its sole discretion, terminate such person's interest in any such payment and direct that the same be held and applied to or for the benefit of such Person, his or her spouse, children or other dependents, or any other Persons deemed to be the natural objects of his or her bounty, or any of them, in such manner as the Administrator may deem proper. (b) Incapacity. If the Administrator shall find that any person to whom any payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is a minor, then any payment due (unless a prior claim therefor shall have been made by a duly appointed guardian, committee or other legal representative), in the sole discretion of the Administrator, may be paid to his or her spouse, a child, a parent, or a brother or sister, or any other person deemed by the Administrator to have incurred expenses for such person otherwise entitled to payment, in such manner and proportions as the Administrator may determine. Any such payment shall constitute a complete discharge of the liability of the Company or Participating Subsidiary under the Plan. (c) Information Required. Each Eligible Employee shall provide the Administrator with such pertinent information concerning himself or herself and his or her Beneficiary relating to Plan administration or participation by the Eligible Employee as the Administrator may specify, and no Eligible Employee or Beneficiary or other person shall have any rights or be entitled to any benefits under the Plan unless such information is provided by or with respect to him or her. (d) Election by Employee. All elections, designations, requests, notices, instructions and other communications from an Eligible Employee, Beneficiary or other person to the Administrator required or permitted under the Plan shall be in such form as is prescribed from time to time by the Administrator, shall be mailed by first-class mail, transmitted by facsimile or delivered to such location as shall be specified by the Administrator and shall be deemed to have been given and delivered only upon actual receipt thereof by the Administrator at such location. (e) Notices by Company. All notices, statements, reports and other communications from the Administrator to any employee, Eligible Employee, Beneficiary or other person required or permitted under the Plan shall be deemed to have been duly given when delivered to, or when mailed first-class mail, postage prepaid and addressed to, such employee, Eligible Employee, Beneficiary or other person at his or her address last appearing on the records of the Company. (f) No Employment Rights. Neither the Plan nor any action taken hereunder shall be construed as giving to any employee the right to be retained in the employ of the Company or Participating Subsidiary or as affecting the right of the Company or Participating Subsidiary to dismiss any employee at any time, with or without cause. (g) Captions. The captions preceding the sections and subsections hereof have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions thereof. (h) Choice of Law. The Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of California. LEVI STRAUSS ASSOCIATES INC. --------- AMENDMENT OF LEVI STRAUSS ASSOCIATES INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") maintains the Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (as amended and restated through April 1, 1994) (the "Plan"); WHEREAS, pursuant to Article 10 of the Plan, the Board of Directors of the Company or its delegatee is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company desires to amend the Plan; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the Plan and to delegate to any other officer of the Company the authority to adopt certain amendments to the Plan; WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the Plan subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof, WHEREAS, the amendments herein are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, effective April 1, 1994, Section 6(f) shall be amended by the addition of a new paragraph at the end of existing Section 6(f), to read as set forth below: In the event the Administrative Committee approves a hardship distribution to an Eligible Employee under this Section 6(f), deferrals of such Eligible Employee's total compensation automatically shall be cancelled for the remaining portion of the calendar year in which the Eligible Employee's request is filed with the Administrative Committee. IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on August 22, 1994. /s/Donna J. Goya ------------------------------ Donna J. Goya Senior Vice President LEVI STRAUSS ASSOCIATES INC. --------- AMENDMENT AND RESTATEMENT OF LEVI STRAUSS ASSOCIATES INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") maintains the Levi Strauss Associates Inc. Deferred Compensation Plan for Executives (the "Plan"); WHEREAS, pursuant to Article 10 of the Plan, the Board of Directors of the Company or its delegatee is authorized to amend the Plan at any time and for any reason; WHEREAS, the Company desires to amend the Plan and restate the Plan to provide alternative measurement methods with respect to deferred compensation accounts and effect certain other changes; WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of Directors of the Company authorized Robert D. Haas, Chairman of the Board and Chief Executive Officer, to adopt certain amendments to the Plan and to delegate to any other officer of the Company the authority to adopt certain amendments to the Plan; WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya, Senior Vice President, the authority to amend the Plan subject to specified limits, and such delegation has not been amended, rescinded or superseded as of the date hereof, WHEREAS, the amendment and restatement effected hereby are within such limits to the delegated authority of Donna J. Goya; NOW, THEREFORE, effective April 1, 1994, the Plan is hereby amended and restated to read as set forth in the exhibit hereto. IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on August 22, 1994. /s/Donna J. Goya ------------------------------ Donna J. Goya Senior Vice President EX-27 5 EXHIBIT 27 - FIN DATA SCHEDULE FOR LSAI 3Q94
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF LEVI STRAUSS ASSOCIATES INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS NOV-27-1994 NOV-29-1993 AUG-28-1994 661,558 0 849,246 32,742 854,979 2,563,192 1,080,585 441,538 3,753,918 1,172,948 17,410 256,872 49,655 0 1,147,157 3,753,918 4,308,080 4,314,536 2,615,218 3,658,410 35,509 0 15,472 605,145 242,058 363,087 0 0 (236,517) 126,570 2.41 0
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